Order-15.
Date-11/01/2017.
Shri Kamal De, President.
This is an application u/s.12 of the C.P. Act, 1986.
This case relates to deficiency of service and unfair trade practice against the OPs, being Canara Bank.
The factual matrix of complainants’ case, in short, is that complainant no.1 is an employee of OP Bank and complainant 2 is a student. The OPs are Public Sector Nationalized Bank. The complainant no.1 opened a Recurring Deposit Account being No.26921821165 with the OP2 for Rs.1,000/- per month for a period of 5 years on 18-05-2011. Complainant no.2 has Educational Loan Account no.03966517899 with OP3. Complainant no.1 was a co-borrower in respect of the said Educational Loan Account. As per complainants’ instruction given by complainant no.1 to OP2, OP2 would debit instalment amount on recurring deposit of Rs.1,000/- per month from Overdraft Account No.39625310571 of the complainant. The maturity value of the recurring deposit stands to Rs.77,388/-. In the month of March, 2014 complainant no.1 suffered some financial crisis due to non-payment of salary of Rs.3,50,000/- approx for a period of 6 months for which the complainant no.1 wanted to close the early account before its date of maturity on 27-03-2014. At that time Senior Manager of OP2 expressed his inability to close the early account. Owing to instruction from OP1 the complainant no.1 submitted letters dated 25-03-2014 and 27-03-2014 to OP2 for closure of early account due to financial hardship. The Senior Manager of OP2 forwarded the letter of the complainant no.1 to OP1 for closure of early account. The complainant received a letter from OP2 in the month of April, 2014 in which OP2 informed the complainant that the proceed of the R.D. A/c. has already been to the Educational Loan Account on 31-03-2014 due to overdue of Rs.1,00,778/-in the Education Loan Account without any prior intimation to the complainant. It is significant to mention that OP closed the R.D. Account for adjustment of educational loan before maturity of RDA. The complainant made a complaint before the RBI, Ombudsman on 15-05-2014 for arbitrary adjustment of Rs.35,708/- regarding deposit with the Educational Loan Account but the issue remained unresolved. Complainant no.1, thereafter, vide letter dated 28-07-2014 represented the matter before the Hon’ble Finance Minister Shri Arun Jetly, Govt. of India. On the basis of application of complainants no.1 and 2 for extending repayment holiday at least for one year as per rule or till the complainant no.2 gets employment, OP vide reference No.KCRAHEL Restructure 2032012 dated 03-11-2012 permitted/granted repayment Holiday for one year i.e. October, 2013. The complainants further submitted that during the repayment holiday period of Educational Loan no interest has been charged by the OP on Educational Loan Account in terms of the circular no.107/2008, 181/2004 and 47/2012 dated 28-04-2008, 02-08-2004 and 14-02-2012. On 16-04-2015 complainant no.2 received a letter from OPs 1 and 2 in which the OP was pleased to inform complainant no.2 that an amount of Rs.3,11,611/- was refunded to the loan account on 07-04-2015 towards excess interest charged to the complainant no.2 account during the repayment holiday period. The complainants’ case is that OPs closed the RD A/c. before maturity due to outstanding of Rs.1,00,778/- in the Educational Loan Account of complainant no.2 whereas OPs admitted that an amount of Rs.3,11,611/- refunded to the Educational Loan Account of complainant no.2. Complainant no.1 vide letter dated 11-06-2016 requested the OP1 to redress grievances of the complainant no.1 for arbitrary closure of RD Account for adjustment with EL Account when complainant no.1 suffered serious financial crisis. Complainant has also alleged that OP1 had not adjusted other 5 RD Account of complainant no.1 being maintained at Bowbazar Branch, Kolkata for the reason best known to the OP Bank. The complainants’ further case is that complainant no.1 has suffered monetary loss due to the loss to the tune of Rs.77,388/- towards maturity value of the RD and that complainants have also suffered mental agony and harassment. OP1 vide letter dated 17-11-2015 assured the complainant no.1 that they have sought certain clarifications/demands from the concerned Sections and Branch and they would revert back to the complainant shortly in this matter. The complainants have alleged deficiency and negligence in service for closing the recurring deposit account to complainant no.1 before maturity. OP Bank has not, however, given any letter in such connection thereafter. The cause of action arose on 17-11-2015, hence, this case.
