Chairman-Cum-M.D,R.F.Corpn.And Anr vs Commander,S.C.Jain(Retd) & Anr

The Chairman-cum-Managing Director, Rajasthan Financial Corporation and Anr. ..........Appellants

Versus

Commander S.C. Jain (Retd.) & Anr. .........Respondents

ORDER

H.L. DATTU, J.

The petitioner has sought leave to appeal against the order

passed by the National Consumer Disputes Rederessal

Commission, New Delhi (for short `National Commission')

wherein and whereunder it has directed the appellant to pay

compensation to the tune of Rs.1,50,000/- along with interest at the

rate of 12 per cent from the date of filing of petition in favour of

the respondent. Leave granted.

1 FACTS:

2) The Respondent had applied for loan on 03.03.1990 to the

Rajasthan Financial Corporation (in short `Corporation') for setting

up a manufacturing unit of plastic doors, windows etc. The

Corporation after considering the request made, had sanctioned term

loan of Rs.18,000/- for machinery and also Rs.1,26,000/- as the

working capital limit for the said business. As per the sanction letter,

the Corporation was to provide only 75 per cent of the purchase price

to the respondent and the remaining share, i.e., 25 per cent was to be

contributed by the respondent. The sanction letter also provided that if

the concern has purchased machinery in accordance with the scheme

and full payment has been made, 90 per cent of the admissible amount

of loan will be released on the basis of the statement of account

prescribed for the purpose, duly supported by bills and receipts and

balance after valuation of machines. The period of repayment of the

loan was eight years in quarterly installments. The first installment

was to be due on the first day of 18th month reckoned from the date of

first disbursement of loan against fixed assets. Further as per the terms

of the sanction letter one of the important terms was that the

2 machinery should be purchased from authorized dealer and of Wolf

make or from M/s Rally India Ltd.

3) On 29.06.1990, the respondent requested the appellant

-Corporation for more time to complete the formalities of submitting

the loan documents in order to enable the appellant to disburse the

loan amount. The loan document was, however, executed in favour of

the appellant on 05.07.1990. The appellant -Corporation requested the

respondent to submit bills and receipts of plant and machinery as well

as raw material so that the parties could proceed with the loan

agreement. Thereafter, in a short period, the bills were submitted and

it was apparent from the bills submitted that the name of the firm in

whose favour the bills were originally issued was struck off and the

respondent firm's name was inserted in its place. Thus the appellant -

Corporation asked the respondent to submit correct bills.

4) Thereafter on 26.07.1990, the respondent again submitted the

bills in the name of Kailash Udhyog and not in the name of his own

business, i.e., Fauji Kutir Udhyog. The appellant - Corporation was

forced to dishonor the bills as the name indicated in them were not as

per the requirement and new bills were asked to be submitted. Later,

3 on 04.05.1991 the respondent submitted a bill of Nita Udyogic Vastu

Bhandar Private Limited dated 21.08.1989 for a sum of Rs.10,200/-

representing the purchase price of drill machine etc., prior to the date

of sanction of the loan and its disbursement. Another bill of

Rs.17,800/- dated 29.12.1989 which represented saw machines with

two HP motors with accessories etc. was also submitted. Due to

repeated submission of wrong bills by the respondent, the appellant

addressed a letter to the respondent stating that the bills were

unacceptable for two reasons, firstly, Nita Udyogic Vastu Bhandar

Private Limited is a family concern and the respondent is in gainful

employment in the concern. Secondly, Nita Udyogic Vastu Bhandar

Private Limited is not an authorized dealer for Wolf make machine or

M/s rally India Ltd. The appellant also informed that the machines

were old as per the internal checkup done by the appellant -

Corporation. The respondent was given another chance as the

appellant informed the respondent that though the loan agreement was

time barred, his case could be considered favourably only if he

submits the bills from authorized dealer or manufacturer. The correct

and accurate bills were to be submitted within one month from

31.05.1991. The respondent submitted bills from the authorized dealer

4 of Wolf portable machine, i.e., Heerex Corporation amounting to

Rs.19,797.75/- against which a sum of Rs.2000/-, as advance was paid

to the respondent. The respondent was, therefore, asked to submit a

receipt for Rs.3172.75 denoting his contribution of 25 per cent, in

order to avail the sum of Rs.14,625/-. In spite of such a request the

respondent never submitted the receipt. The appellant - Corporation

sent a cheque of Rs.14,625/- favouring the authorized dealer Heerex

Corporation, to Fauji Kutir Udyog along with a request to send the

receipt to the Corporation for the amount so paid. An additional

request was also made as regards the receipts showing the

respondent's share of Rs.3172.75/-. Another correspondence was

addressed to the respondent requesting him to fulfill all other terms

and conditions of the loan agreement, including a condition to create

assets in the ratio of 1:1.10 as stipulated in Clause 5 of the Special

Terms and Conditions annexed with the loan agreement. The

respondent thereafter made a representation whereby he claimed that

the Corporation was under liability to pay a sum of Rs.3,375/- as the

balance amount of sanctioned loan by considering his earlier bill of

Nita Udyog Vastu Bhandar Private Limited which was rejected by the

appellant stating it to be untenable as the Nita Udyog Vastu Bhandar

5 was not an authorized dealer.

