Sri.D.Krishnappa,<br /> President<br /> <br /> 1. The grievances of the complainant who has approached this Forum under section 12 of the Consumer Protection Act, 1986 are, that the 1st Opposite party – Bank had arranged Housing Loan Mela for advancing housing loans on 17.03.2006. That he participated in the said mela. On his application and on satisfying the requirements the 1st Opposite party, sanctioned him housing loan of Rs.9,90,000/- vide its sanction letter dated 17.03.2006. Thereafter, he on the request of the 1st Opposite party signed all the necessary documents furnished stamp papers worth Rs.5,305/- for drawing loan agreement and requested for release the funds. But, the 1st Opposite party failed to release the sanctioned loan. That the 2nd Opposite party who is an agent of 1st Opposite party. Both Opposite parties in collusion demanded 3% commission for the loan sanctioned to him. But, he refused to pay 3%, but on their insist, he had offered to pay only 1%, accordingly issued a cheque for Rs.10,000/- drawn on the 1st Opposite party Bank in favour of 2nd Opposite party. Later on he wrote a letter to the 1st Opposite party for stopping payment, but the 1st Opposite party did not oblige. As the 1st Opposite party did not release the loan he had complained to the Regional Manager of 1st Opposite party – Bank through a complaint dated 27.09.2006, but, that also did not yield any result. That on the assurance of sanctioning loan by the 1st Opposite party he had taken up the construction of house, but for want of further funds construction was stopped and he has suffered damages worth Rs.70,000/-. The complainant has also referred to a criminal case filed under 138 of the Negotiable Instruments Act by the 2nd Opposite party, which in our view is nothing to do with this case. Therefore, we do not propose to deliberate at length on it. However, the complainant complained that non-releasing of loan amount by the 1st Opposite party amounts to deficiency and has prayed for a direction to the 1st Opposite party to release the loan amount of Rs.9,90,000/- immediately and not to take interest till the actual payment in paid to him and also award compensation of Rs.70,000/-.<br /> 2. The 1st Opposite party in its version admitted holding of housing loan mela and also sanctioning of loan in favour of the complainant but stated conditionally. It is further contended that the complainant was told that the loan amount would be released after clearance of legal and technical clearance. It is also contended that the complainant had produced certain documents as security for the loan, which were all defective in title, were sent to their legal scrutiny and received legal opinion on 23.09.2006, wherein the legal opinion was given stating that the documents given by the complainant as security for the loan were not adequate and not satisfactory, it was therefore, the loan amount was not released. It is further contended that sanctioning of loan or rejecting the same is purely at its discretion and the complainant cannot force to suit his convenience. The Opposite party denying all other allegations including demand of commission has contended that there is no deficiency on their part and has prayed for dismissal of the complaint.<br /> 3. The 2nd Opposite party has also filed his version contending that he has nothing to do with the loan transaction between the complainant and the 1st Opposite party and further denying all other allegations in toto has prayed for dismissal of the complaint.<br /> 4. The complainant and Senior Manager of the 1st Opposite party and 2nd Opposite party have filed their affidavit evidence reiterating the contentions they have taken in their respective complaint and versions. The complainant and 1st Opposite party have produced certain documents. We have heard the counsel for both the parties and perused the records. <br /> 5. On the above contentions, following points for determination arise.<br /> 1. Whether the Complainant proves that the 1st Opposite party after sanctioning him housing loan on 17.03.2006 has caused deficiency in it’s service in not releasing that amount in his favour?<br /> 2. Whether the complainant is entitled for the relief as sought for?<br /> 3. What order?<br /> 6. Our findings are as under:-<br /> Point no.1 : In the Affirmative.<br /> Point no.2 : Answered in the affirmative in part.<br /> Point no.3 : See the final order.<br /> <br /> REASONS<br /> <br /> 7. Points no. 1 & 2:- The fact that in the housing loan mela held on 17.03.2006, the 1st Opposite party sanctioned housing loan of Rs.9,90,000/- to the complainant is not in dispute. The complainant and the 1st Opposite party have also produced the sanction memorandum to this effect. But, it is the claim of the complainant that the 1st Opposite party did not release the sanctioned loan for utilizing it for construction of the house, but insisted upon payment of commission at 3% through 2nd Opposite party and when he refused to accede to their demand, the 1st Opposite party totally refused to release the sanctioned loan. Whereas, it is the contention of the 1st Opposite party that loan was sanctioned conditionally subject to terms and conditions imposed and approval of the issue of legal and technical clearance. It is further contended that the complainant had produced certain documents as security for repayment of the loan but were found unacceptable as per the legal opinion dated 23.09.2006. Therefore, they refused