KOSHY VARGHESE v. HDFC BANK LTD. & 2 ORS.

appellant was entitled to avail loan of Rs.75,00,000/- he had only drawn an amount of Rs.20,00,000/-. When the bank demanded payment of loan amounts the appellant paid an amount of Rs.10,00,000/- and he was ready to pay the balance amount. The bank under no circumstance could resort to the sale of shares held by the appellant since in future there would have been spurt in the share value.

3. But without giving proper and valid notice or demanding payment of amounts due in respect of the loan and without giving sufficient time to pay off the loan and without the consent and knowledge of the appellant , the respondent bank sold the shares held by the appellant for a price of Rs.454/- per share and later for a price of Rs.270/- per share. After retaining about 100 shares all the remaining shares were sold for pittance. The bank which was carrying out depository services knew very well that the shares of Aban Offshore Ltd would be reaching a rate exceeding Rs.1500/- per share within few days. The shares were sold on 29.01.2009 and the present value of the shares was Rs.1600/- per share. The said price was reached within a couple of days and the appellant was not even informed of the name of the person to whom the shares were sold. The appellant, a customer, was deceived by the bank and taken undue advantage of which amounts to unfair trade practice. Considering the present value of the shares sold it would have fetched a value of Rs.45,00,000/-. But the sale price obtained was Rs.11,41,559/-. The difference in value is Rs.35,00,000/-. The appellant was ready to hold the said shares and to pay off the liability of the bank without difficulty. By the illegal sale of shares severe mental pressure and agony were caused to the appellant. Hence the complaint. The appellant sought a direction to the respondent to pay an amount of Rs.45,00,000/- towards the value of 2789/- shares of Aban Offshore Ltd and claimed a compensation of Rs.10,00,000/- towards the mental agony and distress caused to the appellant by the alleged illegal sale of shares.

4. The Respondent/Opposite Party filed a joint version and after amendment of the complaint, an additional version. The contentions raised were that the appellant was not a consumer as defined under Section 2 (1) (d) of the Consumer Protection Act. The loan against shares was an overdraft account opened by the appellant with the respondent bank against the security of equity shares pledged with them. Further investment in equity shares was in the nature of speculative investment made for commercial purpose. The investment carried an inherent risk of capital erosion which can be caused by dips in the stock market. Such investments cannot be said to be made for earning livelihood since they do not guarantee any returns and can even wipe out the entire investment made by the investor. Dealing with equity shares cannot be treated as one for earning livelihood. Loan against shares was granted to the appellant on the basis of a loan agreement cum guarantee document executed between the parties which attract Section 172 of the Indian Contract Act. Further appellant had executed letter of continuity, promissory note and irrevocable power of attorney by which the shares pledged in favour of the respondent bank were authorised to be disposed of in case of default, among other things. The provisions incorporated in the agreement executed between the parties conferred full right / authority to the bank to sell, dispose of or realise the securities on such terms and for such price as the bank deemed fit and adjust the proceeds towards the satisfaction of the bank dues in the overdraft account including charges , expenses etc., in the eventually of the expiry of the term or in case the borrower failed to make payment due to the bank in respect of over draft facility availed by him.

5. Details regarding the allotment of shares to the appellant were not known to the

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respondents. The values of shares alleged in the complaint were not correct. The allegations in the complaint itself would show that there was balance outstanding in the loan account of the appellant demand for payment of which was made by the bank and that there was an outstanding balance in the loan account even after demand. When outstanding balance rose to Rs.11,27,532.28/- two telegrams were sent to the appellant on 30.12.2008 and 03.01.2009. 2175 shares were sold on 27.01.2009. 27 days after the date of first notice at the rate of Rs.454.27/- per share. Even after notices the appellant took no step to regularise the account. Hence, the bank was left with no alternative, but to invoke the relevant provisions in the agreement between the parties. When the sale proceeds fell short to regularise the account notice was again sent on 09.03.2009 by way of telegram but the appellant did not turn up. Hence the bank was left with no other alternative but to sell 614/- shares on 16.03.2009 at the rate of Rs.261.14/- per share. An amount of Rs.1,59,390.88/- was credited in the account of the appellant. The value of shares as in November 2009 was not a matter to be considered in this case. The respondent did not commit any unfair trade practice or deficiency in service. The loan account was yet to be closed by the appellant and he continues to be a defaulter. The complaint an attempt to wriggle out from the liability towards the bank. The appellant suffered no mental agony as alleged. The respondents were not duty bound to look into the performance of a particular company and to wait for increase in the share value to its optimum level as alleged in the complaint. In so far as the appellant alleged cheating from the side of the respondents, this commission lacked jurisdiction to entertain the complaint. The appellant was not entitled to claim any relief.

