KARNATAKA STATE INDUSTRIAL COOP BANK Vs. VIRUPAKSHAYYA CHANVEERAYYA

JUDGEMENT

(1.) This revision petition has been filed by the Karnataka State Industrial Cooperative Bank and Anr. (hereinafter referred to as the 'Petitioners') against the order of the State Consumer Disputes Redressal Commission, Karnataka (hereinafter referred to as the 'State Commission') in favor of one Virupakshayya Channveerayya Maidurgimutt (hereinafter referred to as the 'Respondent') who was the original complainant before the District Forum.

(2.) The facts of the case are that the Respondent, a businessman, in order to extend his trade approached the Petitioner/bank for a loan of Rs. 4 lakhs subject to a collateral security in addition to compliance of necessary requirements. In this connection, Respondent had to deposit the title deed of immovable property as security for the purpose of loan to be discharged in accordance with the terms and conditions of the sanction order dated 30.12.2000. As per Clause 10 of the sanction order, the Respondent was to execute equitable mortgage deed at the Sub-Registrar's office. On 17.01.2001, Respondent executed a Memorandum of equitable mortgage by way of deposit of the title deed in respect of immovable Property No. CTS 1794 C 1. Respondent also stated that no third party interests exist in the said property and that it is free from encumbrances. On the basis of these documents, the Petitioner released a major part of the loan amount of Rs. 4 lakhs by transferring it to the saving bank account of the Respondent. During this period, the Petitioner exercising due diligence referred the title deed and documents to the City Survey Department for verification. A report was received from that Department stating that the actual owner of the mortgaged property was one Ravishankar Isloor. Further inquiries revealed that the Petitioner had only permanent tenancy rights with no absolute right/interest over the property to either mortgage or alienate it. The Petitioner, therefore, issued notices to the Respondent calling upon him to furnish fresh security free from encumbrances. The Respondent failed to do so and according to the Petitioner/bank, with an intent to commit further fraud, Respondent issued three cheques for a total amount of Rs. 2.85lakhs after receiving the above notice. The Petitioner, therefore, in exercise of powers under Section 171 of the Indian Contract Act under the general lien of bankers stopped the payment of the cheques on presentation. The Petitioner also recalled the loan and filed for recovery of Rs. 1,40,000/- which included interest on the loan of Rs. 1,22,550/- already availed of by the Petitioner.

(3.) The Respondent has denied the above allegations made by the Petitioners and aggrieved by the action of the Petitioner, filed a complaint before the District Forum alleging deficiency in service on the part of the Petitioners and requested that Petitioners should pay him Rs. 2 lakhs as compensation including Rs. 50,000/ for mental agony.