to release the loan and thereby denied all other allegations. With these differences between the parties we shall examine the oral and documentary evidence adduced by the contesting parties i.e. the complainant and 1st Opposite party. <br /> 8. The sanctioned memorandum issued by the 1st Opposite party sanctioning a loan of Rs.9,90,000/- on 17.03.2006, is undisputed is before us. On going through the entire contents of this letter, it do not indicate that the loan was sanctioned to the complainant subject to the scrutiny and the opinion of legal and technical clearance of 1st Opposite party. The sanctioned memorandum only reveals that the 1st Opposite party – Bank may revoke in part or full withdraw / stop financial assistance at any stages by giving reasonable notice to the borrower. Other condition is only that sanctioned loan to be withdrawn or availed within 6 months from the date of this sanctioned letter. This letter further shows that disbursement of the sanctioned loan will be made on stages. Therefore, the contention of the 1st Opposite party that the loan was sanctioned to the complainant subject to the legal and technical opinion cannot be accepted. The counsel for the 1st Opposite party in the course of arguments invited our attention to the legal security report in respect of the property belongs to the complainant, which is said to be the opinion of the legal officer of the 1st Opposite party, in which the legal advisor has opined that the documents produced by the complainant as security for the loan are not clear as per the law and those documents cannot be accepted. This legal opinion shown to have been given on 23.09.2006 that is after many months after sanctioned memorandum was issued by the 1st Opposite party to the complainant. The learned counsel representing the Opposite party further argued that sanctioning or rejecting the loan is purely the right and discretion of the Bank and the complainant cannot force the Bank to suit his convenience. This is also the stand taken by the 1st Opposite party not only in the version, but also in the affidavit. The learned counsel in support of his arguments in this regard relied on 2 decisions reported in II (1995) CPJ 86 (NC) between Govind Electrods Pvt. Ltd., Vs. General Manager United Commercial Bank and another and I (2001) CPJ 88 of Tamilnadu State Commission, Chennai between C.Gengri Vs. Canara Bank and others. The learned counsel representing the 1st Opposite party in our view appears to have misunderstood the decisions he has relied upon. No doubt as observed by the Hon’ble National Commission and Tamilnadu State Commission in the above decisions, the Banks has the discretion to decide in good faith in the interest of safe guarding public funds whether the party should be given or continued to be given credit facilities or not and Banks undoubtedly is to have legal discretion in granting or rejecting the loan and they cannot be arbitrary in dealing with the public money, for which they are trustees. But, in the cases referred to above, the Banks found the borrowers were defaulters did not repay the money and despite giving declaration they were not having any account or credit facilities from any other Bank, though they were transacting contrary to it, and the Tamilnadu State Commission has held that the bank has to arrive at a decision after examining relevant facts and circumstances before granting or refusing the loan. There cannot be any doubt with regard to the care that the Banks are required to exercise as observed by the Hon’ble National Commission and Tamilnadu State Commission. But, at the same time we would say that the Bank cannot also be arbitrary in either advancing loan or rejecting loan. Therefore, what the conclusion we can reach on this is, if the Bank found that an applicant who had applied for financial assistance was not a worthy client or applicant or security furnished is not acceptable or even where he has no capacity to repay the loan, in such a cases the Bank or Banks have definatory have discretion to extend financial assistant or not.<br /> 9. Coming to the facts of the case on hand, as we have already pointed out above, the 1st Opposite party – Bank had sanctioned loan without any conditions of subject to legal or technical scrutiny. But, with other conditions, which are not much relevant to be discussed here. Assuming that the Opposite party after issue of sanctioned memorandum as we have noticed in this case at the later stage before releasing the loan amount found that the applicant, the complainant has produced security documents, which are either defective or do not stand the legal scrutiny or unacceptable, it can at that stage also can stop the releasing of fund and it is bound to exercise such a care before releasing of fund or sanctioning of loan. If the 1st Opposite party after receipt of the legal opinion on 23.09.2006 found that the documents furnished by the complainant were not acceptable and on the basis of such security, the sanctioned loan amount cannot be released, then what was the course upon it is a pertinent question. In such a case even if the 1st Opposite party sanctioned the loan to the complainant and found later that the security documents furnished by him were not legal, and acceptable then it should have informed the complainant by issue of a notice intimating him that the security documents furnished by him cannot be accepted and to give him an opportunity to the complainant to