BEFORE THE DAKSHINA KANNADA DISTRICT CONSUMER DISPUTES REDRESSAL FORUM, MANGALORE
Dated this the 23rd of January 2012
PRESENT
SMT. ASHA SHETTY : HON’BLE PRESIDENT
SMT.LAVANYA M. RAI : MEMBER
SRI. ARUN KUMAR K. : MEMBER
COMPLAINT NO.268/2010
(Admitted on 08.10.2010)
K.Muthanna Gowda,
So. Koragappa Gowda,
Aged about 60 years,
Trackmen, S.W. Railway,
RA. Karenaru House,
Kudmar Village & Post,
Puttur Taluk, Dakshina Kannada. …….. COMPLAINANT
(Advocate for the Complainant: Sri.Sanjay D).
VERSUS
Manager,
Syndicate Bank,
Market Yard Branch,
Puttur, Dakshina Kannada. ……. OPPOSITE PARTY
(Advocate for the Opposite Party: Sri.K.M. Krishna Bhat).
***************
ORDER DELIVERED BY HON’BLE PRESIDENT SMT. ASHA SHETTY:
1. This complaint is filed under Section 12 of the Consumer Protection Act alleging deficiency in service against the Opposite Party claiming certain reliefs.
The brief facts of the case are as under:
The Complainant stated that, he was working as a trackman in South Western Railway at Puttur and retired on 31.07.2010. It is stated that, the Complainant was drawing the salary through his S.B. Account held in the Opposite Party bank as per S.B. account No.02082010018293. The Complainant has been operating the above S.B. account throughout his service. When the matter stood thus, the Complainant stood as a surety to one Mr. Samuel in the year 2003 for a loan of Rs.50,000/-. The said loan was granted on the basis of salary to be repayable through the salary Samuel. Thereafter, the principal borrower Samuel died in the year 2006. It is stated that, the death of the Samuel was orally informed to the Opposite Party and Samuel had S.B. account with the Opposite Party through which his salary was disbursed and monthly installments were paid to the above loan. The information of Samuel’s death was within the knowledge of the Opposite Party. After the death of Samuel in the year 2006, the Opposite Party did not take any steps to recover the loan due amount from his salary benefits.
It is stated that, the Complainant has retired the service from 31.07.2010 and his retirement pension benefit of Rs.4,70,716/- was credited to his S.B. account on 04.08.2010. Thereafter the Complainant approached to withdraw the retirement pension benefit amount of Rs.4,70,000/- by cheque dated 07.10.2010. The Opposite Party refused to release the amount instead allowed only Rs.4,00,000/- to be withdrawn and the balance amount of Rs.70,000/- shown as deposit in his account and not allowed to be withdrawn. It is stated that, Rs.70,000/- was kept as deposit by the Opposite Party forcibly and without the consent of the Complainant and told the Complainant that the loan of the Samuel is due and the Complainant should get the said Samuel to clear the loan due and then only the balance amount will be released to the Complainant. It is stated that, unless and until all remedies against the principal borrower are exhausted the Opposite Party cannot recover from the surety / Complainant. Hence the Complainant got issued legal notice to the Opposite Party and the Opposite Party has issued false reply. It is stated that, the Opposite Party has no right to refuse the withdrawal of amount from the Complainant’s account which amounts to deficiency in service and hence the above complaint filed under Section 12 of the Consumer Protection Act 1986 (herein after referred to as ‘the Act’) seeking direction from this Forum to the Opposite Party to release Rs.70,000/- from S.B account with interest at 12% p.a. from 07.08.2010 till payment and also claimed Rs.60,000/- as compensation and cost of the proceedings.
2. Version notice served to the Opposite Party by RPAD. Opposite Party appeared through their counsel filed version stated that one Mr.K.M.Samuel borrowed a loan of Rs.90,000/- from this Opposite Party on 23.07.2004 and executed the loan papers agreeing and undertaking to repay the same together with interest at 13.5% p.a. The Complainant stood as a guarantor and executed a guarantee agreement. It is stated that, the loan was repayable in equated monthly installment of Rs.2,070/- commencing from 23.08.2004 and the subsequent installment on the 23rd of every month and the last installment on or before 23.07.2009. It is stated that, the Complainant was not allowed to withdraw the full amount from his S.B. account, this is done legally and as per the rights of this Opposite Party. It is stated that, there is no forcible action and the consent of the Complainant is not required under law. It is further stated that, the Complainant is guarantor for the loan of Mr. Samuel, his liability is co-extensive with that of the borrower. More than Rs.60,000/- was due to this Opposite Party towards the said loan. This Opposite Party has got general lien over the amount available in the S.B account of the Complainant. The Opposite Party had issued a notice calling upon the Complainant to repay the loan dues. This Opposite Party can proceeded against the guarantor without executing the remedy against the principal borrower. Since the borrower is the principal debtor jointly with the borrower and accordingly the guarantor shall not be entitled to any of the rights conferred as surety by Section 133, 134, 135, 139 and 141 or any other relevant provisions of Indian Contract Act 1872. It is stated that, the above loan is not time barred under any law of limitation. It is stated that, once the amount is in the S.B. account it looses its earlier character as provident fund amount or retirement benefit and stated that there is no deficiency and the action taken by the Opposite Party is as per law and prayed for dismissal of the complaint.
