Syndicate Bank vs O.K. PLY INDIA LTD.

THE appellant has directed this appeal against the impugned order dated 11.12.2000 passed by District Forum whereby its claim of Rs. 75,000/- towards consultancy fee was declined. Facts giving rise to this appeal in brief are as under: THE respondent was earlier working under the name and style of M/s. Aquapure Containers Ltd. came out with planning to bring out the public issue of Rs. 3.74 crores some time in the month of March/April, 1993. THE appellant Bank sanctioned a bridge loan of Rs. 80 lacs in favour of the respondent against the said issue on terms and conditions incorporated in the letters of the respondent dated 9.3.1993 and 11.3.1993 (Annexure 1 and Annexure II). It is pertinent to mention that the appellant gave this loan before the Securities and Exchange Board of India (SEBI) clearance was obtained by the respondent.

AS per terms of the letters (Annexure I), the appellant Bank was to be appointed as the only adviser of the proposed public issue to the respondent and was to be paid Rs. 75,000/- as consultancy fee. It was also a part of the terms of agreement that this amount of consultancy fee will be recoverable from the sale proceeds of the proposed public issue. Admittedly the said public issue did not come out in March, 1993 and was post poned and ultimately it came out in January/February, 1994 on the same terms and conditions as contained in Annexure I. However, perusal of the impugned order shows as if said issue never came out and automatically expired on the expiry of validity period of three months. On this premise, the District Forum dismissed the claim of the appellant for recovery of consultancy fee by observing that since the issue never saw the light of the day and lapsed on 19.6.1993 appellant-Bank was not justified to deduct a sum of Rs. 75,000/- on account of consultancy fee as no consultancy was ever provided by the appellant with regard to the public issue in question and moreover this consultancy fee was independent of the service as a Lead Manager.

We have perused various documents produced by the parties particularly Annexure I, Annexure II and Annexure VIII. Annexure A-1 relates to terms and conditions of the loan as well as the clause that the appellant Bank will be the only adviser of the proposed issue and so to be paid Rs. 75,000/- as consultancy charges to be recovered from the sale proceeds of the proposed issue. Letter dated 9.10.1993 stipulates that the same public issue was postponed and was to come out some time in the month of January/February, 1994, the same terms and conditions were rolled over as were stipulated in Annexure I. The very fact that the said issue came out in the month of January/February, 1994 shows that public issue did not automatically expire after three months of its validity period. Had it been so, the question of postponement of the public issue which was to be funded by the appellant Bank by way of bridge loan could not have been arisen. So much so the amount of Rs. 75,000/- was deducted from the sale proceeds of the proposed public issue. This fact also fortified the plea of the appellant that public issue did come out and yielded the sale proceeds and, therefore, amount of Rs. 75,000/- towards consultancy fee was rightly deducted by the appellant. In view of the foregoing reasons, the appeal is allowed and the impugned order is set aside as the appellant''s services were availed as advisor for the public issue besides its being a Lead Manager also.

FDR/Bank Guarantee, if any, deposited by the appellant be returned to the appellant forthwith under proper receipt. A copy of this order, as per the statutory requirements be forwarded to the parties, free of charge and also to the concerned District Forum and thereafter the file be consigned to the Record Room. Appeal allowed.