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Judgment
IN case where a loan is sanctioned by the bank, but when the title of the property which is mortgaged is found to be defective, can it be said that non-disbursement of loan is unjustified? In our view it cannot be said to be unjustified, in any manner. Apart from the prime object of social welfare, the Banks shall also safe-guard their financial interests as banking business is for earning profit.
THIS complaint is filed against State Bank of India (hereinafter referred to as the Bank), Branch Belgaum, contending that non-disbursement of the sanctioned loan has resulted in loss to the Complainants and hence they are entitled to a compensation of Rs.75,45,142/- on various grounds. Before dealing with the contentions we would refer to few admitted facts: 1. On 10.12.1997 the Complainants submitted an application to the Bank seeking a loan facility to establish mosquito repellent coil manufacturing unit at Belgaum. 2. By letter dated 9.1.1998 the Bank agreed to sanction the credit facilities, such as, medium term loan for machinery etc. for a sum of Rs.24,75,000/-; cash credit limit to the tune of Rs.10 lakhs, cash credit, (book debts limit) to the tune of Rs.5 lakhs, and letter of credit limit to Rs.5 lakhs, subject to the conditions mentioned therein. One of the conditions for collateral security was ''equitable mortgage/registered mortgage of open plot at RS No.6, 3A/R, Vinayak Nagar, Belgaum, measuring 8 guntas" which was existing in the name of Sri Prabhakar Yashwant Sabnis, and also personal guarantee of all the partners and of Sri Prabhakar Yashwant Sabnis. 3. On 21.1.1998 the mortgage deed was executed for the said immovable property.
The main dispute starts at this point. It is the contention of the Bank that they came to know that the property offered by the guarantor as security was acquired by the Belgaum Urban Development Authority (BUDA) by issuing a notification dated 10th December, 1982. A copy of the notification was also sent to this Commission, after the hearing of the matter was closed on 25th January, 2006 at Bangalore sitting of this Commission.
ON 5.2.1998 the Officers of the Bank decided to inspect the proposed factory premises after a partial disbursement of the loan, to verify as to whether the Complainants had installed the electrical equipment. It is the say of the Bank that the Complainants did not allow the officials of the Bank to inspect the premises.
ON 4.3.1998 the Bank sought clarification from the Complainants and requested to comply with the terms and conditions of the sanctioned letter. On 5.3.1998 the Complainants gave reply to the letter of the Bank.
ON 11.3.1998 the Complainants sent letter and sought for change of suppliers.
ON 19.3.1998, the Bank sought certain clarification from the Complainants with regard to the change of the supplier On 30.3.1998 the Respondent Bank received a letter dated 24th March, 1998 form M/s. Spaco Enterprises and came to know that no advance money was paid and that the Complainants had cancelled the order.
ON 30.3.1998 the Respondent Bank sent a letter to the Complainants seeking clarification for the delay in project, reasons for change of supplier, etc.
ON 30.4.1998 the Bank sent a letter to M/s. Amit Machine Tools and Accessories and requested to submit invoice/bill for which amount has been disbursed by the Bank in the month of February, 1998. By letter dated 25th May, 1998, the Bank sought clarification from the Complainants with regard to: (a) to submit forthwith the list of machineries proposed to be changed from the list submitted earlier; (b) in the lease deed entered into by the KSFC and the firm of the complainants, the firm has wrongly stated that the firm is a proprietary concern while it was a partnership firm. ( c) the registered mortgage deed in respect of the property offered as a collateral security has not been received still; (d) the margin money as required was to be routed through the bank; (e) license from the Central Board of Insecticides was required to be expedited; and, (f) Original invoices and bills in respect of disbursement made for acquisition of machineries from M/s. Amit Tools and Accessories and other items.
THE Complainants replied to the above letter on 29.5.1998 stating that: (a) some changes in the list of suppliers set forth for bank''s approval; (b) request had already been made to KSFC to amend the lease deed; (c ) the firm had approached the Sub-Registrar''s office to hand over the registered mortgage deed to bank''s officials; (d) complainants agreed to deposit the entire margin money in their SBI Current Account whenever required and asked by the bank; (e) license from Central Insecticides Board would be available only after 5th June, 1998, etc.
ON 12.6.1998 the Bank sent one more letter to the Complainants and requested to arrange a quotation of changed suppliers, get the registered lease deed from the KSFC and provide additional security to the Respondent Bank. On 10.7.1998 the Respondent Bank received a letter from the BUDA informing that it has acquired the property given by the Complainants as security by issuing Notification.
