JUDGMENT - G.G. LONEY, President :---This is a consumer dispute made by M/s. Kaniskha Investment Private Limited an Agro-based Project engaged in the poultry farming. In this complaint the negligence is alleged in the service of opposite party viz. Sangli Bank Limited as banker and financier. 2. The complainant alleged that they possess the extensive land in a backward district viz. Raigad. With a view to develop a broiler poultry farm, the complainant approached the Sangli Bank Ltd. for grant of financial assistance for the development of broiler poultry farm. After scrutinising complainants proposal from all angles vide resolution dated 13-10-1989, the Board of Director of Sangli Bank Ltd. approved the proposal and sanctioned the term loan for the sum of Rs. 26,32,000/-. By the aforesaid resolution dated 13-10-1989 the Bank fixed interest for the term loan @ 12.5% p.a. The period for the repayment of loan was fixed for seven years with initial grace period of one year. The loan was repayable in six annual equated instalments. The first instalment of loan commenced from January, 1992. The Agro-based project was expected to start from January, 1990. It was stipulated in the aforesaid letter dated 13-10-1989 that the proposal was governed by all standard Terms and Conditions of poultry farm advance and crop loan which will be stipulated by National Bank for Agricultural Rural Development (hereinafter referred as "NABARD". The said proposal was sent by Sangli Bank to NABARD in January, 1990 which was approved on 10-12-1991. Accordingly, NABARD gave sanction to the establishment of complainants broiler poultry farm unit of 46.86 lacs and the financial assistance was approved by the leading Bank for an amount of Rs. 37.95 lacs. 3. The Sangli Bank further sanctioned to complainant Rs. 4.30 lacs and Rs. 4.95 lacs cash credit for poultry feed, milk unit and machinery. As the original Bank resolution stipulating the NABARD conditions, the loan was agreed to be re-financed by the NABARD. The lending rate of interest to be paid by complainant was fixed by the NABARD at 12.5% pa. and re-payment period was fixed for five years with annual equated instalments. The NABARDs resolution is placed on record. 4. As the original Bank resolution stipulating the NABARD conditions, the loan was agreed to be re-financed by the NABARD. The lending rate of interest to be paid by complainant was fixed by the NABARD at 12.5% pa. and re-payment period was fixed for five years with annual equated instalments. The NABARDs resolution is placed on record. 4. According to complainant, the first deficiency in the service of the Bank is that despite the agreed rates of interest @ 12.5% p.a. as simple interest for agricultural loan the Bank charged interest ranging from 14% to 23.25% p.a. to complainant. It is also alleged that the rate of interest was calculated with compound interest with quarterly rests which is contrary to the directions of the R.B.I. and the NABARD for agricultural loan. 5. According to complainant, the second deficiency in the service of opposite party is that Sangli Bank did not release the sanctioned loan to complainant when required and demanded back the loan as a result of which complainant suffered in the establishment of his poultry farm and was required to pay for the over-head charges. It is also alleged that due to insufficient cash flow from the Sangli Bank, the poultry feed could not be purchased as a result of which about 26,000 birds were perished. The complainant therefore alleged that apart from the loss suffered by complainant the Sangli Bank stopped further finance to complainants unit and proceeded further for recovery of loan with compound interest from complainant even before the expiry of the period permissible for the repayment of the loan. On the basis of this fact the complainant alleged that the services of the Sangli Bank were seriously deficient due to negligence as a result of which his poultry unit was rendered uneconomical. The complainant therefore claimed that the Sangli Bank shall be directed not to recover interest than the stipulated amount on the term loan and complainant be released Rs. 8,11,000/- from term loan account as per the conditions of the NABARD. The complainant further alleged that, according to the conditions laid down by the NABARD re-finance be sanctioned to complainant. The complainant therefore claimed that the Sangli Bank shall be directed not to recover interest than the stipulated amount on the term loan and complainant be released Rs. 8,11,000/- from term loan account as per the conditions of the NABARD. The complainant further alleged that, according to the conditions laid down by the NABARD re-finance be sanctioned to complainant. It is also alleged that the opposite party had promised to find out the solution for facilitating the finance to complainant after holding a high-level meeting through their solicitor, Shri Mahimkar but till the filing of this complaint, no high-level meeting has been convened by opposite party. The complainant therefore claimed Rs. 15 lacs towards compensation due to the loss suffered to the poultry unit. 6. The opposite party viz. Sangli Bank through their solicitor received the notice from this commission under section 13 of the Consumer Protection Act on 16-7-1994. The opposite party has not filed the written version. The affidavit of one Shri Sunil Dattatray, Branch Manager