THE CHAIRMAN-CUM-MANAGING DIRECTOR, RAJASTHAN FINANCIAL CORPORATION AND ANR.versusCOMMANDER S.C. JAIN (RETD.) & ANR.

                         [2010] 3 S.C.R. 836

A        THE CHAIRMAN-CUM-MANAGING DIRECTOR,
       RAJASTHAN FINANCIAL CORPORATION AND ANR.
                                  v.
             COMMANDER S.C. JAIN (RETD.) & ANR.
                (Civil Appeal No. 2774 of 2010)
8
                          MARCH 26, 2010
             (P. SATHASIVAM AND H.L. DATTU, JJ.]

         CONSUMER PROTECTION ACT, 1986:
c
        ss. 2(1)(c), (g) and 14 - 'Complaint' - 'Deficiency' in
   service - 'Finding of District Forum' - Complaint filed alleging
   deficiency in service of providing loan - Rejected by District
   Forum holding that the bills produced by complainant, as
D required in terms of agreement, were fraudulent - State
   Commission declining to entertain the appeal of complainant
  - National Commission in revision, holding that there was no
   deficiency in rendering service to the complainant, but
   directing the Corporation to pay the complainant
  compensation amounting to Rs.1,50,0001- along with 12%
E interest - HELD: National Commission failed to appreciate
  that the respondent had repeatedly acted fraudulently in
  providing the bills and receipts to the appellant-Corporation
  - The Act has provided provision for correcting the
  shortcomings in the service or goods provided by way of
F awarding compensation or other means specified only when
  the Consumer Forum comes to the conclusion that there is
   'deficiency' in service provided or goods sold - The loss
  suffered by the complainant for the reason of not being able
  to start the unit cannot be the basis for awarding the
G compensation specifically when the complainant was at fault
  for the non-release of the balance loan amount - Therefore,
  when there is no deficiency found on the part of the
  Corporation, it cannot be asked to pay compensation -
  National Commission, though has held that there is no
H                                 836
      CHAIRMAN 7CUM-M. D., CORPORATION v.                    837
         G:OMMANDER S.C. JAIN (RETD.)
deficiency in service as regards the qisbursement of the            A
balance loan amount, has erred in going ahead to award
compensation with interest @ 12 per cent - The impugned
order cannot be sustained and is accordingly set aside.
[para 13, 14, 18 and 19]
                                                                    B
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
2774 of 2010.

    From the Judgment & Order dated 25.7.2006 of the
National Consumer Disputes Redressal Commission, New
Delhi in Revision Petition No. 2372 of 2004.                        C

     S.K. Bhattacharya for the Appellant.

     Commander, S.C. Jain (Retd.) Respondent-in-person.

     The Order of the Court was delivered by                        D

                            ORDER

     H.L. DATTU, J. 1. The petitioner has sought leave to
appeal against the order passed by the National Consumer            E
Disputes Rederessal Commission, New Delhi (for short
'National Commission'}Wherein and whereunder it has directed
the appellant to pay compensation to the tune of Rs.1,50,000/
- along with interest at the rate of 12 per cent from the date of
filing of petition in favour of the respondent. Leave granted.
                                                                    F
Facts:

      2. The Respondent had applied for loan on 03.03.1990 to
the Rajasthan Financial Corporation (in short 'Corporation') for
setting up a manufacturing unit of plastic doors, windows etc.      G
The Corporation after considering the request made, had
sanctioned term loan of Rs.18,000/- for machinery and also
Rs.1,26,000/- as the working capital limit for the said business.
As per the sanction letter, the Corporation was to provide only
75 per cent of the purchase price to the respondent and the         H
    838      SUPREME COURT REPORTS                 [2010] 3 S.C.R.


