Kerala

StateCommission

CC/09/28

Koshy Varghese - Complainant(s)

Versus

HDFC Bank Ltd. - Opp.Party(s)

R.Narayan

31 Oct 2016

ORDER

KERALA STATE CONSUMER DISPUTES REDRESSAL COMMISSION SISUVIHARLANE VAZHUTHACADU THIRUVANANTHAPURAM

 

CC.NO.28/09

JUDGMENT DATED : 31.10.2016

PRESENT

 

SRI.K.CHANDRADAS NADAR   : JUDICIAL MEMBER

SMT.A.RADHA                         : MEMBER

 

COMPLAINANT

 

Koshy Varghese,

Thavalathil House,

Mele Vettipuram,

Pathanamthitta – 689 645

 

(By Adv.Sri.T.M.Abdul Latiff, Adv.Sri.Abdul Rahiman &   

 Adv.Sri.Narayan.R)

 

Vs

OPPOSITE PARTIES

 

1. HDFC Bank Ltd,

Trade World,

Rep.by its Manager,

Depository Services,

A-Wing, Ground Floor,

Kamala Mills Compound,

Senapati Bapat Marg,

Lower Parel, Mumbai – 400 013

 

2.The Branch Manager,

HDFC Bank Ltd,

Ernakulam

 

3. The Branch Manager,

HDFC Bank Ltd,

Pathanamthitta

 

(By Adv.Sri.T.L.Sreeram)

 

JUDGMENT

 

SRI.K.CHANDRADAS NADAR   : JUDICIAL MEMBER

        This is a complaint filed under section 17 of the Consumer Protection Act. The allegations in the complaint in brief are the following. Complainant had purchased 3000 equity shares of Aban Offshore Ltd. Originally 500 shares and thereafter 2500 shares were allotted to him. From the said shares complainant sold 105 shares on 31.12.2007 and retained the remaining 2895 shares. In the account maintained in the name of the complainant under the depository services of the bank the value of the said shares was Rs.1,48,43,070.25/.  The opposite party bank had allowed the complainant to avail loan on the security deposit of the shares. The bank was prepared to provide 50% of the share value amount as existed on the date of such pledge. The bank was not given authorization or power or authority to sell the shares. Only if complainant gave written permission to do so the Bank could sell the same. The complainant was always ready to pay the liability due to the bank by diverting funds from other sources if they made demand after giving sufficient time. Though the complainant was entitled to avail loan of Rs.75,00,000/- he had only drawn an amount of Rs.20,00,000/-. Even when there was dwindling in the market value of shares held by the complainant, the value of the shares was sufficient to meet the loan liability to the bank. When the bank demanded payment of loan amounts the complainant paid an amount of Rs.10,00,000/- and he was ready to pay the balance amount. The bank under no circumstance could resort to the sale of shares held by the complainant since in future there would have been spurt in the share value.

        2.     But without giving proper and valid notice or demanding payment of amounts due in respect of the loan and without giving sufficient time to pay off the loan and without the consent and knowledge of the complainant, the opp.party bank sold the shares held by the complainant for a price of Rs.454/-  per share and later for a price of Rs.270/- per share.  After retaining about 100 shares all the remaining shares were sold for pittance. The bank which is carrying out depository services knew very well then that the shares of Aban Offshore  Ltd would be reaching a rate exceeding Rs.1500/- per share within few days. The shares were sold on 29.01.2009 and the present value of the shares is Rs.1600/- per share. The said price was reached within a couple of days and the complainant was not even informed the name of the person to whom sale was made. The complainant a customer was deceived by the bank and taken undue advantage of which amounts to unfair trade practice. Considering the present value of the shares sold it would have fetched a value of Rs.45,00,000/-. But the sale price obtained was Rs.11,41,559/-.  The difference in value is Rs.35,00,000/-. The complainant was ready to hold the said shares and to pay off the liability of the bank without difficulty. By the illegal sale of shares severe mental pressure and agony were caused to the complainant. Hence the complaint. The complainant seeks direction to the opposite parties to pay an amount of Rs.45,00,000/- towards the value of 2789/- shares of Aban Offshore Ltd and claims a compensation of Rs.10,00,000/- towards the mental agony and distress caused to the complainant by the alleged illegal sale of shares.

