HYDERABAD.

C.D.No.25 OF 2005

Between:

Agri Gold Farms Limited, having its registered

Office at 4^th Floor, Catholic complex, M.G.Road,

Vijayawada, represented by its Chairman &

Managing Director Sri V.R.Rao Avvas and Authorized

Person Sri K.Ram Babu, S/o.K.Durga Prasad Rao,

Aged 32 years, working as Group Relations Officer.                               ..Complainant

            And

1. The Chairman & Managing Director,

     Canara Bank, Central Office

    112, Jaya Chamarajendra (J.C.Road)

     BANGALORE-564 002.

2. The General Manager

     Canara Bank, Opp.Old MLA Quarters,

    Basheerbagh, Hyderabad.

3. The Senior Branch Manager,

    Canara Bank, Venkateswarapuram Branch,

    Vijayawada-520 010.

4. Deputy General Manager,

    Customer Service Section,

    Canara Bank, P.D.Wing,

Head Office, Bangalore.                                                                  ..Opposite parties.

Counsel for the Complainant:M/s.P.S.Nagarajan

Counsel for the Opposite Parties: M/s.Deepak Bhattacharjee

CORAM:SMT.M.SREESHA, INCHARGE PRESIDENT.

AND

SRI G.BHOOPATHI REDDY, MEMBER.

THURSDAY, THE TENTH DAY OF JANUARY,

TWO THOUSAND EIGHT.

Oral Order:(Per Smt.M.Shreesha, Hon’b;e I/c.President).

***

            The brief facts as set out in the complaint are that the complainant is operating a current account with third opposite party, Canara Bank, bearing Account No.696 in addition to it the complainant is also having fixed deposits with third opposite party branch for an amount of Rs.2.27 crores apart from the interest.  The complainant submits that till date the complainant was having comfortable relationship with the banker and there was no single instance of any inconvenience caused by him to the bank.  The complainant was previously carrying on the business of corporate agriculture and allied activities and the interested persons joined the scheme of the complainant company and specific agreements were executed according to which the member enjoys lien on the proportionate lands which is secure.  In October, 1999 in pursuance of the SEBI guidelines, the complainant stopped its activities in the field of plantation schemes and issued post dated cheques to the investors for the maturity amount as a precautionary measure apart from the lien on the proportionate land.  The complainant submits that these post dated cheques were on different banks and were issued to the unit holders before October, 1999.  On 18-5-1999 the complainant received a letter from third opposite party stating that the complainant has obtained in excess of its short turn needs and issuing post dated cheques extending for longer periods, hence third opposite party has been instructed by their head office to collect the unused cheques from the complainant to close the account giving time upto 30-6-1999 for making alternative arrangements, for which the complainant gave a reply on 22-5-1999 complying the instructions.  Once again on 17-1-2000 inspite of reply  dated 22-5-1999 instructing the complainant to surrender all unused cheques and also to close the current account, the complainant personally explained to the D.G.M. of the difficulties and probable loss of business and submitted when there is sufficient amount to cover the cheques, the act of the opposite party in instructing the complainant to close the current account is against natural justice.  The complainant submits that they made a representation to all the opposite parties on 09-9-2000 and on 01-6-2001.  On 30-8-2001 the third opposite party addressed a letter to the complainant for which the complainant replied on 16-8-2003 requesting to cancel the F.D.Rs. with the third opposite party and gave all the details.  The complainant also explained the difficulties by enclosing the press release of SEBI dated10-6-2003 but did not receive any response and thereafter the complainant informed that he was ready and willing to close all the accounts of the group companies with the opposite party bank with an endeavour to give utmost importance to the guide lines of SEBI dated 31-10-2003.  The act of the third opposite party in not releasing the maturity deposits is unreasonable and against the principles of natural justice for which the complainant addressed a letter on 17-6-2004 requesting immediate action and cancel the F.D.Rs. and adjust the same to the loan account and credit the balance proceeds to the complainant’s current account since the auditors wanted to know whether the loan has been adjusted or not.  Once again there was no response and the complainant got issued a legal notice on 21-6-2004 calling upon the opposite parties for closure of F.Ds. and adjust the loan amount and crediting the balance to the current account. The details of the Fixed Depsits and loan availed is given as hereunder:

Vexed with the attitude of the opposite parties, the complainant approached this Commission seeking a direction for payment of Rs.10,00,000/- towards financial loss, Rs.5,00,000/- towards damages, Rs.5,00,000/- towards mental agony and Rs.10,000/- towards costs and other reliefs.

