The main legal point established in the judgment is the bank's liability for negligence in handling the educational loan and the entitlement of the appellants to damages for the distress and suffering caused by the bank's actions.

1. In this second appeal, appellants assail a decree of Rs.2,05,020.19/- suffered by them in respect of an educational loan of Rs.4 lacs taken by appellant No.1 way back in August, 2005. Trial court vide its judgment of 25th January, 2012 had also decreed counter-claim of appellants for a sum of Rs.33,938/-. Enhancement of counter-claim decree to Rs.5,95,000/- with interest @ 11% per annum and litigation cost of Rs.2 lacs is also sought by appellants in this appeal. Appellants have also sought a direction to respondent-Bank to erase CIBIL Report from the records. First appellate court vide impugned judgment of 19th February, 2013 has reaffirmed trial court's judgment of 25th January, 2012 decreeing the respondent's suit and the counter-claim of appellants as referred to hereinabove.

2. The factual basis of this case, as already noticed in the impugned judgment, is as under: -

“Brief facts of the case are that on 16.08.2005, the appellants approached the bank for grant of an educational loan for appellant No.1, which was duly sanctioned for Rs.4 lakhs on 27.08.2005. The appellant however availed Rs.2.08 lakhs only. All pre-conditions for availing the loan were accepted by the appellants by executing relevant documents. The EMIs towards the repayment were required to commence after the moratorium period upon completion of the course or upon getting a job, whichever was earlier. Till then the appellants were required to pay only the interest instalments on the amount availed. The appellants’ grievance is that the bank, on account of its own deficiency in services, stopped debiting the monthly interest from their account between October 2006 to September 2008 despite standing instructions and declared the appellants as defaulters with CIBIL. Aggrieved by being enlisted as defaulter, appellant no.2 approached the respondent bank and informed them that he had sufficient balance maintained in the savings account. Their action of notifying CIBIL was therefore unwarranted. The appellants were forced to deposit Rs.73,000/- with the plaintiff bank despite sufficient balance available. The respondent bank realised its mistake and attributed the stoppage of the pre-EMI interest to a computer generated fault while switching over from the Bank Master to the Core Banking System. Admitting their mistake, the bank credited Rs.3,405/- towards loss of interest to the appellant’s account, thought it took them more than a year to do so. The details of the calculation were not provided to the appellants. Dissatisfied, the appellants asked for the dispute to be referred for a Dispute Resolution, but their prayers went nnheard. The appellant had also approached the Bank to recalculate the EMI as they had availed only 2.08 Lakhs of the Rs.4 lakhs sanctioned. The plaintiff bank, however unjustifiable issued a legal notice and recalled the educational loan. Without due consideration of the appellants’ submission, the bank proceeded to institute the suit for recovery against them.

In their written statement as well as in the counter-claim, the appellants prayed for declaration that the recall of the loan amount was bad in law and sought damages on the following counts: -

(i) Damages for wrongful termination of contract. Rs.45,000/-

(ii) Damages for defamation/loss of reputation. Rs.1,50,000/-

(iii) Damages for emotional and mental and physical pain and agony Rs.1,00,000/-

Total amount Rs.2,95,000/-

3. On behalf of respondent-plaintiff Bank, its then Manager (Loans)-Mr. Subodh Verma (PW-1) has deposed and appellants-defendants have deposed to resist the suit of recovery filed by respondent-Bank and to support their counter-claim. The crux of deposition of the witnesses as noticed by trial court in its judgment of 25th January, 2012 is as under:-

“During cross-examination, PW-1, Sh. Subodh Verma admitted that the defendants had submitted a FDR in August, 2005; that the defendants had opened a savings account in the PBB branch of the plaintiff bank for