C D FATEL Vs. CANARA BANK

JUDGEMENT

(1.) The complainant is a non-resident Indian currently settled in United Kingdom. He is one of the major share holders of OP No.2. OP No.2 was in need of financial assistance to meet some present interest payments and had approached OP No.1 for some overdraft facility. OP No.1 required guarantee from an NRI who will keep in Fixed Deposit some adequate sum for a period of two years subject to approval of RBI. OP No.2 approached the complainant for such a deposit for which the complainant agreed and sent a draft of 15,000/-on 28.10.1986 in his name with specific understanding that the amount be kept as complainants F. C. N. R. Fixed Deposit Account for a period of two years only and on the strength of said account the 1st opp. party may grant equal amount to 2nd opp. party in overdraft. After the expiry of guarantee period of two years there was no further extension of guarantee. On maturity of Fixed Deposit it was renewed at the request of complainant periodically by reinvesting the interest accrued thereon. The fixed deposit now matures in the month of October, 1994. The complainant has given the fixed deposit as a continuing guarantee for the debts of second opp. party. His guarantee was limited only for a period of two years as borne out from the application and documents executed by opp. party No.2 in favour of opp. party No.1. On maturity of the F. C. N. R. Fixed Deposit, opp. party No.1 is trying to appropriate the proceeds towards the debts of opp. party No.2 by exercising his lien. After the expiry of guarantee period of two years the complainant has not consented to continue as surety or guarantee for the debts of opp. party No.2 nor any sanction of RBI was obtained to continue to hold the F. C. N. R. fixed deposit as security for the overdraft account of opp. party No.2 or for his other debts. Hence, the claim of opp. party No.1 is illegal, without authority of complainant, arbitrary and opposed to the Banking practice and hence the present complaint to direct the 1st opp. party to make full payment of the proceeds of F. C. N. R. Fixed Deposit to the complainant and costs.

(2.) The opp. parties have appeared and filed their respective versions. The version of opp. party No.2 is in conformity of the complaint and consents that the complaint may be allowed as prayed for. Opp. party No.1 has denied the claim of complainant. The claim of the Bank (1st opp. party) is that the complainant made the deposit of U. K.15,000/- with the Bank for a period of two years covered by Foreign currency Non-Resident Kamadhenu Deposit receipt issued by the Bank and the same was pledged by the complainant with the Bank for the loan of Rs.2,00,000/- advanced by the Bank to opp. party No.2 under the head of A/c VSL 5166/86. The said deposit on its maturity together with interest was renewed from time to time at the request of complainant and also by reason of automatic renewal as indicated in the foot-note described in F. D. Receipt No.413/95/92. The Reserve Bank of India by its letter dated 3.12.1986 has accorded permission to the Bank to sanction loan to opp. party No.2 to the permissible limit against the security of Fixed Deposit of U. K.15,000/- in the name of complainant, an NRI and that sanction had concurrence of department of banking operations and Development (DBOD ). According to the recitals contained in the letter of pledge executed by the complainant the pledge is given as a continuing security for the said loan of Rs.2,00,000/- of opp. party No.2 and the opp. party bank is entitled to hold the said pledged F. D. R. as a continuing guarantee for all loans, advances, overdraft and bank guarantees made or to be made to opp. party No.2 on whatsoever from time to time and all sums ultimately become due with full right of enforcement or appropriation. The complainant's contention that the security was only for two years and not beyond is untrue and untenable. The pledge made by complainant was by way of continuing security and irrevocable, until the liabilities of opp. party No.2 were all discharged. There is no irregularity or illegality in holding the pledged F. D. R. as continuing guarantee for the debts of opp. party No.2. There is no violation of Regulations of RBI or the Department of Banking Operation and Development. Opp. party No.2 has obtained several financial assistance on various accounts and for the dues in these accounts totally amounting to Rs.3,83,51/350.18 a civil suit has been filed as O. S. No.3 of 1994 in the Court of 2nd Addl. Civil Judge, Bangalore Rural District, Bangalore, which now stands transferred to Debt Recovery Tribunal. The maturity value of F. C. N. R. fixed deposit on 28.10.1994 was U. K.34,728.54, the equivalent value in Indian currency was Rs.17,74,628/-. The amount due on VSL 51 of 2nd OP had come to Rs.7,51,032/- and after adjusting so much amount towards the discharge of debt the balance amount of F. D. A. cw as Rs.10,23,596/- and the same is transferred to suspense account for adjustment of the same towards the other liabilities of opp. party No.2. In the end amongst some other contentions the opp. party Bank has claimed for dismissal of complaint with cost.

(3.) Both the sides have filed their affidavits and documents. On behalf of the complainant his power of attorney V. Jayanth Kini has filed the affidavit and on behalf of opp. party Bank, the Manager of the Bank has filed his affidavit. The documents of complainant produced in evidence are marked as Ex. C 1 to Ex. C 5, and that of the opp. party Bank as Ex. Rq to Ex. R 14. We have heard the arguments of both sides. On the basis of pleadings, the points arising for our consideration are as follows: (a) Whether the petition of complainant is maintainable? (b) Whether the pledge or security given by the complainant was limited for a period of two years? (c) Whether the Fixed Deposit pledged or given in security is available for discharge of other liabilities of the debtor? (d) For what relief the complainant is entitled? our findings on the above points are as follows: 1. Affirmative 2. Negative 3. Negative