BEFORE THE A.P. STATE CONSUMER DISPUTES REDRESSAL COMMISSION
AT HYDERABAD.
C. C. 5/2010
Between:
B. Srinivasa Rao, S/o. Late B. Purushotham Rao
Age: 48 years, Business
R/o. 6-3-630, Anandnagar
Khairatabad, Hyderabad. *** Complainant
And
State Bank of Hyderabad
Rep. by its Manager
Bellavista Branch
Somajiguda, Hyderabad. *** Opposite Party
Counsel for the complainant : M/s. C. Raghu
Counsel for the opposite Parties: M/s. Alluri Krishnam Raju
CORAM:
HON’BLE SRI JUSTICE D. APPA RAO, PRESIDENT
&
SMT. M. SHREESHA, MEMBER
THURSDAY, THE TWENTY FIFTH DAY OF NOVEMBER TWO THOUSAND TEN
Oral Order: (Per Hon’ble Justice D. Appa Rao, President)
*****
1) This is a complaint filed against the opposite party bank claiming compensation of Rs. 49, 90,000/- towards deficiency in service together with costs.
2) The case of the complainant in brief is that he had deposited Rs. 15 lakhs by way of Fixed Deposit Receipts (FDRs) Dt 28.3.2001. He had entered into an agreement with M/s. Sam Entertainments which had earlier availed loan from the opposite party bank. There was no nexus between his FDRs and the loan availed by the above concern. After maturity, when claim was made at the instance of M/s. Sam Entertainments, the opposite party bank refused to pay the amounts without any reason. Thereupon he was constrained to approach Banking Ombudsman which directed the bank to pay the amount. Instead of paying the amount it had filed an application before the DRT in O.A. No. 110/2003 impleading him as Defendant No. 9 alleging that it had got right to with-hold the amounts covered under the FDRs. The DRT vide its order dt. 8.2.2005 dismissed the claim of the opposite party bank. It held that he was not liable to pay any amount and the FDRs do not relate to any transaction between them. Despite dismissal, the bank did not pay the amount. In the meantime other partners of M/s. Sam Entertainments approached the Civil Court under the Arbitration and Conciliation Act and obtained orders against the opposite party restraining payment of amount. The delay in payment was deliberate. It was only to facilitate other parties to approach the Civil Court and obtain orders restraining from releasing the amount. The opposite party also filed Review Application before the RBI at Mumbai and the same was dismissed. Later an award was passed by the arbitrator in ARC No. 29/2004 dt. 26.10.2008 holding that the bank does not have any right against FDRs. Finally the amounts were paid in November, 2008. Due to illegal acts of the bank he had sustained damages to a tune of Rs. 30 lakhs. This constitutes deficiency in service. He was constrained to raise loan of Rs. 15 lakhs from Smt. Rukmini Bai in the month of January, 2004 at higher rate of interest @ 24% p.a., which the opposite party was bound to compensate besides Rs. 30 lakhs towards interest loss on maturity amount, Rs. 17,400/- towards interest on the loans availed by him, Rs. 2 lakhs towards litigation expenses and Rs. 50,000/- towards compensation, in all Rs. 49,90,000/-.
