BEFORE THE A.P. STATE CONSUMER DISPUTES REDRESSAL COMMISSION

AT HYDERABAD.

C. C. 56/2009

Between:

Y. Venkata Subbaiah

S/o. Late  Venkata Ramaiah

Age: 38 years, Business

R/o. 7-1-246/2, Flat No. 603

Sai Sudharshan Enclave

Balkampet, Hyderabad-38.                         ***                         Complainant

                                                                   And

1. Canara Bank

Kanchanbagh Branch

Hyderabad

Rep. by its Branch Manager

2. The Branch Manager

Canara Bank, Kanchanbagh Branch

Hyderabad.                                                          ***                         Opposite Parties

Counsel for the complainant   :                 M/s. G. Madhusudhan Kumar

Counsel for the  opposite Parties:                M/s. Deepak Bhattacharjee

CORAM:

                          HON’BLE SRI JUSTICE D. APPA RAO, PRESIDENT     

&

                                            SMT. M. SHREESHA, MEMBER

TUESDAY, THIS THE TWENTY THIRD DAY OF  NOVEMBER  TWO THOUSAND TEN

Oral Order: (Per Hon’ble  Justice D. Appa Rao, President)

                                                          *****

1)                 This is a complaint filed  to direct the opposite parties  to pay Rs. 68,100/-  together with interest @ 18% p.a.,   incurred by him towards  registration charges  for deposit of title deed  in their favour and discharge the  property  and hand over the original  title deed  which was kept in their custody besides  compensation of Rs. 95 lakhs  towards business loss  together with  punitive damages and costs.

2)                 The case of the complainant in brief is that he has approached the opposite party bank to avail a loan of Rs. 50 lakhs for his business by depositing title deed of his property.   As per the instructions of the Branch Manager (Op2) he had deposited the sale deed dt.  18.9.2008 got it registered incurring registration charges.    After completion of all the formalities Op2 issued sanction letter dt. 23.9.2008 to open cash credit basis by making hypothecation of stock and receivables.    However, Op2 had postponed without assigning any reasons despite fulfilment of all the formalities due to which he had sustained heavy loss as well as reputation of his business.    In fact he had spent huge amount for formation of a company under the name and style of ‘Yala Mobiles & Computers Pvt. Ltd. under the Companies Act, 1956.    He approached the bank for the above said loan.    He got issued a registered notice which did not evoke  any reply.    Alleging that it amounts to deficiency in service, breach of trust and non-compliance of customers’ grievance  filed the complaint seeking return of amount spent towards registration chares and return of  the title deeds, and Rs. 95 lakhs towards business loss besides punitive damages and costs.

