THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLESRI JUSTICE NOUSHAD ALI W.P.No.511 of 2008 Date of Order: 10-02-2010 Between: Deputy Director, A.P. Khadi and Village Industries Board, Srikakulam, Srikakulam Dist. ..Petitioner And 1. The District Consumer Forum Constituted under the Consumer Protection Act (Act 68/1986) Srikakulam and others. ..Respondents The Court made the following Order: THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLESRI JUSTICE NOUSHAD ALI W.P.No.511 of 2008 Oral Order: (Per Hon’ble Sri Justice A.Gopal Reddy) 1. By means of filing this Writ Petition under Article 226 of the Constitution, the petitioner challenges the order of the District Consumer Forum, Srikakulam dated 16-06-2006 made in C.D.No.84 of 2004 as illegal and arbitrary and to set aside the same by issuing a writ of Mandamus. 2. The 2nd respondent (complainant) herein filed a complaint before the District Consumer Forum alleging deficiency of service by Sri Visaka Grameena Bank—opposite party No.1 and Khadi and Village Board—opposite party No.2, in releasing 30% Margin Money of the loan amount, by issuing a direction to both the opposite parties to adjust the Margin Money of 30% with interest from the date of sanction of loan to the complainant and adjust the same into her loan account by awarding damages of Rs.10,000/- and also litigation expenses of Rs.5,000/-. 3. The complainant pleaded before the Forum that opposite party No.1—3rd respondent herein sanctioned a loan amount of Rs.1,50,000/- for establishing and running rice and floor mill at Annupuram Village, Saravakota Mandal under Women Beneficiaries Scheme. The 2nd opposite party, who is the petitioner herein, agreed to release 30% of the margin amount on release of the loan amount by the 1st opposite party—Bank and on the complainant paying 5% of the amount towards project cost. Accordingly, the complainant paid the project cost of 5%. On receiving the project cost, the 1st opposite party—Bank sanctioned Term Loan of Rs.1,50,000/- under 2 or 3 instalments. The complainant paid Rs.93,000/- in seven (7) instalments and also an amount of Rs.47,000/- to the Bank towards loan amount. While so, the 1st opposite party—Bank received the Margin Money from the 2nd opposite party—Board, but not adjusted the same to the loan account of the complainant and informed the balance amount to be paid her. Hence, there is deficiency of service by the opposite parties 1 and 2. 4. The writ petitioner—Board (2nd opposite party) filed a detailed counter opposing the CD stating that the proposals of the complainant for sanction of the Margin Money was forwarded to the 1st opposite party—Bank by their letter dated 19-01-1998—Ex.B2; as the complainant was selected as beneficiary under the Women Beneficiary Scheme by the Khadi & Village Industries Board for the year 1997-1998, for considering the sanction of Rs.1,28,250/- against the project cost of Rs.1,35,000/- the Board requested the 3rd respondent—Bank (1st opposite party) to send the Bank Sanction Order along with 1st instalment release order to process the same to the Head Office, Hyderabad for sanction of 30% Margin Money during the financial year 1997-98. In the said letter the procedure for sanction of Margin Money was also indicated. After the loan was sanctioned and the 1st instalment was released, all the concerned papers are to be submitted by the complainant through the 1st opposite party—Bank to the 2nd opposite party—Board for enabling it to recommend for sanction of Margin Money to the Head Office, Hyderabad. But during the financial year 1997-98 no such proposals were received either from the complainant or from the 1st opposite party—Bank. 5. On 05-02-1999, the 1st opposite party—Bank was informed about the sanction of Margin Money in favour of the complainant for the financial year 1998-99 by showing the project cost of Rs.1,88,690/-. For sanction of Margin Money at 30%, documents 1 to 5 mentioned in the said letter are to be forwarded to the writ petitioner—Board. But the same was not complied with either by the complainant or by the 1st opposite party—Bank. As admitted by the complainant herself, after the loan amount was sanctioned on 08-06-2000, there was no proposal by the Board to grant Margin Money in favour of the complainant for the years 1999-2000 or 2000-2001. Therefore, the complainant is not entitled for the benefit under the scheme in the absence of any sanction of Margin Money in her favour. Mere proposal to sanction the Margin Money in favour of the complainant on fulfillment of conditions stipulated in Ex.B2—letter, dated 19-01-1998 cannot be treated as the Margin Money is sanctioned by the 2nd opposite party—Board. There is default on the part of the complainant in fulfilling the conditions stipulated by the Board in their circular letters dated 15-11-2003 and 15-01-2003— Exs.B4 and B5. Therefore, there is no cause of action for the complainant to file the complaint against the Board, as the Board did not fail to discharge their part of the obligation, and prayed for dismissal of the complaint. 