6. In the additional version the respondents refuted the claim of the appellant for Rs.45,00,000/- towards the value of shares sold by the respondents as there was no illegality in the sale as alleged in the complaint. According to the opposite parties the attempt of the complainant was to make illegal enrichment at the instance of the opposite parties.

7. The State Commission vide its order dated 31.10.2016, while dismissing the Appeal, observed as under;

"10. The main allegation in the complaint is that the opposite parties enforced sale of securities without seven days' notice as agreed between the parties. This according to the complainant amounts to unfair trade practice and deficiency in service on the part of the opposite parties. The opposite parties contend that three notices by telegrams were given to the complainant before enforcing the security by sale of shares. It is admitted in the version that 2175 shares were sold by the opposite parties on 27.01.2009 after 27 days from the date of first notice. The shares were sold for a price of Rs.454.27 per share and the amount was credited in the account of the complainant. Subsequently, notice by way of telegram was given on 09.03.2009 and on the failure of the complainant to regularise the accounts 614 shares were sold on 16.03.2009 at the rate of Rs.261.14 per share and Rs.1,59,390.88/- was credited in the account of the complainant.

11. The contentions of the complainant are twofold. Firstly, it is contended that the shares were sold for a meagre price. Had the bank waited for some more time there would have been large increase in the share value of the Aban Offshore Ltd. But in so far as the shares are not intended as investment there is no question of prudent management in the matter of sale of shares by the bank. Here the bank

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was enforcing its security on the failure of the complainant to regularise the accounts. So in Law the bank was not obliged to wait for increase in the share value before effecting sale. The second contention of the complainant is that seven days' notice as prescribed in ExtB1 agreement between the parties was not given to the complainant and thereby the opposite parties have committed deficiency in service. A subsidiary question also arises whether notice by telegram was sufficient. In this regard, Clause 12 of Ext.B1 loan agreement cum guarantee is relevant. The said clause grants authority to the bank to require the borrower at any time to change the securities pledged or mortgaged. Such change can be in the securities or mortgage made by the borrower or guarantor. Sub Clauses 2 & 3 of Clause 12 are particularly relevant and read thus: 2.If at any time the value of the said Securities falls so as to create a deficiency in the margin requirement specified by the Bank from time to time or there is an excess over the overdraft facility limit, the Borrower shall within seven days of notice from the Bank, deposit with the Bank additional security in the form of cash or such other securities which may be acceptable to the Bank, falling which the Bank may at its discretion sell, dispose off or realize any or all of the securities then held by the bank without being liable for any loss or damage or diminishes in value sustained thereby".

" 3. In case of expiry of the term or in case the Borrower falls to make any payment due to the bank in respect of overdraft facility, the Bank would have the full rights to sell, dispose off or realize the said Securities after giving the Borrower, notice of not less than 7 (seven) days, on such terms and for such price that the bank deems fit, and apply that net proceeds towards the satisfaction of the balance outstanding in the overdraft account including charges, expenses etc."

13. In the present case Clause 2 is not applicable as the parties have no case that as value of securities fell deficit in the margin requirement specified by the bank or in the overdraft facility limit was created. This was a case where the borrower failed to make payment due to the bank in respect of the overdraft facility. So sub clause 3 of Clause 12 is applicable. As per Sub Clause 2 referred to earlier, it is the duty of the borrower to deposit additional security within seven days of notice from the bank. So once notice is given the sale can be made any time after seven days unless the borrower fulfils his obligations.