ON 3.8.1998 the Respondent Bank informed the Complainants that the Bank has withdrawn the loan facility.
ON 19.8.1998, the Bank called upon the Complainants to repay the amount of Rs.1,80,458.66 which was due as the Complainants have failed to comply with the conditions of sanction letter. On 31.8.1998 the Complainants replied to the said letter by stating that the charges of suppression of the facts were baseless and false, and the action of the bank in calling off the account was wrongful. Therefore, for the loss which the Complainants suffered, would be required to be paid by the bank.
ON 7.8.1999 the Bank filed Original Suit No. 169 of 1999 i.e. Suit for recovery of money, before the Additional Civil Judge, Senior Division, Belgaum, against the Complainants. The Bank has also produced on record the common judgment and decree passed by Prl. Civil Judge, Jr. Division, in Original Suit No. 173 of 1990 filed by Gnyanoba Jakkappa Jadhav Vs. Abhiman Apartments; and, Original Suit No. 174 of 1990 filed by Prabhakar Yashwant Sabnis against Abhiman Apartments, wherein the Court directed as under: "O.S. No. 174 of 1990 : The suit of Plaintiff is hereby decreed. The defendant, his agent or anybody on his behalf are hereby restrained by order of permanent injunction from interfering with the Plaintiff''s peaceful possession and enjoyment of the suit property bearing Plot No.14 out of R.S. No. 6/sA/A, more particularly shown towards its eastern side in the map Ex.C-1, submitted by the Court Commissioner, from laying roads or plots."
ON 8.9.1998 the Complainants sent a letter informing the Bank that the behaviour of their officers was unjustified and made allegation of corruption against them. Finally, it was stated that: "We have already made alternative arrangement to start the factory. We will approach to Court for compensation, within short time, please note". (a). Further, on 7.9.1998 this Complaint was filed before this Commission. (b) On 18.9.1998 the Complaint No. 107 of 1998 was filed before the Karnataka State Commission claiming compensation and relief to the extent of Rs.18,78,121/-. The same was dismissed for non-prosecution by the State Commission by order dated 8.11.2002. (c) On 10.6.1999 Complaint No. 212 of 1999 was filed before the District Forum, Belgaum. On 8.12.2000 Complaint No. 212 of 1999 filed by the Petitioner before the District Forum, Belgaum was dismissed.
Findings: The main defence of the Bank is that the property which was sought to be mortgaged was acquired by the BUDA by Notification dated 10.12.1982. And, therefore, the alleged mortgage executed by the Complainants, was totally void.
Secondly, the Bank officials decided to inspect the Complainants'' factory on 5.2.1998 after disbursement of loan amount of Rs.69,000/- to verify as to whether the Complainants had installed the electrical equipment. However, the Complainants refused the bank officials to have access to the factory. The Complainants have also failed to produce the registered deed executed by the Karnataka State Financial Corporation. They have also paid the advance money to the supplier directly without routing through the Bank and changing the supplier without the consent of the Bank; and for delay in completion of various formalities like certificate from the Pollution Control Board. It is also contended that the Complainants have approached the District Forum, the State Commission and the National Commission for the same cause, and, therefore, the Complaint was required to be dismissed.
Conclusion:
FROM the facts stated above, it is apparent that the title to the property which was mortgaged by the Complainants was in dispute and this is clear as per the judgment rendered by the Civil Court. The title was clarified by the common judgment and decree rendered by the Civil Court in Original Suit Nos. 173/90 and 174/90 on 27th August, 1998. Bank has also produced on record the notification dated 10.12.1982 by which the property which was to be mortgaged, had been acquired by the Belgaun Urban Development Authority. Once the title of collateral security is in dispute, it cannot be said that the bank was unjustified in any manner in refusing the release of the sanctioned loan. Before releasing the loan, Complainants were required to give collateral security and if that condition is not complied with, bank cannot release the loan. It has been stated that after releasing the amount of Rs.0.69 lakhs bank''s officials decided to inspect the complainants factory on 5.2.1998 to verify as to whether, Complainants had installed the electrical equipment, but they were not permitted by the complainants.
IT has also been pointed out that there was no justifiable reason for not getting the registered lease deed executed from the Karnataka State Financial Corporation for a period of five years and there were no justifiable reasons for delaying various formalities like production of certificate from the Pollution Control Board. In view of the aforesaid facts, it cannot be said that refusal to disburse the sanctioned loan by the bank, was without justifiable reasons. Proper security for repayment of the loan is the necessity. Hence, this complaint is dismissed. There shall be no order as to costs.