National Consumer Disputes Redressal
Deluxe Laminates Pvt Ltd vs U.P. Financial Corporation on 14 May, 2015
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 106 OF 2008 1. DELUXE LAMINATES PVT LTD 2100 Chah Indara Bhagirath Place New Delhi-110048 ...........Complainant(s) Versus 1. U.P. FINANCIAL CORPORATION Head Office at 14/88, Civil Lines, Kanpur 2. - - 3. - - ...........Opp.Party(s)
BEFORE: HON'BLE MR. JUSTICE V.K. JAIN, PRESIDING MEMBER HON'BLE MR. DR. B.C. GUPTA, MEMBER
For the Complainant : Mr. Vinod Kumar, Advocate For the Opp.Party : Mr. Harsha Vinoy, Advocate
For Mr. Mukul Kumar, Advocate
Dated : 14 May 2015 ORDER
This consumer complaint, CC No. 106/2008, has been filed under section 21 of the Consumer Protection Act, 1986 (hereinafter referred to as the Act) by M/S Deluxe Laminates Pvt. Ltd., a private limited company, having registered office at Delhi through its Director Smt. Varinder Kaur, saying that the said company set-up a small-scale industrial (SSI) unit at H-1 Industrial Area, Sikandarabad, District Bulandshahr, Uttar Pradesh, duly registered as such by the District Industries Centre, Bullandshahr, UP. The company is engaged in the manufacture of decorative electric switch-board sheets and industrial laminated sheets. In 1989, a term loan of ₹47.60 lakhs was advanced by the opposite party (OP), the Uttar Pradesh Financial Corporation (hereinafter referred to as UPFC) and a loan agreement/deed of hypothecation was executed between the parties and duly registered with the Registrar of Companies in Delhi. As stated in the consumer complaint, a letter was received by the complainant in April 1999 from the Managing Director, UPFC, inviting applications for one time settlement (OTS) under some proposed policy for settlement of dues. The complainant sent a letter dated 14.12.1999 to UPFC, enclosing therewith cheque No. 087674 dated 14.12.1999 for ₹50,000/- for the purpose of OTS. The said cheque was duly encashed by UPFC and a certificate to this effect was also issued by the Bank. The complainant wrote to UPFC to furnish statement of account of loan, so as to enable the complainant company to compute OTS amount, but since no statement of accounts was provided by the UPFC, this factor constitutes negligence, deficiency in service and unfair trade practice on the part of the OP. The Regional Manager, UPFC sent letter dated 25.10.2000 to the head office, UPFC giving false report that the said cheque had not been honoured. On 04.01.2001, the Regional Manager, UPFC, NOIDA wrote to the Zonal Manager, UPFC seeking approval for taking physical possession of the industrial unit in question. The said approval was granted by the Zonal Office vide letter dated 23.01.2001, but even before that, the OP took over the possession of the SSI Unit on 16.01.2001. As stated by the complainant, no notice or information was given to them before taking over the said possession.
2. On the other hand, the complainant again requested for OTS vide letters dated 13.06.2001 and 19.06.2001 and paid earnest money of ₹49,442/- vide cheque No. 87675 dated 19.06.2001. The complainant further deposited sums of ₹90,000/- vide cheque dated 07.08.2001 and ₹1,30,000/- vide cheque dated 23.08.2001. The UPFC thus, received total earnest money of ₹3,19,442/- from the complainant, but the said amount had not even been refunded to the complainant. The UPFC also prepared statements of accounts from time to time and levied exorbitant interest on the loan amount, including default interest @7.5%. They also included the additional loan of ₹3.85 lakh, purported to have been given to the complainant, but the factual position was that the said loan was never disbursed to the complainant.
