N.L.P. Organics Pvt. Ltd. vs The Chairman -cum -Managing Director, Indian Bank

THE key controversy swirls around the short question, "Whether, the complainant is a ''consumer'', under section 2(d)(i) of C.P.Act -. The present complaint was filed in this Commission on 11.03.1999. M/s. N.L.P. Organics Pvt. Ltd., Bhiwadi, used to enjoy the credit facilities from the Indian Bank, through its Chief Manager, OP5, for carrying on its business activities and dealings in pharmaceuticals and supplying the medicines to Inland as well as foreign buyers. The complainant requested OP5 vide letter dated 18.04.1999 to sanction the rehabilitation package on its declaring as the sick unit, but on the contrary, the Bank, vide its letter dated 02.03.1995, did not accede to its request. The said fact was conveyed to the complainant vide letters of OP5, dated 08.01.1995 to 15.03.1995, and requested the complainant that it could accept the rehabilitation package as per the calculation as a cut -off dated on 31.03.1994 and not 31.03.1995.

OP 5 vide its letter dated 02.03.1995, though sanctioned the open Cash Credit Limit and export packing credit limit to the total sum of Rs.10.00 lakhs, in favour of the complainant, however, only a sum of Rs.4.00 lakhs was disbursed and the remaining Rs.6.00 lakhs was debited in the account as the adjustments of some old out -standings and thus the complainant was made to run the business within a sum of Rs.4.00 lakhs. Consequently, the complainant could not meet out the requirements in the business and financially, the complainant suffered serious setback in running the business. Vide letter dated 26.04.1995, the complainant wrote a letter to the Assistant General Manager of the Bank and requested for immediate action so that the company may not go sick again, but it did not ring the bell. On the contrary, OP5 continued to charge interest in Cash Credit Account at the higher rate of interest showing that the limit is over drawn than the sanctioned limit. Even the penal rate of interest was charged, thus increasing the outstanding balance in Cash Credit limit. These facts were brought to the notice of the OP5 vide letter dated 08.01.1998 and recalculation of entire operations of the account from 31.03.1995 to 31.12.1997 was submitted. The Bank refused to extend the Cash Credit Limit in favour of the complainant saying that the account is already over drawn. A sum of Rs.24.00 lakhs approximately was shown as the interest amount which the Bank charged from time to time without any valid reason and without any intimation to the complainant company. This liability further increased. The complainant protested vide letter dated 08.01.1998. The debits thus shown in the account of the complainant company are unilateral and without the consent and intimation of the complainant. The sales in the business also dropped significantly from 1.75 crores to Rs.60.00 lakhs.

UNDER the rehabilitation package and sanction dated 02.03.1995 it was agreed to create funded Interest Term Loan Headead He (in short '' FITL) with a limit of Rs.9.15 lakhs which excluded interest and repayable in monthly installment of Rs.30,000/ - per month and was to charge interest rate @ 10.50% p.a. As per RBI guidelines, the Bank is not supposed to change any interest as the interest liability pertains to the sick industries. It is alleged that OP5 started debiting the FITL installments in the current account of the complainant and thus charged the interest rate applicable in the current account and as a result of which the outstandings in the current account also increased due to interest in the factory only. However, OP5 continued further charging compoundable interest thereon. No concession was made available to the complainant company. Though the agreement was that the OP5 will charge interest @ 10.50% p.a., yet, it charged interest on the FITL account as applicable to the current account which was charged varying from 18.5% p.a. to 23% p.a. Again, there was no principal amount put to the disposal of the complainant for its use in the business and the whole liability consisting of interest factor only. The cheques sent by the complainant were bounced illegally.

