Case Note & Summary
The dispute arose from a loan transaction between the petitioners, who were borrowers, and the respondent Syndicate Bank. The petitioners approached the consumer forums alleging deficiency in service on the part of the bank for not disbursing the full amount of sanctioned loans. They had taken two loan accounts, one for Rs.1,50,000 and another for Rs.3,00,000. The bank had disbursed a sum of Rs.1.47 lakhs, and the balance amount was not released. The petitioners contended before the District Forum that due to this deficiency in service, namely failure to disburse the total amount contracted under the agreement, they could not carry on their business, discharge obligations to pay labour charges, and manufacture products for which orders had been served. They also stated that because of a slump in the market, they could not discharge the contract for repayment. Accordingly, they filed a complaint for damages in the sum of Rs.9,50,000. The Tribunals below dismissed the case, and the National Consumer Disputes Redressal Commission confirmed the dismissal on three grounds. First, the petitioners had not complied with the conditions of the agreement of repayment, thereby committing breach of contract. Second, a suit was filed by the bank for recovery, and the Commission thought it could not go into that question. Third, in a letter addressed by the petitioners to the bank, they admitted that failure to pay the instalments was due to slump in the market of the finished products. The Supreme Court found that there was not much force in the first two grounds. It observed that if pursuant to the contract the bank did not disburse the amount and there was any resultant default in payment on account thereof, that may be a defence open to the petitioners in the suit and also furnishes a right to complain of deficiency in service under the Consumer Protection Act. On that ground, the relief could not be rejected and the question was required to be gone into. The Court also held that the mere filing of the suit for recovery may not be an absolute bar on the Commission to go into that question because the issue before the Civil Court is not the deficiency in service unless that is specifically raised as a defence in the suit. Under those circumstances, merely filing of the suit by the bank does not put a bar on the Tribunal to go into the merits in the complaint. Each case requires examination on the facts of the case. However, the Court found force in the reasoning given by the Tribunal on the third point. It noted that the petitioners' case was that they were unable to produce the goods and have them marketed to pay back the loan in instalments. It was not the case that this was due to deficiency in service. On the other hand, it was admitted that due to slump in the market they could not sell the goods, realise the price of the finished product and pay back the loan to the bank. That admission stood in their way to plead at the late stage that they suffered loss on account of the deficiency in service. Under those circumstances, the Supreme Court found no ground warranting interference and dismissed the special leave petition.
Headnote
A) Consumer Law - Deficiency in Service - Non-disbursement of Loan - Consumer Protection Act, 1986 - The complainant alleged that the bank failed to disburse the total sanctioned loan amount, causing inability to run business and repay; the Supreme Court observed that if such non-disbursement led to default, it could be a defence in the recovery suit and a ground for deficiency in service, and dismissal solely on that ground was erroneous. Held that non-disbursement of loan may constitute deficiency and require examination. B) Consumer Law - Jurisdiction of Consumer Fora - Bar of Civil Suit - Consumer Protection Act, 1986 - The National Commission held that filing of a bank recovery suit barred the consumer complaint; the Supreme Court held that mere filing of a suit is not an absolute bar because the issue before the civil court is not deficiency of service unless specifically raised as a defence, and each case must be examined on its facts. Held that filing of recovery suit alone does not bar consumer forum. C) Evidence - Admission - Effect of Admission on Later Plea - Consumer Protection Act, 1986 - The petitioners admitted in a letter that failure to pay instalments was due to slump in the market for finished products; the Supreme Court held that this admission stood in their way to plead later that they suffered loss on account of deficiency in service, and no ground for interference was made out. Held that admission of market slump as cause of default precludes claim of deficiency.
Issue of Consideration
Whether non-disbursement of balance loan amount constituted deficiency in service under the Consumer Protection Act, 1986; whether the filing of a recovery suit by the bank barred the consumer complaint; whether the petitioners' admission that repayment failure was due to market slump precluded claiming deficiency in service
Final Decision
The Supreme Court dismissed the special leave petition, holding that the petitioners' admission that they could not sell goods due to slump in market, not deficiency in service, barred their claim. It observed that non-disbursement of loan and mere filing of suit would not have barred the complaint, but on facts the admission was fatal; no ground to interfere.
Law Points
- Deficiency in service under Consumer Protection Act
- 1986 may arise from non-disbursement of sanctioned loan
- mere filing of recovery suit by bank does not bar consumer forum
- admission of default due to market slump estops later claim of deficiency