5) On 19.12.1991, the respondent requested the appellant

-Corporation for disbursement of the loan against the raw materials

without submitting any supporting documents showing the details of

the expenditure. The appellant - Corporation addressed two separate

letters dated 26.12.1991 and 02.11.1992 asking the respondent to

submit the details of the consumption of quantity of raw materials and

the stock position update along with sales made.

PROCEEDINGS BEFORE THE CONSUMER FORUM:

6) The respondent moved the District Consumer Commission with

a complaint of deficiency of service and also prayed for the

disbursement of Rs.3,375/-. The plea of the respondent was dismissed

by the District Consumer Commission on the principle that his

application is not maintainable as the dispute in a loan agreement

between the debtor and creditor does fall within the jurisdiction of the

Consumer forum.

7) Due to the repeated failure on part of the respondent to submit

the details of the material purchased and consumed, the appellant

finally cancelled the unavailed loan, on 08.09.1992 and informed the

6 same to respondent. The respondent replied to the said communication

stating that he had already initiated the proceedings before the State

Consumer Commission, Jaipur on 15.07.1992.

8) The State Commission allowed the appeal vide order dated

12.12.1994 and remanded the matter back to the District Forum. The

District forum dismissed the complaint on 02.12.1995 holding that the

respondent was unable to show the details of the purchased goods

from authorized dealer and that M/s Nita Udyog Vastu Bhadar Private

Limited is their own concern which was closed much before the

issuance of the bill, thus failing to show that he was entitled to the

sum of Rs.3,375/-. Further, the appeal was entertained by the State

Commission as the respondent sought to file certain documents. The

matter was remanded back to the District Forum vide order dated

21.03.2003. The District Consumer Forum dismissed the complaint

along with costs vide order date 31.01.2004 stating that there was no

deficiency in service as the bills presented by the respondent were of a

firm which was non-existent.

9) The respondent being aggrieved by the order of the District

forum, preferred appeal before the State Consumer Commission. The

7 State Commission refused to entertain the appeal vide order date

02.09.2004. Thereafter, the review petition filed by the respondent

was also rejected by the State Commission vide order dated

09.09.2004.

REVISION PETITION BEFORE THE NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION:

10) The respondent being aggrieved by the decision of the State

Consumer Commission preferred a Revision Petition before the

National Consumer Disputes Redressal Commission. The National

Commission considered revision on two counts. Firstly, as regards the

non-release of the balance amount of Rs.3,375/- as against the

machinery and secondly, the non-release of the balance amount of

Rs.81,000/- from the sanctioned amount of Rs.1,26,000/- for working

capital limit. As regards the first point, the National Commission

considered the contention of the appellant - Corporation whereby it

was stated that the amount of Rs.3,375/- was not released as the

respondent did not comply with the terms spelled out in the letter of

sanction. However, the National Commission concluded on this point

that there was no specific obligation pointed out by the appellant

-Corporation which is said to be left unfulfilled by the respondent. As

8 regards the second point, the National Commission cited a para from

the letter dated May 04, 1991 addressed by the appellant - Corporation

to the respondent whereby it is pointed out that the bills submitted

were not the correct one as they were issued in name of firm Kailash

Udyog and the respondent had fraudulently replaced there name in the

bills. Therefore, the National Commission observed that the appellant

-Corporation "cannot be held to be deficient in rendering services" in

the said loan agreement. Further, it is important to note that the

National Commission has specifically pointed out that the prayer in

the original complaint was only for release of Rs. 3,375/- and only at a

later stage, i.e., when the matter was remanded back to the District

Forum by the State Commission vide order dated 21.03.2003, that the

respondent filed another complaint with regard to the amount for

working capital thereby seeking direction to release the sum of

Rs.81,000/-. Further, the peculiar observation made by the National

Commission is that the respondent have claimed compensation

"without any corresponding profit and loss statement or any affidavit

in support of such a demand".

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11) However, the National Commission has directed the appellant -

Corporation to pay compensation of Rs.1,50,000/- with interest at the

rate of 12 per cent from the date of filling of complaint. The cost is

also awarded to the tune of Rs 10,000/-.

APPEAL FROM THE DECISION OF THE NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION:

12) The appellant - Corporation has sought appeal on the ground

that the National Commission has erred in awarding the compensation

with interest, inspite of holding that there was no deficiency in

rendering the service to the respondent. It is also contended by the

appellant - Corporation that they have fully discharged obligation

under the loan agreement and there was nothing outstanding for which

it could be held responsible and, in fact, it is the respondent who had

failed to carry out its obligation as they had repeatedly submitted

incorrect and fraudulent receipts.