THE complainant company exported the goods/medicines worth Rs.25.00 lakhs to Vietnam against Irrevocable letter of credit through the Bank and advanced Rs.20.00 lakhs against the above said Letter of Credit but OP 5, again recovered Rs.11.00 lakhs on the same day. The complainant company informed the General Manager, vide its letter dated 27.02.1997 alleging that Letter of Credit should have been opened as promised but there was no response to the said letter. The complainant company had to suffer heavy losses. The complainant requested the Bank to open the letter of credit because all the formalities were done. However, the Bank pressurized the complainant to reimport the material in place of taking any action. The complainant, thereafter, as a good gesture and as the goods were of quality product, reimported the material from Vietnam which was done in pursuance of the letter of the Bank, dated 06.08.1997. The complainant company took lot of steps to take back the delivery of the goods from Vietnam and also spent Rs.140.00 lakhs approximately and got back on 31.03.1998 from the Indian Customs. The reimported goods were taken into custody by OP5 and the same were kept in a separate room under their lock and key. OP5 was asked to release the goods under its custody so that the same may be disposed of in the market. They were also informed that the goods must be disposed by the end of November, 1998, otherwise, the complainant company would not be in a position to dispose of the same and to fetch the maximum price of the medicines. The complainant did not receive any response. Another letter was sent on 17.04.1998. It was also informed that the expiry date of all those goods is November, 1998. The value of the goods was Rs. 25.00 lakhs (approximately). However, OP5 failed to deliver the goods to the complainant company. Op5 vide letter dated 31.07.1998 informed the complainant that it could take the delivery of the goods as per its terms and conditions. Vide its letter dated 08.08.1998, the complainant showed its inability to pay the interest on the goods within a period of two months. The cheque issued for the salary of staff also stood bounced. The complainant had to borrow the money from the market. Vide letter dated 10.12.1998, protest was made to the Bank. Ultimately, the present complaint was filed and compensation in the sum of Rs.70.00 lakhs along with interest @ 24% p.a., pendente lite and future interest, was filed. It was also prayed that the costs of the case should also be awarded to the complainant. The complainant has given the details of compensation, as follows : -

Defence : -

THE OPs 1 to 5 have listed the following defences in their written version. The complainant is not a consumer. No deficiency can be attributed on the part of OP5. The Bank conducted business strictly in in accordance with the terms of the arrangement of cash credit loan facility account. The complainant should not be permitted to take advantage on its own wrong. The adjustment of the part of the sanctioned limit against the outstanding liability does not constitute a breach of the bank''s obligation towards its debtors. It is explained that the complainant was enjoying the credit facilities since the year 1987, but the performance of the complainant was not good. In the month of August, 1987, the complainant applied for and requested the OP5 to grant certain credit facilities. On 28.12.1987, OCC facility for Rs.5.00 lakhs, DOCBP/DABP facilities for Rs.7.00 lakhs and performance guarantee for Rs.50,0000/ - was granted on regular terms and conditions which were duly explained to the complainant and to which it readily agreed. The Sanction Ticket dated 28.12.1987 has been placed on record as Annexure -1. The Bank granted additional Inland LC Facility to the tune of Rs.3.00 lakhs and continued other facilities to it except DOCBP facility which was suspended. A copy of the sanction ticket dated 30.05.1989 has been placed on record as Annexure -2.

