BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM-II, U.T. CHANDIGARH

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Complt. Case No :  513 of 2009

Date of Institution:   16.04.2009

Date of Decision  :   06.10.2010

1]       Som Nath Singh father of Sohan Singh minor and first holder of the policy r/o H.No.3767, Maloya Colony Chandigarh, presently resident of H.No.3281, Maloya Colony, Chandigarh.

2]          Amarwati Devi wife of Som Nath Singh and nominee in the IDBI Deep Discount Bond 1996, presently resident of H.No.3281, Maloya Colony, Chandigarh.

……Complainants

V E R S U S

1]          Industrial Development Bank of India, (established under the Industrial Development Bank of India, Act, 1964) Inv. Services of India Limited IDBI Building 2^nd Floor, ‘A’ Wing, Sector CBD, Belapur Navi Mumbai 400614, 022-27579636-46 through its Director.

          2^nd Address:- IDBI Bank Limited, IDBI Tower, WTC Complex, Cuffe Parade, Mumbai 400005

2]          Industrial Development Bank of India, (established under the Industrial Development Bank of India, Act, 1964), SCO No.72-73 (Bank Square), Chandigarh, 0172-5059720 through its Director.

.…..Opposite Parties

CORAM:          SH.LAKSHMAN SHARMA                           PRESIDENT

                    SH.ASHOK RAJ BHANDARI              MEMBER

                    MRS.MADHU MUTNEJA                          MEMBER

PRESENT:      Sh.Deepak Aggarwal, Adv. for complainant.

Sh.Surinder Chandana, Adv, proxy for OP-2

OP No.1 exparte

PER MADHU MUTNEJA, MEMBER

                This complaint has been filed by Sh.Som Nath & Smt.Amarwati Devi against IDBI under Section 12 of the Consumer Protection Act. 

                The complainants had purchased IDBI Deep Discount Bond’96 and paid a total sum of Rs.5300/- to the OPs.  After deposit of the amount, relevant bond certificate No.03305711,  Folio No.3327230 with face value of Rs.2.00 lacs was issued to the complainant by the OP on 18 March, 1996.  The Industrial Development Bank of India (IDBI) had vide Bond Certificate No.03305711 (Ann.C-1) promised to pay to the complainant as under:-

“…on demand at the Head Office of IDBI at Bombay, on March 18, 2021, a sum of Rs.2.00 lacs being the face value of the Bond herein contained for value received.  The holder(s) of this Bond/IDBI shall have the option of to redeem the Bond on any of the following dates at the deemed face value mentioned:-

                             On August 1, 2000 at Rs.10,000/-

                             On December 1, 2006 at Rs.25,000/-

                             On September 1, 2011 at Rs.50,000/-

                             On June 1, 2016 at Rs.1,00,000/-.

On the holder(s) of this Bond receiving the amount as specified above on exercise of the option as aforesaid, the liability of IDBI hereunder shall stand fully extinguished.”

                The complainant visited the office of OPs in March, 2009 to provide fresh address for correspondence because he had shifted to a new location and also to check the status of his case.  He was surprised to know from the office that the said scheme has been abandoned and he was only entitled for the amount initially deposited in the scheme. 

                The complainant thus served a notice dated 18.3.2009 to the Op for refunding Rs.25,000/- which has became due on 1.12.2006 along with interest @18% p.a.  The complainant also demanded compensation from the OPs.  The OPs never gave any reply to the notice.  Hence, the complainant was left with no other option but to file the instant complaint before this Forum.

                The complainant has requested that the OPs be directed to refund of Rs.25,000/-, which became due on Dec.1, 2006 along with interest @18% p.a. as well as pay compensation and cost of litigation.

2]             After admission of complaint, notice was sent to OPs. 

                Summons were sent to OP No.1 many times.  OP No.1 was finally served on 12.8.2010.  Since none was present on behalf of OP No.1 on the next date of hearing i.e. 25.8.2010, it was proceeded exparte on the same date.

