BEFORE:

HON’BLE MR. SUBHASH CHANDRA, PRESIDING MEMBER

HON’BLE DR. SADHNA SHANKER, MEMBER

For the Appellant                Mr Aman Leekha and Ms Nikita Sharma

                                       Advocates  

For the Respondent             Mr Sanjeev Kumar Verma, Advocate

ORDER

PER SUBHASH CHANDRA

1.     This first appeal under section 19 of the Consumer Protection Act, 1986 (in short, ‘the Act’) is directed against the order dated 25.10.2018 of the Punjab State Consumer Disputes Redressal Commission, Chandigarh (in short, ‘the State Commission’) in complaint no. 184 of 2018 whereby the State Commission has allowed the complaint.

2.      We have heard the learned counsel for the parties and have carefully perused the material on record. Delay of 162 days in filing the appeal was condoned vide order dated 02.08.2019 subject to appellant depositing Rs.20,000/- with the Consumer Legal Aid Account of this Commission.

3.     The relevant facts of the case in brief are that the respondent which is a proprietorship firm registered under the provisions of Himachal Pradesh VAT Act, 2005, situated at Guruji Building, near Fire Station, Sector 3, Parwanoo, District Solan (HP) had obtained an Over Draft Account no. 13072790000045 with the appellant Bank. On 10.03.2016 and 14.03.2016 the Deputy Excise and Taxation Commissioner (in short, ‘the DETC’), Flying Squad, South Zone, Parwanoo served a notice under section 27 of the Himachal Pradesh VAT Act upon the appellant directing it to pay Rs.1.00 crore or a lessor amount available in the said account or any other account of the complainant towards the outstanding dues of the respondent. On 11.03.2016, without instructions of the respondent, a sum of Rs.9,78,3903/- and thereafter sums of Rs.4,05,000/- on 15.03.2016, Rs.2,00,000/- on 16.03.2016 and Rs.1,11,176/- were transferred from the said account of the respondent to the DETC. The respondent served a legal notice dated 18.03.016 on the appellant requesting reversal of the debited amount and to reduce the OD limit. She also requested the DETC not to direct the Banks to transfer the funds from her OD account or Cash Credit limit, in response to which the appellant, vide reply dated 28.03.2016, denied the allegations and stated that the funds were transferred in due compliance of legal notice of the Government of Himachal Pradesh. A sum of Rs.3527/- was again transferred by the Bank to the DETC on 24.05.2016. According to the appellant, in the absence of directions by it, this amounted to deficiency of service. Hence, the respondent approached the State Commission which, on contest, by way of the impugned order directed:

1. to delete the entries of the transferred amount from the CC/OD account of the complainant for making payment to DETC, over and above the amount lying deposited in the said account on the said date of receipt of notice;
2. to pay Rs.30,000/- as compensation on account of deficiency in service and unfair trade practice adopted by them as well as for causing mental agony and harassment to the complainant, including litigation expenses; and
3. to comply with this order by the opposite parties to be done within a period of 30 days of the receipt of certified copy of the order.

This order is impugned before us.

4.     The contention of the appellant is that the cash credit limit account of the respondent could be debited by it in respect of the demand raised by the concerned department of the Government was incorrect, in view of Section 27 of the Himachal Pradesh VAT Act. The appellant therefore, argued that there was no deficiency committed by it in doing so. It was contended that the impugned order did not appreciate the material on record and was therefore perverse. It was contended that the DETC had provided the details of the account of the respondent and therefore, the demand notice dated 24.01.2016 was issued. It was contended that the State Commission ought to have called upon the complainant or the department to clarify whether demand had been allowed finally. The appellant had no alternative but to comply with the orders of the DETC. It was also stated that it was settled law that action based on the given facts cannot be considered as deficiency in service. It was submitted that the complaint before the State Commission was filed in 2018 after almost two years of the legal notice being issued and that no explanation had been provided as to why the State Commission has not been approached earlier. The DETC had also not been made a party to the proceedings. It was stated that the respondent had not approached the State Commission through full disclosure with regard to its appeal before the DETC. According to the appellant, the appellant’s action under Section 27 of the VAT Act was in pursuance of the directions in that section that in case of delay in paying the amount, the same would be recoverable from any person since the Bank was the holder of the money in the cash credit limit account on behalf of the respondent and that deductions were therefore justified under Section 27 (3) of the VAT Act.