A remaining share, i.e., 25 per cent was to be contributed by the
  respondent. The sanction letter also provided that if the concern
  has purchased machinery in accordance with the scheme and
  full payment has been made, 90 per cent of the admissible
  amount of loan will be released on the basis of the statement
B of account prescribed for the purpose, duly supported by bills
  and receipts and balance after valuation of machines. The
  period of repayment of the loan was eight years in quarterly
  installments. The first installment was to be due on the first day
  of 18th month reckoned from the date of first disbursement of
c loan against fixed assets. Further as per the terms of the
  sanction letter one of the important terms was that the
  machinery should be purchased from authorized dealer and of
  Wolf make or from M/s Rally India Ltd.

         3. On 29.06.1990, the respondent requested the appellant
D -Corporation for more time to complete the formalities of
  submitting the loan documents in order to enable the appellant
  to disburse the loan amount. The loan document was, however,
  executed in favour of the appellant on 05.07.1990. The appellant
  -Corporation requested the respondent to submit bills and
E receipts of plant and machinery as well as raw material so that
  the parties could proceed with the loan agreement. Thereafter,
  in a short period, the bills were submitted and it was apparent
  from the bills submitted that the name of the firm in whose favour
  the bills were originally issued was struck off and the
F respondent firm's name was inserted in its place. Thus the
  appellant - Corporation asked the respondent to submit correct
  bills.

      4. Thereafter on 26.07.1990, the respondent again
G submitted the bills in the name of Kailash Udhyog and not in
  the name of his own business, i.e., Fauji Kutir Udhyog. The
  appellant - Corporation was forced to dishonor the bills as the
  name indicated in them were not as per the requirement and
  new bills were asked to be submitted. Later, on 04.05.1991 the
  respondent submitted a bill of Nita Udyogic Vastu Bhandar
H
    CHAIRMAN-CUM-M. D., CORPORATION v.                         839        .l
  COMMANDER S.C. JAIN (RETD.) [H.L. DATTU, J.]
 Private Limited dated 21.08.1989 for a sum of Rs.10,200/-            A
representing the purchase price of drill machine etc., prior to
 the date of sanction of the loan and its disbursement. Another
 bill of Rs.17,800/- datea 29.12.1989 which represented saw
 machines with two HP motors with accessories etc. was also
 submitted. Due to repeated submission of wrong bills by the          B
 respondent, the appelfant addressed a letter to the respondent
 stating that the bills were unacceptable for two reasons, firstly,
 Nita Udyogic Vastu Bhandar Private Limited is a family
 concern and the respondent is in gainful employment in the
 concern. Secondly, Nita Udyogic Vastu Bhandar Private Limited        c
is not an authorized dealer for Wolf make machine or M/s rally
 India Ltd. The appellant also informed that the machines were
old as per the internal checkup done by the appellant -
Corporation. The respondent was given another chance as the
appellant informed the .respondent that though the loan               D
agreement was time barred, his case could be considered
favourably only if he submits the bills from authorized dealer or
manufacturer. The correct and accurate bills were to be
submitted within one month from 31.05.1991. The respondent
submitted bills from the authorized dealer of Wolf portable
machine, i.e., Heerex Corporation amounting to Rs.19,797.75/          E
- against which a sum of Rs.2000/-, as advance was paid to
the respondent. The respondent was, therefore, asked to
submit a receipt for Rs.3172. 75 denoting his contribution of 25
per cent, in order to avail the sum of Rs.14,625/-. In spite of
such a request tl}e respondent never submitted the receipt. The       F
appellant - Corporation sent a cheque of Rs.14,625/- favouring
the authorized dealer Heerex Corporation, to Fauji Kutir Udyog
along with a request to send the receipt to the Corporation for
the amount so paid. An additional request was also made as
regards the receipts showing the respondent's share of                G
Rs.3172.75/-. Another correspondence was addr~sf;ed to the
respondent requesting him to fulfill all other: terms and
conditions of the loan agreement, including a condition to create
assets in the ratio of 1: 1.10 as stipulated in Clause 5 of the
Special Terms and Conditions annexed with the loan                    H
    840     SUPREME COURT REPORTS                [2010] 3 S.C.R.

