Per Hon’ble Mr. P.N. Kashalkar PRESIDING JUDICIAL MEMBER
1. This is a complaint filed by complainant company-M/s.Roop Technology Private Ltd. against ICICI Bank alleging deficiency in service. According to complainant company-M/s.Roop Technology Pvt.Ltd. is having registered office at 15/120, Old Anand Nagar Society, Vakola Police Station Street, Santacruz (East), Mumbai 400 055, it is in the business of purchase and sale of high-end electronic products including computer peripherals and accessories thereto and cater to well expanded cliental and customer base. The opponent is the banking company. It provides various banking services by providing fund based and non fund based finance facilities. The complainant company approached opponent in June 2007 for finance facilities in fund based and non fund based for their business. They told opponent that they needed `250 millions to fulfill their prospective commitments by 31/10/20007 to their sellers for payment of the value of the goods. The complainants were contemplating to avail the finance and borrowing facilities in time schedule and operation. The complainants’ director Mr.Umang Mehta appraised officers of the opponent bank about the need of the complainants’ banking service and accordingly, after prolonged negotiation, opponent bank agreed to provide their service by giving banking facilities and finance to the extent of `250 millions in the time work frame and schedule. The opponent bank asked complainant to initially deposit `28,09,000/- as processing fee. Accordingly, by cheque dated 03/08/2007, cheque was issued in favour of Bank of Baroda, Zaveri Bazaar Branch, Mumbai. Complainants then submitted various documents pertaining to immovable property belonging to the complainants directors and their respective HUFs. In the course of negotiation and finalising the said agreement, opponents were fully appraised of and told that there were minors coparceners also in the said HUF properties. After having satisfied, opponent received `28,09,000/- towards the process fee from the complainant company and also received true copies of the said property documents. Mr.M.C.Punjwani, property valuer, who is approved valuer on the list of the opponent bank valued the HUF property and submitted his valuation report to the opponent bank on 03/09/2007, copy thereof was delivered to the complainants. The complainants pleaded that after receiving processing fee and documents relating to HUF of the company’s directors, the opponent delivered to the complainants their Credit Arrangement letter dated 20/08/2007 sanctioning finance facility payable on demand under various heads for the agreed sum of `250 millions. ‘Exhibit A’ is the said letter issued by opponent bank.
2. Further, it is the case of complainant company that later on in exchange of E-mail correspondence it has come to their notice that opponent failed and neglected to provide agreed finance services even after sending letter dated 20/08/2007 sanctioning the amount of `250 millions in favour of the complainant company. The complainant company pleaded that consequently complainant suffered injury, embarrassments and losses in transaction, losses in business and they could not fulfill commitment to various sellers due to prolongation and eventual failure of the opponent to render the said finance service though they had agreed to disburse finance service to the extent of `250 millions. Hence complainant company sent letter to the opponent on 01/11/2007 vide ‘Exhibit B’ and called upon opponent to refund the said amount of processing fee of `28,09,000/-. The complainants pleaded that opponent was dragging its feet despite sanctioning of loan on the ground that minors were also the coparceners in the said HUF. But according to complainants it is dishonest belief taken by the opponent bank. Complainants pleaded that opponent was not justified in imposing conditions and reducing the original sanctioned loan amount. According to complainants irrespective of minors having an interest in HUFs’ properties, the directors in the complainants as Karta of the HUFs in law were entitled to pledge the HUFs properties as and by way of security to the opponent. The complainants explained this position to the opponent bank and requested opponent to sort out the matter by the end of October 2007, but opponent bank failed and neglected to do so. As such, complainants sent their attorney’s letter dated 09/08/2007 and placed all the facts on record and demanded back the amount of `28,09,000/- with interest @ 18% p.a. since they had paid processing fee and since after sanction of the loan, opponent bank was not disbursing the amount as per the agreement. Complainants received letter from the opponent on E-mail on 15/10/2007 and bank took up the plea that complainants had never mentioned that HUF property comprises of minor coparceners. According to complainants, due to failure and negligence on the part of opponent to render the banking services as agreed and for no fault of the complainants, the complainants suffered injury, mental agony and embarrassment in their business commitments and suffered loss of `6 lakhs in the process. Complainants therefore are entitled to claim and recover the same from the opponent.