3. It has further been stated that the complainant's unit was declared as a sick unit on 28.11.2003 by a committee appointed by the Government of UP. Such units are bound to be rehabilitated under some government order dated 13.11.95, but the same was not done, although a RBI circular for rehabilitation of sick units dated 16.01.2002 is also available. The complainant paid a sum of ₹8,000/- for rehabilitation package. The case of the complainant is that the entire amount of loan ₹47,54,900/- alongwith ₹14,34,216.90/- as interest @10.5% p.a. as prescribed by RBI for sick SSI units, had been paid to the UPFC. In fact, an additional amount of ₹4,80,081.25/- had been paid in excess to the UPFC and also, earnest money of ₹3,19,442/- had already been paid to them as OTS. The complainants were then liable to be refunded an amount of ₹4,80,081.25/- + ₹3,19,442/- = ₹7,99,523.05/-.
4. In March 2006, the complainant received information that UPFC was contemplating selling the said factory. They wrote many letters not to do the same and rather, rehabilitate the sick unit, but the OP did not respond to their letters. In spite of giving assurances to the contrary, the OP sold their unit for a mere ₹57 lakh to a third party. No notice of sale was sent to the complainant company. Further, the said sale was made, although a writ petition filed by the complainant was pending in the Hon'ble Allahabad High Court. The complainant also alleged that the UPFC also handed over to the purchaser the raw material, semi-finished goods and finished goods valued at ₹81.21_lakh, as per the balance sheet and profit and loss account submitted to the UPFC.
5. It has been stated in the prayer clause that the possession of all the assets of the complainant taken over should be ordered to be restored to the complainant, or in the alternative, a compensation of ₹300 lakh being the value of the assets of the petitioner should be given to them, alongwith interest @29% p.a. The excess amount of ₹7.99 lakh paid to the OP should also be returned to them alongwith 29% interest. The value of raw-material, semi-finished and finished goods amounting to ₹18.1 lakh which were not in the list of assets sold, should also be paid to the complainant alongwith 29% interest as well as the cost of litigation be paid to them.
6. The complaint was resisted by the OP UPFC by filing a reply in which they stated that the said company was incorporated with the following directors :-
1. Shri Virendra Prakash Agarwal
2. Shri Yogesh Kapoor
3. Shri Mohd. Miyan Quareshi
4. Shri Mani Ram Gupta
7. Later on Shri Dinesh Mohan joined the company as 5th Director with the consent and approval of UPFC. However, the company vide letter dated 14.10.1996, under the signatures of Shri Virender Prakash Aggarwal, Director informed UPFC about the appointment of two new Directors, namely, Smt. Varinder Kaur w/o Maninder Singh and Smt. Taranjeet Kaur w/o Sh. Manjeet Singh. Both these persons were appointed Directors with effect from 13.09.1996 but since this was done without prior information/permission and consent of UPFC, it was a breach of terms and conditions of the loan agreement. The UPFC issued a notice to the company on 18.02.1997 saying that since the appointment of new Directors had been made without their approval, it had been decided to recall the entire outstanding loan. The Corporation sent many notices on subsequent days for recovery, but it was forced to invoke personal guarantee of all previous directors and took over the physical possession of the unit on 16.01.2001. In the meantime, the Managing Director of the UPFC invited all chronic defaulters to settle their liabilities under One Time Settlement policy (OTS of the Corporation). The company submitted cheque No. 087674 dated 14.12.99 for ₹50,000/- being token money against OTS which was encashed on 18.12.1999. However, since the company did not submit concrete proposal for OTS and did not disclose the OTS amount and also did not deposit the required token money, the request was not considered although, they were regularly persuaded for submission of viable proposal for OTS. The respondent have stated that an earlier cheque dated 28.12.1998 for ₹50,000/- paid against OTS was dishonoured, but in the report sent to the head office, it was mentioned by mistake that cheque dated 14.12.1999 had been dishonoured. The token money received was credited towards the interest and over-dues, because no concrete proposal for OTS had been received. The OP then sent the case to the Zonal Manager for approval to take over the possession of the unit. The said approval was received on 23.01.2001 but the possession was taken over on 16.01.2001, as there was apprehension of removal of plant & machinery and this was telephonically conveyed to the Zonal Manager. Before taking possession, notice was sent to all Directors vide letter No. 2971-74 dated 12.01.2001. It has also been mentioned in the written statement that the letters dated 13.06.2001 and 19.06.2001 enclosing a cheque of ₹49,442/- sent by the company were aimed at finalisation of the OTS and for getting back the possession of the factory. The proposal for OTS was processed by the Corporation and the Company was advised vide letter dated 05.07.2001 to deposit the earnest money within 7 days, i.e., by 12.07.2001, failing which the token money deposited by the company shall be transferred to their account as per the norms.
