BABU S.RANGANATHAN vs MANAGER, STATE BANK OF SAURASHTRA

THIS is a complaint under Sec.17 read with Sec.12 of the Consumer Protection Act.

THE complainant and his aunt Mrs. Sar/ aswathy Venugopalan entered into a partnership in the name and style of M/s Sarang Associates for carrying on the business in readymade garments. THE firm opened a current account with the first opposite party and obtained from it cash credit to the limit of Rs. 2.5 lakhs in November 1990, on the security of the stock in trade, book debts and deposit of title deeds in respect of the house of Mrs. Saraswathy Venugopalan. THE business started in January 1991 and the stock statements were regularly furnished to the bank. On 7.8.92, the manager of the Bank i.e. the first opposite party accompanied by the Branch Officer, came to the business premises of the partnership firm, perused the books of accounts and sealed the premises under lock and seal on the ground that the stock in trade were insufficient. THE complainant issued a lawyer notice. On 11.8.92, according to the complainant, the officers of the first opposite party came and opened the lock and seal leaving the premises unprotected. THE complainant put a safe lock on the premises to protect the contents. By letter dated 12.8.92 the first opposite party recalled the advance on the false and baseless allegations that the value of the stocks are insufficient and proper accounts were not maintained. Subsequently, the complainant removed the lock and seal in the stock room and carried out verification. THEre was no substantial shortage. THE recall of the advance by the bank couples with their false stance that the stocks were under their lock and seal dealt a crippling blow to the business of the partnership Firm, bringing it to a grinding halt and disabling it from meeting its obligations to the Bank. Hence this complaint claiming compensation in the sum of Rs. 1,50,000/- as deterioration in value of stocks in trade, Rs. 56,000/- as expenditure towards interest, rent, staff salary etc., Rs. 32,000/- to compensate the loss of personal earnings of the complainant for the last 8 months, Rs. 1 lakh for loss due to irrecoverable bad debts and Rs. 6,00,000/- for mental agony and hardship in all Rs. 9,38,000/-. The first opposite party-bank, State Bank of Saurashtra, George Town, Madras-600 001 has filed a counter in the form of an affidavit by its Branch Manager. It is pointed out that the cash credit advance of Rs. 2.50 lakhs was given to the partnership firm, Sarang Associates. The transaction was between the partnership firm and the bank only and the complaint for deficiency of service, if any, has to be filed by the firm or by all the partners. The present complaint made by the complainant who is one of the partners for reliefs claimed in the complaint is not maintainable. It is also contended that the firm itself is not a consumer within the meaning of the Consumer Protection Act. On merits it is pointed out that the cash credit limit of Rs. 2.50 lakhs was sanctioned on the stock of goods pledged as security on the collateral security of the personal guaranty of Mr. Venugopalan the husband of Mrs. Saraswathy Venugopalan, partner of the firm and had the collateral security of her house by deposit of title deeds. According to the first opposite party the cash credit limit was directed linked to the value of the pledged stocks available and subject to the margin fixed by the first opposite party. In other words, the drawing power of the borrower firm under the cash credit account was limited to a certain fixed percentage of the value of the pledged stocks available. The terms and conditions of the advances were : (1) the borrower firm shall be in physical possession of the pledged stocks subject to the absolute dominion and control of the 1st opposite party and subject to the 1st opposite party''s absolute right to assume and take physical possession of the said stocks whenever it considered it necessary and to sell them at the risk and responsibility of the borrower firm; (2) the firm should submit periodical statements of the pledged stocks to the 1st opposite party; (3) the 1st opposite party was entitled to call up the advances granted under the cash credit account whenever the 1st opposite party thought fit to do so. It is urged that the firm was not adhering to stipulations as to the pledged stocks, to the preparation and submission of periodical statements and to the operations and conduct of the qash credit account. It was found that the business operations were unsatisfactory and irregular. The pledged stocks were not adequate to cover the large indebtedness. Further the other partner Smt. Saraswathi Venugopalan wrote to the first opposite party that the complainant had mismanaged the affairs of the borrower firm and brought the firm on the verge of a crisis. There was dispute between the partners regarding the affairs of the firm. It was also discovered that the firm was maintaining on account with Indian Bank which was in breach of the stipulations under which the cash credit limit was sanctioned by the opposite party. In view of this fact, the first opposite party took physical possession of the pledged stock by locking two rooms in the business premises. Actually the other partner Smt. Saraswathy Venugopalan consented to the first opposite party locking the rooms where the pledged stocks were kept. By doing so the entry of the partners of the borrower firm to the business premises of firm was not prevented. Thereafter the first opposite party issued notices to the borrower firm calling demanding repayment of the amount due under the cash credi t account. The firm failed to do so. On 8.1.93 the complainant had opened the 2 rooms where the pledged stocks of goods were kept under the lock and seal of the first opposite party by breaking open the locks and removal of the placards displayed there at indicating that the goods were under pledge to the first opposite party. The action of the complainant in doing so and appropriating the pledged goods for himself was high handed. It is further a verred that it is entirely within the discretion of the opposite party-bank and not before the Forum constituted under the Consumer Protection Act. The claim for compensation and the quantum of compensation was also denied by the first opposite party.

