JUSTICE SUDIP AHLUWALIA, MEMBER

2. The factual background, in brief, is that the Complainant aimed to establish a food processing unit under the Rural Employment Guarantee Programme, recognized by the Government of India, through a loan scheme under the Small Scale Industries Unit sponsored by the Khadi Village and Industries Board (KVIB) of the District. Initially, he applied for the allotment of 50 decimals of land in the District Industrial Growth Centre for establishing a spice powder manufacturing unit. Subsequently, a revised scheme under the name "Health Food Products" was submitted to the District Industries Centre, Medinipur. The Complainant was allotted 25 decimals of land on 15.10.2003 by the BDO of Medinipur Sadar. In haste to commence operations, he applied for an urgent electricity connection and sought permission to construct the unit under the Medinipur Panchayat Samity, which was approved on 18.02.2003. Furthermore, he obtained necessary certificates for provisional registration as an SSI Unit and Pollution Certificate from the WB Pollution Control Board. After fulfilling the requirements laid down by the authorities, the Complainant applied for margin money and a loan to WBKVIB, obtaining recommendations from the Sabhapati of Medinipur Sadar block, BDO, and the Industrial Development Officer. He also deposited Rs. 44,000/- towards Selami and yearly rent as requested. Subsequently, the proposal was approved by the State Government, and further steps towards the registration of a lease deed were initiated. The WBKVIC sponsored the scheme and forwarded it to the SBI Medinipur Branch on 18.05.2004, along with the Complainant's vetted scheme. The SBI/Main Branch requested necessary promissory and collateral security, and after subsequent compliance, asked for two guarantors, which were provided along with their asset disclosures under oath and the original Title Deeds. Despite completing all necessary procedures and submitting the loan documents and related papers, the Appellant did not disburse the loan despite considerable investment by the Complainant. As a result, the Complainant suffered losses amounting to Rs. 78,61,922/-. This loss included potential earnings projected by the Appellant's empanelled CA, which indicated earnings of approximately Rs. 71.94 lakhs, in addition to potential government subsidies.  Aggrieved by the Appellant's deficiency in service and unfair trade practices, the Complainant filed his complaint before the Learned State Commission, West Bengal. 

3. The Ld. State Commission vide the impugned Order dated 24.02.2010 allowed the Complaint, and directed the Appellant to pay to the Complainant an amount of Rs. 50,00,000/- as compensation. The relevant extracts of the impugned Order are set out as below –

“D. In the light of the foregoing we are of the considered view that the Op No. 1 namely State Bank of India having its central office at Mumbai and one of its branch offices at Midnapur town, commonly known as SBI/Midnapur Branch, is clearly responsible for deficiency service and negligence on its part in not processing the complainant's loan application properly and in time and also in not conveying its final decision thereon even after lapse of more than three years from the date of the application and was also responsible for loss and waste of more than 4.00 lakhs of rupees of the complainant on his conditional investment/other efforts towards the loan application and thus frustrating the complainant's efforts towards establishment of a small scale unit under given Government of India Scheme duly supported by WBKVIC and other State Government authorities/agencies thus frustrating career and ambition of one young entrepreneur who had walked a long distance to fulfill his objectives, but in vain wholly due to utter deficiency of service on part of the OP No. 1. We also hold that non-return of the documents/assets records/relevant other papers to the complainant, even after the OP No. 1 decided on its own not to sanction the loan application beyond the knowledge of the complainant and even failure to produce these before this Commission on being given opportunity is unpardonable deficiency of service on part of OP No. 1, for which clearly it had no explanation or even pretext. Relying on the principle of judgement and order in citation in 2009 (4) CPR 277 (NC) - The Secretary, Orissa Khadi and Village Industries Board Vs. Smt. Kuni Rani Bhanja and First Appeal No. 783 of 2006 before the Hon'ble National Commission, where the facts have a line of similarity, we consider that the ends of justice would be best met if an amount of compensation to the tune of Rs. 50,00,000/-, considered fit and proper in facts and circumstances of the case and being punitive damages as provided by the complainant by swearing an affidavit and not objected to by the OP No. 1/Bank through proper affidavit, is awarded, which, in our opinion, is also deemed fair and reasonable, in the context of the complainant's financial loss, mental and physical agony and permanent damage to his business opportunities/consumer prospects. We also consider that an amount of litigation cost of Rs. 25,000/- should be imposed on the OP No. 1, for unnecessary dragging the complainant before this Commission.