THEREAFTER , the complainant failed to regularize its accounts. OP5, vide its letter dated 14.07.1990, called upon the complainant to clear liabilities standing in their OCC Account, Inland LC Account and BP Returned unpaid account, amounting to the tune of Rs.6,93,165/ -, Rs. 1,73,190/ - and Rs. 2,89,578/ -, respectively. OP5 vide letter dated 18.10.1994, sanctioned FBN/DP/DA (120 days) ad hoc facility to the complainant, which letter has been placed on record as Annexure -3. The complainant approached OP5 with renewal/rehabilitation proposal and in pursuance thereto, sanction was granted vide Sanction Tickets dated 02.03.1995 & 29.03.1995 under OCC facility for Rs.10.00 lakhs, sub -limit FPC Facilities in the sum of Rs.5.00 lakhs, FBN/DP facilities in the sum of Rs.20.00 lakhs and sub -limit FBN/DA (90 -120 days) for Rs. 10.00 lakhs and FOTL for Rs. 9.15 lakhs, Import letter of credit for Rs.7.00 lakhs and Bank Guarantee for Rs. 0.80 lakhs were granted on regular terms and conditions which were duly explained to the complainant and to which it readily agreed. A copy of the Sanction ticket dated 02.03.1995 has been placed on record as Annexure -4. It is explained that the complainant at that point of time, did not disclose that the relief so granted was not adequate or such facility or relief was not acceptable to it, but now, belatedly, the complainant is coming up with a new plea that due to OP5''s deficiency, it has suffered loss. Thereafter, the complainant requested OP5 for Bank Guarantee to be given to the department of Customs. OP5 issued letter of guarantee No.08/96 -97 dated 31.05.1996 for Rs.79,937/ -, copy of which has been placed on record as Annexure -5. The complainant was identified as a Non Performing Asset (NPA) on 01.07.1997 and therefore, the non -realized interest was debited in a separate account called Memorandum of Interest Account. The OP5 never declared the complainant as sick unit. In fact, the complainant could not maintain the financial discipline in spite of rehabilitation package given to the complainant and the complainant, at no point of time, after accepting the package, had averred that the package was unfair, one -sided and unacceptable. OP5, vide sanction ticket dated 02.03.1995 has put all the amount at the disposal of the complainant. OP5 is bound by the guidelines of the RBI and that interest was charged as per the agreed terms and conditions and the complainant cannot now, go back and complain about the same.

AGAIN , the export documents were having certain discrepancies and were not in conformity with the terms and conditions of the Letter of Credit. It is, however, explained that this is a frivolous case for which no court fee has to be filed. On the contrary, OP filed Original Application being OA No. 539 of 1999 before the Debts Recovery Tribunal. OP 5 has filed a claim of Rs.1,04,30,266.45 before the DRT. During the arguments it was brought to the notice of this Commission that the said matter before the DRT already stands disposed of. All the issues already stand adjudicated. The DRT, vide its detailed judgment dated 17.02.2010 observed in Paras Para 7.4 and 7.5, as follows : - 7.4. The next objection raised by the defendants is that the applicant bank is guilty of its own acts and conduct by approaching a sum of Rs.6.00 lakhs out of the sanctioned CC limit of 10.00 lakhs vide sanction ticket dated 02.03.1995. In reply, the applicant bank in the replication has denied the assertion and stated that it was made clear to the defendant that as per sanction ticket dated 02.03.1995, the interest accumulated on the Open cash account was converted into funded interest on loan. The applicant has denied that the applicant unilaterally debited Rs.6.00 lakhs and placed at the disposal of the defendant only Rs.4.00 lakhs and that the action of the defendant was strictly in accordance with terms and arrangement of cash credit loan. As already stated the banking industry has its own norms of maintaining the accounts. When the loans are advanced, the returns are also expected. In this view of the matter, the objection raised by the defendants is rejected.

7.5. The next objection raised by the defendants is that the applicant bank acted illegally in retaining the pledged goods of the value of Rs.25 lakhs after the same were imported from Vietnam which the respondent got back on 31.03.1998. The goods were medicines and the expiry date of the same was November, 1998, but the Bank failed and neglected to release, as a result, the defendant suffered loss of Rs.25 lacs. The goods were of perishable nature.

It was contended that the complaint be dismissed and exemplary costs on the complainant be imposed.