of Sangli Bank was filed on 14-7-1994. In that affidavit it is inter alia stated that the complaint is frivolous and not maintainable. The delay in releasing the loan amount to complainant is denied. According to the Bank complainant did not fulfill certain Terms and Conditions for the sanction of loan. It is also contended that the loan facility was against the hypothecation of stocks and since there was no stocks the Bank did not release the loan. It is also stated that there was no sufficient security for the loan. It is also contended that the complanants industry was not running properly. Lastly, it is contended that it is entirely descretion of the Bank to release or not to release the loan to complainant. However, the Bank has admitted the sanction of term loan of Rs. 26.32 lacs at the rate of 12½% per annum and the sanctioned of working capital of Rs. 23.32 lacs at the rate of 15% per annum to complainant. 7. On the date of filing of the complaint, the complainant had filed an application to direct opposite party to produce the following documents : (a) NABARD Bank correspondence (b) Ledger account of poultry project by complainant. 8. Accordingly, this commission directed opposite party to produce the aforesaid documents on the returnable date fixed on 8-9-1994. 7. On the date of filing of the complaint, the complainant had filed an application to direct opposite party to produce the following documents : (a) NABARD Bank correspondence (b) Ledger account of poultry project by complainant. 8. Accordingly, this commission directed opposite party to produce the aforesaid documents on the returnable date fixed on 8-9-1994. However, despite the repeated direction opposite party did not produce those documents. Hence, we are constrained to draw adverse inference against the Bank. Ultimately on the final date of hearing i.e. on 3-10-1994 none appeared for opposite party. Although, on the previous date of hearing Shri Mahimkar, Advocate represented for Sangli Bank. We therefore proceeded ex-parte against Sangli Bank, Bombay on 3-10-1994, and the complaint was fixed for ex-parte evidence on 5-10-1994. The complainant filed his affidavit in support of his allegation on 5-10-1994. Shri Mahimkar, Advocate also appeared on 5-10-1994 and agreed to file his written note of argument. But till the date of passing this judgment, no written argument has been filed by Shri Mahimkar, Advocate nor the documents were produced. 9. On consideration of the allegations contained in the complaint and the denials from Sangli Bank, the following points arise for our consideration. 1) Whether the complaint is frivolous and not maintainable 2) Whether there are deficiencies in the service of opposite party? 3) Whether the complainant has suffered a loss as a result of negligence in the services of Sangli Bank? 10. Undisputedly, the complainant is the consumer of service of Sangli Bank since he had hired the service of Sangli Bank for finance to his agro-based industry. There are plithora of decisions rendered by the National Commission in which it has been consistently and repeatedly held that a person who is account holder or a person who borrows the loan from Bank is the consumer of the service of Bank. Thus, the complainant being the consumer of services of Sangli Bank this complaint is maintainable under the provisions of Consumer Protection Act. The contention of the Sangli Bank that the complaint is frivolous and not maintainable cannot be accepted. 11. It is alleged by the complainant that the Sangli Bank charged interest at the rate of 23¼% ending on 31-12-1991 as against the agreed rate of interest at the rate of 12½%. This decision has been taken by the Sangli Bank unilaterally and without intimating to complainant. 11. It is alleged by the complainant that the Sangli Bank charged interest at the rate of 23¼% ending on 31-12-1991 as against the agreed rate of interest at the rate of 12½%. This decision has been taken by the Sangli Bank unilaterally and without intimating to complainant. The complainant has filed the annexures-4 5 insupport of his allegations which show that opposite party charged interest at the rate of 23½% from the quarters ending December, 1992, March, 1993 and June, 1993. There is documentary evidence on record filed by complainant to show as to what was the agreed rate of interest and what were the conditions of repayment, of loan. At Exhibits "A", there is copy of the resolution of the Sangli Bank dated 13-10-1979. In that sanctioned letter it is clearly mentioned that the complainant was sanctioned the term loan of Rs. 26.32 lacs with cash credit facility of Rs. 3.16 lacs and Rs. 48,000/- towards cultivation of vegetable. It is stated in the said document that Mr. Narayanrao B. Manjrekar, Chairman of the Sangli Bank had 30 years experience in various business and therefore, the financial assistance was sanctioned for the development of broiler poultry farm and vegetable cultivation. In that document, the salient features of the project as well as its technical feasibility in all respects has been mentioned in detail. In para-II at internal page-5 of that document, the recommendations are mentioned. In Coloumn-9 of that recommendation, interest against the term loan is shown as 12.5% p.a. and interest against working capital is shown as 15.5% p.a. Similarly, in Column 9, the repayment period is shown as 7 years with initial grace period of one year and the repayment of loan in six annual equated instalments commencing on January, 1992. It is therefore clear that the agreed interest was 12.5% and 15.5% respectively on term loan and working capital. Thus, the charging of 23½% interest by the Sangli Bank on complainant is contrary to the stipulation of loan and therefore it is obvious deficiency in the service of opposite party. 