CANARA BANK Vs. C D PATEL

JUDGEMENT

(1.) M/s. Suncrush Fruits P. Ltd. approached the Canara Bank for an over draft facility. Canara Bank agreed to furnish the facility but required a security for the amount. CD. Patel, the complainant, a Non Resident Indian, agreed to provide security by making a fixed deposit of 15,000 pounds with the Canara Bank. Fixed deposit was to be kept in a F.C.N.R. Fixed Deposit Account for a period of two years. On the strength of the fixed deposit, Canara Bank agreed to give Suncrush an over draft facility for an equal amount in Indian Rupees. On the maturity of the Fixed Deposit it was renewed at the request of the complainant CD. Patel, the NRI along with the accrued interest.

(2.) The case of C.D. Patel, the complainant is that he had deposited 15,000 pounds as security for one loan, i.e. Rs. "2 lakhs and that was for a limited period of only 2 years, the period. The said amount was not offered as security for any other loan taken by the Company. The security was allowed to continue beyond two years without knowledge and consent of the complainant. The Bank woke up only after the financial condition of Suncrush becoming precarious and its factory was seized by the financial institutions. The complainant has demanded return of the entire amount with accrued interest amount standing to his credit in the F.C.N.R. Fixed Deposit Account.

(3.) The first question is what is the relationship between the complainant, CD. Patel and the Company Suncrush. Suncrush is a Private Company. CD. Patel is a substantial shareholder in that Company. No shareholder stands security for a loan taken by the Company unless he has a deep and abiding interest in the management of the Company. This relationship has not come out in the open in the petition or in the affidavit filed before us. No affidavit has been filed before us on behalf of Suncrush. It is not known what is the status of the Company now. Has the Company been wound up or has any winding up action has been started against the Company ? It has been stated that financial institution have closed in and have seized the assets of the Company. If the loan was initially given for a period of two years and the security was also for a period of two years only, it is strange that even after the F.C.N.R. Fixed Deposit materialized in 1986 no attempt was made by Patel to withdraw this amount and was kept renewed along with the interest and was allowed to be held as security for the Company's loan/overdraft. It is only when the Company's condition became precarious Patel decided to withdraw the said Deposit. Suncrush had applied for an overdraft/loan of Rs. 2 lakhs and in the printed form for such application, in column 7 it was stated. "the consideration for which The name of C.D. Patel has the overseas depositor has been shown as share holder agreed to pledge the fixed who has the Company to deposit as collateral security tide over problems during for the loan/overdraft. the first year of operation. It was also stated that Patel held 2000 shares of Rs. 100/- each in the Company.