5.     It was argued that the State Commission had erred in interpreting Section 27 (4) of VAT Act and in holding that no notice had been issued by the appellant to the respondent before transferring the said amounts. It was also contended that the State Commission’s reliance on the judgment of the High Court Karnataka in Karnataka Bank Ltd., vs Commissioner of Commercial Taxes in Karnataka and 2 Ors. (1999) 144 STC 19 was erroneous since DETC was a party to the proceedings. It was further prayed that the impugned order be set aside.

6.     Per contra, it was contended on behalf of the respondent that DETC had committed deficiency in service in unilaterally responding to the recovery proceedings initiated by the DETC under Section 27 of the HP VAT Act which also infringed the right of the respondent to file the appeal without any pre-deposit.  It was contended that debiting of the OD account or cash credit limit of the respondent without specific instructions by the appellant was incorrect since in an OD account the customer is also a bank debtor and the bank is a creditor and as such the bank was not liable to make payments under any circumstances. It was also contended that in the absence of directions of the respondent, the appellant may not unilaterally or arbitrarily transfer the amounts from an OD account into another account. It was also argued that the State Commission had rightly held, in the light of the judgment of Hon’ble Supreme Court in Vimal Chandra Grover vs Bank of India, 2000 AIR (SC) 2181 that by issuing overdraft facility the bank had provided a service to the respondent as its customer and therefore, the account holder was a ‘consumer’ of the Bank. It was also contended that the impugned order had rightly relied upon the judgment of Karnataka Bank Ltd., (supra) and held that the facility of overdraft or cash credit facility did not imply that the amount belonged to the customer and the bank was not under the obligation to make any payment from the same. Therefore, it was argued that the unilateral transfer of any amount from the overdraft facility account of the respondent was in violation of banking practice making the bank liable for legal liabilities and therefore, relief provided by the State Commission was in order.

7.     From the above, it is apparent that the appellant had provided to debit an OD and cash credit account to the respondent. In response to the notice under Section 27 of the HP VAT Act issued to it by the DETC, the appellant had debited the amount without notice to or authorisation of the respondent. The State Commission had rightly held, on the basis of Vimal Chandra Grover (supra) that the respondent was a ‘consumer’ of the Bank. It had also been rightly held, on the basis of Karnataka Bank Ltd., (supra), that unless authorised by the account holder, the bank was not authorised to transfer any money to a third party. It is seen that Section 27 of the HP VAT Act provides as under:

27. Special Mode of Recovery:-

(1) Notwithstanding anything contained in section 25 or any law or contract to the contrary, Commissioner, or any officer other than an Excise and Taxation Inspector, appointed under section 3 to assist the Commissioner, may, at any time or from time to time, by notice in writing (a copy of which shall be sent to the dealer at his last address known to the officer issuing the notice), require –

(a) any person from whom any amount is due or may become due to a dealer who has failed to comply with a notice of demand for any amount due under this Act;

(b) any person who holds or may subsequently hold any money for or on account of such dealer, to pay into the Government treasury in the manner specified in the notice issued under this sub-section, so much of the money as is sufficient to pay the amount due from the dealer in respect of the arrears of the tax, interest and penalty under this Act.

Explanation.-- For the purposes of this sub-section, the amount due to a dealer or money held for or on account of a dealer by any person shall be computed after taking into account such claim, if any, as may have fallen due for payment by such dealer to such person and as may be lawfully subsisting.

(2) The officer issuing a notice under sub-section (1) may at any time, or from time to time, amend or revoke any such notice or extend the time for making any payment in pursuance of the notice.

