BEFORE THE DISTRICT CONSUMER FORUM :: GUNTUR Present: Sri T. Anjaneyulu, B.Sc. L.L.B., President Smt. C.Rachel Devavaram, M.A., M.Ed., L.L.M.,(Ph.D) Member Wednesday, the 20th day of August, 2008 C.C.No.536 of 2007 BETWEEN: Shaik Khadar Valli, S/o Khasimsaheb, Muslim, aged 45 years, RPF head constable, S.C. Railway, Guntur R.S. … Complainant AND Syndicate Bank, Rep. by its Senior Branch Manager, 4/9 Brodipet, Guntur. … Opposite party This complaint coming up before us for final hearing on 20-08-08 in the presence of Sri K. Mallikharjuna Rao, advocate for complainant and of Sri C. Narendra Babu, advocate for opposite party, upon perusing the material on record, hearing both sides and having stood over till this day for consideration, this Forum made the following: O R D E R Per Sri T. ANJANEYULU, PRESIDENT: This complaint is filed U/s 12 of CP Act by the complainant for refund of sum of Rs.33,154/- viz., Rs.16,577/- debited out of the salary amount and an equivalent amount of Rs.16,577/- towards deficiency of service, apart from compensation of Rs.3,154/- and costs of Rs.3,000/- from the opposite party and to pass such other orders as deemed fit. The case in brief is as follows: The complainant stood as guarantor for one Sri Patra Syamsundar, RPF constable of Vijayawada, who has applied for a loan in the Bank of opposite party at Guntur. The opposite party has to collect the loan instalments of the principal borrower by way of deducting from the salary, which is being credited in his account in the bank of opposite party. In this regard, a letter of understanding/undertaking for transmission of the salary is obtained from the employer by the opposite party. The liability of the complainant is only in the contingency of the amount remaining irrecoverable from the loanee and after exhausting all the remedies open against the loanee. Any default by the loanee is to be intimated to the complainant so that he can take steps and pressurize the loanee to make payments promptly. An arbitrary recovery from the complainant/guarantor is not contemplated, for that the complainant is not liable to guarantee the recovery of any other advances by the opposite party to the loanee without his knowledge and without executing a letter of guarantee. The complainant further states that after fulfillment of the conditions of the advance, and total repayment by the loanee, the complainant is absolved from the liability. If any amount is collected from the complainant by the opposite party either previously or subsequently, the opposite party has to remit back such amounts to the complainant if found excess than the loan amount. The complainant submits that the opposite party has illegally recovered out of the SB account without any prior intimation, notice or fore-warning in respect of loan transaction of Sri P. Syamsundar. The deducted amounts are as follows: Rs.8,509/- May, 2007 date of deduction 31-5-07 Rs.8,068/- June, 2007 date of deduction 30-06-07 Date of intimation - letter dated 05-06-2007 from the opposite party . The complainant has sent reply to the letter dated 05-06-07 protesting against the ill legal deduction and unauthorized operation of the complainant’s account by the opposite party. But the same has not been rectified. Thus the complainant has sustained mental agony, pain and suffering. The above facts clearly establish deficiency of service hence, the complaint. The version of the opposite party is as follows: In general it has denied all the allegations mentioned in the complaint. Further it is submitted that this complainant as well as one Patra Syamsundar are having savings account in their bank. Both of them are railway employees and drawing salaries through the bank of opposite party and both of them availed loan from the bank. Sri Patra Syamsundar availed loan of Rs.90,000/- on 25-04-03 for which the complainant and one Mamilla Purushotham stood as guarantor and executed necessary documents of guarantee. As per the guarantee agreement any person who stood as guarantor agrees to pay the loan amount on demand together with interest at such rate as applicable to the borrower from time to time including other charges from the date of demand till payment. It is a continuing guarantee for payment of ultimate balance due by the borrower. Further the signature made by the borrower shall constitute a valid acknowledgement of debt liability on behalf of guarantor also. They are jointly and severally liable. The opposite party further submits that the principal Borrower’s salary had not been credited at their bank and regular instalments towards his loan account have not been paid. As on 05-06-07 an amount of Rs.7,772.87 ps is due under this loan account. The bank has no other option except to withhold SB account transactions of the complainant to that extent as the liability of the guarantor is the continuing guarantee towards overdue amount of the principal borrower. The opposite party has rightly intimated the same to the complainant on 05-06-07 and later appropriated the said amount to the loan account of the principal borrower and this was also intimated to the complainant through a letter dated 26-7-07. The balance amount is available in SB account of the complainant. There is no objection for withdrawal of the same by the opposite party. It is false