DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, PALAKKAD
Dated this the 5th day April, 2023
Present : Sri.Vinay Menon V., President
: Smt.Vidya A., Member
: Sri.Krishnankutty N.K., Member Date of filing: 06/09/2019
CC/224/2019
Sabitha
W/o Sathyanadha Menon
Proprietor, M/s Shreyas Organic Health Drinks
4/496, Visalam Complex
Sastha Nagar, Akathethara, Palakkad
(By Adv. K. Balachandran) - Complainant
Vs
1. State Bank of India
Represented by its Chairman
State Bank Bhavan, Madam Cama Road
Mumbai - 400 021
2. RASMEC, State Bank of India
Palakkad Branch
Represented by its Asst. General Manager
State Bank of India Buildings, English Church Road
Palakkad - 678 001 - Opposite parties
(By Adv. P.V.Beena)
O R D E R
By Sri.Krishnankutty.N.K., Member.
Pleadings of the Complainant.
1. The complaint is about the alleged mishandling of the PMEGP loan granted to the complainant by the opposite party Bank. The first part of the allegation is about the improper behaviour of an officer of the opposite party Bank which caused delay in disbursement of the loan before the cut off date for getting subsidy and ultimate cancellation of limits. The complainant applied for a loan under the said scheme through The District Industries Centre. The District Level Task Force Committee interviewed the complainant and approved her proposal and sent it to the opposite party Bank. She had completed the required mandatory training and the certificate was also submitted to the Bank. The opposite party had issued a confirmation letter which was submitted to DIC.
As advised by Mr. Anand, Deputy Manager of the Bank, the complainant submitted the pollution control certificate, sanitary certificate, Food & Safety licence, Panchayath licence, Panchayath tax paid receipt, along with the quotation for the machinery to the Bank. Further, a notarized affidavit from the landlord was also submitted.
Inspection was conducted by a team consisting of the Chief Manager, (Mr. Anantha Narayanan), Mr. Anand, Deputy Manager, and other officers of the Bank. Having satisfied with the infrastructure created at the site, a term loan of Rs. 10.00 lakhs, and Working Capital of 3.00 lakhs were sanctioned. The sanction was conveyed to the complainant on 28/09/2017. Both the term loan and working capital accounts were opened at the Olavakode - Malampuzha Road branch of the Bank. When the complainant went to the said branch in October, 2017 for remitting the margin money, service charges & insurance premium of the loan, it was informed that the accounts are yet to be activated and the complainant was asked to meet the Deputy Manager, Mr. Anand. When contacted, the officer informed that the activation will be done after visiting the site once again. The allegation of the complainant is that Mr. Anand came to the site and demanded 10% of the subsidy amount as bribe for activating the accounts. When the complainant, along with her husband, met Mr. Anand at his office, he repeated the demand and informed that the subsidy would get lapsed by 31/03/2018, if the accounts are not activated. Since, the complainant informed her inability to pay the amount, Mr. Anand purposely delayed the activation and sent a letter on 23/03/2018 stating that the infrastructure creation at the site is not complete as per guidelines and full compliance was to be ensured before 31/03/2018 for releasing the loan. Ultimately the disbursement of loan didn't happen before the cut-off date of 31/03/2018 and as a result the sanction of loan and subsidy got lapsed.
Aggrieved by this, the complainant made a complaint to the first opposite party by email on 18/04/2018. Mr. Viswanath, Assistant General Manager was appointed to inquire the matter.
According to the complainant, the inquiry officer was convinced of the infrastructure created at the site and the allegations against Mr. Anand. As advised by him, the complainant applied for revalidation of the loan and subsidy. Revised sanction for Term Loan of Rs. 12,40,000/- and Working Capital of Rs. 4,80,000/- was conveyed to the complainant vide letter dated 06/07/2018. Further Mr. Anand was transferred and one Mr. Robin was posted to his seat. Term loan was disbursed for purchase of machinery. After installation of the machinery, joint inspection was conducted by Mr. Robin & one Mrs. Soumya and the Cash Credit limit was released towards Working Capital requirements. After permitting few transactions, the the opposite party blocked the transactions in the WC limit and ATM card allegedly because of the refusal of the complainant to withdraw the complaint against Mr. Anand resulting in dishonouring of cheques. Since the Working Capital limit was blocked, production couldn't be commenced and loans couldn't be serviced. According to the complainant, the actions of the opposite party Bank amounts to deficiency in service approached this Commission seeking various reliefs apart from waiver of the loans.
