N V DEORAS Vs. BANK OF INDIA

JUDGEMENT

(1.) According to the complainant, this is the glaring instance of the financing institutions throttling small scale industrial units by not only unreasonably withholding the monetary help for the purpose of nursing unit, but rather finishing the same by recalling the monetary assistance already advanced to the said industrial units. The complainant claims to be one of the victims of this vicious approach on the part of the Bank of India in this case. The complainant was granted loan facilities under "educated Unemployed Scheme" for setting up electronic SSI unit for manufacturing Radios, Tape- recorders and other consumer electronic items in the name of M/s. Dansatte Electronics in the year 1981 by Bank of India, Mahim Branch, Mumbai. The unit was financed to the extent of 70% by the said Bank, but as the said unit became sick shortly thereafter the Bank gave a small nursing package in the year 1985 and another nursing package in the year 1987. The complainant unit has been accepted as a sick unit by the Bank of India as well as by State Directorate of Industries for which the necessary certificates were issued. However, with the additional finance, the unit functioned well for three years from 1987-1990 and was looking for good days in the course of time. Surprisingly, in the month of March, 1992 when all the accounts relating to various loans, discounting facilities, etc. were within the sanctioned operating limits, the Bank suddenly recalled the advances and further freezed the account leaving 13 employees jobless and the complainant starving. Due to this sudden recall, the orders in hand had to be abandoned or cancelled by the complainant and further anticipated orders had to be delisted. The unit was left with raw material parts used for completing its orders became useless for the complainant unit. The entire advance was insured by the Reserve Bank of India under Deposit Insurance Credit Guarantee Corporation scheme. The Bank ignoring the RBI instructions and also the above scheme, proceeded to liquidate the assets of the complainant in July, 1993. The complainant found that the Bank had contravened the RBI guidelines in respect of interest and also other formalities before calling upon the complainant to square up all the accounts. The Bank charged higher interest than stipulated by the RBI, recovered the term loan within one year as against stipulated three years causing cash crunch. On account of shortage of cash flow the orders in hand remained unfulfilled, the proposal of diversification for manufacture of T. V. and two-in-one had to be abandoned, the request for finances from 1990 onwards were turned down and advances were recalled unilaterally without following the prescribed guidelines by the Reserve Bank of India.

(2.) According to the complainant, the total amount disbursed by way of principal amount in the Cash Credit Account and the Term loan was Rs.2,19,803.92 ps. whereas the interest recovered was Rs.10,25,663.35 ps. The present outstanding amount has been quantified at Rs.6,98,794.48 ps. This is the instance of the Bank overcharging the interest and still claiming the principal amount. The rate of interest chargeable to the complainant was 10% and further this interest should have come down from the date the unit was declared sick by the Bank and State Directorate of Industries. The complainant has referred to various guidelines in regard prescription of interest, recovery of loans from the sick SSI units as prescribed by the Reserve Bank of India. It is also stated that the financial projections given by the complainant at the time when the first assistance was given in 1981 turned out to be true in the later part. The period of six years in regard to Term loan made the burden of Term loan heavy being at the amount of Rs.3,84,196/-, out of the fresh cash credits limit of Rs.4.89 lakhs Bank siphoned out term loan of Rs.3,84,196/- leaving the uncalled amount for working capital at Rs.1,04,804/-. There was thus loss of orders to the tune of Rs.25,34,319.20 ps. , which could have earned the gross profit of Rs.6,33,534.80 ps. @ 25%. The Bank also refused to accept the bills drawn on M/s. Skywaves Electronics Pvt. Ltd. It was expected mat me working capital would be generated by discounting hundis and obtaining finances. This would have enabled the complainant to rotate the finances for supplying 100 sets of TV and could have make the turnover of Rs.19,53,600/- in a year. Similarly another order from M/s. Avineet Electronics Pvt. Ltd. for supply of two-in-one pieces also could not be gathered although the said company had opened letter of credit for Rs.50,000/-. The Bank refused to discount the letter of credit initially, but sanctioned the amount of Rs.37,500/- which was inadequate. The letters of request for extending finances from time to time were declined by the Bank and in consequence complainant lost orders for supply of Radios, T. V. , Two-in-one, etc. By the letter dated 28.3.1992, the opposite party Bank called upon the complainant to repay all the loans although at this time all the loans were within the sanctioned limits. The recall of advances was totally unwarranted in view of the RBI directions. All the previous dues were duly cleared and it was not proper on the part of the Bank to have refused to discount bills issued by Jetking. The complainant has claimed refund of excess interest of Rs.5,80,245.63 ps. , loss arising out of pending orders Rs.6,33,534.80 ps. , loss arising out of ruined career of Rs.3,50,000/-, loss turnover of Rs.35 lakhs per year from 1987-90 @ 10% on Rs.70 lakhs i. e. Rs.7 lakhs. In all Rs.25,39,779.40 ps. The complainant has deducted the pending claim of the Bank of Rs.6,98,794.48 ps. The net claim preferred is Rs.18,40,984.92 ps. Here we may state that the complainant has not claimed Rs.2,75,999.80 ps. being the salary payable to workers, because the workers have not claimed the salary.

(3.) This has been opposed by the Bank of India in its written statement filed in April, 1994. The prime contention of the Bank is that the Bank has filed the Suit. No.2701 of 1993 against the complainant for recovery of their claims about the loans and other facilities advanced to the complainant and in that light of the matter, the complaint cannot be entertained. The further story of the Bank is that the complainant was given the cash credit against hypothecation of stock facility to the extent of Rs.40,000/- in December, 1981. The same was enhanced to Rs.45,000/- in September, 1985 and further enhanced to Rs.4,89,000/- in December,1987. This included other facilities including bills discount, letter of credit facility, etc. The aggregate of all the facilities was Rs.13.17 lakhs and the repayment of the amounts under the said credit facilities was secured by hypothecation of stocks belonging to the complainant. In March, 1991, the working capital to the extent of Rs.37,500/-was extended to the complainant. The complainant from time to time accepted the interest charged by the Bank and that the interest was charged @ 13.50% to 17.50%. The suit in the High Court is for the recovery of aggregate amount of Rs.7,45,916.90ps. The National Commission in such cases has held that the matter should be referred to the Civil Court when it involves complicated questions requiring detailed examination and cross-examination of several witnesses and also reference to accounts books. The question of advancing finance to the sick units should be agitated in the Civil Court and not under the Consumer Protection Act. The interest was charged according to the agreement between the parties and the allegations regarding the sudden withdrawal of loans by the Bank is not true as much as performance of the complainant unit was unsatisfactory for a period of about three years or more. The Bank has a discretion to sanction or to withdraw the monetary assistance given to the units. The decision regarding refusal to accept the bills drawn on Skywaves Electronics, Avineet Electronics Pvt. Ltd. was the policy decision of the Bank and that is taken on the basis of the performance of the complainant unit with the Bank. Term loan No.1 for Rs.78,000/- was given on 25.8.1981 and repaid on 27.5.1987. Similarly term loan No.2 for Rs.37,000/- was sanctioned on 25.8.1981 and was repaid on 4th June, 1987. Thus the loans were recovered after the period of three years. The cancellation of orders by Nelco is the internal affair of the complainant and Nelco and need not be ascribed to the recall of credit facilities. The High Court by its order dated 17.8.1993 has appointed the Court Receiver for making inventory of the hypothecated securities and further granted injunctions restraining the complainant from dealing with his properties and for these reasons, the complaint is not sustainable.