14. Sub Clause 3 referred to earlier is worded slightly differently. In case the borrower fails to make payment due to the bank in respect of over draft facility, the bank has the right to sell dispose of or realise the securities after giving the borrower notice of not less than seven days. Here also once notice is given it is the duty of the borrower to deposit the money to regularise the accounts, for that is the obligation under taken by the borrower as per the agreement between the parties.

15. The opposite parties have produced and marked in evidence the telegrams sent by them as well as evidence to show that telegrams were in fact sent as claimed in the version. In Ext.B1 no particular mode of notice is mentioned. So it

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is sufficient that the failure of the complainant to deposit the money as agreed is brought his notice in a reasonable way. The text of the telegrams show that intimations were earlier given to the complainant to regularise his accounts and in the case of his further failure the shares could be sold. The contention of the complainant is that he had deposited in various instalments Rs.10,00,000/-. The statements of accounts of the complainant are brought in evidence but it is quite obvious that the complainant failed to regularise the accounts as demanded by the opposite parties. It was in that context the shares were sold. There is no doubt that the shares were sold after seven days from the date of the relevant telegrams. In the result, the complaint is dismissed but without costs".

8. Hence, the present Appeal.

9. During the proceedings of the case, when the Counsel for the Appellant was asked as to how the Appellant/Complainant comes under the purview of 'Consumer' as defined under Section 2(1)(d) of the Consumer Protection Act, 1986, the Counsel for the Appellant had sought time to file an affidavit to clarify that in 2009 what was the income of the Appellant and the source of this income and the purpose for which he had taken overdraft facility of Rs.20 Lakhs from the Opposite Party-Bank and file a copy of his loan application. The Appellant has filed his affidavit but has failed to file copy of his loan application.

10. Nowhere in the Complaint, has the Appellant mentioned as to why he took the said loan/overdraft facility against the said shares. He has nowhere pleaded in his Complaint that he had taken said loan exclusively for the purpose of earning his livelihood by means of self- employment. On other hand, the Appellant has stated that "Complainant is a person with sufficient means". In his affidavit, the Complainant has stated that 'He is an agriculturist and a dealer of the Indian Oil Corporation, kerosene dealer and his annual income is over Rs.6,00,000/-." It can hence be safely concluded from the same that he had not availed the overdraft facility to earn his livelihood by self- employment. Though in the affidavit, the appellant has stated that he had taken the overdraft facility to buy a property. Nowhere in the affidavit has he given any details of the property, he bought, if any, out of the money availed against overdraft facility.

11. The main issue involved in this Appeal, whether the Appellant/Complainant comes within definition of a 'consumer' as defined under Section (2)(1) (d) of the Consumer Protection Act, 1986 (for short, 'Act'). In order to answer the aforesaid vital question, it would be useful to describe amended definition of a 'Consumer' along with its 'Explanation' as provided under Section 2(1) (d) of the Act, which reads as under;

" (d) Consumer means any person who,--- buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such

1.

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goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

[hires or avails] of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person [but does not include a person who avails of such services for any commercial purpose];

2.

[Explanation—For the purpose of this clause, "commercial purpose" does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment]".

12. The Respondent in their written statement has specifically raised preliminary objection that the 'Complainant' was not a Consumer as defined under Section 2(1) (d) of the Consumer Protection Act, 1986 and further the Appellant has nowhere pleaded in his Appeal pleaded that the alleged transaction was one to earn his livelihood by means of self-employment. The State Commission has not dealt with the preliminary objection raised by the Respondent in the written statement before it. It is seen from the facts of the case that the Appellant has failed, either to plead or establish that he had obtained the overdraft facility for earning his livelihood by means of self-employment. Hence, the Appellant/Complainant is not a 'Consumer' as per Section (2) (1) (d) of the Act and the Complaint filed by the Appellant /Complainant is not maintainable and is liable to dismissed on this sole ground. Further, it is settled law that the question in which law point is involved can be decided at any stage of the proceedings of the case. The State Commission in their detailed order as also other facts of the case dismissed the Complaint of the Appellant on merits.

13. In view of the above, the present Appeal as also the Complaint filed by the Appellant/Complainant before the State Commission is dismissed being not maintainable with no order as to cost.

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REKHA GUPTA

PRESIDING MEMBER

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