3. The complainants therefore filed this consumer complaint to recover refund of `28,09,000/- and interest thereon @ 18% p.a. and also claimed total amount of `41,65,750/- as per the particulars of claim appended to complaint at ‘Exhibit D’. According to complainants cause of action arose on 01/10/2007. Complaint as filed in 2009 is well within limitation. Complainant relied upon certain documents and affidavit of complainants’ director.
4. Opponent filed written version and submitted that the complaint as filed by the complainants is not tenable in law since the services offered by the opponent have been availed by the complainant admittedly for the ‘commercial purpose’. So the complainants’ company cannot be said to be a ‘Consumer’ under the Consumer Protection Act, 1986 and on this count alone the complaint should be dismissed. Opponent pleaded that very fact that complainants had applied for a facility amounting to `250 millions from the opponent bank would clearly establish that the complainants company was availing services for their business which was nothing but a commercial purpose. The opponent bank also pleaded that complainants had approached opponent for availing services but it denied that it was given assurance that it would be giving finance services as and when demanded by the complainants. Complainants’ director was in fact told by the opponent that said facility could be disbursed to the company only after compliance of all the formalities and documentation as per standard banking practices. Opponent bank pleaded that the complainants had approached the opponent previously as well for a loan against property which was rejected. Opponent pleaded that there are two stages in granting any loan (a) sanction and (b) disbursal. The sanction is based on the credit rating and repayment capacity of the borrower. For the purpose of sanction of a loan only the credit rating and repayment capacity are looked into while for disbursal, the security, the title of the property offered as security and the legal requirements of mortgage of the said security are looked into. According to opponent bank for non disbursement of loan, the complainants company was unnecessarily blaming it. It pleaded that on the basis of information submitted by the complainants, the facility was sanctioned to it and a Credit Arrangement letter was issued to the complainants company on 20/08/2007. The terms and conditions of the said Credit Arrangement letter were duly accepted by the complainants. Said letter clearly stipulated that the credit arrangement is subject to the conditions that are contained in the documents to be executed between the opponent bank and the complainants. Further, the said letter also stipulated that the credit facilities would be available on receipt of all documents duly executed. Opponent pleaded that complainants had not executed the necessary documentation in order to be entitled for disbursement of the loan. The complainants had agreed by way of security for the repayment of the said facility to mortgage certain immovable property belonging to the Directors of the company and on taking search of the Revenue records, it was disclosed that title of the directors of the said immovable properties was not clear and beyond doubt and some of the original agreements forming the chain of title were not registered. It also revealed that it was an HUF that was providing the security but said HUF had minor coparceners and this was disclosed to the opponent only on 17/09/2007 by way of a mail from one Mr.Bipin Dhan, C.A. representing the complainants. Opponent bank pleaded that non disclosure of minors interest by the complainants and its directors were calculated to mislead the opponent bank of the underlying risks. The details of the ownership pattern including the particulars relating to the minor coparceners of the HUF were informed even later i.e. on 04/10/2007 by way of a mail from one Shri Nilesh Mehta, despite the same, the opposite party bank did not outright reject the facility, but were exploring and suggesting ways to mitigate the risk and complainant was asked to submit indemnities in respect of the defect in title so as to safeguard the interest of the opponent bank. Complainants did not submit the same and as security furnished by the complainants fell short of the expectation of the opponent bank, opponent bank offered a reduced amount of loan to which complainants company was not interested. They therefore refused to agree to the reduced loan amount. Opponent bank pleaded that processing fees are charged for processing each case from the stage of negotiation to documentation and are independent of availment/disbursement of the facility. So even if the sanction loan is not disbursed that does not mean that bank is obliged in law to refund the processing fee collected from the client like the complainants company.
