The branch had a chaotic system of accunting, and did not furnish a statement of repayments adjusted and did not produce any legible statement of interest and bank charges.
The company has been communicating, in writing since July 2002, asking the bank at all levels for a comprehensive statement of account. The bank has been dodging this basic requirement, which is a matter of fundamental right to information by the account holder.
The bank rushed to court in defence with a slip shod statement of accounts from an arbitrary date of the year 2000, a two column statement showing details for one column - loans released, with no details on the other column - repayments mad ( internally adjusted from export proceeds realized ), totalled up a sum of principal and interest amounting to Rs 1.24 crores, and expects the Judiciary to award an order for recovery. The liability is not proved, the bank presented a completely one sided history and the bank totally suppresses all particulars of export proceeds routed through the bank that exceeded US $ 1.5 million.
The following is a document in file that contains arguments prepared on the need for a consolidated statement of accounts. This document is an internal note ( note prepared and sent to the Legal Counsel as input to prepare a petition:
OA 268/03
01 The defendent and petitioner reiterates all the averments in the petition/affidavit filed on 18.12.2003 and repeated on october 2003
02 The defendant company questions the validity, truthfulness and accuracy of the respondent's application against the petitioner at the DRT for realization of a total amount of Rs 1.24,14,848.00 as it is not tallied to show loans and repayments to arrive at the claimed figure of Rs 1,24,14,848.00. All that the respondent has filed a statement of Packing Credit Loans released to the defendant on various dates in such a way that the total is 1,24,14,848.00. Such a list of packing credit loans, can show any amount, be it 1.24 crores or multiples of it as the respondent fancies because the table shows loans said to be released wilfully and misleadingly omitting all repayments made during the corresponding period. On this and on several other counts the respondent's application misleads the Debt Recovery Tribunal.
03. The defendant reiterates the averments made in para 3 of the Affidavit of the petition. It was stated that the OA filed by the Bank and the claim raised therein are highly imaginary and exaggerated. It was further stated that the claim statement is devoid of documents and in suppression of essential reports, papers and statements. The defendant reiterates the averments and elaborates as below:
a) The false basis of the original application 268/ 2003 dated 25.08.2003 the responant is a statement that shows Packing credit loans released to the defendant company during 05.7.2000 and 22.03.2001. The applicant bank has produced this record which shows packing credit loans released but does not show and wilfully and maliciously omits REPAYMENTS DURING THE SAME PERIOD. During the same period repayments by way of export proceeds routed through the FDBP account exceeds Rs 68 lakhs, the exact amount to be stated before the tribunal only after the respondent furnishes the statement of accounts.
b) The application filed by the respondent does not show ALL LOANS AND ALL REPAYMENTS DURING THE LENGHT OF THE BANKING ARRANGEMENT- the one sided statement of loans for an arbitrary period contravenes all principles of accounting and violates the basic norms of accounting. The applicant bank has not shown any history of repayments by the defendent and interests levies taken from the defendant's account. The application misleads the Tribunal by completely suppressing an amount in excess of Rs 600 lakhs of remittances (about as much as US $ 1.5 million, mostly in US dollar denominated receipts) to the bank by way of export and local sale proceeds, the exact amount to be stated before the Tribunal only after the bank furnishes the detailed and comprehensive statement of accounts.
c) The packing credit facility extended by the respondent is merely one component of the defendent's banking arrangement with the respondent. The Packing Credit facility was interlinked with another facility known as FUBP facility, which the bank conveniently modified from time to time as a FDDP facility or RABC facility arbitrarily and as it fancied fit, though which the defendent remitted all Export Proceeds in excess of Rs 600 lakhs (Total export and local sale proceeds routed exceeded this amount). The bank deducted an interest for the FUBP/FDDP/RABC facility, deducted an interest for the Packing Credit Loans, took away a part of the proceeds as Bank Charges and Bank Commission, other charges, moved an amount equivallent to the all the remaining amount of the Export Proceeds through FUBP/FDDP/RABC towards repayment of outstanding Packing Credit Loands and at times transferred a percentage of the FUBP/FDDP/RABC proceeds to a Term Deposit Account.