ORDER

The complaint is allowed on contest on payment of cost of Rs. 25,000/- (Rupees twenty five thousand only) and compensation for an amount of Rs. 50,00,000/- (Rupees fifty lakhs only) to be paid by the OP No. 1 within 30 days from the date of the judgement and order to the complainant and on default, the OP No. 1 is to pay interest @ 10% (ten per cent) per annum on the defaulted amount till the amount is totally paid.”  

4. Aggrieved by the impugned Order, the present Appeal has been filed raising the following contentions – 

a. That the State Commission failed to recognize that the statutory limitation period for filing the complaint under Section 24(a)(1) of the Act, which stipulates a two-year limit from the date the cause of action arises. It is argued that considering the application date of the loan as 18.05.2004, and even if the Complainant's affidavit date is assumed to be in 2005, the Complaint was lodged in 2008, which exceeds the limitation period. Consequently, it is asserted that the State Commission should have dismissed the Complaint as time-barred. Hence, the impugned Order is urged to be quashed and set aside;

b. That the State Commission should have delved into the loan sanctioning process by Banks and Financial Institutions. When evaluating a loan proposal, each Bank and Financial Institution typically charges processing fees from the proposed borrower as part of the appraisal process. In this instance, the Complainant did not pay any processing fee to the bank. Therefore, it is argued that the non-processing of the loan application cannot be considered a deficiency in service because, for a service to be rendered, consideration for that service is essential, which is conspicuously absent in this case. Hence, the failure to process the loan application to the point of sanction cannot be classified as deficiency in service, but rather a case of 'no service'. It is emphasized that a case of 'no service' does not fall within the purview of the Consumer Protection Act;

c. That the State Commission failed to recognize that, according to Banking Law, a consumer in banking terms is defined as someone with whom an account relationship has been established with the bank, either through a deposit account or borrower account. In the present case, Respondent No. 1 was merely an applicant for the loan proposal submitted to the bank for sanction, which did not progress into any borrower relationship. Therefore, it is argued that Respondent No. 1 does not qualify as a 'consumer' of the Bank, and consequently, the question of deficiency in service does not arise with a non-customer;

d. That the State Commission made an erroneous observation by holding the Appellant responsible for deficiency in service due to purportedly inadequate processing of the loan application. It is contended that the State Commission failed to consider that the expenses alleged by Respondent No. 1 were not approved by the Appellant. Consequently, it is argued that the Appellant cannot be held accountable for expenses that were not authorized or sanctioned by them.

5. Ld. Counsel for Respondent No. 1 has argued that the Appellant engaged in fraudulent practices and approached this Commission with unclean hands; That the Bank lost the original documents submitted by the Complainant for processing the loan and provided conflicting statements on affidavit, thereby making false statements before the State Commission. The Manager, SME/Development Banking Division of SBI affirmed in response to Question No. 29 by the Complainant, that the bank authority is the custodian of all original documents related to loan proposals submitted to the bank. However, in another affidavit, the Appellant claimed that the original documents were taken back by the Complainant without providing any receipt to substantiate the claim; That the Appellant provisionally sanctioned the loan on 29.01.2005, and the Directorate of Food Processing Industries, Govt. of West Bengal deemed the project technically feasible and recommended its implementation. Given these circumstances, it is unexplained why the bank remained silent on the issue for an extended period, especially considering SBI Bank’s guidelines stipulating that loans above Rs. 25,000/- should be sanctioned within 8 to 9 weeks; That due to the non-refund of the original documents, the Complainant missed opportunities to avail bank loans from other financial institutions, resulting in lost business prospects; That the bank did not follow the stage-wise procedure for loan sanctioning as per banking norms, and instead whimsically directed the Complainant to comply with certain formalities; That despite sending letters and reminders to the Appellant for the sanction and disbursement of the loan amount, none of the correspondences received replies from the bank.

6. This Commission has heard the Ld. Counsel for both the Appellant and Respondent No. 1, and perused the material available on record.

