Tamil Nadu

StateCommission

FA/209/2014

The Manager, Standard Chartered Bank - Complainant(s)

Versus

M/S. Mehta Jewellers, Rep. by its Partner, A. Ashish Mehta & anr. - Opp.Party(s)

S. Ramasubramaniam & Asso

16 Mar 2020

ORDER

IN THE TAMILNADU STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI.

 

 

Present:      HON’BLE Dr. JUSTICE.  S. TAMILVANAN,   ::  PRESIDENT

                    THIRU.K. BASKARAN,                                   ::  JUDICIAL MEMBER

        TMT.Dr.S.M.LATHA MAHESWARI                 ::  MEMBER

 

F.A.No.209/2014

[Against the order passed in C.C.No.7/2012, dated 10.01.2013 on the file of the District Forum, Coimbatore]

 

MONDAY, THE 16^th DAY OF MARCH 2020.

                                                 

The Manager,

Standard Chartered Bank,

R.S. Puram,

Coimbatore – 641 002.                                ::   Appellant / 1^st opposite party

 

Vs.

1. M/s.Mehta Jewellers,

Rep. by its partner

A.Ashish Mehta,

No.178 DB Road, R.S. Puram,

Coimbatore – 641 002.                                 ::   1^st Respondent/ Complainant.

 

2. The Manager,

         HDFC Bank Ltd.,

         R.S. Puram Branch,

Coimbatore – 641 002.:                              :2^nd Respondent/ 2^nd opposite party.

 

     

For Appellant /1^st opposite party                     :  M/s.Ramasubramanian, Advocate.

For 1^st Respondent/ complainant                     :  M/s.Sarvabhuman Associates.

For 2^nd Respondent/ 2^nd opposite party            :  Proforma Party.

 

             This appeal coming before us for final hearing on 05.03.2020 and on hearing the arguments of both sides and upon perusing the material records, this Commission made the following:- 

ORDER

THIRU.K. BASKARAN,  JUDICIAL MEMBER

 

1.            The 1^st opposite party who suffered an order in the hands of the learned District Consumer Disputes Redressal Forum, Coimbatore (in short the learned District Forum) dated 10.01.2013 in C.C.No.7/2012 directing the 1^st opposite party to return the documents and to repay  certain amount and to pay some amount as compensation besides costs  has preferred this appeal.

2.           For the sake of convenience and brevity, the parties are referred to here as they stood arrayed in the District Forum.

3.     The factual matrix giving rise to this appeal:     

          That the complainant had filed this complaint claiming a direction against the 1^st opposite party to handover the original documents deposited by it and to pay Rs.7,81,361/- together with interest and a sum of Rs.7 lakhs as compensation for deficiency in service and mental agony etc., besides Rs.5,000/- as costs alleging, interalia, that it was having  a current account with the 1^st opposite party bank and that it had availed over draft facility in the year 2005 and as years rolled by the opposite party arbitrarily hiked the interest, it wanted to close the account  and for that purpose  entered into an agreement with the 2^nd opposite party bank and accordingly on 01.11.2011 the 2^nd opposite party had settled the amount outstanding to the 1^st opposite party bank from the complainant; but the 1^st opposite party even after receipt of the entire outstanding amount including interest and other charges refused to handover the documents of title deposited by the complainant at the time of availing the over draft facility, for the reason that as the complainant had prepaid the amount outstanding it was liable to pay the preclosure/prepayment charges @ 2% on the limits sanctioned and it came around Rs.7,72,100/- which was unlawful and it amounted to adoption of unfair trade practice and deficiency in service;

          That the complaint was resisted by the 1^st opposite party bank with a defence that as per the terms and conditions of the agreement between the parties at the time of sanction of the over draft facility the complainant had agreed to pay 2% preclosure charges in the event of it prepaying the amount outstanding ahead of the scheduled payment date and hence, there was nothing wrong in charging preclosure charges @ 2% on the limit of the over draft facility sanctioned to the complainant and in retaining the documents of title deposited by the complainant;

          That the defence of the 2^nd opposite party is that it is an unnecessary party and that it has nothing to do with the alleged deficiency in service on the part of the 1^st opposite party and that no relief  was sought for against the 2^nd opposite party and hence the complaint deserved dismissal against it;

