M/S Packer Sea Food Private Limited has filed this complaint against the Tamil Nadu Investment Corporation. The complaint arises from alleged delay in disbursal and part non-disbursal of a loan of Rs.70 lakhs, sanctioned by the OPs to the Complainant for setting up a marine products processing unit. 2. The case of the Complainant is that the loan was sanctioned on 20.10.1993 but only Rs.15.3 lakhs had been disbursed till 18.3.1994. By the time the complaint was filed, only Rs.44.83 lakhs had been released and remaining balance of Rs.25.17 lakhs and subsidy were never released. This was inspite of the fact that the Principal, Govt. College of Engineering, Tirunelveli, appointed by the OPs to evaluate the plant and machinery, had reported that the building was worth Rs.41.58 lakhs, excluding cost of the land.
3. The complaint petition gives details of alleged “dillydallying attitude” of the OPs, which eventually forced him to write to the Complainant on 7.2.1996 stating that it was left with no alternative but to seek funding facilities from another source. This letter (Annexure P-49) stated:-
“Therefore this is to require you to release the documents that we have deposited with you as additional collateral security to enable us to hypothicate with other financiers. It is also noted that you yourself and the corporation alone shall be liable for losses, and other damages that we have incurred on account of “Dilly-dallying” tactics adopted by you for the past 1 ½ years in the disbursement to our project. Since our project is nearing completion we have been driven to this extreme step as you have been dragging the matter unnecessarly and purposely for reasons best known to yourself.”
4. According to the Complainant, the project has suffered delay of 2½ years due to failure of the OPs to make timely and sufficient disbursal of the sanctioned loan. Even after arrangements were made to raise necessary funding from another source, the NOC was not released by the OPs. Therefore, the Complainant has sought the following reliefs against the OPs, for loss caused by their negligence, delay and failure to provide proper service—
“ (i) Interest on delayed completion Rs.25.74
(ii) Cost escalation Rs.95.99
(iii) interest arising out of non-release of sanctioned
amount by respondent Rs.2.97
(iv) interest loan on account of delayed claim of
subsidy amount Rs.1.94
(v) EB minimum charges payable for the delayed
Period Rs.13.50
(vi) mental agony suffered because of the aforesaid
causes Rs.10.00
(vii) loss of profit including contacting other persons
for arranging loans/lacs Rs.50.00”
5. During the course of these proceedings, the Commission identified six issues for decision and directed on 6.9.2010 that—
“The complainant shall submit brief written arguments on the six issues, which are required to be decided in this complaint with reference to the evidence on each head and the quantum of claim on each head, copy of the same be furnished to the counsel for the opposite party within four weeks. Thereafter, counsel for the opposite party shall file item-wise reply on each issue and furnish a copy of the same to the counsel for the complainant within four weeks. Parties are at liberty to add issues to be decided”.
Accordingly, a brief written argument was filed by the Complainant on 9.11.2010. In this, the following issues/heads are listed:-
“a. Interest on Rs.25 lack taken from private party.
b. Increase of cost or propitiate escalation cost.
c. Delay in release the subsidy by TIIC its actual cost/effect.
d. Minimum Electricity Charges (EB)
e. Business loss
f. Mental Agony”
6. Per contra, the case of the OPs is that it is a corporation set up by the government of Tamil Nadu with branches all over the States and with the avowed objective of “extending financial assistance to various entrepreneurs in the State of Tamilnadu for development of industries in the State”. The loan to the Complainant was sanctioned on 20.10.1993 with clear terms and conditions, which were accepted by it on 17.1.1994. As per Clause 43 therein, collateral security for the loan was required to be provided by the Complainant. Delay in this, led to delay in disbursal of loan. OPs have further alleged that:-
a) The Complainant sought sanction for purchase of two generator sets and an additional Plate Freezer from suppliers different from the ones originally purposed.
b) The procedure for payment required the advance amount to be paid to the supplier through the opposite parties. Therefore, details were sought from the Complainant for change of suppliers of generator sets and motors.
d) As per norms of disbursement release of loan amount for purchase of assets not envisaged in the scheme, was not permissible. Such purchases could be made from contingency. But, contingency itself could be utilized after implementation of the full project. All equipments considered necessary for the project, should have been included by the complainant in the original project itself.
e) Inspection of the factory building by the regional office of OPs revealed that the Complainant had not purchased any machinery as per the bills submitted.