                OP No.2 has filed reply/evidence by way of affidavit of Sh.Kapil Vashishat, Branch Head of IDBI.  In the affidavit, the OP have submitted that IDBI had made a public issue of IDBI Flexi Bonds-1996 in march, 1996 under 4 types of unsecured redeemable bonds viz. IDBI Deep Discount Bond’96, IDBI Easy Exit Bond’96, IDBI Regular Income Bond’96 and IDBI Retirement Bond’ 96.  This public bond issue was made in accordance with the guidelines to Development Financial Institutions for Disclosure and Investor Protection dated September 29, 1992 issued by SEBI.  The Bond Regulations have been approved by the Parliament and are in the nature of sub-ordinate legislation.  In terms of Regulation 3 of the Bond Regulations, IDBI was authorized to issue the bond in the form of promissory note or in the form of entry in the books of the IDBI.  As such, the bonds issued by IDBI for public subscription were in the form of promissory note.  In terms of the Offer Document (filed with Securities Exchange Board of India, SEBI) dated January 30, 1996, Deep Discount Bonds having issue price of Rs.5,300/- per bond were issued with a withdrawal/redemption right to the bond holder and/or IDBI respectively.  The principal terms of IDBI Deep Discount Bonds are given in Page 5 o the Offer Document (Annexure 1) wherein it has been clearly stated “IDBI also reserves the right (Call Option) to redeem the Deep Discount Bonds on the dates mentioned above” and one of such dated was August 1, 2000 and IDBI was liable to pay a sum of Rs.10,000/- per bond to the investor, if IDBI decided to exercise the call option.  The full maturity amount of Rs.2,00,000/- was payable only if the bond holder did not exercise the Put Option right and IDBI (the Bond Issuer)did not exercise the Call Option right for early redemption of the Bond on any specified date.  As per Regulation 19 of the IDBI (Issue and Management Bonds) Regulations 1972 IDBI would be discharged of its obligation in case of payment made after a lapse of four year from the date on which the payment was due.  

                Further they have submitted that when public issue was launched in1996, the Deep Discount Bonds were offered with a longer maturity period.  However, keeping in mind the interest of investors against fluctuating lending rates, the IDBI had exercised the Call Option on August 1, 2000.  The bonds were redeemable by paying Rs.10,000/- per bond. 

                The Call Option was published in “The Times of India” on Wednesday, May 10, 2000 and also through individual notices to the registered bondholders including the complainant.  The IDBI had clearly mentioned therein that interest would not be payable on the bonds beyond August 1, 2000.

                The OPs have submitted that the bond holder must register his name with IDBI if he decides to exercise early redemption option and the bonds will be redeemed on the surrender of the duly discharged bond certificates by the registered bond holders only. 

                The OPs vide this affidavit have also taken a number of preliminary objections.  They have submitted that the bonds did not fall within the definition of goods or service and the complainant does not fall within the definition of consumer.  They have therefore, prayed for dismissal of the complaint.   

3]             We have heard the ld.Counsel for the parties and have also perused the evidence and documents placed on record by the parties as well as the written arguments of OP No.2.  OP No.1 was proceeded exparte on 25.8.2010.

4]             The complainants had invested the money with the motive of earning good return in future.  The scheme of IDBI had seemed very attractive to the complainants at the time of investment.  Unfortunately, the recall option of IDBI was not received by the complainant, hence they were not able to take benefit of the amount  at the relevant time.  This, however, does not allow OPs to refuse the amount, which is due to the complainants.  OPs have kept the amount in question for over 10 years and should not only compensate the complainants by paying them redemption amount but also interest at the prevalent bank rate.

5]             The ld.Counsel for the OP No.2 has taken objection that the complainant is not a consumer under Section 2(1)(d) of the Consumer Protection Act and the bonds issued to the complainant did not fall within the definition of “goods” or “service” defined in the Consumer Protection Act.  He has also submitted that IDBI had the right for redemption and the bond were accordingly redeemed by IDBI on August 1, 2000.  The face value of the bond on this date was payable to the bondholders.  The notice of the call option was given to the complainants in the manner stipulated in the offer document i.e. by U.P.C.  Subsequently reminder notice was also sent by OP No.1 on 3.10.2000 through UPC to all bond holders. Public notices were also published in various newspapers on May 10, 2000 and IDBI had clearly mentioned therein that “No interest will be payable on the bonds beyond August 01, 2000.”

6]             It is important to mention here that the demand of the complainant for redemption as on December 1, 2006 cannot be met since IDBI cannot go beyond the required norms and pay “them alone” as per the second date of redemption option demanded by them.

7]             In view of the above, we feel it will be appropriate if the OPs be directed to redeem the bond certificate of the complainant as per the first option only dated August 01, 2000 and pay interest on the redemption amount of Rs.10,000/- w.e.f. 1.8.2000 till the date of payment.  We therefore allow the complaint and direct the OPs as under:-

I] To redeem the duly discharged original bonds of complainant taking the first option date i.e. August 01, 2000 with face value of Rs.10,000/- along with interest @9% p.a. w.e.f. 01.08.2000 till the date of payment.

2] To pay the complainant a sum Rs.5000/- as cost of litigation.

                    This order be complied with within 30 days from the date of receipt of its certified copy, failing which the OPs shall jointly and severally pay the aforesaid decreed amount of bonds along with interest @12% per annum from the date of order till the date of realization besides the cost of litigation.

8]             Certified copies of this order be communicated to the parties, free of charge. After compliance file be consigned to record room.  

 Announced

06^th Oct., 2010                                                            Sd/-

(LAKSHMAN SHARMA)

PRESIDENT

                                                                   Sd/-

                                       (ASHOK RAJ BHANDARI)

MEMBER

                                                                                                Sd/-

                                                    (MADHU MUTNEJA)

MEMBER

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