2. Notices were issued to opposite parties. They entered appearance and filed joint version refuting the allegations including those against the staff. The contentions in version are as follows.
- The first loan of Rs. 10.00 lakhs & 3.00 lakhs couldn't be disbursed before the cutoff date since the complainant failed to complete the civil work for installation of machinery in time. Even during the field visit on 22/03/2018 it was noticed that the civil works were not complete.
- Regarding the revalidated loan, Term Loan for Rs. 12.40 lakhs was disbursed in full on 01/09/2018 towards the purchase of machinery. The Working Capital limit of Rs. 4.8 lakhs was made available to the complainant of which, Rs. 2,99,631.43 has already been withdrawn by the complainant, with which the complainant could have started production. Further, the complainant hasn't submitted regular stock statements with details of stock and receivables as stipulated in the sanction. She had submitted only one statement as on 31/03/2019 showing a stock value of Rs 1,95,500/- The permissible drawings against this stock is only Rs. 1,85,725/- against which the outstanding is Rs. 2,78,606.31/- That is the reason for blocking further withdrawals from the Working Capital limit.
- Inspite of regular follow up with the complainant, she failed to comply with the sanction terms such as submission of stock statements, regularizing the loan accounts etc. Even access was denied to the Bank officials to visit the unit. Hence SARFAESI proceedings have already been initiated against the complainant for recovery.
- The unit is eligible for subsidy under PMEGP and Rs. 4,56,842/- and Rs. 1,76,842/- have already been received from DIC as subsidy which is deposited in the name of the complainant. Hence this complaint is bad for non-joinder of DIC as a party.
3. The following issues arise for consideration:
1. Whether the transaction is “Commercial” in nature, barring the jurisdiction of this Commission?
2. Whether the jurisdiction of this Commission is barred in view of the initiation of SARFAESI proceedings by the Bank?
3. Whether the conduct of the Bank was transparent and adhering to accepted norms for disbursement and management of financial assistances?
4. Whether there is deficiency in service on the part of the O.P.s?
5. Whether the complainant is entitled to any of the reliefs sought for?
6. Any other Reliefs?
4. Complainant filed proof affidavit and marked documents Ext. A1 to A14 as evidence.
Opposite parties filed proof affidavit and marked documents Ext.B1 to B7 as evidence.
Complainant was cross examined as PW1 and the Asst. General Manager of the opposite party Bank was examined as DW 1.
Ext. A1 is the letter issued by DIC to the Bank regarding the processing of the loan application of the complainant uploaded in the PMEGP portal along with the letter of sponsorship from the DLTFC. A2 is the certificate issued to the complainant by DIC for having completed the EDP. A3 is the sanction letter for Term Loan of Rs. 10.00 lakhs & Working Capital of Rs. 3.00 lakhs. A4 is the letter issued by opposite party instructing the complainant to complete/comply with certain requirements so as to complete the disbursement before 31/03/2018. A5 is the Complaint sent by the complainant to the second opposite party by email. Ext. A6 is the acknowledgement received for the said mail. Ext.A7 is the sanction conveyance for the revised loan asking her to complete the documentation. Ext. A8 is the account statement of the Working Capital limit. Ext. A9 is the print out mobile messages regarding return of clearing cheques and Ext. A10 is the message regarding the blockage of ATM card. Ext. A11 is the account statement of term loan and A12 is the letter issued by the opposite party to the complainant indicating various irregularities in the loan accounts. Ext.A13 is the reply sent to this letter by the complainant along with the postal acknowledgement and Ext. 14 is the letter sent by the opposite party to the complainant.
Ext. B1 is the loan application submitted by the complainant & B2 is the sanction memo issued. Ext. B3 is the loan agreement executed by the complainant for the loan and Ext. B4 is the Bank account statement for the Working Capital limit. Ext. B5 is the SARFAESI notice issued to the complainant by the opposite party and Ext.B6 & Ext.B7 are the lease agreement for the premises of the unit.