5. Opponent bank pleaded that they were not aware that the complainants suffered losses since they could not honour the commitments they have given to various buyers and purchasers. Bank denied that it allegedly got satisfied that the aggregate distress sale value of the said HUF properties as on 27/08/2007 was more than `25 crores as alleged in the complaint. According to opponent bank complainants had misled the opponent with respect to details of the coparceners having a share in the property and that itself prompted opponent bank not to undertake the risk and to negate the value of security altogether. The opponent bank has not avoided disbursing the facility at any time but had stated that the opponent would accept the property as collateral by taking an indemnity for the minor’s share of the property and the overall sanction limit would be proportionately reduced so as to exclude the minors share/interest in the property. Opponent bank pleaded that it cannot refund processing fee because processing fee is used for the purpose of processing the sanction and meant to be paid on or before the signing of the Facility Agreement, hence is clearly independent of disbursement/ availment of the said facility. Non disbursement facility was a result of non completion of documents consequent upon failure of the complainant in not disclosing fundamental details pertaining to the properties to be secured. So failure of this facility could be attributed to the action of the complainant company and its directors. Opponent therefore pleaded that the complaint be dismissed with compensatory costs.
6. Both the parties have filed affidavits and certain documents in support of their case.
7. We heard submissions of Advocate Manoj Mhambrey for the complainants and Advocate V.Mannadiar for the opponent.
8. At the outset Mr.Mannadiar –Advocate submitted that the consumer complaint as filed by the complainant company cannot lie under the Consumer Protection Act, 1986 for the simple reason that the complainant had asked for loan facility for its business purpose. It is not the case of complainant company that it is earning its livelihood for or by way of self employment. It is the company registered under the Companies Act having board of directors on it and complainant company has got business in crores and to expand its business and to keep financial flow for its business constantly available, company needed an amount of `250 millions and for that purpose they had approached opponent bank. Thus Mr.Mannadiar-Advocate submitted that complaint as filed by the complainant company is surely not tenable in law as complainant company cannot be said to be a ‘Consumer’. He relied upon the judgement of the Hon’ble National Commission in the case of Sree Anantha Grameena Bank v/s. The Industrial Finance Corporation of India Ltd. Reported in IV(2005) CPJ 10 (NC) wherein Hon’ble National Commission clearly held that consumer complaint filed by the company who has engaged in commercial purpose is not tenable in law as complainant company cannot be said to be a Consumer as per section 2(1)(d)(ii) after amendment the Hon’ble National Commission interpreted 2(1)(d)(ii) and clearly held that if the loan if availed of for the commercial purpose by any commercial establishment any consumer complaint arising out of such loan facility cannot be entertained after the amendment of 15/03/2003.
9. Counsel for the complainant relied upon judgement of the Hon’ble Supreme Court to buttress his contention. Hon’ble Supreme Court in the case of Karnataka Power Transmission Corporation and another v/s. Ashok Iron Works Pvt.Ltd. reported in 2009 ALL SCR 1004 held that juristic person like Company is not exonerated from the purview of section 2(1)(d). Hon’ble Supreme Court held that if there is deficiency in service by non supply of electricity within time fixed, the consumer complaint at the instance of M/s.Ashok Iron Works Pvt.Ltd. was held maintainable since there was deficiency in service on the part of Karnataka Power Transmission Corporation. However, in the instant case, Bank had simply agreed to provide loan and not disbursement of loan to the Company having crores of business cannot be said to be falling under the definition of ‘Consumer’ within the meaning of section 2(1)(d)(ii) of Consumer Protection Act, 1986. Facts of Karnataka Power Transmission Corporation’s case are distinguishable from the one obtainable in this case.
10. There was another case wherein consumer complaint was filed by insurer on the basis of letter of subrogation. The Hon’ble Supreme Court held in the case of Economic Transport Organization V/s.Charan Spinning Mills (P) Ltd. & anr. Reported in I(2010) CPJ 4 (SC) held that a joint complaint in the name of Insurance Company and original consignor was tenable on the basis of letter of subrogation given in favour of the consignor after Insurance Company had paid the dues under the policy. So consumer complaint jointly filed in the name of Insurance Company and the original party consignor was tenable in law against the transporter. In our case facts are quite distinct. Loan facility was applied by Complainant company having business of crores of rupees. Loan was sanctioned by issuing Credit Arrangement letter dated 20/08/2007. After sending the letter, the opponent did not provide finance facility and hence complaint was filed by the complainant company for `28,09,000/- along with interest thereon from the date of deposit of said amount as processing fee till the date when non release of funds was made clear by the opponent. This transaction being for the business and commercial purpose we are of the view that this consumer complaint as filed by the complainant company is not tenable in law because after amendment the consumer who is engaged in commercial activity is excluded from the definition of Consumer as incorporated in section 2(1)(d)(ii) of Consumer Protection Act, 1986. On this ground alone complaint is liable to be dismissed.