furnish better documents. As referred to above by us, the loan sanctioned memorandum given by 1st Opposite party itself provides for giving reasonable notice to the borrower, in the event of the 1st Opposite party takes decision of revoking, withdrawing or stopping financial assistance. But, as indicated by the 1st Opposite party itself in the sanction memorandum they have not followed the condition of sanction by issuing a notice to the complainant to produce better documents. Though, the learned counsel for the 1st Opposite party in the course of arguments submitted that the 1st Opposite party had orally informed the complainant to this effect, do not inspire our confidence because of the developments of this case. As the sanctioned letter provides for a written notice to the borrower, the contention of the 1st Opposite party that the complainant was informed orally in this regard fall short of legal requirement. Further, it could be seen that the complaint, when 1st Opposite party refused to release loan even complained to the Regional Manager of Canara Bank vide his letter dated 27.09.2006. The complainant has averred in his affidavit that despite he approaching the 1st Opposite party to release the loan, he did not release it, therefore, had to complain against it to the Regional Manager who also did not bother to reply to him nor intimated him to furnish better security documents. It could be seen that according to 1st Opposite party, its legal advisor gave his opinion on 23/9/06 regarding in acceptability of the documents given by the complainant. The complainant gave a complaint to the Regional Manager on 27.09.2006. Even at that stage also neither the Regional Manager nor the 1st Opposite party informed the complainant that the security documents produced by him are not legal and to produce better documents. The 1st Opposite party and the Regional Manager through out exhibited their silence or turned defer to the grievance of the complainant and complainant to approach this Forum with this complaint. This act of the 1st Opposite party is nothing sort of arbitrariness and it should not think that it has the privilege of sitting over the grievance of the customers in the guise of exercising its discretion as contended by them in their version and affidavit evidence. Therefore, the 1st Opposite party ought not to have kept quite by withholding the loan sanctioned and on the other hand it should have extended an opportunity to the complainant to meet its requirements, then after affording such an opportunity also if complainant failed to meet its requirements, then 1st Opposite party could have exercised its discretion of cancelling or stopping the loan. Therefore, in the absence of following such a procedure, we find that there is gross deficiency on the part of the 1st. <br /> 10. The 2nd Opposite party is not even an employee of the 1st Opposite party, the complainant attributed convenience between the 1st and 2nd Opposite party in demanding commission for having sanctioned loan. In this regard, the complainant though has referred to a proceeding of the 2nd Opposite party under section 138 of the Negotiable Instrument Act, but in the circumstances of this case, we do not find it has any relevancy to this case. The complainant has filed to establish any nexus between the Opposite parties and as nor relief is sought against 2nd Opposite party, we do not propose to go at length. However, it is sufficient for us to conclude that the complainant has proved deficiency in the service of the 1st Opposite party and the complaint deserves to be allowed. The complainant has contended as if he had taken up the construction of the building, it was in the half way as the 1st Opposite party did not release the loan, as the result he suffered financial loss to the extent of Rs.70,000/- and in this regard he has produced a Xerox copy of a work progress report issued by an Engineer. But, that Engineer has not been examined nor an affidavit is got filed. Therefore, that report in our view is not sufficient to act upon in support of the claim of the complainant. Therefore the complainant in our view has failed to prove the loss he has suffered as contended by him. With the result, we pass the following order:- <br /> ORDER<br /> <br /> 1. The Complaint is allowed in part.<br /> 2. The 1st Opposite party is directed to issue a notice to the complainant within 15 days from the date of this order calling upon him to produce required legal documents as security for the releasing of loan amount and on so furnishing the 1st Opposite party shall get them scrutinized within 15 days from the date of receipt of the original documents and if they are found acceptable release the loan amount in favour of the complainant in stages as proposed by them.<br /> 3. The 1st Opposite party shall pay damages of Rs.5,000/- to the complainant within 2 months from the date of this order failing which it shall pay interest at 15% p.a. from the date of filing of this complaint till the date of payment.<br /> 4. Further the 1st Opposite party – Bank shall recover that amount of Rs.5,000/- from the Manager who was working at that time and who has failed to provide efficient service in accordance with the established norms.<br /> 5. The 1st Opposite party is also directed to pay cost of this complaint Rs.1,000/-.<br /> 6. The complaint against the 2nd Opposite party is dismissed. <br /> 7. Give a copy of this order to each party according to Rules.<br />