8. Regarding the statement of accounts, it has been stated that the said statement was found correct by all five Directors of the company. All these 5 Directors applied for OTS which was considered by the Corporation and approved by the competent authority by waiving of a sum of approximately ₹81.44 lakhs.
9. The Corporation was compelled to take recourse to recover the loan after issuing notice under section 29 of the SFCs Act. After taking over the possession, the assets were advertised in the newspapers and the sale of the unit was affected. After the sale, the Corporation issued personal recovery certificate against the 5 Directors, who came forward for OTS in individual capacities and the Corporation settled the account of each Director for ₹1.5 lakh each and waived off a sum of ₹81.44 lakh due up to 20.03.2009. Further, the proposal for rehabilitation was not accepted, as the unit was not found viable in accordance with the guidelines of the RBI. The unit was advertised for sale under section 29 of the SFCs Act from time to time. Various offers were received, but finally the offer of M/s. G.M. Traders for ₹57 lakh was accepted and it was decided to affect the sale in their favour. It is also mentioned in the written statement that the Corporation had got evaluated the assets of the Unit by the officers of the Corporation as well as by Government approved valuer for amounts of ₹61.6 lakh and ₹53.87 lakh respectively.
10. At the time of hearing before us, learned counsel for the complainant submitted that the respondent UPFC had not allowed them to avail the facility of OTS as per the scheme floated by them, although the complainant had deposited a total amount of ₹3,19,442/- with them for the purpose, as per details given. The learned counsel further stated that although their unit was declared a sick unit by the concerned committee, but still the rehabilitation package was not provided to them. The action of the OP in selling the unit without allowing them to avail the facility of OTS and without giving them opportunity to avail rehabilitation package, was against the declared policy of the Corporation and hence, the complainant was liable to be compensated on this account. The learned counsel has drawn our attention to a report dated 13.06.2001 made by Deputy Senior Manager (Law) of the OP UPFC in which it has been stated that the complainants, Varinder Kaur and Taranjeet Kaur were bonafide directors of the company with effect from 13.09.96 and the approval of the Corporation for their payment was simply a formality. The Deputy Senior Manager (Law) stated that further necessary action should be taken for settlement of accounts with the new directors. The failure on the part of the OP to settle the accounts with them is a deficiency in service for which they should be suitably compensated as per the amended prayer clause of the complaint.
11. The learned counsel for the OP stated that the complainants were inducted as new Directors without the approval of the corporation and hence, the OP rightly decided to recall the loan in question. The husbands of the complainants were also defaulters of the M.P. Financial Corporation and the M.P. State Industrial Development Corporation, having taken loan for their company M/s. Anand Laminates. These facts had not been disclosed to the OP and accordingly, the proposed Directors were not creditworthy. The learned counsel stated that in pursuance of the process of recovery initiated against their personal liabilities, the Corporation had settled account of all five previous Directors at a sum of ₹1.5 lakh each and waived off a sum of ₹81.44 lakh upto 20.03.2009. Regarding the OTS, after the deposit of the token amount, the company submitted an OTS proposal for ₹11.69 lakh on 3.12.2001, but the same was rejected by letter dated 15.01.2002, because the corporation could settle the OTS at ₹35.34 lakh payable within six months. However, the company did not enhance the OTS amount from ₹11.69 lakh to ₹35.34 lakh. Since the company failed to clear their dues despite various opportunities given to them, the unit was auctioned after due notice and after following the procedural formalities in favour of M/s. G.M. Traders for ₹57 lakhs. The learned counsel has drawn our attention to two orders dated 6.11.2006, passed by the Hon'ble High Court of Judicature at Allahabad in two separate writ petitions filed by the complainant vide which both the petitions were dismissed. One of the Writ Petitions was for restraining the OP from auctioning the said unit, while the other petition was made for quashing the sale made in favour of M/s. G.M. Traders. Since both the writ petitions stood dismissed by the Hon'ble High Court, no further action was required to be taken in the present case. The learned counsel also stated that the rehabilitation proposal was rejected, because the Unit was not found viable as per RBI guidelines. The learned counsel stated that in view of these facts, the consumer complaint should be dismissed.
