BEFORE THE III ADDITIONAL BANGALORE URBAN

DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION,

                             BENGALURU – 560 027.

DATED THIS THE 29^th DAY OF MARCH, 2023

CONSUMER COMPLAINT NO.458/2018

PRESENT:

SRI. RAJU K.S:MEMBER

                    SMT.REKHA SAYANNAVAR,:MEMBER

Aged about 21 Years,

R/at No.373, 1st Main,

6th Cross, Sahakaranagar Post,

Tata Nagar,

•                              ……          COMPLAINANT

(Represented by Sri. Jagadeesh .M, Adv)

V/s

IDBI Bank Ltd
CMS-Operation,

Corporate Park, Unit No.2,

Sion-Trombay Road,

Chemdur-Mumbai-40071.                       ……OPPOSITE PARTY-1

The IDBI Bank
No.102,1st Floor,

Shakthi Comfort Tower,

K.H.Road,

Bengaluru-560027.                         ……OPPOSITE PARTY-2

The IDBI Bank,
No.58, Mission Road,

Bengaluru-560027.                       ……OPPOSITE PARTY-3

(Opposite party No.1 to 3represented by Sri. T.P Muthanna, Adv.,)

*****

//JUDGEMENT//

BY SMT. REKHA SAYANNAVAR, MEMBER

          The present complaint is made U/s 12 of the Consumer Protection Act-1986 by the complainant with a prayer to direct the parties to pay Rs.3,20,000/- in total as follows:

2. The brief facts of the complaint is as under;

The counsel for the complainant submits that when the complainant was minor, then his grandfather one Mr P H Habid, had purchased two IDBI Flexi bonds for a sum of Rs.5500/-each. The date of the maturity was 31 May 2017 and amount was assured was Rs.1,00,000/- each.

3. When the complainant approached opposite party.  To the shock and surprise of the complainant it is learnt that the above mentioned scheme was closed and is not in existence and the opposite parties not paid the assured maturity amount of Rs.2,00,000/- for both bonds.  The complainant was left with no other alternatives to approach this commission for the redressal of his grievances under the CP Act-1986 for the deficiency services of the opposite parties. Hence, this complaint.

4. The counsel for opposite party filed detailed version, the opposite parties introduced the scheme of unsecured Bonds aggregating Rs.750 crores during 1997. It was specifically made clear in the offer documents by IDBI to all the then proposed investors and the public that IDBI deep discount bonds will be issued with the put/call option, whereby an investor of the bond as per the said offer document and /or IDBI respectively had an option to surrender/redeem the bonds prematurely. Accordingly, in the event of any party exercising its right to early redemption, the other party was bound to honour it. In other words, if the investor exercised the put option right on any of the   specified dates, then IDBI had to pay the amount indicated on the certificate against that date. Similarly, if IDBI exercised its call option right on any of the specified dates, then the investor had to surrender duly discharged bond certificate(s) to enable the investor. Pursuant to the offer document issued, based on the application received from the investors, bonds certificates were issued to various investors who subscribed to the bonds inter alia on terms and conditions contained in offer documents.

5. The opposite party bank had exercised the call option to redeem deep discount bond as per table given in the bond on 30.04.2001. At the time of call option on 30.04.2001, the redemption amount was Rs.10,000/- each against the investment of Rs.5,500/- for each bond. As per the terms laid down in the OD, information about the call option was sent to individual bond holders by post and call option notices were also published in the leading newspaper many times all over India. The opposite party bank has taken all possible efforts and due care to inform all the bond holders about exercising of the call option and requested them to submit the duly discharged bond certificate by 30.04.2001 to effect payment of deemed face value of the Rs.10,000/- of the bond as on the date of the call option. Personal notices were sent to all individual investors by M/s Karvy Consultants Ltd., M/s Karvy Consultants Ltd., had sent personal notice to the complainant by post. The complainant was requested to surrender deep discount bond to the opposite party bank and get the amount as mentioned in the application from by April 30, 2001. Hence, it is prayed to dismiss the complaint with cost.  

        6. The counsel for the complainant had filed an affidavit in the form of evidence in chief of the complainant along with documents as PW1. The counsel for the opposite parties had also filed an affidavit in the form of their evidence in chief along with documents as RW1.

7. Counsel for both parties have filed their respective written arguments.

8.   Heard the arguments.

9. The points that would arise for consideration are as under:

i) Whether the complainant has proved the deficiency in service of the opposite parties?

ii) If so, to what relief the complainant is entitled for?

iii) What order?

