COMPETITION APPELLATE TRIBUNAL, NEW DELHI
Bank of India
JUSTICE V.S. SIRPURKAR, CHAIRMAN
RAHUL SARIN AND MRS. PRAVIN TRIPATHI, MEMBER
Unfair Trade Practices Enquiry No. 160 of 2007
Compensation Application No.86 of 2007
JANUARY 4, 2013
Justice V.S. Sirpurkar, Chairman
Respondents – Bank of India have raised a preliminary objection regarding the maintainability of the complaint as also the Compensation Application filed by M/s. Rangi International. This preliminary objection is on the basis of Section 66(3) of the Competition Act read with Section 3(g) and Section 2(da)(iv) of the Monopolies and Restrictive Trade Practice Act, 1969 (in short the “MRTP Act”). The said complaint was filed by M/s Rangi International under Sections 36-A, 36B, 36D and 37 of the MRTP Act. In this complaint M/s. Rangi International have contended that the complainant is a sole proprietorship firm converted into a company which have availed the services of respondent bank. The said service was of sub-standard quality and that the respondents have adopted unfair and deceptive practices while rendering the same and had also coercively recovered Export Outstanding Charges (‘XOS charges’ in short) and it had neglected and failed to return original title deeds of the properties entrusted to the respondent bank as a collateral security inspite of having been fully paid all the debts given to the complainant. It was inter-alia stated in the complaint that the complainant firm was engaged in manufacture and export of ready made garments and started banking with the respondent bank in the year 1984 through its different branches at Janpath, Connaught Circus, Parliament Street and Vijaya Building Branch. It was pointed out that in the first four years i.e. between 1984 to 1987 it had not opted for any financial assistance from the respondent bank and had conducted export business from its own resources. However, in the year 1988, the complainant approached the respondent bank for credit facility and the respondent granted Adhoc Packing credit limit of Rs.30 lakhs and the bank guarantee limit of Rs. 25 lakhs against three collateral securities, they being :-
(i) Original title deed of factory building at 220, UdyogVihar, Phase 1, Gurgaon (Haryana).
(ii) Original title deed of the factory building at C-58/1, Okhla Industrial Area, Phase II, New Delhi (market value of both properties was above Rs.3 crore at that time)
(iii) Original title deed of Plot No.8, GulmoharMarg, DLF, Qutab Enclave, Gurgaon (Haryana).
According to the complainant this property was given as collateral security for temporary accommodation and additional bank guarantee limit and the market value of the property was above Rs.1 crore at that time.
2. The complainant then states that though the complainant asked for enhancement of various credit limits those applications were kept pending for two long years and therefore, though the complainant’s foreign buyers had been pressurizing to ship the garments in time, in the absence of sufficient funds, complainant was unable to procure the required material for manufacturing of garments for exports and as such complainant having no other alternative was constrained to transfer banking operation to Vysya Bank in the month of August 1992. The complainant then wrote a letter dated 16.07.1993 to the respondent bank, requesting them to transfer the securities to the Vysya Bank and in lieu thereof Vysya Bank was to issue the counter guarantee favouring respondent bank in respect of the bank guarantees issued by respondent bank to Apparel Export Promotion Council (‘AEPC’ for short). However, the respondent bank out of the spirit of vendetta denied this proposal and did not accept the counter guarantee, which the respondent was bound to accept as per the prevailing banking practice. This was informed by the respondent’s bank by its letter dated 31.07.1993.