f) The machineries were erected in the factory premises by a fabricator, who was not a supplier as per the sanctioned scheme.
g) Principal Government College of Engineering Tirunelveli had valued the building at Rs.39,56,245/- and the machinery at Rs.21,60,000/-. The valuation of machinery here was questioned by the OPs in their letter of 7.3.1994.
h) If the borrower requests for change of equipment suppliers, the OPs have to verify the capacity, market reputation and comparative cost of the proposed supplier. In the case of generator sets, the change of supplier was agreed by the OPs within a month, but the supply could not be effected as the Complainant did not accept the condition of payment after delivery of the generator sets.
i) When the Complainant asked for NOC to raise working capital from another financier, there was an overdue of Rs 17 lakhs in his loan account. Therefore, the Complainant was asked to clear the overdue for issue of the NOC.
j) Even after the loan account between the two parties was settled, the Marine Products Export Development Authority, Govt. of India informed that invoices/bills and receipts submitted by the Complainants to the OPs are fabricated and false.
7. We have carefully considered the pleadings and evidence brought on record by the two sides and heard their counsels, Mr M L Mahajan for the complainant and Mr K P Toms for the OPs. Mr Mahajan drew our attention to the sixteen page document (signed by the lender/OPs on 28.10.1993) containing the details of sanction of this term loan of Rs 70 lakhs (Annexure P-2). It projects total cost of the venture as Rs 155 lakhs, to be funded in the following manner—
Loan from the OP Rs 70 Lakhs
Subsidy/State capital Rs 15 lakhs
Capital Rs 50 lakhs
Unsecured loans Rs 20 lakhs
The loan of 70 lakhs was sanctioned for construction of the factory building and purchase of machinery required for the project. It was to be repaid in 24 instalments, after a moratorium of 24 months from the date of the first disbursal. As per the terms, the disbursal for civil works and equipment was to be made after inspection and valuation. For this, a valuer was appointed by the OPs. Learned counsel pointed out that the valuer (Government College of Engineering, Tirunnelveli) submitted reports to the OPs, from time to time. Their reports from 3.11.1993 to 6.3.1994 (i.e. before the first disbursal by the OPs) show that an investment of Rs 44.95 lakhs in land & building and Rs 3.86 lakhs in machinery had already been made by the complainant.
8. Mr M L Mahajan, learned counsel for the complainant, argued that the total amount released by the OPs was only Rs 44.83 lakhs. No release was made after March 1995. Therefore, the balance of Rs 25.17 lakhs had to be raised from private sources at very high rates of interest, to ensure completion of the project.
9. In reply, Mr K P Toms, learned counsel for the OPs filed additional written arguments on 24.9.2012 with records of disbursement to show that as on 29.3.2005, in all Rs 44.83 lakhs towards the term loan and Rs 9.51 lakhs towards subsidy had been released to the complainant. Learned counsel argued that subsidy and the term loan together constituted only 55% of the project cost. Therefore, the commitment of the OPs was limited to funding 55% of the asset created under the project. The borrower had created assets worth Rs 89.36 lakhs only. The OPs were required to release only 55% thereof i.e. Rs 49.15 lakhs. Accordingly, actual release fell short by Rs 4.32 lakhs only which was retained by the OPs towards cost of the machinery supplied by M/S Rank Engineering Works. In this context, Mr K P Toms referred to the written response filed by the OP in this Commission on 17.5.1999. Para 23 therein states—
“With regard to paragraph 11 of the complaint, the statement issued by the banker for the account of M/s Rank Engineering Works did not a have any authenticity. M/s. Lakshmi Vilas Bank, Nagercoil said to have issued statement of account for the company M/s Rank Engineering Works which was having its factory and office at Chennai. The payments made to the said engineering company were sent to office at Chennai only. Therefore, the statement issued by a bank at Nagercoil caused suspicion on the genuiness of the statement. Besides this, the complainant reported to have paid Rs.21.60 lakhs but the said engineering company has received Rs.4 lakhs only. Further with regard to the allegation of demanding interest, it is stated that the complainant had to pay the interest accrued to the account and therefore, the second opposite party demanded the interest from the complainant.”