3. In support of the complaint, Sri.K.Muthanna Gowda (CW1) filed affidavit reiterating what has been stated in the complaint and answered the interrogatories served on him. Ex C1 to C7 were marked for the Complainant as listed in the annexure in detail. One Sri.P.Ishwara Bhat (RW1), Manager of the Opposite Party filed counter affidavit and answered the interrogatories served on him. Ex R1 to R12 were marked for the Opposite Party as listed in the annexure in detail. The Complainant as well as Opposite Party filed notes of arguments along with citations.
4. In view of the above said facts, the points now that arise for our consideration in this case are as under:
- Whether the Complainant proves that the Opposite Party has committed deficiency in service?
- If so, whether the Complainant is entitled for the reliefs claimed?
- What order?
We have considered the notes/oral arguments submitted by the learned counsels and also considered the materials that was placed before this Forum and answer the points are as follows:
Point No.(i): Affirmative.
Point No.(ii) & (iii): As per the final order.
Reasons
5. Point No. (i) to (iii):
In the instant case, the facts which are admitted is that, one Mr.K.M.Samuel borrowed a loan of Rs.90,000/- from the Syndicate bank i.e., Opposite Party on 23.07.2004. The Complainant herein stood as a guarantor for the above said loan. The loan was repayable in equated monthly installment of Rs.2,070/- commencing from 23.08.2004 and the subsequent installment on the 23rd of every month thereafter and the last installment on or before 23.07.2009. While availing the loan Mr.Samuel as a principal borrower and the Complainant as a guarantor executed the loan documents with the Opposite Party bank. It is also admitted that, the Complainant was working as a trackman in South Western Railway Division at Puttur retired on 31.07.2010, he drawn the salary through his S.B. account bearing No.02082010018293 held with the Opposite Party bank. It is also admitted that, on his retirement, the Complainant received retirement pension benefits of Rs.4,70,716/- from his employer and credited the same to the above mentioned S.B. account held with the Opposite Party on 04.08.2010.
Now the point in dispute between the parties before this FORA is that, the Complainant stated that he is stood as a guarantor to one Mr.Samuel but unfortunately the principal borrower Mr.Samuel died in the year 2006, the Opposite Party did not take any steps to recover the loan due from Samuel i.e., the principal borrower’s salary and the loan obtained by Samuel was hit by law of limitation. And subsequently the Opposite Party bank, without the consent of the Complainant the retirement pension benefits of Rs.4,70,716/- credited to his S.B. account on 04.08.2010 held with the Opposite Party bank, Rs.70,000/- out of Rs.4,70,000/- shown as deposit in his account and not allowed to be withdrawn and later told the Complainant that the above said amount was adjusted towards the loan of the aforementioned Samuel i.e., the principal borrower. The Complainant contended that, the Opposite Party bank cannot recover the loan amount from the guarantor i.e., the Complainant until and unless all remedies against the principal borrower are exhausted. In the instant case, without taking any steps to recover from the principal borrower the Opposite Party bank not allowed to withdraw the amount from the Complainant’s S.B account and adjusted towards the loan account. Feeling aggrieved by the above, the Complainant came up with this complaint.
The Opposite Party on the other hand seriously contended that, the steps taken by the Opposite Party bank against the Complainant who is a guarantor is in accordance with law. The above subject loan is not hit by law of limitation.
The Complainant filed oral evidence by way of affidavit and produced Ex C1 to C7. Opposite Party also filed oral evidence by way of affidavit and produced Ex R1 to R12.