A agreement. The respondent thereafter made a representation
  whereby he claimed that the Corporation was under liability to
  pay a sum of Rs.3,375/- as the balance amount of sanctioned
  loan by considering his earlier bill of Nita Udyog Vastu Bhandar
  Private Limited which was rejected by the appellant stating it
B to be untenable as the Nita Udyog Vastu Bhandar was not an
  authorized dealer.    i

      5. On 19.12.1991, the respondent requested the appellant
  -Corporation for disbursement of the loan against the raw
  materials without submitting any supporting documents showing
C the details of the expenditure. The appellant - Corporation
  addressed two separate letters dated 26.12.1991 and
  02.11.1992 asking the respondent to submit the details of the
  consumption of quantity of raw materials and the stock position
  update along with sales made.
D
    Proceedings before the Consumer Forum:

       6. The respondent moved the District Consumer
  Commission with a complaint of deficiency of service and also
E prayed for the disbursement of Rs.3,375/-. The plea of the
  respondent was dismissed by the District Consumer
  Commission on the principle that his application is not
  maintainable as the dispute in a loan agreement between the
  debtor and creditor does fall within the jurisdiction of the
  Consumer forum.
F
       7. Due to the repeated failure on part of the respondent to
  submit the details of the material purchased and consumed, the
  appellant finally cancelled the unavailed loan, on 08.09.1992
  and informed the same to respondent. The respondent replied
G to the said communication stating that he had already initiated
  the proceedings before the State Consumer Commission,
  Jaipur on 15.07.1992.

        8. The State Commission allowed the appeal vide order
    dated :t2.12.1994 and remanded the matter back to the District
H
  _ CHAIRMAN-CUM-M. D., CORPORATION v.                        841
  COMMANDER S.C. JAIN (RETD.) [H.L. DATTU, J.]
Forum. The District forum dismissed the complaint on                 A
02.12.1995 holding that the respondent was unable to show the
details of the purchased goods from authorized dealer and that
M/s Nita Udyog Vastu Bhadar Private Limited is their own
concern which was closed much before the issuance of the bill,
thus failing to show that he was entitled to the sum of Rs.3,375/    B
-. Further, the appeal was entertained by the State Commission
as the respondent sought to file certain documents. The matter
was remanded back to the. District Forum vide order dated
21.03.2003. The District Consumer Forum dismissed the
complaint along with costs vide order date 31.01.2004 stating        c
that there was no deficiency in service as the bills presented
by the respondent were of a firm which was non-existent.

      9. The respondent being aggrieved by the order of the
District forum, preferred appeal before the State Consumer
Commission. The State Commission refused to entertain the            D
appeal vide order date 02.09.2004. Thereafter, the review
petition filed by the respondent was also rejected by the State
Commission vide order dated 09.09.2004.

Revision Petition before the National Consumer Disputes              E
Redressal Commissiore

      10. The respo.ad¢Jt being aggrieved by the decision of the
 State Consumer ceinlmission preferred a Revision Petition
 before the National Con-Sy.mer Disputes Redressal
                                                                     F
 Commission. The National Comm~sion considered revision on
two counts. Firstly, as regards the Fion-release of the balance
amount of Rs.3,375/- as against the machinery and secondly,
the non-release of the balance amount of Rs.81,000/- from the
s~nctioned amount of Rs.1,26,000/- for working capital limit. As
regards the first point, the National Commission considered the      G
contention of the appellant - Corporation whereby it was stated
that the amount of Rs.3,375/- was not released as the
respondent did not comply with the terms spelled out in the letter
of sanction. However, the National Commission concluded on
this point that there was no specific obligation pointed out by      H
    842      SUPREME COURT REPORTS                    [2010) 3 S.C.R.