7. We had already noted in our Order passed on 9.1.2024 that in terms of the prescribed Flow Chart pertaining to an application for loan, in terms of the sequence as seen from Page 206 of the Paper Book “The Appraisal” on the Complainant’s Application would appear to have been completed.  Thereafter, on 29.1.2005, he was intimated that his Application for Loan in the concerned Project had been “agreed in principle”, subject to the same being otherwise in order, “after completion of necessary banking formalities”.

8. But what were those formalities, or who had to comply with the same was not indicated in the said letter which is on record as Annexure-16.  It is also a fact that no communication at any stage was ever sent to the Complainant to the effect that his loan had not been sanctioned, nor was he informed about compliance of any outstanding formalities on his part.

9. On the other hand, there are manifest contradictions in the version of the Appellant/Bank.  It has been brought to our notice that the Complainant had submitted all the requisite original documents being the Project Report, Affidavit, original Validation Report, original Title Deed and record of the property of Shri Nand Dulal Patra, apart from the original MSME forms under his separate letters dated 24.6.2004, 27.8.2004 and 11.1.2006 respectively, the receipt of which original documents was duly acknowledged on behalf of the Bank. But the same were not returned to the Complainant in any event, irrespective of whether or not he was entitled to get the loan for which he had been sponsored by the West Bengal Khadi and Village Industries Board (Respondent No. 2).  On the contrary, in its Memo of Appeal the Appellant Bank has flatly denied having received any such original documents from the Respondent, which is in direct contradiction to the statements made by its Chief Manager in his Affidavit filed in the Ld. State Commission, in which he stated that all the original documents had been taken back by the Complainant in original, which were given to him by the Bank Officer without obtaining any acknowledgment, since they all had a soft corner on him on account of the fact that he is the son of a Bank employee.

10. In view of such gross contradictory statements, and the fact that after having informed the Complainant that his proposal for loan had been approved in principle, not sanctioning such loan subsequently, nor informing him of any further formalities at all which remained to be completed by him, or not even informing him about the fate of his loan application at any stage thereafter would amount to manifest deficiency in service, especially concerning that the REGP Scheme under which the loan was covered, was itself a limited duration Scheme, which ended on 31.3.2008.  All through the relevant period, the Complainant remained under the expectation that he would receive the amount to be sanctioned.  But when the Scheme itself lapsed w.e.f. 1.4.2008, he approached the State Commission and filed his complaint.

11. The deficiency in service on the part of the Appellant/Bank is therefore, clearly untenable. It nevertheless has brazenly sought to deny that it had ever received any original document from the Respondent, whereas its own Chief Manager had stated in his Affidavit in the Ld. State Commission that the originals were given back to the Complainant without any acknowledgement.  Such manifest contradiction in the stand taken by the Bank qua the non-receipt on one hand, and alleged return without acknowledgement of the documents  on the other, cuts at the root of the defence raised by it in the original complaint.

12. For the aforesaid reasons, this Commission finds no tangible grounds to interfere with the well-reasoned Order of the Ld. State Commission, since it cannot be denied that if the original Title Deeds are not returned to the Complainant, economic/financial loss which could be caused to him by way of fall in value of his properties in case he needs to sell the same for valuable consideration, cannot be properly assessed or calculated.  Nevertheless, an award of compensation to the tune of Rs.50 lakhs flat would appear to be somewhat exorbitant.

13. Such compensation is therefore, ordered to be reduced to Rs.25 lacs instead subject to the condition that the Petitioner/Bank shall issue proper Certificate to the Complainant acknowledging the loss of his original documents including Title Deeds by the Bank’s personnel, and also publishing a notification in that regard in the local English and vernacular newspapers having wide circulation in the area of Midnapur and its vicinity in West Bengal, at its own expense, within two months from the date of this Order, failing which the compensation amount of Rs.50 lakhs awarded by the Ld. State Commission shall not be reduced.  In either event, any delay in payment of the original or reduced compensation subject to compliance of the direction passed in this Order @ 12% per annum instead of 10% per annum as awarded by the Ld. State Commission on the defaulted amount till the date of its final payment.

14. Pending application(s), if any, also stand disposed off as having been rendered infructuous.