On perusing the oral as well as documentary evidence available on record, we find that, admittedly the Complainant is a retired railway employee, retired on 31.07.2010. The retirement pensionary benefit of Rs.4,70,716/- was credited to his S.B account on 04.08.2010 held with the Opposite Party bank as per Ex C1 by his employer. We noticed that, in the instant case, the Opposite Party bank without there being the consent from the Complainant Rs.70,000/- was not allowed to withdrawn from his S.B. account and adjusted towards the loan account bearing No.0208/717/81 pertaining to one Mr.M.K.Samuel, who availed the loan of Rs.90,000/- as a principal borrower on 23.07.2004. The Ex R1 is the loan agreement executed by one Mr.Samuel, Ex R2 is the receipt issued by the Opposite Party bank and the Ex R3 is the guarantee agreement executed by the Complainant shows that one Mr.Samuel being a principal borrower borrowed a sum of Rs.90,000/- from the Opposite Party bank on 23.07.2004 and the same has been received by him whereas the Complainant stood as a guarantor, executed a guarantee agreement in favour of the Opposite Party bank on23.07.2004. Now the point arises for our consideration is that, whether the retirement pensionary benefits pertaining to the guarantor in loan account No.02082010018293 can be attached? Before touching into the merits, it is better to know the meaning of guarantor. ‘Guarantor’ means…………….. . It is understood that guarantee is a promise to another i.e., the creditor Opposite Party bank to secure the payment of a debt payable to the Opposite Party bank. That means he is indemnifying by way of promise to another to secure the repayment of a debt payable by the debtor. In other words, the contract of guarantee, is the contract of principal and surety which may be defined as a contract to pay a debt or perform a duty in the event of another person, who is primarily liable, not paying such debt or performing such duty, is apt to be confounded with other contracts, in particular with the contracts of indemnity and insurance. The contract of guarantee is a promise to become answerable for the debt or default of another may be expressed as an indemnity. Even in the instant case, the Complainant who is a guarantor is answerable for the debt pertaining to one Mr.Samuel. It is seen that the Opposite Party bank utterly failed while discharging their responsibility as a banker in this particular loan transaction. Because the Opposite Party bank has failed to produce the Demand Promissory Note executed by the principal borrower before this FORA. It is a Banking norms that the demand promissory note is always executed by the principal borrower and not by the guarantor. But in the instant case, the Opposite Party bank produced Ex R4 i.e., the demand promissory note dated 28.02.2009 and also produced an acknowledgement of debt executed by the guarantor i.e., Ex R6 dated 23.06.2007. By seeing the above documents, we are very surprise to note the date of the documents because as admitted by the parties before this FORA that the principal borrower one Mr.Samuel obtained the loan of Rs.90,000/- from the Opposite Party bank. We do not understand how the guarantor executed the demand promissory note as a guarantor that also on 28.02.2009. Further the letter of acknowledgement executed on 23.06.2007 that earlier to the above mentioned demand promissory note. If at all the Ex R6 i.e., the letter of acknowledgement is in force then what is the necessity to obtain a demand promissory note on the future dates. The documents produced by the Opposite Party bank clearly shows that the official concerned acted against the banking norms. Because the bank has got no right to execute a demand promissory note on the future date i.e., on 28.02.2009 from the guarantor. That itself shows that the Opposite Party bank indulged in unfair trade practice while executing the loan papers. Apart from the above, we also observed that the amount deposited by the employer of the Complainant is a retired pensionary benefits amount from his service. In the instant case, the Opposite Party bank withheld Rs.70,000/- out of Rs.4,70,000/- deposited by the employer of the Complainant. No doubt, the Opposite Party bank claims that Rs.70,000/- of the retiral amount pertaining to the Complainant not released because it has been adjusted towards the loan due pertaining to the principal borrower Mr.K.M.Samuel. But the Opposite Party bank failed to produce all the relevant records mainly the demand promissory note executed by Mr.Samuel i.e., the principal borrower in this case. No doubt, the lien over the fixed deposits of the customer against loan lent by them cannot possibly be disputed. However, retiral benefits including pension and provident funds are on a different footing than deposits. Though these retiral benefits cannot be attached in proceedings, but shortly after it comes to the hand of the employee, it does not retain its character of retiral benefits and inspiration can be drawn from decision of Hon’ble Apex Court in the case of Union of India versus Jyoti Chit Fund and Others reported in 1976 (3) SCC 607. The Hon’ble Apex Court against threat of attachment of retiral benefits of an employee held that provident fund account, pensions and any other compulsory deposits covered by provisions retain its character until it reaches in hands of the employee. Looking from this angle too, we are of the view that provident fund accumulation deposited by the employer to the employee account cannot be withheld by the Opposite Party bank against the loan raised by the principal borrower. In case the loan raised by the principal borrower i.e., Mr.Samuel in this case, it was open to the Opposite Party bank to initiate recovery proceedings against Mr.Samuel and in case of death against his legal heirs, instead of taking the steps against the principal borrower and his legal heirs the Opposite Party not allowed the Complainant to draw an amount of Rs.70,000/- by stating that they had a lien over the provident fund amount is not correct. The Opposite Party bank failure to discharge/taking steps to recover the amount from the principal borrower inspite of executing a on demand promissory note. We also observed that, the Opposite Party can initiate recovery proceedings against the principal borrower or the guarantor but not the case of attaching the retirement benefits of the guarantor without there being any consent or order from the Court of Law. Under that circumstances, we hold that the Opposite Party not exercised legal right in accordance with Law. Under that circumstances, we hold that the amount recovered by the Opposite Party bank shall be refunded to the Complainant.