3.     Opposite parties field joint version and after amendment of the complaint an additional version. The contentions raised are that the complainant is not a consumer as defined under Section 2 (1) (d) of the Consumer Protection Act. The loan against shares is an overdraft account opened by the complainant with the opposite party bank against the security of equity shares pledged with them. Further investment  in equity shares is in the nature of speculative investment made for commercial purpose. The investment carries an inherent risk of capital erosion which can be caused by dips in the stock market. Such investments cannot be said to be made for earning livelihood since they do not guarantee any returns and can even wipe out the entire investment made by the investor. Dealing with equity shares can not be treated as one for earning livelihood. Loan against shares was granted to the complainant on the basis of a loan agreement cum guarantee document executed between the parties which attracts Section 172 of the Indian Contract Act. Further complainant had executed letter of continuity, promissory note and irrevocable power of attorney by which the shares pledged in favour of the opposite parties were authorised to be disposed of in case of default, among other things. The provisions incorporated  in the agreement executed between the parties confers full right / authority to the bank to sell, dispose of or realise the securities on such terms and for such price as the bank deems fit and adjust the proceeds towards the satisfaction of the bank dues in the over draft account including charges , expenses etc in the eventually of the expiry of the term or in case the borrower fails to make payment due to the bank in respect of over draft facility availed by him.

4.     Details regarding the allotment of shares to the complainant are not known to the opposite parties. The value of shares alleged in the complaint are not correct. The allegations in the complaint itself would show that there was balance outstanding in the loan account of the complainant demand for payment of which was made by the bank and that there was outstanding balance in the loan account even after demand. When outstanding balance rose to Rs. 11,27,532.28/-  two telegrams were sent to the complainant on 30.12.2008 and 03.01.2009. 2175 shares were sold on 27.01.2009. 27 days after the date of first notice at the rate of Rs.454.27/- per share . Even after notices the complainant took no step to regularise the account. Hence the bank was left with no alternative, but to invoke the relevant provisions in the agreement between the parties. When the sale proceeds fell short to regularise the account notice was again sent on 09.03.2009 by way of telegram but the complainant did not turn up. Hence the bank was left with no other alternative but to sell 614/- shares on 16.03.2009 at the rate of Rs.261.14/-  per share. An amount of Rs.1,59,390.88/- was credited in the account of the complainant. The value of shares as in November 2009 is not a matter to be considered in this case. The opposite parties did not commit any unfair trade practice or deficiency in service. The loan account is yet to be closed by the complainant and he continues to be a defaulter. The complaint is of experimental nature and is an attempt to wriggle out from the liability towards the bank. The complainant suffered  no mental agony as alleged. The opposite parties are not duty bound to look into the performance of a particular company and to wait for increase in the share value to its optimum level as alleged in the complaint. In so far as the complainant alleges cheating from the side of the opposite parties, this commission lacks jurisdiction to entertain the complaint. The complainant is not entitled to claim any relief.

        5.     In the additional version the opposite parties refuted the claim of the complainant for Rs.45,00,000/- towards the value of shares sold by the opposite parties as there was no illegality in the sale as alleged in the complaint. According to the opposite parties the attempt of the complainant is to make illegal enrichment at the instance of the opposite parties.

        6.     On the allegations in the complaint and the contentions raised by the opposite parties the following points arise for determination.

1.  Is the complainant a consumer under the provisions of

 the Consumer Protection Act?

 

2. Whether the complainant has succeeded in establishing

deficiency in service or unfair trade practice on the part of the opposite parties?

 

3. What are the reliefs if any to be granted to the

    Complainant?

 

        7.     The evidence in this complaint case consists of the deposition of the complainant as PW1 depositions of two witnesses of the opposite parties as DWs 1 & 2 Exts. A1 to A12 marked on the side of the complainant and Exts.B1 to B11 marked on the side of the opposite parties.

Point Nos. 1 & 2

8.     It is admitted that the complainant was allowed to avail loan from the opposite parties on the security deposit of 2895 equity shares of the company Aban Offshore Ltd. The allegation in the complaint is that the complainant had drawn an amount of Rs.20,00,000/- only though he was entitled to avail a loan of Rs.75,00,000/-. Loan was allowed to be availed to the extent of 50%  of the value of the shares offered as security. The opposite party bank without giving proper and valid notice demanding payment of the loan liability sold off the shares held by the complainant for a meagre price. Thus the opposite parties have committed unfair trade practice and deceived the complainant. The complainant has executed Ext.B1 loan agreement cum guarantee to avail the loan. As per the agreement the opposite parties are given full authority to sell or dispose of the shares and adjust the proceeds towards satisfaction of the loan. The opposite parties have a contention that investment in equity shares is speculative in nature made for commercial purpose. The investment in shares may be having inherent risk of loss but here deficiency in service alleged with reference to the loan granted to the complainant and the transactions need not necessarily be commercial in nature as contended by the opposite parties. Here sale of shares is made in enforcement of the security for the loan. So the nature of the transaction between the parties is obvious. The equity shares were not deposited for speculative trade with a view to earn profit. But the equity shares were deposited as security for the loan availed from the opposite parties. Right to sell the equity shares was granted to the opposite parties only when there was fall in the value of shares and thereby security offered to the bank became insufficient and the short fall was not made good despite notice and also in the case of failure of the borrower to make payments due to the bank. This has to be done in enforcement of the security offered and is a mode of repayment or realisation of the loan.