3)                Opposite Parties resisted the case.   The allegation that in spite of creation of equitable mortgage of his property  the loan was not released was not correct.  At no point of time he was instructed to get the memorandum of deposit of title deed registered for a fictitious housing loan.   Subject to confirmation by the controlling authority prima facie sanction of loan facility was accorded to M/s. Yala Mobiles & Computers Pvt. Ltd.,  and directed the complainant to keep the papers ready including memorandum of deposit of title deeds to offer immovable property as collateral security for OCC limit proposed to be granted to the company.   The loan proposal which was processed was in respect of the company mentioned above.    Op2 did not sign on the said application.    Whenever registration of memorandum of deposit of title deed is made it is incumbent that the officer of the bank to be present for the purpose of registration and take delivery of the original registered document along with registered instrument and  keep  it under lock and key of the branch.    Therefore they were not aware of registration of memorandum nor had it agreed to sanction Rs. 50 lakhs towards loan of the company in his name.    The memorandum of  title deed  containing   the annexure under section 32A of  the Registration Act  was prepared  in advance for facilitating the registration in case the branch  has agreed to  release the OCC limit to the company on getting  clearance  from controlling authority.   Sri M. Venkateswara Rao, officer of the opposite party bank never visited the Sub-Registrar’s office on 18.9.2008 and had not submitted papers   including the registers submitted by the Sub-Registrar.   The practise of entering the documents in EMT register was not even made.    The title deed was not deposited with the bank.    The complainant had left photostat copy of the memorandum of deposit of title deed on the table in the absence of branch manager.    In fact the said document   need not be registered u/s 17 of Indian Registration Act.     After the branch issued the provisional sanction letter   to the company,  the file was forwarded to the Asst.  General Manager (Advances Section), Hyderabad.  After discreet enquiry he recommended the bank not to release the loan as it was unsafe.  The accounts of the complainant viz.,  in respect of TOD of Rs. 2.50 lakhs in the current account and discounting of cheque in respect of Rs. 5 lakhs he failed to liquidate the liability in spite of repeated requests and demands.  In both the cases it had constrained to file a civil suit in O.S. No. 1500/2009 on the file of IV Senior Civil Judge, Hyderabad.    News items were published on 18.3.2009 in widely circulated  dailies indicating that the complainant was involved   in playing fraud with the banking and financial institutions and duped several persons running into several crores.    Thereupon the controlling authority refused to grant permission to disburse the loan and accordingly loan was not disbursed.    In fact if the loan is for the company he should have filed  Form-8 & 13  with the Registrar of Companies  for registration of the charge and non-fulfilment  of  such  formalities  would itself show  that  the allegations of the complainant were not correct.    Neither the lien nor charge was created over the property.     For the legal notice issued they gave suitable reply.   The complaint was filed in order to make wrongful gain.    He is not entitled to any of the reliefs claimed as they were not tenable.    He was trying to play fraud on the financial institutions and the government of India undertakings like Canara Bank.    This is a fit case where compensation and costs could be awarded as he had made baseless allegations.    Therefore   it prayed for dismissal of the complaint with costs.

4)                 The complainant in proof of his case filed his affidavit evidence and got Exs. A1 to A7 marked, while the opposite party bank filed the affidavit evidence of its officer and got Exs. B1 to B5 marked. 

5)                 The points that arise for consideration are:

                     i.        Whether the complainant had deposited his title deed and got it registered and consequently entitled for refund of registration charges on failure to sanction loan?

                   ii.        Whether the complainant is entitled for sanction of loan?

                  iii.        Whether there is any deficiency in service on the part of bank?

                  iv.        Whether the complainant is entitled to any of the reliefs?

6)                 The complainant has admittedly sought for sanction of loan for an amount of  Rs. 50 lakhs by hypothecating stocks and receivables on behalf of his company ‘Yala Mobiles & Computers Pvt. Ltd’ a company incorporated under Companies Act, 1956.   The complainant filed the complaint,  as though the loan was sanctioned  personally to him and he was directed to deposit the title deed  by  executing  registration of memorandum of deposit of title deed   in his personal capacity.    Ex. A3  provisional sanction letter  shows  that  the loan was  applied on behalf of the company  and in view of the fact that  it was  for commercial purpose  and in such case it excludes the provisions of the  Consumer Protection Act vide Section 2(d) (ii), he filed the case in his name.    

7)                 Be that as it may the grievance of the complainant is that pursuant to the sanction letter he deposited the sale deed and title deed Exs. A1 & A2   besides original E.C. Ex. A3 got registered by incurring expenditure of Rs. 68,100/-.  It may be stated herein   that while registering the memorandum of deposit of title deed   none of the representative from the bank   was present nor  signed on it.    No doubt  he had enclosed the  Form  as stipulated u/s 32A of the  Registration Act  however there is no proof that  the officer was present  at the time when the document  was executed.    In fact endorsement on Ex. A2 shows that none of the officers had signed on behalf of the bank.  The officer could not have signed as loan was not sanctioned by the competent authority.    