12. We have examined the entire material on record and given a thoughtful consideration to the arguments advanced before us. The first issue that arises for our consideration is whether the appointment of complainants, Varinder Kaur and Taranjeet Kaur, as Directors of the company was required to be approved by the OP Corporation, or such an approval was just a formality. The OP has taken the plea that the said Varinder Kaur had no locus standi to file the present complaint and also, as per the agreement between the company and the OP Corporation, the management could not have been changed without the prior approval of the OP Corporation. However, in this regard, a copy of one Office Memo of the OP UPFC has been placed on record by the complainant with their rejoinder. This office memo is signed by R.K. Srivastava, Deputy Senior Manager (Law) of the OP and the legal opinion has been given on the following two points:-
"1. Whether the Corporation can settle the accounts of the captioned party under OTS or not with the company and the new directors who joined company in 1996?
2. What is the locus standi of the new directors of the company under the Companies Act."
13. The Deputy Senior Manager (Law) has stated that Varinder Kaur and Taranjeet Kaur were bonafide Directors of the company with effect from 13.09.1996, as the necessary Form No. 32 had been filled with the Registrar of Companies and the outgoing Directors, Virender Aggarwal and Dinesh Mohan had nothing to do with the affairs of the company. It has been opined that the Corporation could make settlement of the accounts of the company as OTS with the new directors. It was also stated that formal approval of the Corporation was simply a formality because the new directors had stepped into the shoes of the old Directors, once Form No. 32 was filled and shares held by the old Directors were transferred. In view of the legal opinion given by one officer of the OP Corporation, it is clear that the OP cannot take any such plea that Varinder Kaur had no locus standi to file the present complaint, or the OP Corporation had no obligation to deal with the new Directors. In fact, it has been stated in this very office memo that the possession of the Unit was taken over by the Corporation, even earlier in the year 1997, but the said possession was restored to the new Directors after receiving the payment of ₹3.8 lakh in June 1997. The OP is, therefore, clearly debarred from taking the plea that they had no obligation to deal with the new Directors regarding the affairs of the complainant company.
14. Regarding the OTS scheme, it is an admitted fact that the Complainant Company deposited certain amounts with the Corporation from time to time for the purpose of OTS. A sum of ₹50,000/- was first deposited through cheque dated 14.12.1999 and the amount was admittedly received by OP Corporation on 18.12.1999. The OP have taken the plea that the proposal for OTS was rejected because no concrete proposal had been submitted by the Company and full amount had not been deposited. The sum of ₹50,000/- received was adjusted in the loan account of the company. Later on, the Company has admittedly deposited other amounts of ₹49,442/- and ₹90,000/- and ₹1,30,000/- making it a total of ₹3,19,442/-. The case of the OP Corporation is that the Company had submitted an OTS proposal for ₹11.69 lakh, but the same was rejected as the OP Corporation could settle OTS at ₹35.34 lakh payable in 6 months. It has, however, not been clarified as to what happened to the amount of ₹3,19,442/- deposited by the Company with the OP Corporation. If the proposal for OTS was found not to be in order, it was the duty of the OP Corporation to have refunded the amount paid by the Company and intimated the reasons for rejecting the OTS proposal. We do not find any reason to agree with the contention of the OP Corporation that they could adjust any of the amounts received for the purpose of OTS against the loan account of the company. The OPs are, therefore, liable to refund the entire amount received from the complainants for OTS alongwith interest.