BOTH the parties have submitted written synopses twice and raised considerable arguments in this summary case trial. The principal question which falls for consideration is, whether, the complainant is a ''consumer''?. It is strange that the complainant has referred to the celebrated authority of Hon''ble Apex Court, reported in Laxmi Engineering Works vs.PSG Industrial Institute - : (1995) 3 SCC 583. It is contended that an amendment in the year 1993 was made only on Section 2(1)(d)(i) and not on Section 2(1)(d)(ii). It was argued by the counsel for the complainant that by way of 1993 amendment, the commercial aspect was not included in the ''hiring and availing of services''. It is explained that the complainant company availed the services of the OP5, Bank, therefore, the amendment of 1993 is not applicable. In Section 2(1)(d)(ii) of the CPA, 1986, the amendment was brought in the year 2002 akin to what was amended in Section 2(1)(d)(i) in 1993. Therefore, the amendment of 2002 excluding the commercial hiring and availing of service is not applicable in the present case as the case was filed way back in the year 1999. The arguments averred by the counsel for the complainant lack conviction. Para 1 of the complaint runs as follows: - That the complainant had been enjoying the credit facility from the Opposite Party No.5 for carrying on its business activities and dealing in pharmaceuticals and supplying the medicines to Inland as well as Foreign Buyers.

Other relevant portions, we have already highlighted.

AT the foot of Para No.10, of the authority, Laxmi Engineering Works Vs. PSG Industrial Institute (Supra), it was observed : - Indeed, the entire Act revolves round the consumer and is designed to protect his interest. The Act provides for "business -to -consumer'' disputes and not for "business -to - business" disputes. This scheme of the Act in our opinion, is relevant to and helps in interpreting the words that fall for consideration in this appeal.

PARA No.11 of the judgment reads as follows : - Now coming back to the definition of the expression ''consumer'' in Section 2(d), a consumer means in so far as is relevant for the purpose of this appeal, (i) a person who buys any goods for consideration; it is immaterial whether the consideration is paid or promised, or partly paid and partly promised, or whether the payment of consideration is deferred; (ii) a person who uses such goods with the approval of the person who buys such goods for consideration (iii) but does not include a person who buys such goods for resale or for any commercial purpose. The expression "resale" is clear enough. Controversy has, however, arisen with respect to meaning of the expression "commercial purpose". It is also not defined in the Act. In the absence of a definition, we have to go by its ordinary meaning. "Commercial" denotes "pertaining to commerce" (Chamber''s Twentieth Century Dictionary); it means "connected with, or engaged in commerce; mercantile; having profit as the main aim" (Collins English Dictionary) whereas the word "commerce" means "financial transactions especially buying and selling of merchandise, on a large scale" (Concise Oxford Dictionary). The National Commission appears to have been taking a consistent view that where a person purchases goods "with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit, he will not be a "consumer" within the meaning of Section 2(d)(i) of the Act. Broadly affirming the said view and more particularly with a view to obviate any confusion the expression "large -scale" is not a very precise expression the Parliament stepped in and added the explanation to Section 2(d)(i) by Ordinance/ Amendment Act, 1993. The explanation excludes certain purposes from the purview of the expression "commercial purpose" - a case of exception to an exception. Let us elaborate: a person who buys a typewriter or a car and uses them for his personal use is certainly a consumer but a person who buys a typewriter or a car for typing others'' work for consideration or for plying the car as a taxi can be said to be using the typewriter/car for a commercial purpose. The explanation however clarifies that in certain situations, purchase of goods for "commercial purpose" would not yet take the purchaser out of the definition o expression "consumer". If the commercial use is by the purchaser himself for the purpose of earning his livelihood by means of self -employment, such purchaser of goods is yet a "consumer". In the illustration given above, if the purchaser himself works on typewriter or plies the car as a taxi himself, he does not cease to be a consumer. In other words, if the buyer of goods uses them himself, i.e., by self - employment, for earning his livelihood, it would not be treated as a "commercial purpose" and he does not cease to be a consumer for the purposes of the Act. The explanation reduces the question, what is a "commercial purpose", to a question of fact to be decided in the facts of each case. It is not the value of the goods that matters but the purpose to which the goods bought are put to. The several words employed in the explanation, viz., "uses them by himself", "exclusively for the purpose of earning his livelihood" and "by means of self -employment" make the intention of Parliament abundantly clear, that the goods bought must be used by the buyer himself, by employing himself for earning his livelihood. A few more illustrations would serve to emphasis what we say. A person who purchases an auto -rickshaw to ply it himself on hire for earning his livelihood would be a consumer. Similarly, a purchaser of a truck who purchases it for plying it as a public carrier by himself would be a consumer. A person who purchases a lathe machine or other machine to operate it himself for earning his livelihood would be a consumer. (In the above illustrations, if such buyer takes the assistance of one or two persons to assist/help him in operating the vehicle or machinery, he does not cease to be a consumer.) As against this a person who purchases an auto -rickshaw, a car or a lathe machine or other machine to be plied or operated exclusively by another person would not be a consumer. This is the necessary limitation flowing from the expressions "used by him", and "by means of self -employment" in the explanation. The ambiguity in the meaning of the words "for the purpose of earning his livelihood" is explained and clarified by the other two sets of words.