10. This claim, made on behalf of the OPs, was challenged by Mr Mahajan, counsel for the complainant. He drew our attention to the report of 10.3.1995 submitted by the valuer, Government College of Engineering, appointed by the OP/Tamil Nadu Industrial Investment Corporation itself. The three items of equipment having, total value of Rs 21.60, lakhs figure as the last three items in the report signed by two senior lecturers of the Engineering Department of the College. When confronted with this piece of evidence on record, learned counsel for the OPs very gracefully concede that he had no answer for the same. It is therefore, clear that the OPs have not verified their facts before filing the written response of 17.5.1999 and written arguments on 17.9.2012. At this stage, we do not wish to make any further observation on this point.
11. The evidence brought on record shows that the first three disbursals were made in March 1994. In September 1994 the complainant was informed that further disbursal of the loan was decided by the OPs to be “withheld”. Thus, no release of loan or subsidy was made until 29.3.1995. Rs 25.17 lakhs of loan and Rs 5.94 lakhs of subsidy i.e. 31.11 lakhs out of the commitment of Rs 85 lakhs, was never disbursed. The final position is confirmed by the counsel for the OPs in the statement produced before us on 24.9.2012. The allegations of delay in disbursal and non-disbursal of the loan and subsidy are to be seen in this factual background.
12. In the affidavit evidence filed on behalf of the OPs, delay is attributed mainly to the decision of the complainant to purchase generator sets and Plate Freezer from suppliers different from the ones ‘originally proposed’. The request was agreed by the OPs, in so far as the generators were concerned. But, there is no explanation why no advance was released in favour of the supplier. Nor is there an explanation why the condition of supply before payment was imposed when, as admitted in the affidavit evidence of the OPs, payment of advance to the suppliers was permissible, subject to the same being routed through the OPs. More importantly, there is no explanation for the resultant delay. Details in para 17 of the affidavit evidence of the complainant show that it was over three months.
13. As noted earlier, the stoppage of further disbursals was communicated to the complainant on 15.9.1994. This was preceded by inspection by the Regional Office of the OPs. As per the affidavit evidence of the OPs, “The inspection revealed that the complainant had not purchased any machinery as per the bills admitted.” However, the letter of 15.9.1994 (produced on record as Annexure P-9), which is a cryptic one para letter, gives no idea whatsoever of the reason for stoppage of further disbursements. But, a reading the affidavit evidence of the OPs, filed on 7.5.2008 together with the objections filed by the complainant on 5.10.1999, gives a clear idea of the underlying reason. As per the complainant, it preferred to buy the generators from another supplier as it had quoted rates 20% lower than the one chosen by the OPs (Para26). The OPs do not respond to the question of rate difference but admit that “On 16.3.1994 the complainant requested for change of machinery supplier from M/s Mahanarayanee Investment and Trading Co.P. Ltd., Madurai to M/s Parry Engineering and Exports Limited for the purchase of 2 Generator set for which the second opposite party requested vide their letter dated 17.3.1994 the complainant to submit the original proforma invoice so as to take a decision on change of supplier. While it was so, on 29.3.94, the second opposite party issued a commitment letter to M/s Air Power India Ltd. guaranteeing payment subject to conditions on supply of machinery. A DD for Rs 6,13,000/- was forwarded to the said supplier as advance out of term loan against subsidy eligibility................Also, in another letter dated 6.6.94, the complainant reiterated the stand to purchase 2 Gensets from M/s Parry & Co., instead of M/s Mahanarayanee Investments and Trading Co. P.Ltd.”(Para 15). This is a clear admission that the OPs were in a hurry to procure the equipment, even before taking a final view on the request of the complainant to change the supplier.
14. Following conclusions emerge from the detailed consideration above—
a. Report of the valuer shows that even before the first disbursal by the OP, investment of Rs 44.95 lakhs in the building and Rs 3.86 lakhs in machinery had been made by the complainant.
b. Most of the machinery and equipment have been procured subsequent to the sanction of the loan by the OPs. Therefore, its value, as assessed by the valuer rose from 3.86 lakhs in November 1993 to 49.71 lakhs in March 1995.
c. The OPs disbursed part of the loan and subsidy but with long delays between disbursals. Admittedly, Rs 25.17 lakhs of the term loan and Rs 5.49 lakhs of subsidy remained undisbursed.
d. Delay in disbursal is sought to be explained on the ground that the purchased machinery (though reflected in the evaluation report of 7.7.1994) was not found in the factory during subsequent inspection by the OPs. But, it is also admitted that Rs 16.88 lakhs were released in March 1995, based on the valuation report of 10.3.1995. There is no explanation as to what happened in between to satisfy the OPs that the ‘missing machinery’ was not physically missing. We are therefore, of the view that the delay on this account cannot be treated as bona fide conduct on the part of the OPs.
