A complaint alleging deficiency in banking services provided by a bank to a small-scale industry, involving complex questions of fact and law and intertwined with issues in a pending civil suit, is not maintainable before the Consumer Commission and should be adjudicated upon by a Civil Court.

Headnote:
CONSUMER PROTECTION ACT - BANKING SERVICES - DEFICIENCY IN SERVICE - JURISDICTION - CIVIL COURT - CONSUMER FORUM - SMALL-SCALE INDUSTRY - FINANCING FACILITY - LOAN - OVERDRAFT - CASH CREDIT - HINDUSTAN COMMERCIAL BANK - PUNJAB NATIONAL BANK - HARYANA INDUSTRIAL CONSULTANTS LIMITED (HARICON) REPORT - LIMITATION - SECTION 2(1)(g) OF THE CONSUMER PROTECTION ACT, 1986 - SECTION 3 OF THE CONSUMER PROTECTION ACT, 1986 - SECTION 13(2) AND (3) OF THE CONSUMER PROTECTION ACT, 1986 - RULE 14(2) OF THE CONSUMER PROTECTION RULES, 1987 - ORDER 38, RULE 1, C.P.C. - ORDER 39, RULE 1, C.P.C.
Fact of the Case:

The complainant, M/s. Special Machines, Karnal, a small-scale industrial unit, alleged that the Hindustan Commercial Bank Limited (Hindustan Bank) failed to provide timely financial services, leading to business difficulties and losses. The complainant claimed that the Bank unilaterally withdrew promised services, insisted on margins and daily drawing powers, and 'checked out' inland letter of credits. The complaint also alleged that the Bank charged a high rate of interest and banking service charges, did not maintain accounts as per banking norms, and committed errors and irregularities resulting in the deprivation of banking services. The complainant sought compensation for losses suffered under 12 heads, totaling Rs. 3,489.39 lakhs, from the Punjab National Bank (Punjab Bank), which had amalgamated with Hindustan Bank in 1986.
Finding of the Court:

The Commission held that the complaint was not maintainable before it and should be adjudicated upon by a Civil Court. The Commission found that the subject matter of the complaint was sub judice before the Senior Sub-Judge, Karnal, where the Punjab Bank had filed a suit against the complainant for recovery of amounts due under various loan accounts. The Commission also found that the issues raised in the complaint were inextricably intertwined with the claims, questions, and issues arising in the pending civil suit. Additionally, the Commission held that the complaint involved numerous intricate and highly disputed questions of fact and law, which could not be properly decided on the basis of affidavits and required a lengthy trial and the scrutiny of voluminous evidence.
Issues: 1. Whether the complaint was maintainable before the Commission or should be adjudicated upon by a Civil Court? 2. Whether the subject matter of the complaint was sub judice before the Senior Sub-Judge, Karnal, in the suit filed by the Punjab Bank against the complainant? 3. Whether the issues raised in the complaint were inextricably intertwined with the claims, questions, and issues arising in the pending civil suit? 4. Whether the complaint involved numerous intricate and highly disputed questions of fact and law, which could not be properly decided on the basis of affidavits and required a lengthy trial and the scrutiny of voluminous evidence?
Ratio Decidendi: 1. The Commission held that the complaint was not maintainable before it and should be adjudicated upon by a Civil Court, as the subject matter of the complaint was sub judice before the Senior Sub-Judge, Karnal, in the suit filed by the Punjab Bank against the complainant. 2. The Commission found that the issues raised in the complaint were inextricably intertwined with the claims, questions, and issues arising in the pending civil suit. 3. The Commission held that the complaint involved numerous intricate and highly disputed questions of fact and law, which could not be properly decided on the basis of affidavits and required a lengthy trial and the scrutiny of voluminous evidence.
Final Decision: The Commission upheld the preliminary objections raised by the Punjab Bank, except for the one relating to the bar of limitation, and rejected the complaint petition without going into the merits of the case.

JUDGMENT

V. Balakrishna Eradi, President—The complainant in this case is M/s. Special Machines, Karnal, which is a proprietary concern (owned by one Shri R.M. Jain), which has established a small-scale industrial unit at Karnal for the manufacture of welding electrodes. For the purpose of the said business the complainant had obtained loan facilities from the Hindustan Commercial Bank Limited, Karnal by way of Cash Credit (Hypothecation), Cash Credit (Pledge), Overdraft (Documentary Bills), Letters of Credit and Performance Guarantee etc. According to the complainant because of the failure on the part of the Hindustan Commercial Bank Limited to take to provide timely financial services, the complainant’s business ran into serious difficulties and the complainant suffered heavy losses as a result thereof. The complainant has alleged inter alia that though his concern had been promised services by the Hindustan Commercial Bank Limited such as ‘single head’ account operation, non- insistence of margin money etc., these promised services were unilaterally withdrawn without any justification or reason and without following statutory norms and policy guidelines framed and proclaimed by the Reserve Bank of India from time to time in respect of small-scale industrial units in the country. It is further alleged that during 1982-83, the Hindustan Commercial Bank Limited unilaterally and arbitrarily insisted upon the “bifurcation” of the complainant’s accounts from one head to several heads; insisted on margins and on daily drawing powers and ‘checked out’ the inland letter of credits. The complaint petition goes on to state that the petitioner who had already working capital shortage was compelled by the first respondent Bank to divert money from working capital to fixed deposits in violation of all the Banking Laws and norms. The complainant has the further grievance that the first respondent has charged a very high rate of interest as well as unduly high banking service charges and the accounts of complainant were not maintained and operated by the Hindustan Commercial Bank Limited as per the Banking Laws, Rules, Regulations and norms and as per Reserve Bank of India Circulars, Guidelines, etc. According to the complainant the first respondent had committed many errors, irregularities and illegalities resulting in the complainant being deprived of availing the banking and financial services which the first respondent was under a legal obligation to provide to its customers. The complainant states that because of the aforesaid and other acts and omissions on the part of the Hindustan Commercial Bank Limited his small-scale industrial units could not work normally, its sales came down steadily and the interest burden increased disproportionately. The first respondent Bank is said to have illegally stopped operation of accounts by the complainant from 21st May, 1986 by sending a letter directing the complainant not to issue cheques without proper arrangement, which again is alleged to have been done in violation of all Banking Laws and practices. Another ground of grievance put forward in the complaint-petition is that the recommended working capital limit had not been sanctioned to the complainant by the first respondent Bank and due to this the complainant had to face great hardships in the working of his small-scale unit and in maintaining normal production and sale. The complainant has also alleged that he was put to very serious loss on account of the failure of the first respondent Bank to extend to him financing facility for procuring the basic raw material namely, M.S. Rimming Quality Steel from Steel Authority of India Ltd./Tata Iron and Steel Company Ltd. at control price. It is alleged that it was because of the failure of the first respondent Bank to meet the complainant’s requirements of finances for the smooth running of his unit that the complainant’s unit suffered heavy losses.

2. On 18-12-1986. the Hindustan Commercial Ban

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A complaint alleging deficiency in banking services provided by a bank to a small-scale industry, involving complex questions of fact and law and intertwined with issues in a pending civil suit, is not maintainable before the Consumer Commission and should be adjudicated upon by a Civil Court.

Cases Referred (5)