OF 2008 AGAINST C.C.NO.138 OF 2006 DISTRICT CONSUMER FORUM NELLORE

Between

The Branch Manager,
Indian Overseas Bank
Bogole Village & Mandal
Nellore District-524 142

Appellant/opposite party

        A N D

Chintala Brahmaiah S/o late Venkata Swamy

Hindu, 50 years, Correspondent of Padmaja
English Medium School, Bitragunta
Bogole Village & Mandal, Nellore Dist -524 142

                                                        Respondent/complainant

Counsel for the Appellant             Sri K.Suryanarayana

Counsel for the Respondent          Sri V.Gourisankara Rao

QUORUM:         SRI SYED ABDULLAH, HON’BLE MEMBER

&

                            SRI R.LAKSHMINARSIMHA RAO, HON’BLE MEMBER

                                THURSDAY THE SIXTEENTH DAY OF DECEMBER

                                            TWO THOUSAND TEN

Oral Order ( As per R.Lakshminarsimha Rao, Member)
                                      ***

1.     The opposite party is the appellant.

2.     The factual matrix leading to filing of the appeal is that the complainant is the correspondent to the Padmaja English Medium School, Bitragunta which was started in the year 1975 and he belongs Schedule Caste community and that he is a physically handicapped person. The complainant has been maintaining financial dealings with the opposite party bank for 20 years.   For the development of the school he intended to purchase the children transport vehicle with the financial aid of the opposite party bank and applied for grant of loan on 2.9.2002 and on the request of the opposite party bank, he had submitted quotation for Rs.3,71,000/- from Mahendra company and also that the District Collector Nellore accorded permission for granting subsidy at 20% of the loan amount.  The opposite party has not granted the loan as the Manager of the opposite party bank demanded for bribe.  The complainant had sent representation to the Regional Manager, IOB, Vijayawada on 14.5.2004 and two representations dated 24.11.2005 and 12.12.2005 to the Regional Manager, Vijayawada.  The complainant got issued notice dated 5.11.2005 with a demand to the opposite party to grant the loan amount.  The opposite part has not given a proper reply.  The complainant claimed various amounts under different heads stating that the opposite party  caused him mental and physical harassment. 

3.     The counter filed on behalf of the opposite party bank any deficiency of service on the part of the bank is denied and it was submitted that the complainant is not a consumer nor the District Forum has jurisdiction to entertain the complaint.  It is submitted that the complainant submitted application for grant of loan for purchase of transport vehicle and subsequently he produced documents relating to his income which on verification, the opposite party  bank came to know that the complainant had no sufficient income to repay the proposed loan instalments.  Therefore, the bank was unable to grant loan to the complainant for purchase of transport vehicle.  Originally the complainant availed a loan of `20,000/- vide loan account no.42/1998 dated 15.12.1998 from the opposite party bank agreeing to repay the amount with  monthly installments @ `1000/- each for 20 months. 

4.     The complainant was irregular in payment of th installments and he could pay the amount in 48 months instead of the agreed period of 20 months.  The financial status of the complainant is very bad and he is unable to maintain his school properly.  He is unable to pay monthly salaries to his school staff.  It is submitted that if the opposite party provide loan to the complainant, it will be unable to realize the loan amount from the complainant.  The complainant is not entitled to demand the opposite party  bank to provides loan as it is purely discretion of the opposite party bank whether to sanction loan or not on the merit of the proposal.  The opposite party bank and its Regional Office rejected the grant of loan and accordingly informed the complainant.  Hence, prayed for dismissal of the complaint.

5.     The complainant filed his affidavit in addition to affidavits of PWs 2 and 3 and marked Exs.A1 to A19.  The Manager of the opposite party bank has file this affidavit and documents Exs.B1 to B3.

6.     The District Forum has allowed the complaint directing the opposite party to pay Rs.10,000/- towards loss of subsidy, Rs.10,000/- towards compensation for mental agony with interest @ 9% per annum.

7.     Feeling aggrieved by the order of the District Forum, the opposite party bank has filed the appeal contending that the complainant is not a consumer and that the sanction given in principle to enable the complainant eligible for getting subsidy does not by itself a ground for coming to the conclusion that there was deficiency in service on the part of the opposite party particularly when it was subsequently found that the school run by the complainant was not generating sufficient income and the proposal of the complainant for loan was not economically viable and that the school cannot afford for a transport vehicle with the given income. 

8.     The point for consideration whether there is any misappreciation of fact or law.

9.     The complainant running a school and his approaching the opposite party bank for grant of loan and that the opposite party  bank has given an in principle sanction are not disputed.  After receipt of the application from the complainant, the opposite party has made enquiry about the economic viability of the school run by the complainant and the capacity of the complainant to pay the loan amount etc.  It is pertinent to note that the complainant has obtained loan an amount of Rs.20,000/- from the opposite party bank earlier with an agreement that the amount was payable in 20 instalments @ Rs.1,000/- per month.  The complainant could not pay the instalments within the agreed period and he could pay the amount only after a period of 48 months. 

10.    It is not disputed that on enquiry the opposite party bank came to know that the financial status of the complainant was very bad and he was unable to maintain his school properly and also that the complainant was unable to pay the monthly salary to his school staff.  At the time of sanction of a loan amount the opposite party bank has vested with power to enquire into the correct facts in regard to the economic viability to pay the proposed loan amount and the past conduct of the proposed borrower. 

11.    The learned counsel for the opposite party bank has correctly submitted that the in principle sanction of any loan amount ipso facto is not a ground for coming to the conclusion that the non-sanction of the loan does amount to deficiency in service on the part of the bank more particularly when the subsequent events unravel the economic viability of the borrower as also his past conduct.  The bank does engage in banking business which is the source of its existence and identity.  It is the discretion of the bank whether to sanction the proposed loan or not taking into consideration of various parameters among which the economic viability of the proposed borrower to pay the loan amount is prima facia the vital factor influencing the bank whether to proceed with the in principle sanction or withdraw from it.  No bank can be compelled to sanction loan amount to a proposed borrower who is not able to pay the proposed loan amount.  The District Forum erred in holding that there was deficiency in service on the part of the opposite party bank in not sanctioning the loan amount to the complainant. The findings of the District forum do not stand to the scrutiny.  The appeal deserves to be allowed.

        In the result the appeal is allowed setting aside the order of the District Forum.  Consequently, the complaint is dismissed.  No costs.

                                                                           Sd/-

                                                                        MEMBER

                                                                            Sd/-

                                                                        MEMBER

                                                                   Dt.16.12.2010

KMK*