          That on the pleadings of the parties the learned District Forum  framed three points for consideration and had held that the complainant was a consumer as such the  consumer complaint was maintainable and that the 1^st opposite party was guilty of adoption of unfair trade practice and partly allowed the complaint directing the 1^st opposite party to refund Rs.7,81,361/- collected from the complainant towards the preclosure charges and to return the documents of title to the 2^nd opposite party bank and pay Rs.50,000/- as compensation for the  mental agony suffered by the complainant due to the deficiency in service and to pay Rs.1,000/- as cost of litigation;

          That the aggrieved 1^st opposite party is now before us in this appeal.

4.       Points for Consideration in this Appeal are as follows:-

          1)       Whether the complainant is  a consumer as defined under Sec.2(1)(d) of the Consumer Protection Act, 1986?

2)       Whether there was any deficiency in service or adoption of unfair trade practice on the part of the opposite parties?

          3)       Whether the complainant is entitled to  the reliefs granted by the learned District Forum?

5.       Point No.1:-         We are of the view that this point can be decided based on the admitted facts and infact most of the facts are not in dispute in this case which are as follows;

          (a)      that the complainant is a partnership firm and it was running a jewelery business in Coimbatore and the 1^st opposite party is a commercial bank;

          (b)     that the complainant had applied for Over Draft Facility to the 1^st opposite party bank which had sanctioned the same for the first time in 2005 and initially the over draft limit was Rs.50 lakhs and gradually it was increased to Rs.3.5 crores;

          (c)      that at the time of availing the said facility the complainant had deposited the  title deeds with the 1^st opposite party bank as collateral security;

(d)     that feeling aggrieved over the higher rate of interest charged by the 1^st opposite party the complainant wanted to shift their account to the 2^nd opposite party bank which was accepted by both the opposite parties and after the settlement of account the 1^st opposite party had to hand over the documents of title deeds deposited by the complainant to the 2^nd opposite party;

          (e)      that as agreed the 2^nd opposite party bank had paid Rs.3.45 crore to the 1^st opposite party bank being the amount outstanding together with interest due from the complainant and this settlement  was made on 31.10.2011 ;

(f) that even thereafter the 1^st opposite party bank did not handover the documents of title deposited by the complainant to the 2^nd opposite party bank on the ground that the complainant had to pay pre-payment charges or pre-closure charges @ 2% as agreed by the parties which came to Rs.7,72,100/- as on 01.11.2011;

6.       Despite letter by the complainant the opposite party bank did not reverse the debit entry in respect of the preclosure charges and did not  return the title deeds. Hence the complaint was filed and was resisted by the opposite party bank as stated supra and after hearing both the parties the learned District Forum had found the opposite party guilty of adoption of unfair trade practice and deficiency in service and directed it to refund  Rs.7,81,361/- which was collected from the complainant towards the preclosure charges together with interest and to return the original documents of title to the 2^nd opposite party and to pay Rs.50,000/- as compensation for mental agony besides litigation cost of Rs.1,000/-.

7.       Though the main plank of attack of the first opposite party on the claim is that the complainant is not at all a consumer as defind under Sec.2(i)(d) of the Consumer Protection Act, 1986, the learned District Forum had simply held, relying upon the order of the Jammu & Kashmir, State Commission in  the case law reported in (II) CPJ 493, in para 10 of its order as follows; “In the present case also, as the complainant has engaged in the business of jewellery etc., for the livelihood, the consumer complaint raised by them against the opposite parties is maintainable since they come under the definition “Consumer” defined in Section 2(1)(d)(ii) of the Consumer Protection Act, 1986.” In that case law even though the complainant was a private company carrying on civil construction work and had purchased a JCB machine for the purpose of the civil works it was held by the learned Jammu & Kashmir, State Commission that the company was earning  livelihood for itself and its employees and hence the complainant in that case was a consumer. We cannot accept this ratio for the simple reason that Hon’ble Supreme Court of India in (1997) I Supreme Court Cases 131 -       Cheema Engineering Services Vs. Rajan Singh had categorically held as follows;

          “The only question for consideration is whether the respondent has been using the machine ‘Brickman’ for clay preparation, brick-moulding, brick-drying and brick-burning, after purchasing the same from the appellant for earning his livelihood with  in the meaning of Explanation to Section 2(1)(d) of the Consumer Protection Act, 1986? Section 2(1)(d) reads as under;

          “2.(1)(d) ‘consumer’ means any person who.-

1. buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or
2. hires any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person.”