            Opposite parties 1 to 4 filed counter affidavit stating that this Commission has no jurisdiction to entertain the matter and the party should approach the civil court and that opposite party No.3 addressed letter to the complainant on 17-1-2000 to surrender all the usused cheques an also to close the account.  The complainant had requested that all the deposits to be paid in cash in operating the CD deposit account and to meet the requirement of payment of cheques.  Hence the complainant was directed to continue the account till April, 2002 subject to the condition that:

a)     Term deposit should not be prematurely closed or utilize for the purpose

other than making payments to cheques.

b)     Term deposit should  be renewed periodically till all the commitments are

      met by utilizing the maturity proceeds and making payments for the post

      dated cheques.

c)      Loans/Advances should not be granted against the term payments.

The bank extended good customer services and the complainant had addressed a letter on 16-8-2003 and opposite party No.2 discussed this matter with the Executive Director of the complainant company on 01-9-2003 and opposite party No.4 addressed a letter on 10-12-2003 advising the complainant to bear with the bank as the matter will be redressed shortly.  The complainant got issued a legal notice to the opposite parties on 21-6-2004 and opposite party No.3 requested the complainant under letters dated8-9-2004 and 29-4-2005 to inform the position of the post dated cheques issued by the complainant and also the details of cheques taken back from their customers and details of the blank cheques, if any, and details of amounts of post dated cheques encashed till date.  SEBI issued a notification dated 10-6-2003 not to rely on post dated cheques as security for making investment.  It was also pointed out by SEBI that the provisional registration granted by SEBI to the complainant expired and the entity is required  to wind up its CIS to repay its investors in the status report issued on 31-10-2003.  The complainant claimed that it suffered financial loss of Rs.10 lakhs as immense operational inconvenience and also suffered financial loss as it had to pay the amounts raised from other sources to oblige SEBI directions.  Opposite parties deny that they caused any annoyance and damage to the complainant and submitted that there is no deficiency of service on their behalf and submitted that they strictly adhered to the norms set by RBI and SEBI and thereafter addressed letters on 18-5-1999 directing the complainant to hand over all unused cheques and close the account by 30-6-1999 and make alternative arrangements.  Time was also extended upto 31-1-2000 and on 8-9-2004 and 29-4-2005 letters were addressed to the complainant to issue details of post dated cheques and inspite of repeated requests, the complainant did not choose to close the account and therefore there is no deficiency of service on their behalf.

            The complainant filed a detailed affidavit by way of evidence and Exs.A1 to A17 were marked on their behalf.  Opposite parties 1 to 4 filed a detailed affidavit by way of evidence and got marked Exs.B1 to B17.

            The brief point that falls for consideration is whether there is any deficiency of service on behalf of the opposite parties and if the complainant is entitled for the amount claimed in the complaint?

            The complainant filed affidavit reiterating the facts stated in the complaint.  Ex.A1 is the incorporation certificate issued by the Registrar of companies dated 9-11-1995.  Ex.A2 is authorization given to Mr.K.Ram Babu by the company dated 10-3-2003.  Ex.A3 is the letter dated 18-5-1999 of the 3^rd opposite party to the complainant with an instruction to handover the unused cheques and close the account.  Ex.A4 is the letter dated 22-5-1999 of the complainant to third opposite party returning the unused cheques and requesting to continue the account.  Ex.A5 is the letter dated 17-1-2000 of third opposite party to the complainant to make alternative arrangement.  Ex.A6 is the letter dated 01-6-2001 of the complainant to 1^st opposite party with copy to other opposite parties requesting them to permit him continue current account.  Ex.A7 is the letter dated 16-8-2003 of the complainant to third opposite party requesting cancellation of deposits and closure of deposit loan.  Ex.A8 is the letter dated 9-9-2000 of the complainant to the 1^st opposite party  and under copy to other opposite parties requesting to continue their account.  Ex.A9 is the letter dated 30-8-2001 of the third opposite party.  Ex.A10 are four letters to the opposite parties dated 3-12-2003 requesting to normalize the situation of the account and release the holding money in F.D.Rs.  Ex.A11 is the letter dated 10-12-2003 of 4^th opposite party  acknowledging receipt of the letter.  Ex.A12 is the letter dated 13-12-2003 of the complainant requesting to adjust the loan amount  released on the deposits and credit the proceeds.  Ex.A13 is the letter dated 15-12-2003 of the complainant appraising its difficulties by enclosing SEBI press release dated 10-6-2003.  Ex.A14 is the letter dated 31-12-2003 of complainant requesting to transfer the Fixed deposit amounts to current deposit account.  Ex.A15 is the registered notice dated 21-6-2004 to the opposite parties.  Ex.A16 is the acknowledgement.  Ex.A17 is the  letter dated 28-6-2004 of the opposite party that they referred the matter to administrative office at Hyderabad and requesting to bear with them.