5. The counsels for the complainant and the opposite party put forth their arguments. The crux of the arguments of the complainant's counsel is that the mishandling of the loan proposal of the complainant since beginning is the reason for the failure of the unit and it has to be treated as deficiency in service on the part of the opposite party and compensated adequately as per the prayer in the complaint. The counsel for the opposite party put forth some additional points of bar of jurisdiction as follows:
- The loan availed is for commercial purpose and hence will not come under the purview of the CP Act 2019.
- The opposite party has already initiated action under SARFAESI act and hence this Commission has no jurisdiction to decide on this case.
Further she vehemently argued that the actions of the Bank had been in line with the common guidelines for sanctioning and follow up of loans as conveyed to the complainant by way of a sanction letter and the agreement executed by her at the time of availing the loan. Hence the action of the Bank in not allowing withdrawal from the working capital limit and the resultant bouncing of cheques and blockage of ATM card etc. had been due to the failure of the complainant to comply with the sanction terms and cannot be termed as deficiency on the part of the opposite party.
Issue No. 1
6. The initial objection of the O.P. is with regard to the “Commercial” nature of the transaction. They contented that the jurisdiction of this Commission stood ousted as the financial assistance was availed for Commercial purposes.
7. A perusal of the facts and circumstances of the case shows that eventhough the nature of the transaction is Commercial, it will not come under the ambit of “Commercial” as contemplated under the Act. The terms “Commercial” in the Act, as interpreted by various decisions rendered by the Hon’ble Supreme Court, is not to be taken for its mere dictionary meaning and was given a narrower meaning. It is to be defined as a commercial transaction of voluminous revenue turnover.
The factual matrix herein does not illustrate a scenario as contemplated under the Act, which would bar the jurisdiction of this Commission. Hence we reject this contention of the O.P.
Issue No. 2.
8. The 2nd wave of offence was with regard to the bar of this Commission as SARFAESI proceedings were initiated against the complainant.
It is true that a Bank’s decision to resort to SARFAESI reliefs is not assailable under proceedings in this Commission. But the proceedings herein are not related to the proceedings under SARFAESI Act. Both the reliefs and cause of action are entirely different in both the proceedings. And this Commission is not barred by any Statute to look into any matters that might be a “Deficiency in Service”. We are not inclined to look into any other aspects of the loan which is on the basis of a contact between the complainant and the opposite party. Further we are not intervening in the matter of SARFAESI proceeding initiated by the opposite party.
Thus the objection of the O.P. with regard to bar of jurisdiction of this Commission as SARFAESI Act also is rejected.
Issue Nos. 3 & 4.
9. Based the facts enumerated above and evidence adduced by the opposite party, it can be seen that the opposite party has failed on many fronts in complying with the terms and conditions of the loan sanction. The following points are not properly answered by the opposite party.
- In the case of first loan, it is reported that the field staff had visited the site 31/10/2017 and instructed the complainant to complete the civil work in order to disburse the term loan for machinery. However the letter indicating that the loan & subsidy would get lapsed if not availed before the cutoff date of 31/03/2018 is seen sent only on 22/03/2018 after the visit on the same day i.e. just a few days before the cutoff date. In the absence of any documents regarding the follow up done between these two dates, it is to be presumed that either there was lapse in follow up or a deliberate act, that caused the delay which finally resulted in getting the loan and subsidy lapsed. And sending a letter at the far end of period is only a step to shirk the responsibility if the loan is lapsed.
- In the case of second (revised) sanction it seen that the Term Loan was disbursed on 01/09/2018, and the Working Capital limit was made available on 11/09/2018.The Working Capital limits were made available only after ensuring the installation of machinery in entirety. In this case the opposite party, even in the letter dated 14/06/2019 was asking the complainant to confirm the installation of machinery. The reason for release of Working Capital limit before completing the installation is not explained. Such conduct for which proper explanation was not forthcoming can only be held in favour of the complainant by drawing adverse inference against O.P.s.
- Though the opposite party made lot of statements regarding the visits made to the unit on several occasions, no evidence is produced to prove that pleading.
