NIRPENDER SINGH CHAHAL vs STATE BANK OF PATIALA

THE complainants have filed the complaint under Section 12 read with Section 17(1)(a)(i) of the Consumer Protection Act, 1986 (hereinafter referred to as ''the Act, against the Manager of the State Bank of Patiala, and Shri Swarn Singh, Area Manager of WIMCO Ltd., Chandigarh. THE complainants have claimed various reliefs in para 12 of the complaint.

IN short, the complainants'' case is that WIMCO Ltd. sponsored a scheme known as ''WIMCO-Nabard Project'' for enlarging Poplar Planting activities to cater the great demand of wood in the country, and all the nationalised banks, including State Bank of Patiala (hereinafter referred to as ''the Bank'') adopted the scheme (Annexure ''A'') as detailed in para 5 of the complaint, to provide credit assistance to the farmers underan Agro Forestry Project and formulated the credit norms to provide credits to the farmers. The complainants applied for a loan under the said project and were sanctioned a sum of Rs. 4,93,000/- by the Bank. The scheme (Annexure ''A'') with regard to the credit norms inter alia lays down as follows : - "Security Norms (i) Hypothecation of the growing trees. (ii) Regular mortgage of land or creation of charge on land preferably on which poplar trees are grown. (iii) The economics of the project is given in Annexure-IV. It would be observed that the borrower will have sufficient surplus left after repaying the Bank''s dues. The project is, therefore, economically viable."

The complainants accordingly offered the securities of trees and land for creation of charge thereon under the provisions of Punjab Agricultural Credit Operations and Miscellaneous Provisions (Banks) Act, 1978. But the Bank refused to disburse the duly sanctioned loan on the ground that the creation of charge on the land would not suffice and instead a regular mortgage of land be created. The complainants in this complaint have sought a direction to the Bank to disburse the sanctioned loan amount by creation of the charge over the land in question as a collateral security and to award them Rs. 2 lakhs as compensation for causing delay in disbursing the loan.

The Bank filed its version on 10.4.1992. It was admitted that the complainants had applied for loan of Rs. 4,93,000/- and the same was sanctioned subject to the terms and conditions of the creation of stipulated securities in regard to mortgage of land as collateral security, but the complainants had failed to fulfil the conditions. It was further pleaded that it was for the Bank to consider the required nature of security needed by it and the prospective borrowers cannot dictate terms as to the nature of the security.

WE have carefully considered the complaint and the reply thereto. The grievance of the complainants is that the Bank has failed to provide loan under the Agro Forestry Project and it created various obstacles, as a result of which loan was not sanctioned to them and this resulted in mental agony and financial loss to them. Shri Ashok Jain, learned Counsel for the complainants, strenuously urged that the Bank has unreasonably and unjustifiably insisted that the complainants should mortgage their land, whereas the loan could have been advanced to them by creation of charge on the land. WE find no merit in this contention. It is the Banks which have to take decisions as to the type and the volume of the credit facility to be extended and whether the security offered is adequate. The responsibility of the Bank in this matter has been dealt with at length by the National Commission in case Essex Farms (P) Ltd. & Anr. v. Punjab National Bank & Anr., I (1992) CPJ 111 (NC), wherein it has been held as under : - "..It is in the discretion of the bank to determine whether credit has to be allowed to a party to the extent of sanctioned limits, keeping in view how the party is discharging his obligations towards the bank such as repayment of the credit and interest thereon, provision of adequate and acceptable security and the management of the scheme/project or the activity for which credit has been agreed to be provided by the Bank. Again the Bank has to satisfy itself that the assets which are offered as security are good and free from encumbrance, the title of the party in the goods or property is clear and that the valuation of the assets is just and fair. It is for the bank to determine whether the party''s creditworthiness and if so the extent to which it should be allowed credit and against what security. The refusal of the Bank to enhance the existing sanctioned limits of credit or even to continue to grant credit to the extent of the limits already sanctioned cannot and does not constitute a breach of the Bank''s obligations towards its debtors. It is primary duty of the Bank to ensure that the money of the depositors which it invests in the form of credit is safe."

In view of the above, it has to be held that it is for the Bank to consider or require the measure of security needed by it and the complainants cannot dictate terms as to the nature of security. The Bank has the right to exercise its discretion and judgment for granting and withholding loan. In the counter filed by the Bank it has been stated that after examining of the pros and cons of the case, it has stipulated the security by way of mortgage of land. This commission is, therefore, of the view that the complainants have failed to establish that there has been any deficiency of service rendered by the Bank and hence the complaint is dismissed. In the circumstances, however, there shall be no order as to costs. Complaint dismissed.