to state that the opposite party has withheld an amount of Rs.16,577/- in the account of the complainant from his salary. In fact, everything is done in accordance with the rights of the bank under bankers lien and the action of the bank cannot be said to be arbitrary or irrational or violation of the constitution and rights of the complainant and everything is done in accordance with law as there is remedy to the opposite party to recover the said amount from the guarantor. Absolutely, there is no deficiency of service on the part of the opposite party. Therefore, it is prayed to dismiss the complaint with costs. Both sides have filed their affidavits and as well as documents in support of their claims. On behalf of the complainant Ex.A-1 to A-8 are marked. On behalf of the opposite party Exs.B-1 to B-6 are marked. The points for consideration are: 1. Whether any deficiency of service on the part of the opposite party? 2. To what relief? POINTS 1&2:- The case of the complainant is that the opposite party has ill legally and unauthorizedly debited a sum of Rs.16,577/- out of his salary account, for having stood over as guarantor to one of the co-employee namely Patra Syamsundar. According to him his liability to answer the claim does arise when the opposite party exhausted all the remedies against the loanee and his employer as per letter of undertaking and other modes of recovery. It is claimed that his liability is limited in accordance with the documents executed i.e., letter of guarantee. If the loan amount is not paid or any other advances made to the principal borrower, the bank cannot deduct the amounts out of the salary account of the complainant without intimation and demand. So also the bank cannot collect any excess amount than the loan amount due and the same is to be remitted back to the account of the complainant. The opposite party has filed its version with false averments and sent a registered letter with envelop cover on 27-09-07. In that letter the bank could not mention the steps taken for recovery of the salary amount of the complainant. Basing on these contentions, the complainant justify the demand made for the aforesaid sums from the opposite party. In this connection the learned counsel for the complainant reply upon head note of the decision reported in AIR 2008 (NOC 392) (NCC). An amount deposited in saving account of customer was debited without his consent or authorization on giving oral instructions. The bank did not disclose the name of the officer to whom instructions were given. The customer opposed for debiting the amounts out of his saving account. In the said circumstances, it is held that there is deficiency of service on the part of the bank. The learned counsel for the opposite party has raised his contentions in the same tenor as per their version. They deny deduction of sum of Rs.16,577/- out of the salary account of the complainant as alleged by them and that they are entitled for a total sum of Rs.33,154/-. The complainant who stood as guarantor is liable to discharge the loan amount of the principal borrower if remains unpaid either wholly or in part as per terms of contract of guarantee. According to the learned counsel the bank did not receive regular instalments towards loan account of the principal borrower and as on 05-06-07 an amount of Rs.7,772.87 is due and there was no other option except to withhold the SB account transactions of the complainant to that extent as liability of the guarantor is continuing guarantee towards overdue amount of the principal borrower. This has been rightly intimated to the complainant on 05-06-07 through a letter and subsequently, about the debit made on 26-7-07. The bank did not commit any illegality nor there is any deficiency of service. Therefore, it is prayed to dismiss the complaint. The facts are not in dispute. It is to be found out whether the bank has debited a sum of Rs.16,577/- for two months i.e., May 2007 and June, 2007 out of the salary amount of the complainant for adjustment in the loan account of the principal borrower i.e., P.Syamsundar for whom the complainant stood as guarantor or a sum of Rs.7,772.87 as alleged by the bank. Whether deduction of the amounts out of the salary account of the complainant is an authorized act and in tune with the terms of letter of guarantee. The bank to its letter dated 5-6-07 vide Ex.A-1 informed the complainant that he stood as guarantor to Sri P. Syamsundar, RPF constable, VJA who has availed personal loan under personal banking scheme, that since the loanee salary is not being credited at their branch and regular instalments towards his loan account is not coming forth, they have no option except to withhold the SB account transactions of the complainant to recover the overdue instalments from his SB account as surety to above transactions, hence intimated. Through this letter the bank has simply intimated to recover the amount from the SB account of the complainant, which is overdue from the principal borrower. It is note worthy that no quantum of amount is mentioned in the said letter. The complainant got issued legal notice dated 14-6-07 Ex.A-2 to the above referred letter. In this he got mentioned that the loanee Syamsundar has paid loan amount of Rs.70,590/- on 20-09-04 vide receipt No.2298. If any amount is