            Opposite parties 1 to 4 filed a detailed affidavit reiterating the facts stated in the counter.  Ex.B1 is the press release of Security Exchange Board of India dated 10-6-2003.  Ex.B2 is details of investment scheme registered with SEBI  and the entry in item No.20 manifest that provisional registration granted by SEBI expired and the entity is required to wind up its CIS to repay its investors.  Ex.B3 is the letter of loans and advance against term deposit for Rs.18,00,000/- of complainant dated 5-5-2003.  Ex.B4 is the minutes of meeting of Board of Directors of complainant dated 5-5-2003 authorizing Sri V.R.Rao Avvas, Chairman and M.D. to approach Canara Bank for obtaining loan of Rs.18,00,000/-.  Ex.B5 is the letter of loans and advance against term deposit for Rs.86,00,000/- of complainant dated 5-6-2003.  Ex.B6 is the minutes of meeting of Board of Directors of complainant dated 4-6-2003 authorizing Sri V.R.Rao Avvas, Chairman and M.D. to approach Canara Bank for obtaining loan of Rs.86,00,000/-.  Ex.B7 is the letter of loans and advance against term deposit for Rs.30,00,000/- of complainant dated 2-5-2003.  Ex.B8 is the minutes of meeting of Board of Directors of complainant dated 30-4-2003 authorizing Sri V.R.Rao Avvas, Chairman and M.D. to approach Canara Bank for obtaining loan of Rs.30,00,000/-.  Ex.B9 is the letter of loans and advance against term deposit for Rs.28,00,000/- of complainant dated 3-5-2003.  Ex.B10 is the minutes of meeting of Board of Directors of complainant dated 2-5-2003 authorizing Sri V.R.Rao Avvas, Chairman and M.D. to approach Canara Bank for obtaining loan of Rs.28,00,000/-.  Ex.B11 is statement of account covering the period from 01-1-2006 to 7-9-2007.  Ex.B12 is the circular issued by Head office of Canara Bank dated 2-9-1998 in respect of issuing cheque books and with instructions to branches of the bank to review the accounts and issue cheque books to meet short term requirements and not to issue post dated cheques.  Ex.B13 is the letter of the opposite party bank dated 17-1-2000 requesting the complainant to surrender all unused cheques and close the account.  Ex.B14 is letter dated 18-5-99 of the opposite parties requesting the complainant to return the unused cheques and close the account.  Ex.B15 is the letter addressed by the opposite party to the complainant on 8-9-2004 giving status of all post dated cheques.  Ex.B16 is the letter addressed by opposite party on 29-4-2005 to the complainant directing him to account for all post dated cheques or cancel the same by producing original cheques and pointed out that as per circular of SEBI, CIS operation has to be closed.  Ex.B17 is a detailed statement of account covering the period from 2-5-2003 to 17-4-2007.