The defendant company's pre-shipment fund needs were meant to be financed by the applicant bank by the facility called a PCL A/c (Packing Credit Loan Account) with the applicant bank. The PCL loans were utilized to fund the company's production and other needs. Peiodically, upon requests from the defendant the applicant bank would release a PCL loans by transferring the requested amount in the defendant company's Current A/c No Cd 5893. The applicant bank did not have the practice of issuing a Pass Book for this account, nor did it issue periodic statements of withdrawals, interest taken, repayments debitted and bank charges. Total transactions so far about Rs 5 crores of PCL withdrawals and automatic repayments (adjusted from Export Sales proceeds realized through the bank accounts) of a corresponding value.
After the applicant bank transfers the Packing Credit Loan to Current A/C CD 5893, the defendant company would withdraw the required funds from this account to the extent needed for its production and other requirements before shipment. After shipment, the company produces all documents (as per Letter of Credit) to the bank which PURCHASES the documents at a foreign currency value fixed by the bank, and the the value of Export Bills PURCHASED by the bank and the proceeds adjusted for repayment and finance charges. The applicant bank did not issue a passbook for Current A/c CD 5893. Computerized statements were issued on request. The statements show PCL released, but not PCL repaid. The applicant bank paid out an insurance premium to Export Credit Guarantee Corporation to protect the money it advanced to the defendant company. Some of the ECGC Insurance installments debitted are shown in the statements of accounts, but not all ECGC installments debitted are shown. Sometimes PCL Interest / FUBP interest taken are shown but without details. Not all PCL interest taken are shown. Totally about Rs 5 crores of PCL loans inwards, about 6 crores of payments made outwards were the transactions, which require complete particulars.
The applicant bank purchased the defendant company's Export Sales Revenue in US dollars at an exchange value as fixed by the applicant bank. Total Export transactions of our company through this account was approximately US $ 1.5 million. The Export Bills so purchased by the bank were temporarily treated as a FUBP transaction. The applicant bank did not issue a passbook nor did it issue periodic transaction statements. Total PURCHASES BY BANK of about US $ 1.5 million This value is not directly released to the Current A/c but SPLIT UP by the bank in the form of FUBP Interest debits, PCL interest debits, ECGC (Insurance) debits, Bank charges debits and after all this the remaining amount is transferred to PCL account for REPAYMENT OF PCL and sometimes a portion of the balance is retained by the bank as a TERM DEPOSIT and any balance is transferred to Current A/c.
d) The applicant bank did not issue any comprehensive statement or a passbook though its transactions followed such a complicated route. There is no PCL passbook and no statement of PCL account given. There is no FUBP passbook and no statement of FUBP outstandings given. Current A/c does not reflect PCL outstanding or FUBP outstanding. No statement of interest, bank charges, Insurance (ECGC) and other debits ever given by the bank.
e) Unless the applicant bank issues a CONSOLIDATED statement of accounts comprehensively showing datewise PCL withdrawals, datewise PCL repayements, datewise PCL interest, datewise FUBP purchase details, datewise FUBP remittances to various accounts, datewise FUBP outstanding, datewise bank charges the defendant is not in a position to verify the basis of the appliant bank's claim. ONLY BY INTEGRATING accounts in this manner can the bank establish that their accounting is proper. It may also please be taken note that the Erode branch of the applicant bank has had a consistent history of corrup bank officials so there is no reason to believe that the bank's accounting is above suspcion.