3) The opposite party bank resisted the case. It alleged that it had financed Rs. 30 lakhs under a term loan to M/s. Sam Entertainments a partnership firm. Since it became a non-performing asset w.e.f. 31.3.1999, it approached the bank on 23.8.2001 with an offer to pay Rs. 25 lakhs towards full and final settlement of MTL account and submitted its proposal. When the proposal was under consideration, the firm was re-constituted by admitting the complainant as a partner. The complainant himself undertook to pay Rs. 15 lakhs. He addressed a letter dt. 30.9.2001 to that effect. Accordingly he deposited Rs. 15 lakhs for the said purpose. Later he sent the FDRs for collection with an after though to dodge the issue. During the said period, it had agreed to settle the firm’s liability at Rs. 30 lakhs, and other partner Sri Michel Reddy requested the bank to appropriate the FDRs of Rs. 15 lakhs and agreed to pay remaining balance of Rs. 15 lakhs. The complainant then approached the Banking Ombudsman who directed the bank to pay the maturity value together with interest up to the date of maturity and overdue interest from the date of maturity till the date of payment. It has preferred a revision against the said order, however, the same was dismissed. Before receiving the order from Banking Ombudsman the bank received a letter dt. 8.2.2003 from M/s. Sam Entertainments represented by its Managing Partner Sri V. Michel Reddy informing that they had filed O.P. No. 437/2003 before the Chief Judge, City Civil Court, Hyderabad u/s 9 of Arbitration and Conciliation Act, 1996 against the complainant and the bank, seeking permanent injunction restraining them from liquidating the FDRs deposited by the complainant with the bank. Interim injunction was granted on 26.2.2003 and further extended till disposal of the O.P. The complainant did not get the order vacated. The said O.P was finally disposed of on 25.1.2005 appointing an arbitrator to enquire into the matter. The interim injunction was made absolute till passing of order by the arbitrator. The arbitration was conducted in AA 29/2004. The said arbitration proceedings were concluded by award dt. 26.10.2008. Immediately after receipt of award it had paid the amounts covered under the FDRs along with up to date interest as applicable to the said deposits. On its own the amount was not withheld by the bank. From 7.2.2003 to 26.10.2008 prohibitary orders were in force by a competent court. There was no deficiency in service on its part for not releasing the amounts covered under FDRs to the complainant. As per the terms agreed by the complainant, he deposited the FDRs, as such it could not pay the amount. Since the entire amount due under the FDRs was paid, the complainant is not entitled to any amount towards compensation from this Commission. The claims for Rs. 30 lakhs on maturity amount and Rs. 17,40,000/- were nothing but duplication. At any rate he was not entitled to Rs. 17,40,000/- after deducting the interest paid by the bank viz., Rs. 6,52,750/-. The claim is speculative in nature. Various litigation expenses cannot be claimed by filing a complaint before this Commission under the Consumer Protection Act. The parties to the proceedings cannot claim expenses, costs and other claims made before various authorities. 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 A9 marked while the bank filed the affidavit evidence of its Manager and got Exs. B1 to B5 marked.
5) The points that arise for consideration are:
i. Whether the opposite party bank deliberately refused to release the FDRs amounts constituting deficiency in service?
ii. Whether the complainant is entitled to any amount?
iii. If so to amount and to what relief?
6) It is an undisputed fact that the complainant has deposited Rs. 2,50,000/- each on 23.8.2001 and 25.8.2001 and Rs. 5 lakhs twice on 13.10.2001 in all Rs. 15 lakhs. After expiry of the maturity period he sought for payment of maturity value through his banker M/s. Kalyan Co-operative Urban Bank Ltd., vide Ex. A6 dt. 12.8.2002. It is also not in dispute that the complainant has joined as partner in M/s. Sam Entertainment a partnership firm consisting of four partners’ viz., Sri V. Michel Reddy, Sri R. Santosh Kumar, Sri K. Sridhar and Smt. V. Sathyavathamma. It had availed a term loan of Rs. 30 lakhs. When it could not repay the amount, entered into one time settlement. The complainant has joined as a partner of the reconstituted firm when Sri V. Michel Reddy was opted out from the partnership firm on 1.9.2001. When the complainant sought for refund of his amount the bank refused to pay on the ground that it had banker’s general lien, till such time the amount from the partnership firm was received the amount could not be refunded.
7) The complainant thereupon filed a complaint No. 122/2002-03 before the Banking Ombudsman. After enquiry the Banking Ombudsman opined that there was no lien for the bank, and directed it to pay the amount covered under the FDRs vide order Ex. A1 Dt. 28.2.2003. The opposite party bank filed a review petition before the RBI as per Clause-18 of the Banking Ombudsman Scheme which in turn dismissed the review petition up-holding the order of the Banking Ombudsman by its order dt. 27.12.2004 vide Ex. A2. It may also be stated that the bank had filed O.A. No. 110/2003 before the Debts Recovery Tribunal at Hyderabad (DRT) for recovery of term loan sanctioned to M/s. Sam Entertainments impleading the complainant as Defendant No. 9. The Tribunal by its order dt. 8.2.2005 dismissed the application against the complainant vide Ex. A4. Against the said order, partnership firm and the partners filed W.P. No. 14361/2003 which ended in dismissal on 24.6.2004. While the above proceedings were pending one of the partners filed I.A. No. 390/2003 in O.P. No. 437/2003 on the file of the Chief Judge, City Civil Court, Hyderabad impleading the complainant and the opposite party bank and sought for injunction against the bank not to release the amounts and obtained interim injunction. While disposing of the said suit the learned Additional Chief Judge made the interim injunction absolute till passing of award by the arbitrator by order dt. 25.1.2005 vide Ex. B5. The arbitrator by his order dt. 26.10.2008 wherein the complainant and opposite party bank were shown as respondents passed the following award:
“In the result, an award is passed dissolving the partnership firm of M/s. Sam Entertainment between the claimant and R1 from the date of award and directing R1 to pay Rs. 15 lakhs to the claimant with interest @ 12% p.a. from 16.9.2006 till payment along with costs of Rs. 63,750/- towards arbitration proceedings. The claimant or R2 did not state when exactly the loan amount was paid by claimant to R2. Hence the starting point for payment of interest is fixed from 16.9.2006 as the claimant has stated for the first time that he cleared the loan account when he was cross-examined on 16.9.2006. R1 & R2 are directed to bear their own costs.”