A the appellant -Corporation which is said to be left unfulfilled by
  the respondent. As regards the second point, the National
  Commission cited a para from the letter dated May 04, 1991
  addressed by the appellant - Corporation to the respondent
  whereby it is pointed out that the bills submitted were not the
B correct one as they were issued in name of firm Kailash Udyog
  and the respondent had fraudulently replaced there name in the
  bills. Therefore, the National Commission observed that the
  appellant -Corporation "cannot be held to be deficient in
  rendering services" in the said loan agreement. Further, it is
c important to note that the National Commission has specifically
  pointed out that the prayer in the original complaint was only
  for release of Rs. 3,375/- and only at a later stage, i.e., when
  the matter was remanded back to the District Forum by the
  State Commission vide order dated 21.03.2003, that the
  respondent filed another complaint with regard to the amount
0
  for working capital thereby seeking direction to release the sum
  of Rs.81,000/-. Further, the peculiar observation made by the
  Natiohal Commission is that the respondent have claimed
  compensation "without any corresponding profit and loss
E statement or any affidavit in support of such a demand".

         11. However, the National Commission has directed the
    appellant - Corporation to pay compensation of Rs.1,50,000/-
    with interest at the rate of 12 per cent from the date of filling of
    complaint. The cost is also awarded to the tune of Rs 10,000/
F -.
    Appeal from the decision of the National Consumer
    Disputes Redressal Commission:

        12. The appellant - Corporation has sought appeal on the
G ground that the National Commission has erred in awarding the ·
  compensation with interest, inspite of holding that there was no 1.-,
  deficiency in rendering the service to the respondent. It is also
  contended by the appellant - Corporation that they have fully
  discharged obligation under the loan agreement and there was
H nothing_ outstanding for which it could be held responsible and,

             /•
    CHAIRMAN-CUM-M. D., CORPORATION v.                       843
  COMMANDER S.C. JAIN (RETD.) [H.L. DATTU, J.]
in fact, it is the respondent who had failed to carry out its       A
obligation as they had repeatedly submitted incorrect and
fraudulent receipts.

     13. It is pertinent to mention that the appellant - Corporation
had repeatedly requested the respondent to submit the bills of
                                                                     8
the purchase of the machinery of Wolf make, or from Mis Rally
India Ltd. in order to disburse the amount sanctioned for the
machinery which in the 'Sanction Letter' dated 3.3.1990
appears to be "Rs.18,000/- against fixed assets" (Annexure P-
1). However, it is on record and is observed by the District C
Commission and State Commission that the respondent has
constantly submitted wrong receipts. The District Consumer
Forum has observed in the order dated 31. 01.2004 that the Nita
Udyogic Vastu Bhandar (P) Ltd. from whom the respondent
claim to have purchased the machinery and the bills so
produced dated 29.12.1989 are clearly fraudulent as this D
concern stood closed since March 1989. This fact was
reiterated by the State Commission in its order dated
02.09.2004. Therefore, we find no hesitation to conclude that
National Commission failed to appreciate that the respondent
had repeatedly acted fraudulently in providing the bills and E
receipts to the appellant - Corporation.

      14. Secondly, the National Commission though has held
that there is no deficiency in service as regards the
disbursement of the balance loan amount of Rs.81,000/-, have        F
gone ahead to award compensation to the tune of Rs.1,50,000/
- with interest of 12 per cent.

     15. For deciding whether the respondent ought to be
awarded compensation, it is important to consider the meaning
of deficiency as provided under section 1(g) of the Consumer       G
Protection Act, 1986 (hereinafter referred to as 'the Act'):

           (g) "Deficiency" means any fault, imperfection,
           shortcoming or inadequacy in the quality, nature and
           manner of performance which is required to be            H
    844       SUPREME COURT REPORTS                  [2010] 3 S.C.R.