4.         If any goods are purchased for consideration, paid or promised or partly paid or under any system of deferred payment including any user of such goods other than the person who by such goods for the consideration paid or promised or partly paid or partly promised, or under system of deferred payment when such use is made with the approval of such person, the purchaser is the ‘consumer’ within the meaning of the Act. But the Act provides for certain exceptions, namely, “does not include a person who obtains such goods for resale or for any commercial purpose; or …”

5.         The Explanation to the definition of ‘consumer’ has been added by way of an amendment in 1993 which reads as under;

            “Explanation,-For the purposes of sub-clause (i), ‘commercial purpose’ does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment.”

6.         In other words, the Explanation excludes from the ambit of commercial purpose in sub-clause (i) of Section 2(1)(d), any goods purchased by a consumer and used by him exclusively for the purpose of earning his livelihood by means of self-employment. Such purchase of goods is not a commercial purpose. The question, therefore, is whether the respondent has been using the aforesaid machine for self-employment? The word “self-employment” is not defined. Therefore, it is a matter of evidence. Unless there is evidence and on consideration thereof it is concluded that the machine was used only for self-employment to earn his livelihood without a sense of commercial purpose by employing on regular basis the employee or workmen for trade in the manufacture and sale of bricks, it would be for self-employment. Manufacture and sale of bricks in a commercial way may also be to earn livelihood, but “merely earning livelihood in commercial business”, does not mean that it is not for commercial purpose. Self-employment connotes altogether a different concept, namely, he alone uses the machinery purchased for the purpose of manufacture by employing himself in working out or producing the goods for earning his livelihood. ‘He’ includes the members of his family. Whether the respondent is using the machine exclusively by himself and the members of his family for preparation, manufacture and sale of bricks or whether he employed any workmen and if so, how many, are matters of evidence. The burden is on the respondent to prove them. therefore, the Tribunals were not right in concluding that the respondent is using the machine only for self-employment and that, therefore, it is not a commercial purpose. The orders of all the Tribunals stand set  aside.”

8.       In this case law a machine was purchased by the complainant which was engaged in the manufacture and sale of bricks. In that factual situation the Hon’ble Supreme Court of India had held that merely earning livelihood in commercial business does not mean that it is not for commercial purpose.  

9.       Similarly, simply because the complainant had pleaded in the complaint as if the complainant was running jewelry shop for their livelihood it cannot be conduded that it was not commercial because  it is nowhere pleaded in the complaint that the complainant was running the jewelry shop by way of self-employment. Everybody in the state of Tamilnadu and particularly from the city of Coimbatore knows that the complainant’s establishment namely Mehta Jewelers is one of the most reputed and popular jewelry shops in Tamilnadu. They are running a big showroom in Coimbatore employing dozens of regular employees and transacting crores and crores of business in gold and silver. Hence, by  no stretch of imagination it can be even  remotely suggested that the complainant was running a  jewelry shop under self-employment for the purpose of eking out livelihood. Furthermore as has been categorically declared by the Hon’ble Supreme Court, it is the complainant who had to prove that he was running   jewelry shop for eking out  livelihood through  self-employment.  As already noted it is not even pleaded in the complaint that the complainant has been running  the jewelry shop through self-employment.     

10.     In this case admittedly the complainant had availed over draft facility with a limit of Rs.3.5 crore from the 1^st opposite party for the purpose of infusing funds into the jewelry business. It is not the case of the complainant  that the loan was availed by them for the purpose  of clearing certain debts. Hence, the service availed by the complainant from the 1^st opposite party namely the over draft facility was only for commercial purpose and not for the purpose of earning livelihood by means of self-employment and hence the complainant in this case cannot take shelter under explanation clause to Sec.2(1)(d)(ii) of the Act.