10.  Our findings on the aforesaid points are as follows:

Point No.1 :  In affirmative

Point No.2 :  Partly in affirmative

Point No.3 :  As per the final order for the following;

REASONS

        11. POINT NO.1 and 2:- In order to avoid the repetition of the facts and these two points are interlinked, they are taken together for consideration.PW1 and RW1 had reiterated the facts stated in the complaint, in the affidavit filed in the form of their respective evidence in chief. The grandfather of the complainant had purchased two deep discount bonds from the opposite party for a sum of Rs.5500 each on 31.01.1997 with the face value of Rs.10,000 each. The terms and conditions are clearly mentioned in the offer document. The said bond had a maturity period of 25 years and on maturity, the face value of Rs.10,000 each can be redeemed. The holder of the bond had an option to redeem the bond on any of the following duration, at the deemed face value mentioned:

          As per the conditions of the bond  the opposite party bank has reserved the right to “call option’’ to redeem the deep discount bonds as per the dates mentioned in the early redemption options scheme, which is also mentioned in the offer document and also on the deemed face value of the bond certificates. The complainant was very much aware of the entire terms and conditions of “Put/Call option’’ stipulated in respect of the said bonds.

          12. As per the terms and conditions mentioned in the bond (a) investors desirous of exercising the option to encash the IDBI Deep Discount Bond on any of the above date should submit their requests in writing to IDBI or the Registrars along with the bond Certificate(s) duly discharged, atleast three months prior to the encashment date (b) IDBI has the call option to redeem the IDBI Deep Discount Bond on the dates specified. In such event, the Demand Face Value of the Bond will be paid to the Bondholders according to the table given in the Bond. That The redemption value of Rs.1,00,000/- was payable as on early redemption date of 31.05.2017. That the full maturity value of Rs.2,00,000/-shall be payable only on 31.01.2022 if the Bondholder does not exercise the Early Encashment option and IDBI does not exercise the call option to redeem the Bond. On the Bondholder receiving the amount as specified above on exercise of the Early Encashment option/Call option at any time, the Bond shall stand fully discharged (c) the difference between the redemption value and the issue price will be subject to deduction of tax at sources as per the law prevailing at the time of redemption and as specified under common terms.

          As per the terms of the offer document, a call option was available to the opposite party bank and the same was exercised by the opposite party bank vide its notification dt.28.02.2001, decided to redeem the Bond by 30.04.2001 (i.e., the call option date), the deemed face value of Rs.10,000/- per bond and also it was clearly stated that no interest will be payable on the bonds after April 30, 2001.

          The opposite party bank had exercised the call option to redeem deep discount bond as per table given in the bond on 30.04.2001. At the time of call option on 30.04.2001, the redemption amount was Rs.10,000/- each against the investment of Rs.5,500/- for each bond. As per the terms laid down in the OD, information about the call option was sent to individual bond holders by post and call option notices were also published in the leading newspaper many times all over India. The opposite party bank has taken all possible efforts and due care to inform all the bond holders about exercising of the call option and requested them to submit the duly discharged bond certificate by 30.04.2001 to effect payment of deemed face value of the Rs.10,000/- of the bond as on the date of the call option. Personal notices were sent to all individual investors by M/s Karvy Consultants Ltd., M/s Karvy Consultants Ltd., had sent personal notice to the complainant by post. The complainant was requested to surrender deep discount bond to the opposite party bank and get the amount as mentioned in the application from by April 30, 2001.

          13.    The opposite bank decided to exercise the redemption option at the end of 4 years and 3 months period from the allotment date and hence, in terms of the offer document, the opposite bank issued:

i) Public notice in Newspaper and

ii) Personal notices (Communication) to all the registered holders of such bonds,

6 months prior to the date of redemption.

          14. The opposite bank after taking prior approval  from the security exchange board of India, they ha d released the public issue with right to redeem the bonds by exercising early  call option for the face value mentioned in the bonds. It is submitted that it is very clearly established in the offer document that on the investors receiving the amount as specified above in respect of a bond on exercise of the option at any one time, the liability of IDBI under such bond will stand extinguished once the opposite bank has exercised the option of redemption of bond. However, the opposite bank with the extent RBI guidelines for the benefit of bond holders, offered three instruments for purpose of reinvestment of redemption proceeds which are as follows:

a) IDBI regular income bond with annual interest payment @11% p.a.

b) IDBI floating rate bond with interest payment @ 3% over the RBI bank rate.

c) IDBI money multiplier bond in which the investment doubles at the end of 6 years and 7 months. The annualised yeild to maturity is 11.10%.

