TN corporation fined Rs.26 lakh for delay in disbursing loan

Last Updated: Tue, Jan 22, 2013 09:10 hrs

New Delhi, Jan 22 (IANS) Harassment by a disbursing agency that withholds an instalment of a sanctioned amount is deficiency in service, the top consumer court has said while directing a Tamil Nadu government organisation to give Rs.26 lakh to a factory owner.

The Tamil Nadu Industrial Investment Corporation Ltd (TIIC) was dragged to the National Consumer Disputes Redressal Commission by Packer Sea Food, a company based in Kanyakumari district, that alleged dithering on the release of an instalment of a loan sanctioned for construction of a factory.

"We hold that the complainant has fully succeeded in establishing that the delay in disbursal of the term loan with subsidy as well as part non-release of the same after March 1995, was without any justifiable cause. This failure to provide proper service to their borrower, amounted to deficiency of service on the part of the TIIC," said commission's Presiding Member J.M. Malik and Member Vinay Kumar.

Allowing time till April 1 to the TIIC to pay Rs.26 lakh, with interest, to the company, the commission said in a recent ruling: "The total compensation payable under all admissible heads is rounded off to Rs.25 lakh. Cost of Rs.1 lakh is also awarded in favour of the complainant."

"The TIIC is directed to pay this amount of Rs.26 lakh to the complainant, together with interest at nine percent per annum, from the date of the complaint," the commission said.

TIIC has the legal right to appeal before the Supreme Court against the commission's award.

The funding agency defended itself by claiming that collateral security for the loan was required to be provided by the company and a delay in doing this held up the disbursal of loan.

The TIIC also alleged that even after the loan account between the two parties was settled, the Marine Products Export Development Authority of the central government informed that invoices/bills and receipts submitted by the company to the loan disbursing agency were fabricated and false.

The company, through its managing director C.P. Azariah Samuel Raj, said in its complaint that it was sanctioned a loan of Rs.70 lakh in 1993 for setting up a marine products processing unit.

By the time a complaint was filed in a consumer court, only Rs.44.83 lakh out of the sanctioned loan amount had been released and the remaining Rs.25.17 lakh and subsidy were never released, the company said.

The company sought compensation for cost escalation for building and machinery and business loss. It alleged that the project suffered a delay of over two years due to the failure of the TIIC to make timely and sufficient disbursal of the sanctioned loan.

The company also sought relief of Rs.25 lakh towards mental pain and agony but it was rejected by the apex consumer court.

"There is no case for allowing further compensation of Rs.25 lakh claimed towards mental pain and agony, as interest on delay in (loan instalment) release, cost escalation as well as business loss have separately been allowed," Malik said.

The commission also pulled up the TIIC for trying to cover up its lapses by offering excuses.

"Delay in disbursal is sought to be explained on the ground that the purchased machinery (though reflected in the evaluation report of July 7, 1994) was not found in the factory during subsequent inspection by the TIIC. But, it is also admitted that Rs.16.88 lakh were released in March 1995, based on the evaluation report of March 10, 1995," Malik said.

"There is no explanation as to what happened in between to satisfy the TIIC that the 'missing machinery' was not physically missing. We are, therefore, of the view that the delay on this account cannot be treated as bonafide conduct on the part of the TIIC," Malik said.

(Rahul Chhabra can be contacted at

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