11.     We are of the view that the other case laws relied upon by the learned counsel for the complainant are not applicable to the facts of the case. In the case law in Civil Appeal No.5166/2009 – Madan Kumar Singh (D) Thr. LR. Vs. Distt. Magistrate, Sultanpur & Ors, the complainant was an auction purchaser of a tractor and there was delay in delivering the  truck and to hand over the documents of the vehicle. In that case the complainant categorically pleaded that the truck was purchased by him to be exclusively used by him for the purpose of earning his livelihood by means of self-employment only. In that circumstance, the Hon’ble Supreme Court has held that the purchaser was a consumer. In our case the complainant is a big jewelry shop and there is no specific pleading that the shop was run by means of self-employment.

12.     Equally, the order of the Hon’ble National Commission in F.A.No.159/2004 in M/s.Harsolia Motors Vs. M/s.National Insurance Co. Ltd., cannot also come to the rescue of the complainant in as much in that case taking of insurance policy by a company involved in commercial activities came up for consideration and in that case it was held by the Hon’ble National Commission that the insurance policies are taken to minimize the risk involved in the business and hence taking of insurance policies cannot be directly linked with generating profit. In our case it is not the case of taking insurance policy by the complainant.

13.     In the light of the discussions held above we have no hesitation to hold that the over draft facility was availed by the complainant from the 1^st opposite party bank only for the purpose of commercial transactions and that the complainant has not been running jewelry shop for earning livelihood by means of self-employment and hence the complainant is not a consumer in respect of the over draft facility availed by them from the 1^st opposite party bank and we answer point no.1 accordingly.

14.Point No.2:

          Dehors our above  finding to point no.1 we propose to answer point no.2 also. The main grievance of the complainant is that as the 1^st opposite party bank went on increasing the rate of interest for the over draft facility availed by them, they thought it fit to shift the account to the 2^nd opposite party bank which had offered lesser rate of interest for the similar facility and hence as agreed between the parties the 2^nd opposite party bank had paid the entire outstanding amount of Rs.3.45 crores due to the 1^st opposite party bank by the complainant as on 31.01.2011 itself and inspite of that the 1^st opposite party had not transferred the documents of title deposited by the complainant  to the 2^nd opposite party bank and that the 1^st opposite party had illegally debited Rs.7,72,100/- as preclosure /prepayment charges.

15.     Per contra, the simple defence of the 1^st opposite party is that, charging of preclosure/prepayment charges is not uncommon in banking industry and it is very common in commercial transactions and that when the complainant had availed the over draft facility it had accepted the terms and conditions of the said facility and one such condition is that the complainant was liable to pay preclosure charges @ 2% on the facility limit granted to the borrower and hence in the absence of any statutory prohibition or legal impediment or order by any regulatory authority or by any court the parties to the agreement are  bound by the terms and conditions of the agreement and in our case as per the  agreement Ex.A4,  the complainant had agreed to pay 2% pre-closure/prepayment charges in the event of  they  pre-paying or pre-closing the over draft facility and in the event of not availing the facilities or any part thereof within 60 days from the date of grant of facility. Hence, there is nothing wrong in the 1^st opposite party bank in debiting the pre-closure charges of Rs.7,72,100/- in the account of the complainant and in refusing to hand over the documents of title  exercising the right of general lien.

16.     It is true that the agreements in respect of the said facility was marked as Ex.B3  series. It is true that in the facility letter dated 7.12.2010 there is a clause namely 18 (2) which provides for repayment charges of 2% in the event of repayment ahead of  previously agreed repayment schedule or tenor.  But we fail to understand as to what was the need for such a clause in such a  facility namely over draft facility. Admittedly, it is not a term loan or any other loan which is repayable in EMIs or otherwise on or before a particular date in every month or every week or every fortnight.  For example if a person avails a  housing loan he will have to repay the housing loan in equated monthly instalments for a specified  number of instalments namely  60 instalments and  if such a borrower wants to repay the entire loan amount in the 20th month then it  would  amount to foreclosure or prepayment  as the bank would incur loss in the shape of interest as it had to redeploy the   prepaid amount to some other prompt and good customer which may take time to materalise  warranting levy of foreclosure/prepayment charges. It is a different matter that as per the guidelines  of  the RBI,  foreclosure or prepayment charges should  not be levied in case of housing loans. So, incase of any other business