          And in addition to all these options, the bond holders had an option to reinvest the proceeds of DDBs in IDBI Suvidha Fixed Deposit Scheme. But the complainant failed to avail these benefits by not surrendering the bond certificate to the registrar viz., Karvy Consultants Ltd., on or before April 16, 2001

          15. The cheque bearing No.000390 was issued for Folio No.FDD067522 with 2 months validity from 25.10.2017. The complainant presented the cheque in clearing on 23.01.2018 and the opposite bank rejected the same. The redemption amount of Rs.17,057/- pertaining to Folio No.FDD067523 was paid to the complainant  vide NEFT to his Indian Overseas Bank numbered 289601000000395 dated 25.10.2017. The calculation of amount of Rs.17,057/- is as follows:

          16. Even though personal notice was issued by the respondent and paper publications were made in the newspaper on several occasions, the complainant failed to take the benefit of call option and now demanded for payment of Rs.2,00,000/- which is not totally justified in contravention of terms agreed by him in offer document as well as bond certificate issued to him.

          17. The opposite party has relied upon the following citation, it is held by the Hon’ble High Court of Madras in Mr. P.N. George  graham V/s IDBI Bank Ltd., “both the bond holder as well as the Respondent were given the option to redeem the bond on 01.08.2000 at Rs.10,000/- without any pre-condition for invoking such redemption clause  and the said  conditions was also printed by the Respondent on the Board Certificates to avoid confusion or misinterpretation. As the said public issue was oversubscribed, in order to satisfy such investors who could not get allotment of bonds under the public issue were given the option to subscribe the bond under the memorandum of private placement. As the plaintiffs were allotted the bonds under public issue and not under private placement, they are governed only by the offer document. Admittedly, the Respondent had not altered or modified the original terms and conditions of the said bond. The said call option was exercised by the Respondent only keeping in mind the fluctuations in interest and future market. When it is not commercially viable to continue to pay higher interest on such bonds with a view to safeguard the interest on such bond holders, the call option is exercised. Therefore, the respondent also had done so, only in the interest of the bond holders. The said exercise of redemption was also as per the contractual terms, Based on the above reasoning, the Courts below had dismissed the suit as not maintainable. When the bond are redeemable at the instance of either the subscriber of the bank, the call option exercised by the respondent cannot be found fault with”. Even after the complaint been filed opposite party did not make any attempt to pay the amount in connection with Folio No. FDD067522 amounting to Rs.17,057/- non-payment of the said amount amounts to deficiency. To that extent there is deficiency of service and not as claimed by the complaint. Further complainant is not entitled to the extent of claim. But entitled for refund of Folio No. FDD067522 for an amount of Rs. 17,057/-. Since opposite party had kept the money payable to the complainant it has to pay interest at the rate of 9% p.a. from 25.10.2017 till realization. Further, the contention of the learned counsel for the opposite party as stated in the written arguments that the payment made in respect of Folio No. FDD0067523 for a sum of Rs.17,057/- has not been disputed in the additional written arguments filed by the complainant. Hence, we answer point No.1 in affirmative and point No.2 partly in affirmative.

        18. POINT NO.3:- In the result, for the foregoing reasons, we proceed to pass the following;

ORDER

The complaint is allowed in part.

The opposite party is directed to pay a sum of Rs.17,075/- to the complainant with interest @ the rate of 9% from 25.10.2017  till realisation and complainant shall also furnish the documents as sought by the opposite party.

  Supply free copy of this order to both the parties and return extra copies of the pleading and evidence to the parties.

Applications pending, if any, stand disposed of in terms of the aforesaid judgement. 

  (Dictated to the Stenographer, typed by her, the transcript corrected, revised and then pronounced in the open Commission on 29^th day of MARCH, 2023)                                            

• REKHA SAYANNAVAR)  (RAJU K.S)   (SHIVARAMA, K)    
•  

//ANNEXURE//

Witness examined for the complainants side:

Smt. Sunitha. H, who being the authorized representative of the complainant has filed her affidavit.

Documents marked for the complainant side:

1. Copy of the letter of authorization.

2. Copy of the two IDBI deep discount bond.

4. Copy of the acknowledgement of the application.

5. Copy of the cheque and returned memo.

6. Copy of the Aadhar Card of the complainant.

 Witness examined for the opposite party side:         

Sri. Prashant Kumar Shetty, Asst. General Manager of opposite party No.3 has filed his affidavit.

Documents marked for the Opposite Parties side:

1. Copy of the extract of register recording the registered notice sent to the complainant dt.21.05.2009.

2. Copy of the Newspaper publication made in local newspaper dt.07.10.2002, 02.06.2006 and 06.06.2010.

3. Copy of the register recording change of address informed by the complainant to the opposite party bank dt.17.08.2017.

• REKHA SAYANNAVAR)    (RAJU K.S)         (SHIVARAMA, K)    
•