Exh. A1 to A12 and B1 to B16 are marked by consent. No oral evidence has been let in.

THE points that arises for consideration are : (1) Whether the firm Sarang Associates is a consumer within the meaning of the Consumer Protection Act? (2) Whether the complaint filed by the complainant is maintainable? (3) Whether there was any deficiency of service and negligence on the part of the first opposite party? (4) To what relief if any is the complainant entitled?

Point No. 1 : The first opposite party has advanced a cash credit loan to the limit of Rs. 2.50 lakhs to M/s. Sarang Associates of which the complainant and Mrs. Saraswathi Venugopalan are partners. The first opposite party is rendering financial service to the said firm within the meaning of Sec. 2(1)(o) of the Consumer Protection Act. The Firm has availed of the services of the first opposite party for consideration, the consideration being in the shape of interest payable on the loan. The Firm is therefore a consumer within the meaning of the Sec. 2(1)(d)(ii) of the Act. This point is found against the first opposite party.

POINT No. 2 : The loan has been advanced by the first opposite party to the partnership firm M/s. Sarang Associates of which the complainant and Mrs. Saraswathi Venugopalan are partners. The allegation in the complaint is that the first opposite party has arbitrarily locked the business premises of the complainant''s firm, recalled the loan amount and thus fully affected the business. But the complaint is filed not by the Firm or by both of these partners, but by one of the partners even without impleading the other partner as an opposite party. As rightly pointed out by the Learned Counsel for the first opposite party, the complainant ought to have been filed either by the firm represented by any of the partners or by both the partners. In any event the other partner ought to have been impleaded atleast as an opposite party. The complaint is at present filed by one of the partners seeking relief for himself and it is clearly not maintainable. The complaint is not therefore sustainable in law. Point No. 3 : The first opposite party has advanced a loan of Rs. 2.50 lakhs on cash credit limit to M/s. Sarang Associates on 7.8.92 the Branch Manager of the first opposite party has visited the premises of the firm verified the accounts of the stock. According to the complainant, the Manager locked and sealed the entire premises on the ground that the stock in trade was insufficient. The contention of the first opposite party is that only two rooms in the premises where the stocks were stored were sealed and locked by the officials of the first opposite party as stock in trade was insufficient to cover the large indebtedness and outstandings of the firm. It is further alleged by the first opposite party, that the complainant has unauthorisedly broken open the locks and seal of these two rooms and misappropriated the stocks. This is a matter with which we need not deal at the moment. It is sufficient to point out that the term loan has been advanced primarily at the stock of goods and the drawing power of the borrower firm is limited to a certain fixed percentage of the value of the pledged stock. According to the first opposite party''s Branch Manager, the stock dwindled and its value was far below, the accumulated loan amount due from the firm to the first opposite party and hence the bank was forced to lock and seal the two rooms in the premises where the stocks were stored. As rightly contended by the first opposite party, it is within the discretion of the bank to consider whether the stock is sufficient to meet the obligations of the borrowers and take appropriate action to safeguard its interest. This decision of the banking authorities is not subjected to review by the Forums constituted under the Act. It cannot therefore be said that the first opposite party''s authorities acted negligently or committed deficiency of service in locking and dealing the two rooms where the stocks were kept. It is the complainant who has acted high handedly in breaking open the seal and lock and appropriating the stock. We are unable to find any deficiency of service on the part of the first opposite party. Point No. 4; In view of our findings in point Nos. 2 & 3 the complainant is not entitled to any relief.

IN the result, the complaint fails and is dismissed, but without costs. Complaint dismissed.