        9.     No doubt banking service falls within the purview of the consumer Protection act but if only there is deficiency in service on the part of the bank or there is unfair trade practice on  the part of the bank. Allegations like cheating are outside the purview of the Consumer Protection Act. So also deficiency can arise only in the matter of service. As per the agreement it is the obligations of the borrower to repay the loan and no deficiency in service on the part of the bank can arise in the matter of repayment of the loan or in enforcing the repayment. The sale of securities is a mode of enforcing repayment.

        10.   The main allegation in the complaint is that the opposite parties enforced sale of securities without seven days notice as agreed between the parties. This according to the complainant amounts to unfair trade practice and deficiency in service on the part of the opposite parties.  The opposite parties contend that three notices by telegrams were given to the complainant before enforcing the security by sale of shares. It is admitted in the version that 2175 shares were sold by the opposite parties on 27.01.2009 after 27 days from the date of first notice. The shares were sold for a price of Rs.454.27 per share and the amount was credited in the account of the complainant. Subsequently, notice by way of telegram was given on 09.03.2009 and on the failure of the complainant to regularise the accounts 614 shares were sold on 16.03.2009 at the rate of Rs.261.14 per share and Rs.1,59,390.88/- was credited in the account of the complainant.

        11.   The contentions of the complainant are two fold. Firstly, it is contended that the shares were sold for a meagre price. Had the bank waited for some more time there would have been large increase in the share value of the Aban Offshore Ltd. But in so far as the shares are not intended as investment there is no question of prudent management in the matter of sale of shares by the bank. Here the bank was enforcing its security on the failure of the complainant to regularise the accounts. So in Law the bank was not obliged to wait for increase in the share value before effecting sale. The second contention of the complainant is that seven days notice as prescribed in ExtB1 agreement between the parties was not given to the complainant and thereby the opposite parties have committed deficiency in service. A subsidiary question also arises whether notice by telegram was sufficient. In this regard, Clause 12 of Ext.B1 loan agreement cum guarantee is relevant. The said clause grants authority to the bank to require the borrower at any time to change the securities pledged or mortgaged. Such change can be in the securities or mortgage made by the borrower or guarantor. Sub Clauses 2 & 3 of Clause 12 are particularly relevant and read thus: 2.If at any time the value of the said Securities falls so as to create a deficiency in the margin requirement specified by the Bank from time to time or there is an excess over the overdraft facility limit, the Borrower shall within seven days of notice from the Bank, deposit with the Bank additional security in the form of cash or such other securities which may be acceptable to the Bank, falling which the Bank may at its discretion sell, dispose off or realize any or all of the securities then held by the bank without being liable for any loss or damage or diminishes in value sustained thereby”.

3. “ In case of expiry of the term or in case the Borrower falls to make any payment due to the bank in respect of overdraft facility, the Bank would have the full rights to sell, dispose off or realize the said Securities after giving the Borrower, notice of not less than 7 (seven) days, on such terms and for such price that the bank deems fit, and apply that net proceeds towards the satisfaction of the balance outstanding in the overdraft account including charges, expenses etc”.

        13.   In the present case Clause 2 is not applicable as the parties have no case that as value of securities fell deficit in the margin requirement specified by the bank or in the overdraft facility limit was created. This was a case where the borrower failed to make payment due to the bank in respect of the over draft facility. So sub clause 3 of Clause 12 is applicable. As per Sub Clause 2 referred to earlier, it is the duty of the borrower to deposit additional security within seven days of notice from the bank. So once notice is given the sale can be made any time after seven days unless the borrower fulfils his obligations.        

        14.   Sub Clause 3 referred to earlier is worded slightly differently. In case the borrower fails to make payment due to the bank in respect of over draft facility, the bank has the right to sell dispose of or realise the securities after giving the borrower notice of not less than seven days. Here also once notice is given it is the duty of the borrower to deposit the money to regularise the accounts, for that is the obligation under taken by the borrower as per the agreement between the parties.