(3) Any person making any payment in compliance with a notice issued under sub-section (1) shall be deemed to have made the payment under the Authority of the dealer and the treasury receipt for such payment shall constitute a good and sufficient discharge of the liability of such person to the extent of the amount specified in the receipt.

(4) Any person discharging any liability to the dealer after service on him of the notice issued under sub-section (1) shall be personally liable to the State Government to the extent of the liability discharged or to the extent of the liability of the dealer for tax, interest and penalty, whichever is less.

The State Commission has held, vide the impugned order as under:

15. ……………….Perusal of sub Section 4 of above reproduced Section 27 shows that any person discharging any liability to the dealer after service on him of the notice issued under sub-section (1) shall be liable to discharge to the extent of liability of the dealer. However, no such notice has been issued by the opposite parties to the complainant in this case, before transferring the above said amounts from the account of the complainant to the account of the DETC. It is the categorical case of the complainant that it never instructed the Bank to transfer the overdraft amount from its account, nor it ever issued any document/instrument upto the limit of overdraft facility. Rather, the opposite parties unilaterally, without any instructions of the complainant, added the amount in the account of the complainant on the basis of the notices issued by the DETC and transferred the same to the account of DETC. We are of the definite view that the Bank is bound to honour the overdraft facility only when the instructions are given by the account holder i.e. the complainant to transfer the said amount to a particular person/department or any cheque etc. which is issued under his/her, authorized signatory’s signatures is required to be honoured. At the most, the opposite parties could transfer the amount, which was lying in the account of the complainant and transfer of the amount beyond the amount lying deposited could have only been done on the written instructions of the complainant. Thus, the transfer of the said amount to DETC, without taking written instructions or issuing notice to the complainant, amounts to grave deficiency in service and unfair trade practice on the part of the opposite parties. Reliance can be placed on the decision of the Hon’ble Karnataka High Court in case Karnataka Bank Ltd. v. Commissioner of Commercial Taxes in Karnataka & Ors. (1999) 114 STC 19, in which it was held as under:

2. This interpretation is contrary to law as well as Bank practice. If there is any amount of the defaulter with the Bank and the commercial Tax Department issues notice under Section 14 of the Act, then the Bank is bound to remit it. But, if the facility has been given to customer to draw overdraft or any credit facility, in that case the said amount cannot be considered as belonging to the customer and the Bank is not under obligation to make payments to the department.  

8.     The State Commission has also held that:

In this case, the facility has been given to complainant to draw overdraft and, as such, the limit of Overdraft facility cannot be considered as belonging to the customer/complainant and the Bank is not under any obligation to make payments to the department.

9.     It is evident from the foregoing that the appellant had debited a total of Rs.16,98,006/- on five different occasions from the OD/ Cash Credit Account held by the respondent, including once despite legal notice by the respondent, in order to satisfy the notice received from the DETC.

10.   Reliance on appellant on section 27 of the HP VAT Act to argue that it was under obligation under the Act to deduct the amount upon notice cannot be accepted. The respondent was a consumer of the appellant in terms of Vimal Chandra Grover (supra) as per the banking norms it should have obtained instructions after notice to the respondent. In any case, the accounts were only that of OD/ Cash Credit and did not have any deposits by the respondent which could have been attached or debited in pursuance of any order. It is apparent that the proceedings on behalf of DETC and the respondent were an ongoing process under which the respondent had the right to file an appeal contesting the notice of the DETC. HP VAT Act also provided for the same. The act of the appellant in debiting the OD account/ cash credit limit without authority of the respondent effectively denied the respondent an opportunity to file an appeal without any pre-deposit. In any case, it was not authorised by the respondent as the account holder and a consumer of the Bank.

11.   For these reasons, the finding of the State Commission that the appellant was deficient in service qua the respondent cannot be found fault with. The appeal is therefore, liable to fail. The appeal is accordingly disallowed.

12.   All pending IAs, if any, also stand disposed of by this order.