IMPORTANT POINT
Bank cannot refuse to disburse loan amount except for cogent and valid reasons.

V.K.Jain, Presiding Member—The complainants, who were seeking to start a Stone Crushing Unit, approached the appellant bank for grant of several credit facilities. After desired documentation by them, the appellant bank, vide its letter dated 07.04.1997, conveyed sanction of Rs. 2 lakhs as secured cash credit, Rs. 5 lakhs as secured loan (under SIDBI scheme) and Rs. 1,94,000/- as soft loan to the complainants/respondents, against hypothecation of raw materials and finished goods and mortgage of land as well as building to be constructed on it and hypothecation of plant and machinery. Vide letter dated 03.09.1997, the appellant bank informed the complainants/respondents about sanction of the aforesaid facilities totalling Rs. 8,94,000/-. Pursuant to the sanction issued by the appellant bank, the respondents/complainants mortgaged the land owned by the complainant no. 1 in favour of the bank and both the complainants also pledged deposit receipts of their family members, by way of security. Complainant No. 1 dug a bore well on which the Stone Crusher was to be set up and also deposited Rs. 36,470/- for obtaining electricity connection. The expenditure incurred in digging the bore well was amounted to Rs. 27,500/-. The complainants also spent Rs. 40,000/- on erecting the structure besides paying Rs. 4,000/- as stamp duty on mortgage deed and incurring expenditure of Rs. 2,145/- on its registration. The aforesaid credit facilities, however, were not released to the complainants, who thereupon sent a legal notice to the bank on 13.03.1999. No response to the said notice having been given, he approached the concerned State Commission by way of a complaint.

2. A Civil suit had been filed against the complainants by Nandini Fruits and Vegetables Production Sangh before a Civil Court, seeking injunction against setting up a Stone Crusher by them. Yet another suit was filed by one Sh. Shripati Dyanu Tagare, against the complainant no 1, Sandeepkumar Ramgauda Patil. Vide order dated 17.04.1998, the Civil Court, while dismissing the appeal filed by the plaintiff in that suit for grant of interim injunction, directed complainant no. 1 to comply with the directions given in para 13 of the said order. The directions contained in para 13 of the aforesaid order required the complainant no. 1 to erect a wall surrounding the Stone Crusher so that the dust shall fall within the limits of the said wall. An alternative was given to him to fix a curtain upto the height of the belt from which the stone used to fall on the ground. Thus, in terms of the aforesaid order of the Civil Court, the complainant no. 1 could either erect a wall or fix a curtain upto the height of the belt from which the stone used to fall on the ground. Though, according to the learned counsel for the appellant, the height of the belt was 27 feet from the ground, there is no material on record to substantiate the said statement. After filing of the complaint, a reply was sent by the appellant bank to the complainants stating inter-alia as under:-

“It is observed that some serious restrictions have been imposed upon you and you have been temporarily permitted to start the stone crusher. My client expects that you are aware that the said interim order is not the final order. The bank is doubtful as to whether the final decision of the court will allow you to start stone crusher or not. As per interim order of the court some serious restrictions have been imposed upon you. The court has ordered you to construct a wall of sufficient height to prevent the dust of the stone crusher to move outside the premises. In addition to this even after the construction of wall of sufficient height you have been advised and take care to see that the dust has not moved away from site. The Bank honestly feels that to prevent the dust from moving outside the compound wall, when the location is on the place where the height of the land is maximum, is not possible for you. Secondly to