11. Secondly, sanction of loan is one thing and disbursement of loan is another thing and processing fee is charged to process the application presented for the sanction of loan. Sanction of loan is made by issuing sanction letter only on finding that the complainant company was having credit rating and having repayment capacity. For disbursement of loan, title of property offered as security is looked into. On presentation of application by the complainant company on finding that the complainant company was having good credit rating and was also having repayment capacity looking to the turnover of the business of the complainant company, Mr.Mannadiar-Advocate submitted that his client immediately sent Credit Arrangement letter to the complainant company sanctioning loan in principle of `250 millions. But then when it comes to disbursement of loan Mr.Mannadiar-Advocate submitted that disbursement could not be done as on seeing the documents submitted by the complainant company by way of security it came to their light that complainant company had submitted property by way of security of the Directors, Directors of HUF which included minors interest. Legal department of the opponent bank took objection about the documents since the documents suggested that there was minors interest involved in the property and, therefore, Mr.Mannadiar-Advocate submitted that the opponent bank directed complainant company either to furnish some other security as mortgage or to get reduced amount of loan to be disbursed than applied for (`250 millions). Complainant Company was not agreeable to take reduced loan facility. They insisted that they should be granted loan as per sanctioned loan amount of `250 millions. But bank did not find that security offered by the Directors, Directors of HUF was sufficient to release the fund. Complainant had opted for loan. It is for this reason loan was not ultimately disbursed and complainant company wanted refund of `28,09,000/- they had paid as processing fee. Mr.Mannadiar-Advocate rightly submitted in our view that processing fee cannot be refunded by any bank, who agrees to advance loan to the customers interested. Processing fee is the business of the bank and for doing business for looking to the feasibility of loan applied for by the customer for examining the documents for making documentation for the purpose of security processing fee is asked for and payment of processing fee is condition precedent for entertaining any application for loan. It is universal practice followed by banks anywhere in the world. So it is the banking norm to collect processing fee when any customer approaches them with a proposal for sanction of loan. This processing fee as rightly argued by Mr.Mannadiar –Advocate is not refundable whether or not loan is sanctioned or disbursed to the customer. In this view of the matter, we agree with the contention of Advocate Mannadiar for opponent that processing fee as asked for by the complainant company in this complaint is not payable or refundable at all because processing fee is taken for further processing of the loan application presented by the customer. Moment processing of the complainant’s application starts, processing fee becomes the property of the opponent bank, no matter whether loan is disbursed or not. In this view of the matter we agree with contention of Advocate Mannadiar that processing fee is paid by the complainant company to procure loan of `250 millions and bank has not committed deficiency in service on that count in refusing to refund the processing fee.
12. Mr.Mannadiar also submitted that though complainant may have faced some financial constraints by non disbursement of loan though it is contention of the complainant company that complainant company suffered business loss since they could not honour commitment to the buyers or sellers of their produce that does not mean that business loans could be a matter of consumer dispute under the Consumer Protection Act, 1986. It has been laid down by Supreme Court that business losses or profit earning by the complainant company consequent upon deficiency in service on the part of service provider cannot be a matter of consumer dispute under the Consumer Protection Act, 1986. For business loss, party has to approach to the Civil Court and they cannot be allowed to file consumer complaint to recover business losses. In the light of facts obtainable in the case herein, complaint as filed by the complainant company for refund of `28,09,000/- which they had paid towards the processing fee along with interest thereon @ 18% p.a. is not tenable in law and, therefore, we are inclined to pass the following order:-
ORDER
Consumer complaint stands dismissed.
No order as to costs.
Inform the parties accordingly.
Pronounced on 07th February, 2012.