In view of the above discussion, we hold that the Opposite Party bank cannot withheld Rs.70,000/- of retirement pensionary benefits pertaining to the Complainant without there being any attachment order by the Court of Law. It is well settled that the provident fund amount cannot be attached nor the bank can exercise any lien over it. Therefore, we hereby direct the Opposite Party bank to refund Rs.70,000/- along with interest at the rate of 10% p.a. to the Complainant……………... We also observed that, the officials concerned of the Syndicate Bank not taken any legal steps at the appropriate time to recover the debts from the principal borrower. So that, the Syndicate Bank is hereby at liberty to recover the compensation amount from the concerned erred official because the official one who is in charge should not slept over the matter and later on creating documents by misusing their position and tendering before the FORA without following the banking norms. Even in this case, the concerned official inspite of taking the Ex R6 i.e., the alleged acknowledgement of debt dated 23.06.2007 once again executed a demand promissory note on the future dates i.e., 28.02.2009 without there being any basis. The official concerned should not misuse their position by taking advantage of the blank signed papers having with them.
We also award Rs.1,000/- as cost of the litigation expenses. Payment shall be made within 30 days from the date of this order.
However, the interest as well as compensation both cannot be allowed. Interest is always inclusive of compensation.
6. In the result, we pass the following:
ORDER
The complaint is allowed. Opposite Party is hereby directed to refund Rs.70,000/- (Rupees seventy thousand only) along with interest at the rate of 10% p.a. ……………………. to the Complainant. And further Rs.1,000/- (Rupees one thousand only) awarded as cost of the litigation expenses. Payment shall be made within 30 days from the date of this order.
The copy of this order as per the statutory requirements be forwarded to the parties free of charge or sent to the parties under postal certificate and thereafter the file shall be consigned to the record room.
(Page No.1 to ….. dictated to the Stenographer typed by her, revised and pronounced in the open court on this the 23rd day of January 2012.)
PRESIDENT MEMBER MEMBER
ANNEXURE
Witnesses examined on behalf of the Complainant:
CW1 – Sri.K.Muthanna Gowda – Complainant.
Documents produced on behalf of the Complainant:
Ex C1 – 07.08.2010: Copy of the Pass Book issued by the Opposite Party to the Complainant (2 in numbers).
Ex C2 – 02.08.2010: copy of the service certificate issued by South Western Railway.
Ex C3 – 17.08.2010: Copy of the Lawyer’s notice issued by the Complainant to the Opposite Party.
Ex C4 – 24.08.2010: Reply of the Opposite Party.
Ex C5 – 06.08.2010: Copy of the re-joinder issued to the Opposite Party.
Ex C6 – 07.08.2010: Postal acknowledgement.
Ex C7 – 20.09.2010: Registered notice issued by the Opposite Party to the Complainant.
Witnesses examined on behalf of the Opposite Party:
RW1 – Sri.P.Ishwara Bhat, Manager of the Opposite Party.
Documents produced on behalf of the Opposite Party:
Ex R1 – 23.07.2004: General Agreement – original.
Ex R2 – 23.07.2004: Original receipt.
Ex R3 – 23.07.2004: Guarantee Agreement (Original).
Ex R4 – 28.02.2009: Demand Promissory Note (Original).
Ex R5 – : Ledger extract for the period from 21.06.2008 to 11.11.2010.
Ex R6 – 23.06.2007: Acknowledgement of debt for all types of facilities by borrower/sureties (Original).
Ex R7 – 20.09.2010: Legal notice issued by the Opposite Party (Xerox).
Ex R8 – 25.09.2010: Postal acknowledgement (Xerox).
Ex R9 - : Loan ledger pertaining to the Complainant (original).
Ex R10 - : S.B account extract of the Complainant (original).
Ex R11 – 17.12.2008: Copy of the notice.
Ex R12 – 28.01.2009: Copy of the notice.
Dated:23.01.2012 PRESIDENT