to be paid relating to personal banking scheme, the loanee himself is liable but not the complainant. The loanee is a solvent person and economically sound. The bank has no right to stop the transactions pertaining to complainant SB account and cannot recover from the said account. It is illegal and improper. Therefore, the bank is called upon to release the salary credited by his employer in his SB account, otherwise constrained to take civil and criminal proceedings in the court of law. This notice also did not mention as to how much amount has been withheld from the SB account of the complainant and recovered towards loan of Sri P. Syamsundar. The complainant has filed copy of pass book of his SB account No.32712200044291 along with entry particulars from 19-08-06 till 10-02-07 vide Ex.A5. In this no entry is found to show that amount has been debited and transferred to the SB account of Sri P. Syamsundar. The record on one hand shows SB A/c.No. of Sri P. Syamsundar as 32717170001297. On the other hand, Ex.A-8 letter dated 26-07-07 issued from the bank shows that an amount of Rs.7,772.87 ps has been debited out of SB.A/c.No. 32712200044291 of the complainant and given credit into SB.A/c.No.32717170001297 of Sri P. Syamsundar. The statement of account (extract) of the complainant filed by the bank do show deduction of Rs.7,772.87 ps and credited into SB. A/c.No.32717170001297 of Sri P. Syamsundar. Thus it is made clear except the aforesaid amount of Rs.7.772.87 ps nothing extra has been withheld and recovered from the SB account of the complainant. The complainant has failed to establish that a sum of Rs.16,577/- has been deducted out of his SB.A/c towards recovery of loan amount Sri P. Syamsundar. As a matter of fact the complainant filed the passbook entries from the period 19-08-2006 to February, 2007. Admittedly, the aforesaid amount is said to have deducted during the month of May, 2007 and June, 2007. This goes to show that the complainant has made false allegations with regard to the quantum of debit. Now the other point is that whether the bank is empowered to deduct the aforesaid amount from the SB account of the complainant towards loan amount of Sri P. Syamsundar. It is an admitted fact that the complainant stood as guarantor to Sri P. Syamsundar and executed a letter of guarantee. Some of the salient features of this agreement read as follows: “guarantor hereby agrees to pay the same on demand together with interest on that amount at such rates as applicable to the borrower from time to time compounded calendar monthly/quarterly, other charges etc., from the date of demand till payment.” This guarantee shall be a continuing guarantee for payment of the ultimate balance due to the bank by the borrower. Signature made by the borrower shall constitute a valid acknowledgement of debt/liability on behalf of the guarantor also. The guarantor agrees that as between the bank and the guarantor, the guarantor is the principal debtor jointly with the borrower. The guarantor/s agree/s to pay without demur to the Bank any amount that is outstanding against the borrower directly or indirectly on receipt of the notice of demand from the bank”. In addition to the above terms the learned counsel for the opposite party has relied upon the following decisions, AIR 1992 Supreme Court, 1066, this decision explains about the banker’s lien and also as well the scope of section 126 of the Contract Act to the nature of the bank executed. AIR 2003 Karnataka, 337, this decision explains the right of recovery of dues by bank from the guarantor. In para 15 of the Judgement the following is observed, “In terms of the stipulations contained in the deed of guarantee, the bank has exercised the right of set off and right of general lien and that right could be exercised by the bank whenever the monies advanced to the company become overdue. It is trite that his right is an independent right available to the bank’s management. Therefore, we do not fi9nd any merit in the contention of the learned counsel of the writ petitioner that the right of lien should have been exercised only after the liability of the petitioner is determined by the Debt Recovery Tribunal. The above referred covenants make it clear that the complainant, who stood as guarantor, also becomes principal debtor and his liability is continuing one. The acknowledgement of the debt made by the principal borrower also binds the guarantor. The guarantor shall not claim any rights conferred under the provisions of surety in the Contract Act. The guarantor also admit his liability to pay the outstanding due amount of the principal borrower once he get intimation or served with demand. Therefore, the bank has rightly deducted a sum of Rs.7,772.87 ps from the account of the complainant. This is no way an illegal act. On the otherhand, it is the contractual liability on the part of the complainant. He cannot have any demur or grouse for the same. Therefore, we find no merits in the complaint. Accordingly, complaint is dismissed. Each party shall bear their own costs. Typed to my dictation by junior steno, corrected by us and pronounced in the open Forum dated this the 20th day of August, 2008. Sd/-XXX, PRESIDENT Sd/- XXX, MEMBER
......................C. Racehl Devavaram
......................T.ANJENEYULU | | 