f) This request for a comprehensive statement of accounts were made several times to the Branch, and thereafter this request was sent to the branch by email with a copy to the Chairman on July 7, 2002 for which we received an unsatisfactory reply on July 19, 2002 from Mr Cletus C A of the General Advances Department (GAD) of the bank with an email attachment of his letter dated July 18, 2002. (Copy enclosed). The reply glossed over the request made and immediately a reply was sent insisting on a comprehensive statement of accounts and there has been no response to the request from the bank since. Mr Cletus' response was rejected forthright by the defendant company and it reiterated its request for a comprehensive statement of accounts the same day, July 19, 2002. This matter has been been subsequently raised with the Reserve bank of India on various dates ( one of the more recent communications sent to the Exchange Control Deparment on 17th November 2003 and later to the Finance Minister vide our Communication dated 31st August 2003.
g) The bank has made false averments in para 3 of IA 699/03 filed on 17.07.2004 that the "petitioners were provided with the copies of the various transactions then and there". The bank did not have a practice of maintaining legible and clear accounts nor did it ever issue an intelligible statement.
h) It has always been difficult to obtain accurate records from the branch and even when taken up at the level of the Chairman of the bank, the bank has been evasive as evident from the bank's refusal to furnish records even over two years after the company brought this request to the attention of the Chairman vide its letter dated July 7, 2002.
i) Para 03 of IA 699/03 in OA dated 17.07.2004 filed by the respondent states that the respondent has filed the original applicaion certified under the Banker's Books Evidence Act .... The so called "original application" dated 30.8.2000 signed by the defendant and enclosed as part of the Bank's application to DRT is not the original application by the defendant. The orginal application is suppressed by the respondent bank. What is produced for record under the Banking Books Evidence Act is a part of the routine paperwork prepared and typed out by the bank and presented to the defendant company for signature on the day of sanction and documentation. The original application for a facility equal to the sum sanctioned was made on 22.09.1998 which was 700 days prior to the date shown in the record enclosed. The bank's reluctance to act on time resulted in a situation wherein the defendants were compelled to restrict their operations with temporary limits, sublimits, insufficient enhancements which after 700 days finally resulted in a sanction for the sum applied, by which time the limits sanctioned amonted to too little too late and had caused the company forego several valuable business transactions.
k) In presenting this routine record so called "orignal application" the bank presents a picture of instant application, instant assessment, instant head office approval, instant documentation and instant disbursal. The so called "original application", the various agreements, the various documentation, the board resolution, the signatures - all are dated 30.08.2000. The defendants submit that the applicant bank was far from instant, the bank took years to respond to business needs which was damaging and restrictive.
04) Para 04 of the IA 699/03 filed by the respondent alleges that the defendant is delaying the proceeding of this tribunal. The defendants are victims of all the delays caused by the respondent and the dealys at the Tribunal further aggravate the damages caused by the Respondent bank to the defendant company. It is the Applicant bank who causes the delays and not the Respondent:
a) Our petiton to the DRT seeking a directive for the said statement filed on 19.12.2003 (SKN 748/03) was not complied with by the bank which feigned to comprehend what was petitioned for and furnished a redundant copy of its original application No 269 dated 25.08.2003 instead of the comprehensive statement of accounts petitioned for, so it is the bank which engages in delay tactics.
b) Our petiton was filed once again and rather than choosing to furnish a statement of accounts the applicant continues to be evasive from the defendant's petition for a comprehensive statement of accounts.
d) If a legible statement was ever issued it should TALLY the balance as claimed as Rs 1.24,14.848.00 and because the bank is unable to do so, or has something to hide, the bank is evasive about this simple request for a statement of accounts pending since July 7, 2002 for nearly 800 days now. The applicant bank's system of disbursal and accounting was so complicated that is evasive and adamently refuses to furnish a clear statement of accounts.
e) It is not the defendant company who is "avoiding payment of a legitimate claim" but the applicant bank whose application to the Debt Recovery Tribunal is by itself a diversion from the 'defendant' company's representation to the Reseve Bank of India and to the Finance and Commerce ministries of the government of India seeking an investigation and intervention into the bank's restrictive policies and debilitating management practices that reversed the defendant's company's steady progress and proven prospects.