12. It is contended by complainant the so far as the agricultural loan is concerned the compound interest cannot be charged with quarterly rests. The reliance was placed on the decision of the Supreme Court of India in the case of (Corporation Bank v. D.S. Gawde another)1, 1994 A.I.R. S.C.W. 2721. 12. It is contended by complainant the so far as the agricultural loan is concerned the compound interest cannot be charged with quarterly rests. The reliance was placed on the decision of the Supreme Court of India in the case of (Corporation Bank v. D.S. Gawde another)1, 1994 A.I.R. S.C.W. 2721. The relevant paragraph from the Supreme Courts decision is quoted below: "Although there may be no common law right to charge interest on an overdraft, by universal custom of bankers a reasonable rate of interest on overdrafts is permissible. So also charging of interest with periodical rests of compounding of interest would be allowed if there is evidence of the customer having acquiesced therein provided the relation of banker and customer is subsisting. However, if the relationship undergoes a change into that of mortgage and mortgagor by the taking of mortgage, the charging of interest would be governed in accordance with the terms of the mortgage. The taking of a mortgage to secure the fluctuating balance of an overdrawn account, being not inconsistent with the relationship of banker and customer, would not displace an earlier right to charge compound interest. Thus, the practice of bankers to debit the accrued interest to the borrowers current account at regular periods is a recognised practice. The circulars issued by the Reserve Bank under sections 21, 35-A are not inconsistent with this recognised practice. It is thus clear that the loan in question was sanctioned to complainant as agricultural loan. The poultry farm is classified as "agricultural". Even the resolution dated 13-10-1979 at Exhibit "E" clearly mentions the agricultural loan proposal by M/s. Kanishka Investments Pvt. Ltd. Thus, the loan granted to complainant was for agricultural purpose and therefore, the charging of interest with quarterly rests by opposite party is not only deficiency in its service but is contrary to the directive of R.B.I. as contained in the aforesaid ruling of the Supreme Court and also contrary to the conditions of sanctioned loan to complainant. 13. The deficiency is defined under section 2(g) of the Consumer Protection Act. "The deficiency means any fault, imperfection shortcomings or inadequacy in the quality, nature and manner of performance which is required to be maintained by under any law for the time being in force or has been undertaken to be performed by a person in pursuance of contract or otherwise in relation to any service". "The deficiency means any fault, imperfection shortcomings or inadequacy in the quality, nature and manner of performance which is required to be maintained by under any law for the time being in force or has been undertaken to be performed by a person in pursuance of contract or otherwise in relation to any service". We find that the Sangli Bank had offered the agricultural finance to complainants poultry unit under the Terms and Conditions of a contract. The contract stipulates the charging of interest at the rate of 12.5% and 15.5%. It is therefore evident that the charging of interest with compound interest at the rate of 23½% by opposite party squarely falls within the meaning of deficiency under the provision of the Consumer Protection Act, 1986. 14. The complainant alleged that as against the sanctioned term loan of Rs. 26.32 lacs only Rs. 4.32 lacs and as against the cash credit facility Rs. 4.95 lacs were released. It is further alleged that, the aforesaid loan amounts were released belatedly and thus complainant was left with inadequate cash flow to establish his poultry farm. It can be imagined that the complainant had to plan in his own way to establish his poultry unit. But due to the shortage of cash flow he could not establish his poultry farm according to his own programme and could not purchase the necessary poultry feed for re-production as a result of which his unit was scuttled in the process of formation. The Sangli Bank unilaterally charged interest at the rate of 23¼% and recovered the loan amount from the complainants account. The consequences were disastrous, so far as the development of complainants unit is concerned. The complainant alleged that for want of cash flow his poultry unit came to a grinding halt and he was required to pay to the labourers without any work. The complainant was to repay to the loan in terms of exhibit "A". The repayment was to be made within seven years with initial grace period of one year. The complainant stated that his agro-based project was expected to start from January, 1990. As per the conditions of repayment, first annual instalment was to commence in January, 1992 and the loan was to be repaid in six annual equated instalments and the last payment was to be paid in the year 1990. The