8) It is not known whether the complainant had challenged this award. Now the complainant filed this complaint alleging that the bank was at fault in not paying the amounts covered under FDRs amounting to deficiency in service. In the process he had sustained loss of Rs. 30 lakhs towards interest loss on maturity amount, Rs. 17,400/- towards interest on the private loans availed by him, Rs. 2 lakhs towards litigation expenses and Rs. 50,000/- towards compensation, in all Rs. 49,90,000/-.
9) The opposite party defends its action in not paying the amount on the ground that the injunction order was passed restraining them from releasing the amount culminated into arbitration award. At no time the complainant got the injunction vacated in order to enable it to pay the amount. Non-compliance of the order of the Civil Court naturally would entail penal consequences.
10) The complainant did not establish how the opposite party could pay the amount in the light of injunction order passed by the Civil Court. May be the bank was not justified in not releasing the amount on maturity on the ground that it had banker’s general lien for the amount due by the partnership firm wherein the complainant has joined as a partner. We do not intend to go into that question as the same was already dismissed by Banking Ombudsman confirmed by RBI. In the meantime the injunction order was passed. The bank is also a party to the arbitration proceedings evident from Ex. A9. The complainant imputes that there was collusion between partners and the bank officials to cause loss to him by not releasing the FDRs. We may state herein that Mr. V. Michel Reddy, Managing Partner of M/s. Sam Entertainment while filing arbitration application impleaded the complainant as R1 and the opposite party bank as R2 and sought for dissolution of partnership firm and claimed the following amounts.
Amount payable towards loan account
MTL-98 by the firm as per the
Compromise accepted by the 2nd respondent
Bank vide its letter dt. 1.10.2002 Rs. 30,00,000/-
Loss sustained by the firm due to withdrawal
of 1st respondent from the firm Rs. 10,00,000/-
Costs of the O.P. No. 437/2003 filed by the
Claimant. Rs. 60,000/-
Costs of the arbitration proceedings and
Misc. expenditure incurred Rs. 1,00,000/-
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Total Rs. 41,60,000/-
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The very same issue that was raised in this complaint was raised before the arbitrator. The arbitrator observed that
“ it is clear from the partnership deed that the medium term loan of Rs. 30 lakhs was settled at Rs. 25 lakhs and towards that amount, the claimant has to pay Rs. 10 lakhs, and R1 has to pay Rs. 15 lakhs. RW1 also in his evidence admitted that in the partnership deed, the loan obtained from SBH was mentioned and it is also mentioned in Ex. P6 that the SBH has settled the loan account for Rs. 25 lakhs and that he has to pay Rs. 15 lakhs to the bank towards the loan account and the claimant shall pay an amount of Rs. 10 lakhs towards the bank loan. It is in the evidence of PW1 that R1 has deposited FDRs worth Rs. 15 lakhs with R2 as security for his liability to discharge Rs. 15 lakhs as agreed in the partnership deed. It is admitted by RW1 that he has deposited the cheques Ex. P8(a)(b)(C) worth Rs. 15 lakhs with the bank. It is also admitted by him that Ex. P7 is the copy of the letter written by him to the Branch Manager, SBH, somajiguda i.e., Rs. In this letter addressed to the SBH, R1 stated that he understands that R2 was agreeable for one time settlement by way of payment of Rs. 25 lakhs against the amount due by the organization and he shall arrange to make a payment of Rs. 15 lakhs towards his contribution and accordingly he is depositing an amount of Rs. 5 lakhs as initial payment by way of fixed deposit with the bank, which could be utilized at the time of one time settlement, that the one time settlement is not to exceed beyond Rs. 25 lakhs, that he shall arrange the balance amount of Rs. 10 lakhs on hearing from the bank about the finalization of the arrangement of one time settlement as to enable the bank to appropriate the deposit of Rs. 15 lakhs against the one time settlement. Ex. P8 letter written by R1 to the Manager of the SBH and copies of the FDRS Ex. P8(abcd) would show that he has deposited the FDRs worth Rs. 15 lakhs with SBH. It is clear from the above documents and the evidence of RW1 that he has deposited FDRs worth Rs. 15 lakhs with the SBH towards his liability to pay as per Ex. P6 against the one time settlement amount of Rs. 25 lakhs. The above evidence would also clearly show that steps were taken as per the terms of Ex. P6 towards the payment of one time settlement of the debt.”