            The learned counsel for the complainant submitted that the fixed deposits which were deposited with the bank were not released by the bank inspite of several communications and requests and inspite of the complainant operating a current account No.696 with the bank.  He submitted that a total amount of Rs.2,27,02,316/- in multiples fixed deposits were deposited with the bank.  The learned counsel further submitted that inpsite of complainant’s letter dated 22-5-1999 requesting opposite party No.3 to reconsider its decision as closing its account would materially affect its business and reputation but did not receive any response.  The complainant admits that they had availed a loan of Rs.1,62,00,000/- and requested the opposite parties to cancel the F.D.Rs. and adjust this loan amount and that the complainant is entitled to receive a sum of Rs.65,02,316 apart from interest that accrued on the fixed deposit and even after repeated reminders, the opposite parties did not take any action.  It is the complainant’s case that had they invested this amount in some other form like RBI bonds, it would have yielded an interest of 8.5% i.e. Rs.5,52,696/- p.a. and this amount would have been available to the complainant for a period of four years from 16^th August, 2003 to 16^th August, 2007.  It is the complainant’s case that the act of the opposite parties in not releasing the amount lying in the complainant’s account is an act of deficiency of service for which they have to pay exemplary damages.  The learned counsel for the complainant in his written arguments relied on the decisions of Rookes v. Barnard reported in (1984) I A11 ER 367  and also the decision of the court of Appeal in Mc.Carcy v. Associated Newspaper Ltd. (1964) 3 AH ER 947,

‘the courts have held that for imposing exemplary or punitive damages two  well-defined categories of cases were recognized.  The first category is of those cases where the plaintiff is injured by the oppressive, arbitrary or unconstitutional action by the executive or the servants of the Government. The second category is comprised of those cases in which the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable’.

In M.C.Mehta v. UOI, 1986 Supp (1) SCC 562, the Hon’ble Supreme Court held that:

            ‘The measure of compensation is these kinds of cases must be correlated to

            the magnitude and capacity of the enterprise because such compensation

            must have a deterrent effect.  The larger and more prosperous the enterprise,

            the greater must be the amount of compensation payable by it…’

As against this it is the case of the opposite parties that it was only on account

of indiscriminate issuance of post dated cheques which were against the norms set by RBI, SEBI and Ministry of Finance requesting the complainant to close the account granting sufficient time but the complainant did not choose to do so inspite of repeated requests and they relied on the press release of SEBI dated 10-6-2003 (Ex.B1).  The learned counsel for the opposite parties drew our attention to the circular dated 2-9-1998 marked as Ex.B12 which is issued by Canara Bank head office wherein the bank branches were instructed to review the accounts and issue the cheque books to meet their short term requirements and not to issue post dated cheques and therefore opposite parties had asked the complainant to surrender all the post dated cheques  according to SEBI and RBI instructions and also the head office circular.  Ex.B17 is a detailed statement of account covering the period from 2-5-2003 to 17-4-2007 showing the transactions and the balance.  They relied on the decision of the National Commission in SAHYO KRISHNA VIKAS SEVA KENDRA v. ALLAHABAD BANK reported in 2002 (3) CPJ P-431 (NC) in which it was held that ‘if the complainant had failed to provie any negligence, no compensation can be awarded’.  The learned counsel further contended that Sri V.R.Rao Avvas filed a complaint supported by relevant board resolution and the examination in chief was led by K.Ram Babu, who is a Group Relations Officer and that the evidence of K.Ram Babu is not supported by any resolution of the Board nor he is permitted to do so under the articles and memorandum of association and therefore the evidence led by K.Ram Babu and the documents marked by him cannot be take into consideration but the material on record shows that there is authorization to Mr.K.Ram Babu by the company dated 10-3-2003 and therefore this technical ground cannot be a substantial reason for dismissing the complaint.  The learned counsel also relied on the decisions reported in 2003(3) CPJ, P-58 (NC) in RAJAN GUPTA v. CITY BANK wherein it was held that facts which are complicated cannot be adjudicated in summary proceedings.  We find force in this contention since in AIR 2002 SC P-2931  in DR.J.J.MERCHANT & OTHERS v. SHRINATH CHATURVEDI has clearly laid down that the redressal agencies constituted under the Consumer Protection Act, 1986  cannot relegate function assigned to them to a civil court  on the ground that complicated questions are involved in a given case.  The Apex court further observed that the National Commission is headed by a former judge of Supreme Court, the State Commission is headed by a former judge of High Court and the District Forum is headed by a former District Judge as its President.  The learned counsel for the opposite parties also relied on the following citations:

2002 (3) CPR  P 105 (SC) in SYNKO INDUSTRIES v. STATE BANK OF

 BIKANER AND JAIPUR

2002 (3) CPR P-105 (SC) in JAIPEE PROCESS v. BANK OF INDIA

1995(1) CLT P-96 (NC) in ANIL KUMAR AGARWAL v. DENA BANK

2001(3) CPR P-105 (NC)

1995 (2) CPR P-231 (NC) in CITI BANK v. UNIVERSAL TRADING CORPORATION

1992(2) CPR P-699 in JAYACHANDRA KUMAR v. STATE BANK OF IINDIA

2002(3) CPJ P-427 (NC) in CHUNILAL v. TAMILNADU MERCANTILE BANK LTD.

2002(3) CPJ P-47 (NC) in OMEGA AG SEEDS v. INDIAN OVERSEAS BANK

wherein it was held that in case of inflated claim, the complainant cannot maintain the complaint under Consumer Protection Act.  We are of the considered view that the documentary evidence in the instant case clearly states that fixed deposits for the following amounts and bearing the following  numbers:

totalling a sum of Rs.2,27,02,316/- were admittedly deposited with opposite party No.3 bank.  It is also an admitted fact that opposite party No.3 addressed a letter dated 18-5-1999 asking the complainant to return all unused and close the account and it is also an admitted fact that the complainant by letter dated 22-5-1999 requested opposite party No.3 to reconsider its decision as closing its account would materially affect its business and reputation of the complainant.  In  its letter dated 13-12-2003 addressed to the Branch Manager, Canara Bank, the complainant stated as follows:

            ‘As mentioned in our letter No.15 under reference, we are no more

          in CIS operations and as per the directions of SEBI are closing the

          same by calling back the Post Dated cheques issued by us and settling

          the investor accounts.

          In this context your attention is drawn to the press release of SEBI, PR

          No.136/2003 dated 10-6-2003.  For meeting the requirement in the

          above mentioned context, we required all our deposits in cash in our

          operative C.D. accounts.  Copy of the said SEBI press release is

          enclosed for your ready reference.

          If your Bank is inclined to maintain the same status regarding our

          representations, we have no objection to close all our group companies

          accounts with your bank by arranging alternative arrangements by

          30^th March, 2004.

          Therefore, we request you to adjust the loan amounts released on our

          deposits as per your letters dated 29-7-2003, 10-7-2003 and 24-11-03

          and credit the proceeds to our Current Account immediately’.

and once again on 15-12-2003 requesting the bank to close all the group companies’ accounts and calling back the post dated cheques issued by them and to credit their F.D. accounts to the current deposits.  We observe from the material on record that the opposite parties did not file any substantial documentary evidence that they are entitled to hold back the complainant’s maturity deposits and exercise a general lien by not adjusting it to the loan account and crediting balance to the current account of the complainant.  The complainant’s letter dated 16-8-2003 (Ex.A9) clearly stated as follows:

            ‘With reference to the above, we bring to your kind notice that

          we have availed deposit loan with you worth of Rs.30,00,000/-

          on 2-5-2003, Rs.28,00,000/- on 3-5-2003 and Rs.18,00,000/-

          on 5-5-2003, total amounting to Rs.76,00,000/- and Rs.86,00,000/-

          on 5-6-2003 against the pledge of our Fixed Deposit Receipts worth

          of Rs.2,27,02,316/-.  Now we hereby request your goodselves to

          cancel our Fixed Deposits and adjust the same along with interest

          to our current Account No.696 with you, for which we shall be grateful

          to you’.

It is pertinent to note that the opposite parties have remained silent to his request and have neither cancelled the F.D.Rs. nor adjusted it to the loan account of the complainant and the balance was not credited to their current account No.696.  When the complainant himself has clearly stated in Ex.A9 to cancel the F.D.Rs. and adjust the proceeds to the loan account, there was no response from the opposite parties and the complainant has stated that the company complied with the directions of SEBI and are calling back the issued cheques as per the directions and all relevant material was furnished to the bank including the direction of SEBI dated 31-10-2003 and stated that they were prepared to make alternative arrangements by 30-3-2004 and close all their group accounts.  The act of the opposite parties bank in not responding to adjust the loan account and not specifying under which rule position they have performed this adjustment and credited the balance to the current account is an act of deficiency of service and we direct the opposite parties’ bank to adjust the  F.D.Rs against the loan account of the complainant and credit the balance to the current account and direct the opposite parties to pay interest on the balance amount  after adjustment of the loan account with interest at 12% p.a. from the date of filing of the complaint together with compensation of Rs.10,000/- and costs of Rs.5,000/-.