3. According to the complainant, the entire funded loan of the respondent bank was paid by the complainant as back as in 1993 and the same was confirmed by the respondent bank to the complainant vide their letter dated 05.08.1993. The complainant further goes on to say that the respondent bank ordinarily should have returned the portion of collateral securities as the complainant had paid the entire funded loan (Packing Credit). Otherwise the respondent bank had no right to withhold such large collateral securities of the complainant, since the only purpose of the collateral securities was to secure respondent in case of non-payment. Secondly, the collateral security was multiple time value, the remaining bank guarantee should have been returned by the respondent bank at least in part. The complainant kept on requesting, but the respondent bank did not release collaterals even without considering the proposal of Vysya Bank for counter guarantee. The complainant relied on the letters dated 08.07.1994 and 20.08.1994. The respondent bank instead of releasing of collaterals, raised a plea that the original bank guarantees should be released to enable them to consider the release of collaterals. The complainant admitted that these bank guarantees had expired on 30.10.1994 and no claim was filed by AEPC during the validity of the same. The complainant, therefore, urged that the bank had no right to withhold the collateral security particularly because the bank guarantee period had expired. The complainant then made a reference to a letter dated 25.04.1995 for release of collaterals and margin money kept against the bank guarantee which had expired. However, no response was received from the respondent bank. On complainant’s not being able to fulfill its assurances to Vysya Bank, it informed to the complainant that the enhancement of credit facility were subject to receipt of the collaterals. The complainant then mentions that Vysya Bank was annoyed for not obtaining the collaterals for renewal of pending proposal of credit facilities, therefore, it again requested the respondent bank in the year 1997 to release two properties namely – original title deeds of factory C-58/1, Okhla Industrial Area, Phase-II, New Delhi and DLF Plot No.8, Qutab Enclave, Gurgaon (Haryana) which were not mortgaged to the respondent bank to enable the complainant to submit the same to the Vysya Bank. However, the respondent bank informed vide its letter dated 25.03.1997 mischievously that though technically bank guarantees had expired but several export bills sent under collections were outstanding and advised the complainant to submit write off petition to RBI, if there were no possibilities to realize export proceeds. According to the complainant, it had already informed the respondent bank on 25.01.1997 that foreign buyers who had not kept their obligation of paying the export proceeds had filed bankruptcy petition before US Bankruptcy Court and the said bankruptcy petition was accepted by the Court of United States and they were declared bankrupt. In this behalf complainant relied on the letters dated 01.03.1997, 25.03.1997 and 25.01.1997. As a result of non-fulfilment of the obligation by the complainant, the Vysya Bank stopped the Packing Credit Facility (in short “PCL”) in September 1997 and started recovering the PCL amount which was Rs.250 lakhs and the entire amount was recovered by Vysya Bank by the end of 1998 out of export bills submitted for negotiations during that period. All this caused serious hardship to the complainant and complainant’s financial position became precarious. Ultimately, the respondent bank vide its letter dated 07.09.1998 agreed to release the collaterals securities and margin money with three conditions :-
(i) On payment of XOS charges;
(ii) On return of guarantees for cancellation;
(iii) On finalization of exports bills referred to RBI for write-off.
4. According to the complainant, these conditions were unwarranted as they were already informed about the bankruptcy of the foreign buyers and that there was no possibility of realization of export proceeds. According to the complainant the XOS charges were relatable to the collection of the bills and therefore, there was no question of collecting the XOS charges. On the intervention of RBI, however, the respondent bank stopped debiting XOS charges. According to the complainant, the respondent bank had recovered XOS charges which was neither permissible in law nor in accordance with RBI/FEDAI Guidelines. The complainant has made a reference to the letters dated 30.07.1998, 21.05.1999 and 31.05.1999 with reference to the respondent’s letter dated 09.07.1998. The complainant then goes on to state that because of all this he suffered financial debacle. The complainant states that in doing all this the bank had mala fide intentions. Ultimately, it is reported that the complainant got collaterals released in March 2001. The complainant therefore, claimed that the respondent bank had unnecessarily denied to raise the credit limit of the complainant and then when their business was shifted to other bank, it had illegally refused to part with the collaterals and instead went on recovering the XOS charges which were not payable at all. In the later part of the complaint, the complainant has shown as to how the respondent bank had erred in returning the title deed only on 03.03.2001 after causing irreparable loss. In short the complaint is on account of three grounds :-
(i) Refusal to raise the credit limit;
(ii) Refusal to return the collaterals; and
(iii) Recovery of XOS charges of Rs.25,85,430/-
5. In its prayer, the complainant has prayed for ordering inquiry into unfair trade practices for not delivering the collaterals even after providing no dues certificate and having no charge thereby adopting unfair trade practice. An enquiry has also been prayed for in connection with creating liabilities against the expired bank guarantees in favour of AEPC. Thirdly, an enquiry has been sought for the illegal recovery of XOS charges flouting the RBI/ FEDAI Guidelines. The compensation/ damages/ financial loss has also been prayed for. Refund of XOS charges. Award of financial loss of Rs.1 crore caused by respondent by keeping the collaterals with them without the authority of law. There are some other prayers, which are not relevant.