The Hon''ble Apex Court in Laxmi Engineering Works (supra) further held, as under : -

The expression " person" in Section 2(m) as including a firm (whether registered or not), a Hindu undivided family, a co -operative society or any other association of persons (whether registered under the Societies Registration Act, 1860 or not) makes no difference to the above interpretation. If a firm purchases the goods, the members of the firm should themselves ply, operate or use the goods purchased. Same would be the case of purchase by Hindu Undivided Family, cooperative society or any other association of persons.

It must be borne in mind that in Laxmi Engineering Works (supra), judgments, such as, Lucknow Development Authority Vs. M.K.Gupta, : (1994) 1 SCC 243, Morgan Stanley Mutual Fund Vs. Kartick Das, : (1994) 4 SCC 225, were relied upon other judgments to this effect titled, Synco Textiles (P) Ltd. Vs. Greaves Cotton and Co. Ltd., (1991) 1 CPJ 499, Secretary, Consumer Guidance and Research Society of India Vs. BPL India Ltd,, (1992) 1 CPJ 140 (NC), Oswal Fine Arts Vs. HMT,, (1991) 1 CPJ 330.

IT is thus clear that since the complainant is transacting business, therefore, he cannot be said to be a ''consumer''. The complaint is liable to be dismissed on this score.

THE counsel for the complainant has raised so many other issues that OPs did not produce the requisite documents, therefore, adverse inference should be drawn against them. The complainant was entitled to file the case before this Commission in view of Nahar Industrial Enterprises Limited. Vs. Hong Kong and Shanghai Banking Corporation, : (2009) 8 SCC 646. It was also pointed out that the before the amendment, the complainant was not entitled to file counter -claim against the Bank. It is contended that the Bank''s deficiency stands proved on the record. To our mind, all the issues pale into significance before us. We refrain from deciding all these issues and dismiss the complaint as the complainant is not a ''consumer''.

IT must be mentioned here that the complainant was misguided and ill -advised. The Laxmi Engineering Works (supra) case was declared in the year 1995. The case was filed four years subsequently. Had the complainant been a wee bit vigilant, it would not have attempted to tilt against the windmills. The complainant has wasted the precious time of this Commission for the last about fifteen years, including that of the Apex Court, by filing a SLP, which was dismissed.

WE are, under the circumstances, constrained to impose costs of Rs.25,000/ - which be paid to the "Pay and Accounts Officer, Ministry of Consumer Affairs, New Delhi", through the Registrar of this Commission, within 45 days from the receipt of this order, otherwise, it will carry interest @ 10% p.a., till realisation. Registrar to report about compliance. However, liberty is given to the complainant to approach the appropriate forum or civil court for getting redressal of its grievances as per law and as per the observations made in Laxmi Engineering Works Vs. P.S.G. Industrial Institute, : (1995) 3 SCC 583, at Para 23, as under : - The appeal accordingly fails and is dismissed but without costs. If the appellant chooses to file a suit for the relief claimed in these proceedings, he can do so according to law and in such a case he can claim the benefit of Section 14 of the Limitation Act to exclude the period spent in prosecuting the proceedings under the Consumer Protection Act, while computing the period of limitation prescribed for such a suit.