8)                Sri M. Venkateswara Rao, Manager of the bank filed his affidavit evidence whose photo was affixed to the form stated that “It is humbly submitted that the format under Section 32A of the Registration Act bearing my signature was never handed over by me for making it an annexure to the memorandum of deposit of title deed bearing document No. 4818/2008 for fictitious housing loan.  I have never visited the Sub-Registrar’s Office, Kukatpally on 18.9.2008 or any other subsequent day to receive the said documents.    I have also not received the original memorandum of deposit of title deed or any of the original documents referred in Schedule-A of the said document.    On the instructions of my branch head I had no doubt affixed my photograph.    But I am not aware how the said document was presented by Sri Y. Venkata Subbaiah to the Registrar’s Office to offer his property for a fictitious housing loan.”  The complainant for the reasons best known did not controvert  the affidavit of the said officer.    We may state that the complainant did not disclose as to his capacity to represent ‘Yala Mobiles & Computers Pvt. Ltd’ to which sanction letter was addressed.    It is not known in what capacity he has been representing the said company.   No evidence whatsoever was filed.    At the cost of repetition, we may state that he filed the complaint as though   the loan was sanctioned  to him.  It was contrary to his own recitals.  Memorandum of deposit of title deed   was equally executed by him in favour of the bank unilaterally without getting the signature of any of the officers representing the bank.    He mentions  his own name for the loan that said to have been sanctioned to ‘Yala Mobiles & Computers Pvt. Ltd’    Clause 3 of Ex. A3 reads that “the bank may revoke in part/in full/withdraw/stop financial assistance at any stage.”

9)                 It may be stated herein  the  bank  has  made allegations  against the complainant  stating that he was  involved in fraudulent transactions  running into crores of rupees  which was published in several newspapers vide Ex. B3 in  Andhra Jyothi & Eenadu.    A perusal of which shows that he was involved in some fraudulent transactions duping about 200 customers to a tune of Rs. 5 crores.    Importantly the complainant did not dispute the said fact.    It may be stated herein that the bank alleged that the complainant had failed to pay an amount of Rs. 2.50 lakhs and Rs. 5 lakhs in regard to current account and TOD for which they filed   a civil suit in O.S. No. 1500/2009 on the file of IV Senior Civil Judge, Hyderabad.    The said fact was also not disputed.    The bank in order to prove  that they had never  got the title deeds of the complainant  by way of  deposit constituting mortgage  by way of deposit of deeds  filed Ex. B1  register for recording deposit of  title deeds.   No doubt transaction of the complainant does not find a place in the said register suggesting that the loan was not sanctioned to him in order to constitute valid deposit of title deeds.  There is no proof of that deposit of title deeds was  made. 

10)               The Hon’ble Supreme Court in Managing Director, Maharashtra State Financial Corporation Vs. Sanjay  Shankarsa Mamarde reported in (2010)  7 SCC 489  considering  a case where  the financial institution  with-held the loan sanctioned  and due to which  the complainant had sustained loss.    However, considering the definition of deficiency in service as provided u/s 2(1) (g) 7(o) of the Consumer Protection Act opined that:

“It is manifest from the language employed in the clause that its scope is also very wide but no single test as decisive in the determination of the extent of fault, imperfection, nature and manner of performance etc. required to be maintained can be laid down. It must depend on the facts of the particular case, having regard to the nature of the ‘service’ to be provided.  Therefore, in so far as the present case is concerned, in order to examine whether there was a deficiency in service by the Corporation, it has to be seen if there was any inadequacy in the quality, nature and manner of performance which was required to be maintained by the Corporation in terms of their letter dated 2nd July, 1992, conveying the sanction of loan to the complainant.

After considering the facts the Supreme Court opined that “

In the background of the factual scenario as emerging from the material on record, we are convinced that there was no shortcoming or inadequacy in the service on the part of the Corporation in performing its duty or discharging its obligations under the loan agreement. The Corporation was constrained not to release the balance instalments and recall the loan on account of stated defaults on the part of the complainant himself. Non release of loan amount was not because of any deficiency on the part of the Corporation but due to complainant’s conduct and therefore, the failure of the Corporation to render ‘service’ could not be held to give rise to claim for recovery of any amount under the Act.