6. This complaint was filed in 2007. There was another application filed for amendment of the complaint dated 18.09.2009. The fresh amended complaint was also filed wherein same documents in the nature of earlier correspondence were filed. It is also mentioned that a legal notice was given on 30.12.2005 whereof the reply was given by respondent bank on 03.03.2006. As per amended complaint, however, the three prayers were for issuing notice and initiating enquiry into the unfair trade practices and the residuary prayer was for passing such orders as may be deem fit. During the pendency of this complaint, a Compensation Application under Section 12-B also came to be filed which was registered as CA 86 of 2007.
7. A preliminary objection is now raised to the maintainability of these proceedings. It was decided to consider the preliminary objections.
8. The first objection raised is on the basis of Section 3(b) and 3(g) of the Act. It is contended that when these two provisions are read together, the Act itself would not apply. Secondly, the respondent bank is covered by the definition of financial institution being covered under Clause (iv) of Section 2(da) of the MRTP Act. The learned counsel further points out that under Section 66(3) of the Act, all cases pertaining to monopolistic trade practices or restrictive trade practices pending before the Monopolies and Restrictive Trade Practices Commission (in short the “MRTP Commission”) on or before the commencement of this Act, including the cases in which unfair trade practices have also been alleged, shall on commencement of the Competition Act, shall stand transfer to Competition Commission of India and shall be adjudicated by that Commission in accordance with the provisions of repealed Act, as if that Act had not been repealed. The objection is that since the respondent bank specifically excluded under Section 3(b) and (g) of the MRTP Act, the present complaint is not maintainable and it deserves to be dismissed. The second ground on which the maintainability objection is raised is that the complaint made, does not constitute either monopolistic or restrictive or unfair trade practices within the meaning of the MRTP Act. It is pointed out in this behalf that even if all the allegations are taken to be true, they do not come within the mischief of Section 2(i) or Section 2(o) or unfair trade practices within the meaning of Section 36A of the MRTP Act. In this behalf, the learned counsel further points out that the complaint does not even specify the sub-section under which the impugned action can be categorized as unfair trade practice or monopolistic trade practice. Lastly, the counsel asserts that the complaint is barred by limitation and latches. In this behalf, it is pointed out that though the complainant was apparently aggrieved by non-release of collateral securities since 1993, it has chosen to file the present complaint only after 14 years i.e. in 2007. Similarly as regards XOS charges, it is also pointed out that those charges were payable in accordance Reserve bank of India Rules. It is pointed out that these charges went on accumulating on account of unrealized export bills sent for collection till 09.02.2009 and it was only when RBI wrote off unrealized export bills amounting to Rs.9,05,90,272/-. It is pointed out that merely writing off the unrealized export bills could not and did not result in the write-off the XOS charged which had accumulated over the years. It is also reiterated that non-release of collateral securities was in terms of banking practice and law as applicable and in so far as XOS charges are concerned, they were un-realised charges which were due. During the debate, the learned counsel invited our attention towards a letter dated 09.07.1998 wherein the complainant had specifically requested to release margin held by the bank after “adjusting” XOS charges. Copy of this letter was handed over during the debate and no objection was raised regarding the authenticity of the contents of that letter. It is pointed out that in terms of the authorisation given by the complainant himself, the respondent bank deducted the outstanding XOS charges of Rs.25,89,430/- from the complainant’s margin money/ fixed deposits maturing with the bank on 08.04.1997 and 10.07.1998. The counsel points out that the bank referred the outstanding export bills to RBI for cancellation and subsequent XOS charges were not levied since the outstanding export bills were already referred to Reserve Bank of India for cancellation. On this basis, the learned counsel points out that if at all there was any complaint, it was only in respect of non-return of the collaterals for which the complainant took as long as 14 years to approach the MRTP Commission. The learned counsel also invited our attention that as regards request for refunding the XOS charges, the bank in its replies consistently took the stand that XOS charges had been recovered pursuant to the complainant’s own authorisation letters and therefore, the charges could not be refunded. These letters dated 02.06.2003, 03.03.2006 are on the record. On this account, the learned counsel points out that even after the complaint was filed in 2007, the complainant kept on insisting upon the refund in that behalf the learned counsel contended that on 09.02.2009 the RBI wrote to the bank about its decision to permit the bank to write-off unrealized export bills amounting to Rs.9,05,90,272/- from its books after verifying satisfactory documents evidencing surrender of export incentives availed of by the said exporter in respect of export transactions pertaining to him, of course without prejudice to action that may be taken by the Directorate of Enforcement. It is pointed out by the bank that the Reserve Bank had specifically informed that those transactions could not be reported in XOS to the concerned Regional Office “henceforth”. This letter of Reserve Bank dated 09.02.2009 is also on record. Infact even after this letter, the complainant on 12.06.2009 again sought refund of XOS charges to which the bank vide its letter dated 12.06.2009 again stated that those charges were not refundable and that the RBI had allowed write-off on 09.02.2009 and XOS charges recovered before the said date are not refundable. On this basis, the learned counsel points out that the XOS charges were deducted by bank on 08.04.1997 and 10.07.1998. Since thereafter there is no acknowledgement on the part of the bank, therefore, the petition filed in 2007 was obviously barred by limitation. Similarly, the counsel points out that the collaterals are admittedly released in March 2001 and thereafter there was no justification on the part of the complainant to wait upto 2007 and claim for damages on the ground of late return of collaterals. In this behalf, the learned counsel has relied on the reported judgment in Corporation Bank v. Navin J. Shah  2 SCC 628. On this backdrop, it is required to be seen as to whether the present complaint is maintainable.