e. The logic of proportionate release (i.e. OP’s commitment of loan as 55% of the project cost) is an unconvincing attempt to justify the delay. It has merely remained an attempt to take the focus away from the inexplicable delay caused by the conduct of the OPs. This delay was a negation of their own avowed objective of extending financial assistance to entrepreneurs in Tamil Nadu for development of industries in the State.
f. The delay in procurement of generator sets has not been objectively explained. On the contrary, OPs’ own evidence shows that it was caused by their attempt to procure it from a supplier of their choice (though, as revealed by the Complainant, at a higher cost), against the requirement of the complainant. In this case too, the delay cannot be called bona fide.
g. In so far as the time taken in release of ‘No Objection Certificate’ to the borrower is concerned, we agree with the OPs that it could not have been issued before clearance of the outstanding amount by the complainant.
15. The OPs have sought to rely upon the decision of H’ble Supreme Court of India in Karnataka State Industrial Industrial Investment and Development Corpn. Ltd., (2005) 4 SCC 456. In this case, the respondent had taken a loan of Rs 116.30 lakhs from the Karnataka State Industrial Investment and Development Corpn (KSIIDC) in 1991. The borrower committed defaults in repayment. Therefore, the KSIIDC took over the unit in 1996 and sold it for Rs 171 lakhs in 1998 to a third party. The borrower filed a writ petition in the High Court praying for declaring the sale null and void. The High Court decided that borrower should be given an opportunity to make an offer to purchase on the same terms as agreed by the KSIIDC with the buyer. The decision of the learned single judge was challenged by the buyer in a writ appeal. The Division Bench ordered the KSIIDC to re do the entire sale process and to give the borrower an opportunity to bring a better offer. Hon’ble Supreme Court held that the KSIIDC had acted in a bona fide manner and set aside the direction to it to redo the entire sale process. Facts in the case before us are entirely different. Therefore, in our view the case of the OP/Tamilnadu Industrial Investment Corporation gets no support from this decision.
16. In the result, we hold that the complainant has fully succeeded in establishing that the delay in disbursal of the term loan with subsidy as well as part non-release of the same after March 1995, was without any justifiable cause. This failure to provide proper service to their borrower, amounted to ‘deficiency of service’ on the part of the OPs, within the meaning of Section 2(1)(g) of the Consumer Protection Act, 1986. We are therefore of the view that the complainant is entitled to be compensated for the same.
17. The consequential cost of delay in disbursal and of non-disbursal itself, has been quantified by the complainant, as directed by this Commission. As per written submission of the complainant, the value of total assets had risen to Rs.203.84 lakhs in May 1996 and Rs.274.39 lakhs by May 1997. We do not consider it necessary to go into it. Because, whatever the actual growth of the Unit set up by the complainant, the liability of the OPs in the context of the Consumer Complaint, will not travel beyond the consequences of delay in disbursement of the total agreed quantum of loan and subsidy as well as of non- disbursal of a part thereof.
18. The effect of this delay has been quantified by the Complainant in six heads, as per the direction of this Commission, mentioned earlier in this order. Expectedly, it has not been challenged by the OPs. Towards the non-released sums of loan and subsidy interest, Rs.13.16 lakhs has been claimed at 36% per annum. We consider it proper to limit it to 18%. Cost escalation for building and machinery, calculated at 12 and 10% respectively, are considered reasonable and acceptable. This comes to Rs.11.75 lakhs. Similarly, business loss at 10% for five months is considered reasonable and therefore the claimed amount of Rs.6.45 lakhs is allowed. However, we do deem it proper to allow the minimum electricity charge claimed by the Complainant, as it would have been payable, in any case. Finally, there is no case for allowing further compensation of Rs.25 lakhs claimed towards mental pain and agony, as interest on delay in releases cost escalation as well as business loss have separately been allowed.
19. Accordingly, the total compensation payable under all admissible heads is rounded off to Rs.25 lakhs. Cost of Rs one lakh is also awarded in favour of the Complainant. The OP/Tamilnadu Industrial Investment Corporation Limited, is directed to pay this amount of Rs.26 lakhs to the complainant, together with interest at 9% per annum, from the date of the complaint. The entire amount shall be paid within a period of three months, failing which the period of delay shall carry additional interest of 2% per annum. | 