In this connection, it is pertinent to note that the complainant had filed an application as I.A. 24/2020 seeking a direction to the O.P.s to produce nearly 10 documents which relates to the case of the complainant. The I.A. was allowed on 05/03/2020. Along the documents sought to be produced was the report of the field staff, who carried out inspection of the complainant’s property. But till date of hearing, the O.P.s failed to produce the said documents. The opposite parties have also failed to file a statement as to the reason why the said documents could not be produced.
Production of the entire case file pertaining to the transaction of the complainant (or a copy thereof, if the said documents are produced before the CJM or DRT) would have proved that the pleadings of the O.P.s were transparent and in accordance with the facts. But, having failed to do so, we are constrained to draw a conclusion to the contrary.
- Further no evidence is produced regarding any intimation sent to the complainant regarding the cancellation of the Working Capital limit.
10. By examining all the relevant facts from the limited jurisdiction of this Commission, we find the following deficiencies on the part of the opposite parties.
- Allowing the first loan and the subsidy to get lapsed due to lack of follow up or an intentional delay and by sending a letter on 23/03/2018 as a face saving exercise.
- Stoppage of operations in the Working Capital limit including ATM usage without advance intimation resulting in bouncing of cheques.
11. Thus we hold that there is gross deficiency in service on the part of the opposite parties.
Issue No. 5
12. The complainant has sought for an order declaring that the complainant is not liable to pay the amounts under the Term Loan and Working Capital. Admittedly some amounts were disbursed by the opposite party and the same were put to use by the complainant. In the facts and circumstances of the case, we are leaving the amounts payable or not payable to be considered by the SARFAESI Court. We are refraining from dealing with this prayer.
13. The 2nd relief sought for is Rs. 20,00,000/- as compensation. In the fact and circumstances of the case, the complainant has failed to prove the extent of loss suffered by her. Hence we are not granting her the claimed amount as compensation.
14. In the result, the complaint is allowed in part ordering following reliefs.
- Compensation for deficiency in service :: Rs. 5,00,000/-
(Rupees Five lakhs only)
- Cost :: Rs. 1,00,000/-
(Rupees One lakh only)
The opposite parties shall comply with the directions in this order within 45 days of receipt of this order, failing which opposite party shall pay to the complainant Rs. 500/- per month or part thereof until the date of payment in full and final settlement of this order.
Pronounced in open court on this the 5th day of April, 2023.
Sd/-
Vinay Menon V
President
Sd/-
Vidya A
Member
Sd/-
Krishnankutty N.K.
Member
Appendix
Documents marked from the side of the Complainant:
Ext. A1 : Letter issued by District Insurance Centre to the Bank.
Ext. A2 : Certificate issued by District Industries Centre to the complainant.
Ext. A3 : Letter of arrangement dated 28/09/2017.
Ext. A4 : Letter from SBI dated 23/03/2018.
Ext. A5 : E-mail complaint dated 18/04/2018.
Ext. A6 : Acknowledgement mail dated 19/04/2018.
Ext. A7 : Letter from SBI dated 06/07/2018.
Ext. A8 : Statement of Account from 11/09/2018 to 30/04/2019.
Ext. A9 : Print out mobile messages regarding return of clearing cheques.
Ext. A10: Message regarding the blockage of ATM card.
Ext. A11: Account statement of term loan.
Ext. A12: Letter issued by the opposite party to the complainant dated
13/05/2019.
Ext. A13: Reply letter by the complainant dated 07/06/2019.
Ext. A14: Letter sent by SBI dated 14/06/2019.
Documents marked from the side of opposite party:
Ext. B1: Loan application submitted by the complainant.
Ext. B2: Sanction memo dated 01/09/2018.
Ext. B3: Loan agreement executed by the complainant for the loan.
Ext. B4: Bank account statement for the WC limit.
Ext. B5: SARFAESI notice issued to the complainant by the opposite party.
Ext. B6: Lease agreement for the premises of the unit.
Ext. B7: Lease agreement for the premises of the unit.
Witness examined: Nil
Cost: Rs. 1,00,000/-
NB: Parties are directed to take back all extra set of documents submitted in the proceedings in accordance with Regulation 20(5) of the Consumer Protection (Consumer Commission Procedure) Regulations, 2020 failing which they will be weeded out.