                                                                        INCHARGE PRESIDENT.     MEMBER.

JM                                                                                           Dt.10-1-2008

//APPENDIX OF EVIDENCE//

Witnesses examined for

Complainant:                                                                                  Opposite Parties:

     -Nil-                                                                                                            -Nil-

Exhibits marked on behalf of the complainant:

Ex.A1-Incorporation certificate issued by Registrar of companies dated 9-11-1995. 

Ex.A2-Authorization given to Mr.K.Ram Babu by the company dated 10-3-2003.  Ex.A3-Letter dated 18-5-1999 of the 3^rd opposite party to the complainant.

Ex.A4-Letter dated 22-5-1999 of the complainant to third opposite party.

Ex.A5-Letter dated 17-1-2000 of third opposite party to the complainant.

Ex.A6-Letter dated 01-6-2001 of the complainant to 1^st opposite party with a copy to

          other opposite parties 

Ex.A7-Letter dated 16-8-2003 of the complainant to third opposite party.

Ex.A8-Letter dated 9-9-2000 of the complainant to the 1^st opposite party

Ex.A9-Letter dated 30-8-2001 of the third opposite party. 

Ex.A10-Four letters of the complainant to the opposite parties dated 4-12-2003

Ex.A11-Letter dated 10-12-2003 of 4^th opposite party. 

Ex.A12-Letter dated 13-12-2003 of the complainant. 

Ex.A13-Letter dated 15-12-2003 of the complainant appraising its difficulties by

            enclosing SEBI press release dated 10-6-2003.

Ex.A14-Letter dated 31-12-2003 of complainant requesting to transfer the Fixed

            deposit amounts to current deposit account. 

Ex.A15-Registered notice dated 21-6-2004 to the opposite parties. 

Ex.A16-Acknowledgement. 

Ex.A17-Letter dated 28-6-2004 of the opposite party. 

Exhibits marked on behalf of the Opp.party:

Ex.B1-Press release of Security Exchange Board of India dated 10-6-2003. 

Ex.B2-Details of investment scheme registered with SEBI

Ex.B3-Letter of loans and advance against term deposit for Rs.18,00,000/- of

           complainant dated 5-5-2003. 

Ex.B4-Minutes of meeting of Board of Directors of complainant dated 5-5-2003

Ex.B5-Letter of loans and advance against term deposit for Rs.86,00,000/- of

           complainant dated 5-6-2003. 

Ex.B6-Minutes of meeting of Board of Directors of complainant dated 4-6-2003

Ex.B7-Letter of loans and advance against term deposit for Rs.30,00,000/- of

           complainant dated 2-5-2003. 

Ex.B8-Minutes of meeting of Board of Directors of complainant dated 30-4-2003.

Ex.B9-Letter of loans and advance against term deposit for Rs.28,00,000/- of

           complainant dated 3-5-2003. 

Ex.B10-Minutes of meeting of Board of Directors of complainant dated 2-5-2003

Ex.B11Statement of account covering the period from 01-1-2006 to 7-9-2007. 

Ex.B12-Circular issued by Head office of Canara Bank dated 2-9-1998

Ex.B13-Letter of the opposite party bank dated 17-1-2000

Ex.B14-Letter dated 18-5-99 of the opposite parties requesting the complainant to

            return the unused cheques and close the account. 

Ex.B15-Letter addressed by the opposite party to the complainant on 8-9-2004

Ex.B16-Letter addressed by opposite party on 29-4-2005 to the complainant

Ex.B17-Detailed statement of account covering the period from 2-5-2003 to

            17-4-2007.

                                                                        INCHARGE PRESIDENT.     MEMBER.

JM                                                                                           Dt.10-1-2008