9. It is to be seen that the complainant used to export garments through the Apparel Export Promotion Council (AEPC) and several export bills were sent to the foreign buyers through the bank for “collection only”. In respect of these “collections only” export bills, the bank used to levy xos charge of Rs.250/- per outstanding bill per quarter. These charges were levied since these were required to be reported by the bank to RBI every quarter by way of ‘XOS statements’. This was so because the exporters used to get incentives/benefits on the export proceeds. The bank was required to maintain its records and files for each bill and keep the related GR-1 Forms till the bills were realized or the amounts were permitted by the RBI to be written off as losses. According to the bank, the standard maintenance charges for each bill was Rs.250/- per quarter, in this behalf, our attention was invited to the bank’s letter dated 25.03.1997. Infact, it was only in August 1992 that the complainant had shifted its banking operation to Vysya Bank. However, packing credit limit was paid on 05.08.1993, but the outstanding in the account of the complainant on that date was Rs.1,40,77,644/-. According to the complainant though the loan credit of the respondent bank was liquefied in 1993 and though the bank guarantee also expired on 30.10.1994, but the collaterals were not returned. As per the learned counsel, the collaterals were not returned since the original bank guarantees were not returned to it by the complainant. In the absence of the original bank guarantees, the bank was not absolved from the liability thereunder in view of Section 28(b) of the Indian Contract Act, 1872. For this purpose, the learned counsel relied on the judgement of the Hon’ble Supreme Court in Food Corporation of India v. New India Assurance Co. Ltd.  3 SCC 324. The learned counsel pointed out that though the loan was liquefied, there were substantial outstandings on account of XOS charges account, which again were not cleared. According to the learned counsel, this is clear from the bank’s letter dated 25.03.1997. The bank acted on the letter of the complainant dated 09.06.1998 in which the complainant himself had stated “after release of demand money to AEPC the excess amount lying in margin money may be adjusted towards XOS charges due to you. In case there is any shortfall then we shall arrange to deposit the same with you and only on clearance of this amount you may release the collaterals held by you to us“. It is pointed out that on 09.07.1998, the complainant wrote a second letter wherein it was stated “we request you to release margin held by you after adjusting XOS charges. We undertake to return original Bank Guarantee to you for your cancellation on receipt of from AEPC, which we expect to get within 15-20 days from AEPC”. The learned counsel argues that it was on this basis that the XOS charges were deducted amounting to Rs.25,89,430/- from the complainant’s margin monies/ fixed deposits maturing with the bank on 08.04.1997 and 10.07.1998. The learned counsel pointed out that the bank had referred the outstanding export bills to RBI for cancellation and the subsequent XOS charges were not levied since the outstanding export bills had been referred to RBI for cancellation. The learned counsel, therefore, points out that there was absolutely nothing wrong in first levying the XOS charges which was as per the banking practice and the RBI Rules and further the adjustments of those XOS charges was done as per the request made by the complainant himself. During the debate, the learned counsel appearing for complainant earnestly urged that the complainant had no other option because had had been facing financial debacle and he was almost coerced into writing the letter dated 09.06.1998 and 09.07.1998. We have to say nothing about the compulsions on the part of the complainant to write these letters. However, we cannot appreciate the contention that the XOS charges were firstly not recoverable at all and then they were not liable to be deducted. If the complainant has himself requested the bank to return his margin money after adjusting the XOS charges, there would be no question of any unfair trade practice in this. It must be said at this juncture that once unpaid export bills were referred to Reserve bank for write-off, respondent bank did not levy XOS charges. This assertion on the part of the respondent bank has not been refuted by the complainant in any manner. His only plea is that initially the XOS charges should never have been charged and secondly they should not have been deducted from his margin account. There would be, therefore, no question of finding any fault with the bank transactions, which was acting according to the rules. However, it is pointed out that even thereafter, the complainant started asking for the refund of those XOS charges. We do not see as to how the refund could have been made in the absence of any illegality having been proved about the levy of those charges and the deduction thereof. Nothing has been pointed out that the bank was not within its right to firstly levy those charges or that it was acting beyond the rules. In levying those charges, the bank has fully justified as it relied on the Reserve Bank Rules and the banking practice. After all the bank had to maintain the accounts and it was by way of an agreement between the complainant and the bank that the bank was levying Rs.250/- per bill per quarter. Therefore, on this account we do not find any fault on the part of the bank.