13) It is pertinent to mention that the appellant - Corporation had

repeatedly requested the respondent to submit the bills of the purchase

of the machinery of Wolf make, or from M/s Rally India Ltd. in order

to disburse the amount sanctioned for the machinery which in the

`Sanction Letter' dated 3.3.1990 appears to be "Rs.18,000/-

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against fixed assets"(Annexure P-1). However, it is on record and is

observed by the District Commission and State Commission that the

respondent has constantly submitted wrong receipts. The District

Consumer Forum has observed in the order dated 31.01.2004 that the

Nita Udyogic Vastu Bhandar (P) Ltd from whom the respondent claim

to have purchased the machinery and the bills so produced dated

29.12.1989 are clearly fraudulent as this concern stood closed since

March 1989. This fact was reiterated by the State Commission in its

order dated 02.09.2004. Therefore, we find no hesitation to conclude

that National Commission failed to appreciate that the respondent had

repeatedly acted fraudulently in providing the bills and receipts to the

appellant - Corporation.

14) Secondly, the National Commission though has held that there

is no deficiency in service as regards the disbursement of the balance

loan amount of Rs.81,000/-, have gone ahead to award compensation

to the tune of Rs.1,50,000/- with interest of 12 per cent.

15) For deciding whether the respondent ought to be awarded

compensation, it is important to consider the meaning of deficiency as

1 provided under section 1(g) of the Consumer Protection Act, 1986

(hereinafter referred to as `the Act'):

(g) "Deficiency" means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service;

16) Further, the Consumer Protection Act also provides that the

important component of the complaint by the `consumer' on the basis

of which the compensation is decided, is that there should be

`deficiency' in the service provided or goods sold to the concerned

consumer. The definition of `complaint' is provided under section 1(c)

of the Act :

(c) "Complaint'' means any allegation in writing made by a complainant that-

(i) An unfair trade practice or a restrictive trade practice has been adopted by any trader or service provider;

(ii) The goods bought by him or agreed to be bought by him suffer from one or more defects;

(iii) Service hired or availed of or agreed to be hired

1 or availed of by him suffer from deficiency in any respect;

(iv) a trader or the service provider, as the case may be, has charged for the goods or for the service mentioned in the complaint, a price in excess of the price in excess of the price-

(a) fixed by or under any law for the time being in force;

(b) displayed on the goods or any package containing such goods;

(c) displayed on the price list exhibited by him by or under any law for the time being in force;

(d) agreed between the parties;

(v) goods which will be hazardous to life and safety when used are being offered for sale to the public;- (A) in contravention of any standards relating to safety of such goods as required to be complied with, by or under any law for the time being in force; (B) if the trader could have known with due diligence that the goods so offered are unsafe to the public;

(vi) service which are hazardous or likely to be hazardous to life and safety of the public when used, are being offered by the service provider which such person could have known with due diligence to be injurious to life and safety.

17) It is also important to note the following provision of the Act:

1 Section 14. FINDING OF THE DISTRICT FORUM. (1) If, after the proceeding conducted under section 13, the District Forum is satisfied that the goods complained against suffer from any of the defects specified in the complaint or that any of the allegations contained in the complaint about the services are proved, it shall issue an order to the opposite party directing him to do one or more of the following things, namely :-

(a) to remove the defect pointed out by the appropriate laboratory from the goods in question;

(b) to replace the goods with new goods of similar description which shall be free from any defect;

(c) to return to the complainant the price, or, as the case may be, the charges paid by the complainant;

(d) to pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party;

(e) to remove the defects or deficiencies in the services in question;

(f) to discontinue the unfair trade practice or the restrictive trade practice or not to repeat them;

(g) not to offer the hazardous goods for sale;

(h) to withdraw the hazardous goods from being offered for sale;

(i) to provide for adequate costs to parties.

1 18) Thus, it is clear that the Act has provided provision for

correcting the shortcomings in the service or goods provided by

way of awarding compensation or other means specified in the

provision above mentioned only when the Consumer Forum comes

to the conclusion that there is `deficiency' in service provided or

goods sold. The loss suffered by the respondent for the reason of

not being able to start the unit cannot be the basis for awarding the

compensation specifically when the respondent was at fault for the

non release of the balance loan amount. Therefore, when there is

no deficiency found on the part of the appellant - Corporation, it

cannot be asked to pay compensation.

19) In the light of the above discussion, the impugned order

cannot be sustained. Accordingly, it is set aside. Appeal is

allowed. No order as to costs.

..

..............................J. [ P. SATHASIVAM ]

..................................J. [ H.L. DATTU ] New Delhi, March 26, 2010.

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