OPs have contested the case in filing written version contending, inter alia, that the petition of complaint is not at all maintainable in the eye of law or in fact and the complaint petition is misconceived and harassive. It is stated that the complainant no.2 was granted educational loan to the tune of Rs.7,150/- and complainant no.2 was the co-obligant for such facilities. The complainant no.1 was an employee of OP Bank. The repayment schedule was for one year after completion of course or 6 months of getting employment whichever is earlier. Complainant no.1 after completing the course failed and neglected to make the repayment since the dues were occurring the OPs. OPs after exercising the General Lien adjusted the proceeds of recurring deposit. It is also stated that there was no illegality and or irregularity on the part of the OPs in adjusting the proceeds of the recurring deposits towards loan account. It is stated that statement made in paragraphs 1,2,3,4 and 5 in the complaint petition are matters of record. It is also stated that the complainants are bound to adhere to the terms of Section in respect of Educational Loan. OPs further stated that they had exercised General Lien in respect of Recurrent Deposit Account of the complainants for adjusting the dues of the Educational Loan and such action of the OPs is not illegal and wrongful. It is also stated that the excess interest which was charged has immediately reversed in the account of the complainants. It is denied that the complainants suffered monetary loss to the tune of Rs.77,388/-. The proceeds of the recurring deposit have been adjusted towards the outstanding of the Education Loan being public money. It is stated that there was no negligence or deficiency on the part of the OPs. The OPs have prayed for dismissal of the case.
Point for Decision
- Whether the OPs have been deficient in rendering services to the complainant?
- Whether the OPs have adjusted the proceeds of recurring deposit towards loan account of the complainant as per Banker’s Right of Lien/RBI Guideline?
- Whether the OPs have indulged in unfair trade practice?
- Whether the complainants are entitled to get the relief as prayed for?
Decision with Reasons
We take up all the issues as above together decision for the sake of convenience, brevity and as the issues are inter-related.
We have travelled over the documents on record i.e. Xerox copy of recurring deposit account no.26921821165 along with statement of accounts thereto, Xerox copy of letter addressed to the OP Bank on behalf of the complainant dated 27-03-2014 for closure of RD A/c. before maturity, Xerox copy of another letter dated 25-03-2014 addressed to OP Bank from the end of complainant for closure of RD A/c before maturity, Xerox copy of letter of OP Bank dated 31-03-2014 to the complainant informing prematured closure of RD A/c., Xerox copy of the order dated 27-06-2014 of Banking Ombudsman, Xerox copy of the order dated 23-05-2014 by the OP Bank to the Banking Ombudsman, Xerox copy of the letter of the Nodal Officer of OP Bank dated 24-06-2014, Banking Ombudsman, Xerox copy of the letter dated 22-04-2014 to Mr. Arun Jetly, Hon’ble Finance Minister of Govt. of India from the end of the complainants, Xerox copy of the letter dated 28-07-2014 addressed to Mr. Arun Jetly, Hon’ble Finance Minister, Govt. of India by the complainants, Xerox copy of the order dated 03-11-2012 in respect of restructure of the education loan of the complainant no.2, Xerox copy of the order dated 02-08-2014 regarding no charge of any penal interest for default in interest servicing during the period of repayment holiday, Xerox copy of letter dated 14-02-2012 in respect of modifications in loan scheme, Xerox copy of the letter dated 16-04-2015 in respect of refund of interest to the loan account, Xerox copy of the letter dated 16-04-2015 informing that excess amount of Rs.3,11,611/- refunded to the loan amount on 07-04-2015, Xerox copy of the letter dated 11-06-2015 addressed to the OP Bank by the complainant for reversing the RD A/c, Xerox copy of the letter dated Nil informing the complainant that the proceeds of the RD transferred to overdue Educational Loan A/c., Xerox copy of letter dated 17-11-2015 assuring reversal of amount of Rs.4,530/- to RD Account and other documents on record.