complainant stated that his agro-based project was expected to start from January, 1990. As per the conditions of repayment, first annual instalment was to commence in January, 1992 and the loan was to be repaid in six annual equated instalments and the last payment was to be paid in the year 1990. The complainant alleged that Sangli Bank did not alter to the schedule of payment and started the recovery within the grace period of one year. The complainant also alleged that he was granted 7 years period for the repayment but because of the recovery process started even within the grace period the Sangli Bank has committed serious deficiency in its service. The complainant further alleged that re-finance was promised by the NABARD before the process of the recovery stipulated by the Sangli Bank. From this admitted fact we find that the Sangli Bank acted like crude money lender and destroyed the prospect of agro-based industry in a backward district like Raigad. We find that if such high-handedness is adopted by the finance Bank, no industries in a backward region can come up much less in agricultural sector. 15. The opposite party turned the volte-face and tried to justify its action of recovery without any basis. In paragraph-5 of the Affidavit of Sunil Dattatray on behalf of Sangli Bank has stated that the facility of term loan was against the hypothecation of stocks and since there was no stock, the Bank was not bound to release the loan. This justification is fallacious. When the poultry unit was not allowed to establish and go in production due to delay in release of loan how the Bank expected enough stock for hypothecation? The opposite party did not allow complainant to generate its economy. How there could be stocks available for hypothecation? It is common knowledge that in order to create stock for any hypothecation, the Bank has to wait and allow the industry to raise the stock for generating its economy. But if in the process of establishing the industry the cash flow is arrested then how adequate stocks are expected. The delay to release the finance is not only unjust but is atrocious. Another reason given by the Bank not to release the finance is that there was no sufficient security for the loan. This is totally false submission on behalf of the Bank. The delay to release the finance is not only unjust but is atrocious. Another reason given by the Bank not to release the finance is that there was no sufficient security for the loan. This is totally false submission on behalf of the Bank. The loan was sanctioned to the complainant by furnishing the adequate security. In the loan sanctioned letter dated 13-10-1989 in para-2 the security of the loan furnished by the complainant is described. The security is in the form of 18 acres of land at village Nehru Nagar-Kolad District Raigad valued at Rs. 3.60 lacs. There is also hypothecation of the stocks of Rs. 35.25 lacs, the units of Unit Trust of India valued at Rs. 5 lacs were also placed with opposite party. At the end of that letter there is also mentions of collateral security of units to the extent of Rs. 7 lacs. Thus, it is very obvious that before the sanction of loan the adequate security was obtained by the Bank and therefore the reasons stated in the affidavit of Sunil Dattatray on behalf of the Bank is totally false. The stand of the Sangli Bank is further exposed from the affidavit of Sunil Dattatraya. It is vaguely stated in the affidavit that opposite party had not fulfilled certain Terms and Conditions. However, no specific condition is mentioned either in the affidavit or in the correspondence of the Bank. Thus, we are convinced that the defence of the Bank for causing the delay in releasing the loan is fallacious and an outcome of concotion. There is no valid reason with the Bank to delay the releasing of loan and starting the pre-mature recovery of the sanctioned loan with unjustified rate of interest. 16. The complainant suffered a loss as a result of negligence in the service of opposite party has been fully established. Due to illegal and unjustifiable recovery of interest more than the stipulated rates and pre-mature recovery of loan has completely destroyed the complainants poultry unit in its initial stage of building. The complainant has alleged that because of high-handed action of the Bank, the amounts lying in the complainants account were unilaterally collected by the Bank and the account was made zero. The amount of Rs. 15,22,700/- sanctioned by the NABARD to the complainant for the agro-based project was placed at the disposal of the Sangli Bank. The complainant has alleged that because of high-handed action of the Bank, the amounts lying in the complainants account were unilaterally collected by the Bank and the account was made zero. The amount of Rs. 15,22,700/- sanctioned by the NABARD to the complainant for the agro-based project was placed at the disposal of the Sangli Bank. The aforesaid amount of Rs. 15,22,700/- was not released to the complainant, as a result of which complainant could not complete his project. The complainant also alleged that although the loan amount was recovered prematurely making his account zero, the securities submitted to the opposite party in the form of loan and units are also not released as yet to the complainant. Thus the complainant alleged that Sangli Bank has created an economical blockade to the complainant from all the sides. It clearly appears to us that the Sangli Bank did not act as an honest Banker to extent the financial assistance to an Agro-based industry in its establishment stage but over-stepped the limit of banking norms and also violated Reserve Bank of India and NABARD guidelines. Thus the manner of performance of opposite party is in violation of the conditions of loan and resulted in deficiencies in the service in relations to the recovery of loan and charging of interest. 