11) Finally the arbitrator after considering the evidence placed on record opined that :
“Considering the facts and circumstances of the case, I hold on issue No. 1 that the arbitration proceedings in this case are not barred under Section 69 of the Partnership Act as contended by R1. On issue No. 2 I hold that the claimant is entitled to get only Rs. 15 lakhs from R1, but not Rs. 30 lakhs as claimed by the claimant towards medium term loan account.”
12) As we have earlier pointed out it is not known whether the complainant had challenged the award passed against him. The plea of one of the partners that this Rs. 15 lakhs deposited by way of FDRs was one of the issues. Therefore by no stretch of imagination it can be said that the bank was at fault for not releasing the amount. The complainant by his own acts which we have extracted above made the bank to take a stance in a way upheld by the arbitrator in his award. The complainant no doubt must have borrowed amounts but it has nothing to do with the bank not releasing the amounts. When a court of competent jurisdiction has issued injunction not to release the amount covered under the FDRs by no stretch of imagination it can be said that the bank was deficient in its service. In fact the complainant could have sought damages in the said proceedings on the ground that unjust injunction was sought. He did not take any steps in this regard. He cannot turn it to a consumer dispute. Therefore, we hold that there was no deficiency in service on the part of the bank. There are no merits in the complaint.
13) In the result the complaint is dismissed. No costs.
1) _______________________________
PRESIDENT
2) ________________________________
MEMBER
APPENDIX OF EVIDENCE
WITNESSES EXAMINED FOR
COMPLAINANT: OPPOSITE PARTY
None None.
DOCUMENTS MARKED FOR COMPLAINANT:
Ex A-1 Award passed by the Hon’ble Banking Ombudsman dt: 28.2.2003
Ex A-2 Letter by RBI to MD, SBH, Hyderabad d: 28.12.2004
Ex A-3 Orders in Review Application dt : 27.12.2004
Ex A-4 Orders in OA No. 110/2003 passed by DRT dt : 8.2.2005
Ex A-5 Orders in WP No.14361/2003 dt : 24.6.2004
Ex A-6 Letter by complainant to opp.party dt : 12.8.2002
Ex A-7 Promissory Note executed by the complainant dt : 27.1.2004.
Ex A-8 Statement of account 27.1.2004 to 27.4.2009
Ex A-9 Award passed by the Aritrator dt : 26.10.2008.
DOCUMENTS MARKED FOR OPPOSITE PARTY:
Ex B-1 Award passed under Clause 16 of the Banking Ombudsman
scheme, 2002 Dt 28.2.2003 of Office of the Banking Ombudsman, AP
Ex B-2 Letter addressed to the Branch manager, State Bank of Hyderabad
Bellavista Branch from Managing Partner , Sam Entertainment dt : 8.2.23003
Ex B-3 Award passed by the Chief Judge, City Civil Court, Hyderabad
in IA.No. 390/2003 in OP No. 437 /2003 dt : 1.4.2003.
Ex B-4 Letter notice dt :20.6.2003 to Branch Manager, State Bank of Hyderabad
Bellavista branch , Somajiguda, Hyderabad .
Ex B-5 Copy of judgment in OP 437 /2003 dt : 25.1.2005.
1) _______________________________
PRESIDENT
2) ________________________________
MEMBER
Dt. 25. 11. 2010.
*pnr
“UP LOAD – O.K.”