6. The 3rd respondent—Bank (1st opposite party) filed a separate counter contending that on writ petitioner—Board (2nd opposite party) agreed to give Margin Money they sanctioned loan of Rs.1,50,000/- for the project which is estimated at Rs.1,88,690/- and the balance of Rs.38,690/- is the contribution of the complainant and 30% Margin Money has to be granted by the Board. It is also contended that unless the Margin Money is released by the Board or given any release order for the amounts to be adjusted in the complainant’s loan account, the entire amount of loan has to be recovered from the complainant and there is no deficiency on the part of the Bank. 7. On behalf of Complainant, documents—Exs.A1 to A7; on behalf of Bank, documents—Exs.B6 toB11 and on behalf of Board, documents—Exs.B1 to B5 were marked, but no oral evidence has been adduced. 8. In Ex.B1 dated 05-02-1999 the Board addressed a letter to the 1st opposite party—Bank intimating that Board has sanctioned 30% of Margin Money subject to certain conditions with a copy to the complainant. Ex.B2—letter, dated 19-01-1998 is the copy of Ex.A1. Ex.B3—letter, dated 04-08-2003 is the copy of Ex.A5 letter addressed by the 2nd opposite party—Board to the complainant with a copy to the District Collector, Srikakulam. Ex.B8—letter, dated 13-06-2000 is the letter addressed by the 1st opposite party—Bank to the 2nd opposite party—Board intimating about the sanction of loan amount of Rs.1,50,000/- on 08-06-2000 for establishment of rice and flour mill and requested the Board to arrange for release of 30% Margin Money on the project cost of Rs.1,88,690/-. When the 2nd opposite party—Board agreed for sanction of 30% Margin Money during the financial year 1997-98 with certain conditions and issued the original of Ex.B1 letter dated 05-02-1999, the 1st opposite party—Bank sanctioned loan of Rs.1,50,000/- to the complainant and issued original of Ex.B6— proceedings enclosing the original of Ex.B7—statement, but the Board has not released 30% Margin Money of the project cost of Rs.1,88,690/-. When the Bank claimed after sanction of loan and release of loan amount, it has addressed original of Ex.B8—letter dated 13-06-2000 enclosing the necessary documents as required under original of Ex.B1, but the 2nd opposite party—Board has not released the Margin Money; if the Board fails to release the Margin Money, the complainant has to discharge the entire loan amount together with interest as agreed upon; as the Margin Money was not released by the Board, the Bank has demanded the complainant to pay the entire loan amount. According to the Bank, there is no deficiency of service on their part. As can be seen from the recitals in Exs.B6 to B9, which show that the 1st opposite party—Bank sanctioned loan of Rs.1,50,000/- to the complainant and addressed Ex.B8—letter on 13-06-2000 to release the Margin Money and as per Ex.B11, originals of Exs.B8 and B9 were sent to the 2nd opposite party—Board. 9. The claim of the 2nd opposite party—Board that there is no proposal for release of the Margin Money during the financial year 2000-2001 after release of the loan amount by the 1st opposite party— Bank and there is no deficiency of service on their part cannot accepted, as the recitals under Exs.B6 to B9 and B11 go to probablise that during the financial year 2000-2001 a loan of Rs.1,50,000/- was sanctioned by the 1st opposite party—Bank in favour of the complainant and within one week the Bank addressed the original of Ex.B8—letter enclosing the original Ex.B9—statement showing the amount for which the complainant is entitled to receive the Margin Money from the Board. Ex.A5 is the letter dated 04-08-2003 addressed by the Board to the complainant with a copy to the District Collector, Srikakulam, and after issuing Ex.A7—reply the Board has not taken any steps to get sanction and release of Margin Money to be paid to the Bank with a direction to credit the said amount to the loan account of the complainant. 10. The District Forum after considering the respective pleas and documents by impugned order dated 16-06-2006 held there is deficiency of service on the part of 1st opposite party—Bank and 2nd opposite party—Board and the complainant is entitled to direct the 2nd opposite party—Board to release 30% of the Margin Money i.e. Rs.45,000/- to the 1st opposite party with a direction to credit the said amount to her loan account. Questioning the correctness of the same the present writ petition has been filed by the 2nd opposite party—Board. 11. We have heard the learned counsel for the petitioner and learned counsel for respondents 2 and 3 and in spite of service of notice none appeared on behalf of respondent No.1—Forum. 