Relying a decision n U.P. Financial Corporation & Ors. Vs. Naini Oxygen & Acetylene Gas Ltd. & Anr. (supra) this Court had observed that a Corporation being an independent autonomous statutory body having its own constitution and rules to abide by, and functions and obligations to discharge, in the discharge of its functions, it is free to act according to its own right. The views it forms and the decisions it takes would be on the basis of the information in its possession and the advice it receives and according to its own perspective and calculation. In such a situation, more so in commercial matters, the court should not risk their judgments for the judgments of the bodies to which that task is assigned. It was held that: (SCC p. 761, para 21)

“Unless its action is mala fide, even a wrong decision taken by it is not open to challenge. It is not for the courts or a third party to substitute its decision, however more prudent, commercial or businesslike it may be, for the decision of the Corporation. Hence, whatever the wisdom (or the lack of it) of the conduct of the Corporation, the same cannot be assailed for making the Corporation liable”.

As was observed by this Court in Jagdamba Oil Mills (supra), while not insisting upon the borrower to honour the commitments undertaken by him, the Corporation alone cannot be shackled hand and foot in the name of fairness. Fairness cannot be a one-way street. Where the borrower has no genuine intention to repay and adopts pretexts and ploys to avoid payment like in the present case, he cannot make the grievance that the Corporation was not acting fairly, even if requisite procedures have been followed.

                                                                                      (Emphasis supplied)

11)               Coming to the facts the complainant sought for sanction of loan for a company floated under the name and style of ‘Yala Mobiles & Computers Pvt. Ltd’.   The so called deposit of title deeds is not evidenced by any document except his own unilateral execution of deed without the signature of any of the officers of the bank.    Schedule annexed to Ex. A2 would not in any way suggest that such deed was executed by both parties to the document.    Even otherwise in the light of the fact that the complainant was a defaulter and a civil suit is also pending before the IV Senior Civil Judge, Hyderabad for recovery of the amounts,  and in the light of his conduct wherein an allegation was made that he duped several   investors vide news items, the bank was justified in not sanctioning the loan.  There is no proof that the complainant had deposited the title deeds in order to constitute a valid mortgage.    There is no deficiency in service on the part of the bank.  The question of sustaining loss nor awarding compensation would arise.  

12)               In the result the complaint is dismissed with costs computed at Rs. 5,000/-.  Time for compliance four weeks.

1)      _______________________________

PRESIDENT                 

2)      ________________________________

 MEMBER           

   Dt.  23.  11.   2010.

*pnr

APPENDIX OF EVIDENCE

WITNESSES EXAMINED FOR

COMPLAINANT:                                                    OPPOSITE PARTIES

          None                                                                     None.

Documents marked for complainant:

Ex A-1         Certified Copy of Sale Deed dt :22-12-2006

Ex A-2         Certified Copy of Title Deed dt : 18-9-2008

Ex A-3         Original Copy of E.C. dt : 5-9-2009

Ex A-4         Office copy of legal notice dt : 19-2-2009

Ex A-5         RPAD Receipts original(3)

Ex A-6         Acknowledgment cards (3)

Ex A-7         Office copy of Reply notice dt: 27-2-2009

Documents marked for Opposite Parties:

Ex B-1         True Extract of EMT Register

Ex B-2         Xerox copy of the Memorandum of Deposit of Title Deed

Ex B-3         News Item Published in News Papers

Ex B-4         Direction of Controlling Authority, not to sanction  the Loan.

Ex B-5         Letter issued by the branch provisionally sanctioning

OCC limit of Rs.50.00 Lakhs to M/s. Yala Mobiles

and Computers Pvt. Ltd.

1)      _______________________________

PRESIDENT                 

2)      ________________________________

 MEMBER           

   Dt.  23.  11.   2010.

*pnr

“UP LOAD – O.K.”