loan repayable in monthly instalments or other intervals and if the borrower wanted to clear the entire loan amount ahead of  the repayment schedule then the question of levy of pre-closure or repayment charges would arise. In our case admittedly the facility availed by the complainant is over draft facility, and the  account holder can avail the said facility up to the limit granted to it whenever it  required funds in its account to honour some commitments. For example if a  person is granted over draft facility or cash credit and on a particular date the credit balance in his account was Rs.1 lakh only and if a cheque for Rs.20 lakhs was presented in his account for collection still  the bank would  honour the cheque and levy interest for Rs.20 lakhs less Rs.1 lakh available in the account of the customer. In such case whenever the person has surplus funds he can deposit in his account which will be given credit to in the over draft facility outstanding. Hence there is no previously prepared or agreed schedule for repayment in respect of the outstanding arising out of utilizing the over draft facility. As such there is no question of prepayment or preclosure and hence no question of levy of preclosure charges would arise.

17.     Hence while holding that the complainant is bound by the terms and conditions of the agreement under Ex.B3 still he is not bound to pay the so-called preclosure / prepayment charges in the given  nature and character of the facility availed by the complainant.

18.     If we peruse the written version filed by the 1^st opposite party and the documents filed by the 1^st opposite party we cannot find any repayment schedule in respect of that over draft facility. If at all the 1^st opposite party would clearly plead that the amount outstanding in the over draft facility account of the complainant has to be repaid on or before such and such date then only the question of prepayment/preclosure would arise, in the event of the complainant paying the entire outstanding in the said over draft account. Further  in the said clause,  it is also stated that if prepayment was made ahead of  renewal as contained in the facility letter then the borrower would be liable to pay preclosure charges. Here again we are unable to understand as to how  a borrower of over draft facility could be asked to pay preclosure/prepayment charges if the borrower had not renewed the facility. In banking parlance if a over draft facility was sanctioned to an account holder on 01.01.2020 and if the facility is valid for one year than the borrower and the bank have to renew the said facility on 01.01.2021 and in that event the borrower should ensure there is no outstanding as on 31.12.2020 in the said account. Immediately, on renewal the very next namely 01.01.2021 the borrower could avail the facility subject to the limit fixed. In this circumstances how comes prepayment ahead of renewal, we cannot know even assuming that the borrower had cleared the outstanding as on 31.12.2020 and he does not want to further avail the facility he can opt for closure of the facility without renewing the same. In that event how can the banker insist the borrower to pay the preclosure charges. Further if the said borrower does not renew thesaid facility from 1.01.2021 then the bank can insist the borrower to pay the entire outstanding in that account lest in would attract penal interest.

19.     Because of this factual scenario in this case we are not inclined to deal with the case laws relied upon by both sides on the points of binding nature of the mutual agreement in the absence of any Statutory Prohibition, Regulatory Prohibition, Court Order etc., and the rights of customer to shift over to other bank which offered attractive rate of interest  for the reason that these case laws  did not deal with availing of over draft facility by an account holder and shifting the account to some other bank etc.,

20.     Based on the discussions held above we hold that the 1^st opposite party bank cannot levy preclosure/prepayment charges from the complainant. At the same time we hold that it cannot amount to adoption of unfair trade practice or deficiency in service in this case in as much we have held that the complainant is not at all a consumer in relation to the over draft facility availed from the 1^st opposite party and hence there is no question of deficiency in service or adoption of unfair trade practice and we answer this point accordingly.

21.     Point No.3:-         Having held that the complainant is not a consumer as defined  under Sec.2(1)(d) of the Consumer Protection Act, 1986,  we have to hold that the complaint is not maintainable and it follows that the complainant is not entitled to the reliefs granted and this point is  also answered accordingly.   

          In the result, the appeal is allowed and the order of the learned District Consumer Disputes Redressal Forum, Coimbatore made in C.C.No.7/2012 dated 10.01.2013 is set aside and the complaint is dismissed.

Parties shall bear their own costs throughout.

 

 

S.M.LATHA MAHESWARI                                    K. BASKARAN,                                        S. TAMILVANAN,

        MEMBER                                                     JUDICIAL MEMBER                                           PRESIDENT

 

INDEX; - YES/No

Bsd/e/JM/Orders/