A                maintained by or under any law for the time being
                 in force or has been undertaken to be performed
                 by a person in pursuance of a contract or otherwise
                 in relation to any service;

          16. Further, the Consumer Protection Act also provides
8
    that the important component of the complaint by the 'consumer'
    on the basis of which the compensation is decided, is that there
    should be 'deficiency' in the service provided or goods sold to
    the concerned consumer. The definiti:rn bf 'complaint' is
    provided under section 1(c) of the Act:
c
          (c) "Complaint" means any allegation in writing made by
          a complainant that-

          (i) An unfair trade practice or a restrictive trade practice
0         has been adopted by any trader or service provider;

          (ii) The goods bought by him or agreed to be bought by
          him suffer from one or more defects;

          (iii) Service hired or availed of or agreed to be hired or
E         avRiled of by ,'Jim suffer from deficiency in any respect;

          (iv) a trader or the service provider, as the case may be,
          has charged for the goods or for the service mentioned in
          the complaint, a price in excess of the price in excess of
          the price-
F
          (a) fixed by or under any law for the time being in force;

        (b) displayed on the goods or any package containing such
        goods;
G
        (c) displayed on the price list exhibited by him by or under
        any     law    for   the      time     being    in    force;
        (d) agreed between the parties;

        (v) goods which will be hazardous to life and safety when
H       used are being offered for sale to the public;-
    CHAIRMAN-CUM-M. D., CORPORATION v.                       845
  COMMANDER S.C. JAIN (RETD.) [H.L. DATTU, J.]
    (A) in contravention of any standards relating to safety of     A
    such goods as required to be complied with, by or under
    any law for the time being in force;

    (B) if the trader could have known with due diligence that
    the goods so offered are unsafe to the public;
                                                                    B
    (vi) service which are hazardous or likely to be hazardous
    to life and safety of the public when used, are being offered
    by the service provider which such person could have
    known with due diligence to be injurious to life and safety.
                                                                    c
     17. It is also important to note the following provision of
the Act:

           Section 14. FINDING OF THE DISTRICT
           FORUM.
                                                                    D
           (1) If, after the proceeding conducted under section
           13, the District Forum is satisfied that the goods
           complained against suffer from any of the defects
           specified in the complaint or that any of the
           allegations contained in the complaint about the         E
           services are proved, it shall issue an order to the
           opposite party directing him to do one or more of
           the following things, namely :-

           (a) to remove the defect pointed out by the
                                                                    F
           appropriate laboratory from the goods in question;
           (b) to replace the goods with new goods of similar
           description which shall be free from any defect;

           (c) to return to the complainant the price, or, as the
           case may be, the charges paid by the complainant;        G
           (d) to pay such amount as may be awarded by it
           as compensation to the consumer for any loss or
           injury suffered by the consumer due to the
           negligence of the opposite party;
                                                                    H
    846      SUPREME COURT REPORTS                  [2010) 3 S.C.R.


A              (e) to remove the defects or deficiencies in the
               services in question;

                (f) to discontinue the unfair trade practice or the
                restrictive trade practice or not to repeat them;
B               (g) not to offer the hazardous goods for sale;

                (h) to withdraw the hazardous goods from being
                offered for sale;

                (i) to provide for adequate costs to parties.
c
        18. Thus, it is clear that the Act has provided provision for
  correcting the shortcomings in the service or goods provided
  by way of awarding compensation or other means specified in
  the provision above mentioned only when the Consumer Forum
D comes to the conclusion that there is 'deficiency' in service
  provided or goods sold. The loss suffered by the respondent
  for the reason of not being able to start the unit cannot be the
  basis for awarding the compensation specifically when the
  respondent was at fault for the non release of the balance loan
E amount. Therefore, when there is no deficiency found on the
  part of the appellant - Corporation, it cannot be asked to pay
  compensation.

       19. In the light of the above discussion, the impugned order
F cannot be sustained. Accordingly, it is set aside. Appeal is
  allowed. No order as to costs.

    R.P.                                           Appeal allowed.