12. The provisions of Finance and Accounts Manual (Part—II) apply to the Government transactions, which was followed by Khadi and Village Industries Board, as notified. Chapter—XXIV of the said Manual deals with Rural Employment Generation Programme (Margin Money Scheme) (Directorate of REGP). Para-24.2.3 specifies Modalities of the Scheme financed through Banks. Para-24.2.3.2.3 says Banks will appraise projects technically as well economically and take their own credit decision on the basis of viability of the project. As per para-24.2.3.3 Banks must ensure investment of “own contribution” of the Entrepreneurs/Individual/Co-operative Society etc. @10% of the total cost of the project for general category and 5% in the case of Weaker section beneficiary/Institutions viz. SC/ST/OBC/Women/Minorities/Ex-serviceman and Physically handicapped persons. Para-24.2.3.5 deals with Margin Money which is to be provided in the form of back-ended Subsidy (Grant), it will be credited to the borrower’s loan account after 2 years from the date of first disbursement to the borrower/institution (In case, the Bank’s advance goes “bad” before 2 years period is over, Margin Money will be adjusted by the banks to liquidate loan liability of the borrower either in part or full). Para-24.2.3.4 provides once the Margin Money is released in favour of the loanee, it should be kept in Term Deposit Account for 2 years at branch level in the name of the beneficiary/institution. Interest accrued on such deposit will be utilized to service partial interest burden on the loan disbursed to the beneficiary/institution. 13. The writ petitioner—Board by its letter dated 19-01-1998, Ex.B2 agreed to extend financial assistance by way of Margin Money @ 30% to women beneficiary who have been sanctioned loan upto 95% of the project cost of the scheme and the beneficiary shall have to bear 5% of the project cost. The 30% Margin Money amount will be kept in short term deposit upto 2 years in the name of beneficiary with the bank and the same shall be adjusted against the loan amount of the beneficiary after successful running of the unit and prompt payment of instalments to the bank and requested to consider the sanction of loan amount of Rs.1,28,250/- to the complainant and to send sanction order along with 1st instalment release order to the petitioner’s office early so as to enable it to process the application of the beneficiary for considering sanction of 30% Margin Money. 14. Admittedly, for the financial year 1998-99 no loan as such was sanctioned by the 3rd respondent—Bank. The petitioner—Board by letter dated 05-02-1999, Ex.B1 requested the 3rd respondent—Bank to consider the sanction of Rs.1,79,255/- i.e. 95% of the project cost as loan to the complainant if her scheme/project report is found to be feasible and furnish the documents for taking necessary action. As per the said letter the 3rd respondent—Bank was called upon to furnish the following documents: 1. Copy of bank’s sanction letter; 2. Copy of bank’s appraisal note/report along with the project report/profile; 3. Copy of bank’s release order, releasing the loan to the entrepreneur; 4. Copy of S.S.I. Certificate and 5. Copies of licences obtained and submitted by the entrepreneur. 15. During the financial year 1999-2000 no copy of bank’s sanction letter was forwarded by the 3rd respondent—Bank along with documents required, but by letter dated 13-06-2000, Ex.B8 the 3rd respondent—Bank addressed to the writ petitioner—Board with a request to arrange for release of 30% Margin Money on the project cost i.e. Rs.1,88,690/- at the earliest to enable the beneficiary relieved from interest burden, enclosing the head office sanction letter for ready reference. Admittedly, till such date i.e. 13-06-2000 no sanction letter or other documents, as required by the Board in its letter dated 05-02-1999, was furnished to the Board. 16. In view of the same, the Board is not under obligation to release 30% of the Margin Money to the complainant, as either the complainant or the Bank furnished the documents required by the Board for release of the Margin Money. Nowhere in the complaint filed by the complainant it is stated that the documents required by the Board were furnished for release of Margin Money. 17. The word ‘consumer’ as defined under Section 2(d) of the Consumer Protection Act, 1986 reads thus: (d) "consumer" means any person who,- (i) 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 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 (ii) 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 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. Explanation. For the purposes 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. 18. From the above definition it is crystal clear that the Board has not extended any services for a consideration received by it to the complainant, but it only sanctioned grant to encourage the beneficiary under the scheme formulated by it to provide rural employment, which cannot be construed as service for consideration. 19. In view of the fact that both the complainant and the Bank failed to furnish the documents required for release of grant, namely, “Margin Money”, they cannot complain there was deficiency of service by the Board to fasten the liability. 20. Once the complainant is not a ‘consumer’ of the 2nd respondent—Board within the meaning of Section 2(d) of the Consumer Protection Act, 1986, no liability can be fastened on failure of the Board in release of Margin Money. In view of the same, the impugned order passed by the 1st respondent—Forum cannot be sustainable and it is accordingly set aside and C.D.No.84 of 2004 is dismissed insofar as petitioner—Board is concerned. 21. The Writ Petition is accordingly allowed. No order as to costs. _________________ A.GOPAL REDDY, J. _______________ NOUSHAD ALI ,J. 10-02-2010 Murthy