17. It is undisputedly proved that the Board of Directors of Sangli Bank, vide resolution dated 13-10-1990, sanctioned Rs. 29.48 lakhs loan and further supplementary sanction on 2-4-1991 of term loan for poultry feed, milk unit and machinery of Rs. 4.30 lakhs and Rs. 4.95 lakhs Cash credit for feed. Thus the total loans sanctioned to complainants were Rs. 38.73 lakhs. However, we find in this complaint that the Sangli Bank acted contrary to the aforesaid resolution and NABARD sanction and charged higher interest ranging from 14 to 23.5% p.a. and recovered the loan by quarterly payment with the calculation of quarterly penal interest which is totally illegal and un-authorised as per the terms of agreement and the proposition of law laid down by the Supreme Court. The opposite party, instead of charging simple interest at the rate of 12.5% p. annum charged the compound interest with quarterly rates and debited the loan account. In October, 1992, the opposite party recovered Rs. 18.18 lakhs unilaterly and forcibly encashed the securities of the complainant which were in the possession of the opposite party. The opposite party, instead of charging simple interest at the rate of 12.5% p. annum charged the compound interest with quarterly rates and debited the loan account. In October, 1992, the opposite party recovered Rs. 18.18 lakhs unilaterly and forcibly encashed the securities of the complainant which were in the possession of the opposite party. The details of recovery are set out in the affidavit of the complainant are as under : (a) Interest debited Rs. 20.74 lakhs (b) Re-payment secured by Bank encashing securities and another deposits of borrower. Rs. 18.18 lakhs Thus the total recovery made by the opposite party is amounting to Rs. 39.51 lakhs. It is therefore, obvious that the Sangli Bank has received in excess amount of Rs. 24.79 lakhs upto 3rd March, 1993. The sufferings of the complainant is further compounded by the subsequent conduct of the Bank in not filing the ledger account in respect of the loans advanced to the complainant. Therefore, on the application of the complainant, the direction was issued to the opposite party to produce the documents. Lastly, while highlighting the deficiencies in the service of Sangli Bank, the complainant has also made a common ground that the Sangli Bank did not sanction the loan within a reasonable time and forcibly encashed the securities and diverted them to the quarterly payments, thereby the complainant was forced to close down his business. The complainant alleged that he suffered a loss of Rs. 13 lacs and Rs. 1 lakhs, for loss of profit. The complainant further claimed an amount of Rs. 1 lakh towards interest on the amount illegally recovered by the Bank. Thus the complainant has claimed a total loss of Rs. 15 lakhs. In view of the fact that the complainant has proved his allegations, we find that the complainant deserves the relief which he has prayed for in his complaint. We find that the Sangli Bank is required to remove the deficiencies of calculating higher rate of interest over and above the simple interest at the rate of 12.5% per annum on the loan advanced, spread over for a period of 5 years with one year grace period and is required to remove the deficiencies by restoring the balance amount by re-calculation of interest at the rate of 12.5% simple interest to be calculated per annum. Similarly, the complainant is also entitled to receive the amount of compensation which we quantify Rs. 5 lakhs as against his claim of Rs. 15 lakhs. We find that complainant has suffered more than the amount of Rs. 5 lakhs in the establishment of his poultry farm. However, in our view, it would meet the ends of justice, if total amount of Rs. 5 lakhs towards compensation is granted to complainant for the loss suffered by him due to the delay in the release of loan and by charging higher rate of interest and creating the economical blockage to the complainant. Hence we pass the following order. ORDER 18. The complaint is allowed. The opposite party, viz. Sangli Bank through its Head Office, Bombay is directed to restore the balance in the account of complainant by depositing the excess recovery of interest after re-calculating it at the rate of 12.5% simple interest per annum on the loan advanced, spread over for a period of 5 years allowing one years grace period. The re-calculation of rate of interest and the restoration of balance in the complainants account be done within 7 days from the receipt of this order. The said account shall not be frozen by O.P. The complainant also be awarded Rs. 5 lakhs towards total compensation. The complainant also be granted Rs. 2000/- towards cost. The aforesaid amount of compensation and cost be paid to complainant by Sangli Bank within 30 days from the receipt of this order, failing which the entire amount shall carry interest at the rate of 18% per annum, till realisation. Complaint allowed. *****