We have also browsed over the Banking information in the matter of Banker’s Right to Lien regarding banking transactions.
It appears that from the documents on record that OP2 closed the recurring deposit account of the complainant no.1 being no.26921821165 on 31-03-2014 i.e. before the date of maturity and proceed available was credited and/or adjusted with additional loan of complainant no.2. Complainant no.1 was the co-borrower of the Educational Loan of the complainant No.2. We find that the recurring deposit account with OP2 was for a period of 5 years on and from 18-05-2011 which was supposed to be matured on 18-05-2016 with maturity value of Rs.77,358/-. The question is can Bank close the recurring deposit and credit the proceeds of the recurring deposit to the Education Loan of complainant no.2? The whole gamut of controversy hovers around such question. We find that the Educational Loan was a clear loan without any collateral security. The recurring deposit was not bailed to the OP Bank at the time of granting Educational Loan. Lien can only be initiated after sending a prior notice to the depositor expressing intention to exercise the right of lien. The notice should be of a reasonable period. We find that complainants were not informed anything with prior notice. We find that complainant no.1 expressed intention to incur his RD Account by submitting letters dated 25-03-2014 and 27-03-2017 to the OPs but OPs did not take any step or respond to the letters of the complainant for closure of the recurring deposit. We find that OP closed the RD A/c. without serving any prior notice upon the depositor and crediting the proceeds to the loan account of his son. The complainant was communicated about it by letter dated 31-03-2014 when the mischief was already done. Therefore, we find that there was no communication with record to the closure of recurring deposit and credit of the same to the loan account. The Bank embarked upon such measure without obtaining any consent from the complainants. We think that the bank has committed an illegality violating the banker’s Right to Lien.
This is one side of the coin. The other point is whether there was any due at all in the loan account? We find from the statement of accounts that the complainant no.2 had paid Rs.2,48,908/- when payment is not required due to repayment holiday out of Education Loan granted Rs.7.5 lakhs. The repayment loan was amended till October, 2013 by the competent authority. The complainant has paid Rs.2,48,908/- within the repayment holiday within which repayment is not required. The payment of Rs.2,48,908/- was made regularly by the complainant. We also find that the complainant complained against the wrong doing of the concerned bank to the Hon’ble Finance Minister vide letter dated 28-07-2014. We also find that as a follow up and as per direction of the Hon’ble Finance Minister, the bank informed the complainant dated 14-04-2016 that Rs.3,11,611/- was credited to the Loan Account while assessing overdues pertaining to the education loan account of complainant no.2. So, logically it follows that there was no overdues of education loan as on 31-03-2014 i.e. on the date of closure of the recurring deposit account and transfer of the proceed to the education loan of the complainant no.2. The banker’s Right to Lien can only be used when deposit becomes due i.e. on 18-05-2016. We find that OP Bank acknowledged its mistake for excess interest debited towards Education Loan for the complainant amounting to Rs.3,11,611/- and the complainant no.2 by that time repaid Rs.2,48,908/-. So, the stand of the OPs that educational loan was overdue is incorrect and baseless. We also find that OP Bank has also clandestinely admitted in its written version in para 12 that excess interest was charged and was reversed in the account of the complainant immediately.
The proceeds of the recurring deposits cannot be adjusted towards the outstanding of the Educational Loan. Moreover, there was no outstanding or overdue in the education loan account of complainant no.2. The complainant paid Rs.2,48,908/- within the repayment holiday within which repayment is not required. Bank has also admitted its mistake on its own for excess interest and, in fact, there was no overdue in education loan at the material point of time of closure of the recurring deposit of the complainant i.e. on 31-03-2014. We find that the OP bank has acted illegally and in capricious manner. In the matter of closure by recurring deposit account and crediting the proceeds of the same to the loan account of his son we find that the bank authority arbitrarily adjusted Rs.35,708/- RD with the Educational Loan Account. The OP Bank has been deficient in rendering service to the complainants.