15. The OP have taken the plea that they settled the OTS with the 5 previous Directors of the company. In their affidavit filed on 09.1.2015 before us, the OP have attached copies of letters addressed to two previous Directors. In one such letters addressed to Mohd. Miyan Quareshi, they have clearly stated as follows:-
"In reference to your request subject noted above, this is to inform you that the balance outstanding liabilities against term loan of ₹38,50,000/- and 47,60,000/- sanctioned in your favour and ₹38,50,000/- and 47,54,900/- disbursed respectively has since been settled under One Time Settlement Scheme of the Corporation vide letter no. 72 dated 13.04.2009 for a sum of ₹1,50,000/- (Rupees One Lac Fifty Thousand) only and balance liabilities have been written/waived off.
We have received the entire settled amount of OTS and their remains nothing outstanding in your above mentioned term loan(s) as per our books of accounts as on date."
16. From the version of the OP given above, it is apparent that they settled the accounts with the previous Directors in so far as their personal liabilities towards the loan amount was concerned. It has, however, not been made clear how the said settlement have been arrived at and what happened to the sale proceeds of ₹57 lakh effected in favour of M/s. G.M. Traders in the year 2006. As stated in the preceding paragraph, it was the duty of the OP Corporation to have settled the accounts with the new Directors and to explain clearly as to what happened to the sale proceeds of the unit.
17. The case of the complainant is that after calculating the outstanding loan amount alongwith interest applicable for sick units, they had deposited the entire amount, rather made excess payment of ₹7.99 lakh to the OP Corporation. The complainants have constantly taken the stand that they never availed of the second loan of ₹3.86 lakh. This stand has not been controverted by the OP Corporation anywhere. The OPs were, therefore, duty bound to provide the exact details of the outstanding loan account to the new Directors and settle the accounts with them.
18. Further, it has been stated that the unit was declared a sick unit by a Government committee appointed to deal with such cases. The OPs have taken stand that since the unit was not viable under the RBI Guidelines, it was not liable to be given the rehabilitation package under the scheme of the Government. However, the OP Corporation should have provided the necessary information in detail to the company to this effect including the new Directors.
19. In nutshell, the entire facts and circumstances of the case brings out clearly that the OP has not been able to explain satisfactorily as to how they settled the accounts of the Company and how did they account for the sale proceeds received after the sale of the Unit. As per opinion given by their own legal officer, it was the duty of the OP Corporation to deal with the new Directors and provide them the necessary information about the outstanding liabilities and the position after affecting the sale of the unit. The complainants in their relief clause have also requested for a direction to the OP to furnish the details of the statement of accounts between the complainant and the OP Corporation and also to refund the amount of sale proceeds of the premises and the earnest money for OTS amounting to ₹3,19,442/- deposited with them.
20. In the peculiar set of circumstances of the case, this Consumer Complaint is allowed and the OP Corporation is directed to render up-to-date accounts to the complainant company. The OP Corporation shall provide a detailed statement of accounts to the complainant after crediting the amount received as sale-proceeds of the said unit and the amount deposited by them from time to time by way of repayment of loan. The interest on the loan advanced to the unit should be charged as applicable to sick industrial units. After the necessary detailed account statement is prepared and provided to the complainants, the OP Corporation may take further steps to recover the outstanding amount, if any, from the complainants in accordance with the law. It is also directed that the OP Corporation shall return the amount of ₹3,19,442/- deposited by the complainants towards OTS alongwith interest @12% p.a. from the date of payment of various instalments of the said amount till realisation.
......................J V.K. JAIN PRESIDING MEMBER ...................... DR. B.C. GUPTA MEMBER