10. A point regarding the jurisdiction on account of the non-applicability of the Act against the financial institutions was however, not pressed.
11. That leaves us with the refusal to return collateral securities. The bank has firstly pointed out that the collateral securities were actually returned in March 2001 itself. The bank has justified retaining the collateral securities on the ground that the bank guarantees given by it to AEPC were not returned back. The learned counsel pointed out that unless and until those bank guarantees were returned back to the bank they kept on, being the liability of the bank as per the reported decision in Food Corpn. of India (supra). The bank also justified its not returning the collateral securities on the ground that there were outstanding against the complainant against the XOS charges account, which were not cleared and it was apparent from the bank’s letter dated 25.03.1997. We will not go into the question as to whether the bank was liable to return the collateral securities on demand by the complainant because that is not our jurisdiction. However, we must point out here that even if we find that the bank was not justified in retaining the collateral securities upto March 2001 and if the complainant had any complaint against the same, such complaint was bound to be made within good time. This question was considered by Hon’ble Supreme Court, though in respect of another enactment in the reported decision in Corporation Bank’s case cited supra. It is now a settled position that where there is no limitation provided by a particular enactment, yet the complainant would have to show as to how he was justified for waiting for more than six years. That is the ratio in the reported decision. Hon’ble Supreme Court has taken this view in respect of even other enactments, where the petitioner has to justify the delay. Such period has ordinarily been held to be three years within which the petitioner must bring his action. The petitioner cannot wait for indefinite period and then approach for his remedy without explaining the time taken. We do not find any such justification having been made in the aforementioned matter from the record. Therefore, it is clear that the complaint as well as Compensation Application under Section 12-B were after thought.
12. We were also addressed about the bank not having agreed to raise the credit limit. According to the learned counsel, there was absolutely no reason for the bank not to raise the credit limit of the complainant. We refuse to go into that question because that was for the complainant’s bank to decide. After all the raise in the credit limit could not have been claimed as a right. Therefore, even on that count, we do not find any fault with the bank.
13. The learned counsel for complainant has not brought to our notice any pronouncement by any Court, including the Hon’ble Supreme Court of India, whereby the complainant was absolved from the responsibility of explaining the delay except in saying that the act is silent about the limitation. The learned counsel has not been able to show us any authority on the question. It is then tried to be argued that the period of limitation will start not from the first date of commission of default, but will start from the last date of the commission of default if the nature of the default committed by the respondents is continuous in nature. We have deliberately stated the facts above along with the dates of the correspondence which went on between the parties stretching maximum in favour of the complainant. We do not find any justification as to how the non-return of collaterals could be complained of only in 2007 when admittedly the collateral securities were refused for the first time in somewhere in the year 1993 and when the bank ultimately returned the collaterals in March 2001. As regards the non-refund of XOS charges, we have already found that the complainant has not shown any rule under which he was entitled to the refund, thus there is a complete justification on the part of the respondent bank not to return collaterals. There is no question of limitation as any action in that behalf could not be possible. In the result, we come to the conclusion that the complaint as well as Compensation Application under Section 12-B are not maintainable. They are dismissed.