Complainant was in financial crunch due to non-implement of salary of Rs.3,50,000/- approx for a period of 6 months for which the complainant wanted to close the RD A/c. before maturity on 27-03-2014 and complainant also gave letter to OP2 for closure of the RD A/c. before maturity on 27-03-2017 and that due to financial hardship and reap the money in his hard days. But the bank authority did not take any effective step. On the contrary, OP the bank authority has illegally closed the said account and adjusted the proceed of the same to the credit account of his son. This illegal course of action, we think, amounts to deficiency of service and unfair trade practice.
It is worthy to mention at the very outset that complainant no.1 was the co-borrower of Education Loan of complainant no.2. But the said Education Loan was a clear Loan and without any collateral Security. The said recurring deposit was not also bailed to the Bank at the time of granting loan.
Ld. Lawyer for the OPs has argued that the claim of the complainant is hit u/s.171 of Indian Contract Act, 1872 and the Bank has the right to set off. But we are afraid we are not consensus of opinion with such argument as advanced by the Ld. Lawyer appearing for the OPs. We think that Sec.171 of Contract Act, 1872 is not applicable as argued by the Ld. Lawyer for the OP Bank because the concept of Banker’s Lien is generally in respect of what are called collaterals, i.e. documents, securities etc. which come into the hands of the Banker and are intended to cover the Banker’s claim against the customer.
The complainant no.1 happens to be an employee of the OP Bank. We find that he has been dealt with most unsympathetically, unethically and illegally and OP bank has accordingly put up a gesture of deficiency of service. Complainant no.2 happens to be a student pursuing the course of co-pilotship. He also presumably suffered mental trauma. Banks again exercised lien most illegally over the personal account of customer on the ground that money was due to the bank in another account where he acts in a different capacity. Moreover, the account was not bailed. We think that complainants have suffered financial loss as well as mental pain and agony as such. The complainants underwent mammoth and monumental harassment and suffering and the complainants need to be compensated by the OP Bank adequately as the compensation should be commensurate with the magnitude and gravity of deficiency and the mental trauma, agony and harassment the aggrieved had borne with the days together.
All the issues are thus decided in favour of the comp0lainaints as against the OPs.
BOOKS REFERRED TO BY THE PARTIES .-
For the complainants . Indian Contract Act, 1872.
Decisions reported in 2(2015) CPJ 350 NC, Revision Petition No.2458 of 2003 by Hon’ble N.C. in Vysya Bank Ltd., vs. Y. S. Sreeram Satty, AIR 1994 SC 853, AIR 1968 SC 1413, (1992) 94 BOMLR 585 as cited by the Ld. Lawyer appearing from the side of the complainants.
For the OPs . Indian Contract Act, 1872.
Decision delivered by Hon’ble Supreme Court (Syndicate Bank vs. Vijay
Kumar and Ors. ) delivered on 5th March, 1992, equivalent citations . AIR
1992 SC 1066
In result, the case merits success.
Hence,
Ordered
That the instant case be and the same is allowed on contest against the OPs.
OPs are jointly and severally directed to refund an amount of Rs.35,708/- (Rupees Thirty Five thousand seven hundred and eight only) along with interest at the rate of12 percent p.a. (Twelve per cent per annum) w.e.f. 31-03-2014 till compliance to the complainants within one month from the date of this order.
OPs are also jointly and severally directed to pay an amount of Rs.3 lakhs (Rupees Three Lakhs only) towards compensation for causing harassment, mental pain and agony to the complainants apart from litigation cost of Rs.15,000/- within the said stipulated period.
Failure to comply with the order will entitle the complainants to put the order into execution u/s.25 read with Section 27 of the C.P. Act and in that event OPs shall be liable to pay penal damage at the rate ofRs.5,000/- per month to be paid to this Forum till full and final satisfaction of the decree.
Copies of the judgment be delivered to the parties free of cost.