        15.   The opposite parties have produced and marked in evidence the telegrams sent by them as well as evidence to show that telegrams were in fact sent as claimed in the version. In Ext.B1 no particular mode of notice is mentioned. So it is sufficient that the failure of the complainant to deposit the money as agreed is brought his notice in a reasonable way. The text of the telegrams show that intimations were earlier given to the complainant to regularise his accounts and in the case of his further failure the shares could be sold. The contention of the complainant is that he had deposited in various instalments Rs.10,00,000/-. The statements of accounts of the complainant are brought in evidence but it is quite obvious that the complainant failed to regularise the accounts as demanded by the opposite parties. It was in that context the shares were sold. There is no doubt that the shares were sold after seven days from the date of the relevant telegrams.

        16.   Several decisions were relied on by the learned counsel for the complainant to contend that there was deficiency in service on the part of the opposite parties. In U.Bhikamchand.K. & Nirmal Kumar Jain vs. HDFC Bank Ltd 2011 STPL (CL) 1676 a decision of the Hon’ble National Commission the bank sold away the pledged shares without notice at all. In Vimal Chandra Grover Vs Bank of India 2000 STPL (CL) 180 the Hon’ble Supreme Court considered a case of sale of pledged shares. There the complainant asked the bank to sell some of his shares and adjust the sale proceeds towards loan. There was delay on the part of the bank to sell the shares. In the meanwhile price of share came down. Deficiency in service on the part of the bank was found under the above circumstances. In the present case, the situation is entirely different.

        17.   The decision of the Hon’ble National Consumer Disputes Redressal Commission in RP.No.1144/2013 was in a case in which there was no notice before sale. We have already pointed out that notice by any particular mode is not provided in the agreement and the sale of shares was effected, seven days after the notice by telegram when the complainant borrower failed in his duty to regularise his accounts. So it can not be said that by selling the shares the opposite parties have committed deficiency in service or unfair trade practice. Hence both the points are found against the complainant.

Point No.3

        18.   It follows from the findings on point nos.1 & 2 that the complainant is not entitled to any relief.

        In the result, the complaint is dismissed but without costs.

        K.CHANDRADAS NADAR : JUDICIAL MEMBER

A.RADHA : MEMBER

APPENDIX

List of witness for the complainant

PW1         - Koshy Varghese

 

List of Exihibits for the complainant

Ext.A1      - Copy of complaint filed before the National Stock Exchange

                  of India, Bombay

Ext.A2      - Copy of complaint filed before the National Stock

                  Exchange Branch office, Chennai

Ext.A3      - Copy of statement of holding as on 31.12.2007 issued

                   by HDFC Bank

Ext.A4      - Copy of transaction / billing statement for the period         

                  between 01.12.2008 & 31.12.2008 issued by the bank

Ext.A5      - Copy of statement of accounts from 01.01.2009 to  

                  31.01.2009 issued by the bank.

Ext.A6      - Copy of statement of accounts from 01.03.2009 to

                  31.03.2009

Ext.A7     – The Malayala Manorama Daily reporting the value of

                  the shares during September – October 2009

Ext.A8      - Transaction Request Form issued from the Bank

Ext.A9      - Statement of accounts of Bank from 01.01.2008 to

                  31.12.2010

Ext.A10    - Statement of accounts of 06.01.2009 & 03.03.2009

Ext.A11   - Statement of accounts of 06.01.2009 & 03.03.2009

Ext.A12    - Statement of accounts dated 01.09.2009

 

List of witnesses for the opposite parties

 

DW1         - Shyam Menon

DW2         - Ram Babu

 

List of Exhibits for the opposite parties

 

Ext.B1     - Copy of loan agreement cum guarantee with Letter of

                  Continuity

Ext.B2     - Copy of power of attorney

Ext.B3     - Copy of Booking Slip of telegram dated 30.12.2008

Ext.B4     - Copy of booking slip of telegram dated 03.01.2009

Ext.B5     - Copy of contract note dated 27.01.2009

Ext.B6     - Copy of Booking slip of telegram dtd: 09.03.2009

Ext.B7     - Copy of telegram dated 09.03.2009

Ext.B8     - Copy of statement of accounts in the name of complainant

                  dated 16.03.2009

Ext.B9     - Credit Limit Report of the Complainant

Ext.B10   - Copy of telegram dated 30.12.2008

Ext.B11   - Copy of telegram dated 03.01.2009

 

K.CHANDRADAS NADAR : JUDICIAL MEMBER

 

 

A.RADHA : MEMBER

 

 

Be/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KERALA STATE

 CONSUMER DISPUTES

 REDRESSAL COMMISSION

 SISUVIHARLANE

VAZHUTHACADU

THIRUVANANTHAPURAM

 

CC.NO.28/09

JUDGMENT DTD : 31.10.2016

 

 

                                                                             Be/