f) The applicant bank's application presents a picture of instant response to the company's Export Credit needs - the company filed an application for credit facility on a certain date, the bank sanctioned it on the same day and the funds are disbursed the next day on so on... The bank furnished selective records to present such a misleading picture. This is far from truth. The dates of our application for the credit facilities are different from the dates on the application form the respondent has shown. These are the dates when the bank completed the sanction formalities which included a formal application form. The respondent has misled the Tribunal by suppressing the actual dates of the application and suppressed the destructive delays in processing the credit needs which amounted to a time delay of 180 to 700 days.
g) In summary our complaint to the Reserve Bank of India dated March 12, 2002 (after waiting for a response to a represntation to the Bank's chairman made on 10th December 2001) was about the following:
With all the procedural problems and delays we were performing very well as an exporter and our performance improved from US $ 106,600 in 1996-97 to US $ 473,476 in 1998-99 a four-fold growth of performance in 3 years . This could have been far more if the bank had been professional and if the branch administration was clean in its assessment and service.
- The bank Refused to consider a promising proposal for creating manufacturing facilities
- The bank Blocked us from utilizing a term loan of Rs.1.5 crores sanctioned by SIPCOT
- The bank took our 180 days to partially concede to our requirement as PCL of Rs.75 lakhs
- The bank took 700 days to fully sanction our requirement in full, by white time the sanction was too little.
- The bank prevented us from moving to any other bank which could have more responsive.
- The bank hurt a major export order for US $ 803,750 placed by our regular buyer who had established a buying record well known to the bank, in spite of our repeated request for assessment of this highly time sensitive situation. At that point of time our limits were Rs 80 lakhs of Packing Credit and Rs 105 lakhs. The Packing Credit was fully utilized while all the bills purchased by the bank had realized, but the bank did not offer us the flexibility by considering the unitized portion of the post shipment limits usable. Nor did the bank allow us even the marginal flexibility of exceeding the sanctioned Packing Credit limit even by a fraction. With this impossible situation the export order of US $ 803, 750 could only be partially executed, that too with market borrowings forced upon us by the situation, which was also not sufficient, so the production was delayed, quantities ordered were reduced and finally the order was largely cancelled. With this event, our progress began to reverse, and our company's finances were severely damaged. The bank watched us degenerate and collapse without even acknowledging that its Erode Branch has hurt a customer so badly.
- The bank has done more serious damage by abruptly freezing our account due to which our business came to a standstill during the last four years with prosperous opportunities for growth and profit foregone and the losses are increasing.
- The bank blindly refuses to evaluate our requirements, problems and prospects in spite of various repeated requests for a comprehensive understanding of our problems and prospects.
- During the last four years the bank has been completely silent on its role, refuses to acknowledge any communication from us to its Chairman or other officials.
- The bank has not provided us with a comprehensive statement of our transactions after repeated requests from us. The bank's accounting system at the branch was very vague, it accounting format was confused and the bank is very reluctant to furnish us with a comprehensive statement of accounts.
h) It is the applicant bank which is trying to divert attention away from the defendant company's request for intervention and claim for damages pending with the Chairman of the Bank since July 17, 2003. The applicant bank has diverted the situation as a recovery proceeding and has withheld this and several other facts and has misled the Debt Recovery Tribunal.
05) The respondent has submitted that the defendants have executed balance confirmation on 29.08.2000. The applicant bank claims itself absolved of the obligation to furnish accounts by pointing out that the defendant company has signed a balance confirmation.
a) The defendant does not recollect this particular signature which was one of the several hundred signatures affixed on various papers prepared by the applicant bank - the so called "original applicaiton", Application for enhancement of Packing Credit facility, Board Resolution in the dictated format, Description of property, promisary note(s), agreement of packing credit hypothecation of goods, agreement of export advances, application for enhancement of Bill Discounting facility, another description of property, another promisary note, agreement of bills purchased and discounted, agreement of usance bills discounted, agreement of export advances, renewal of promisary note, security delivery letter, various annexures, modification of charges, and a register of charges. All these papers were matters of routine, signatures were affixed as a matter of trust and as a matter of routine.
b) It was perhaps a routine signature that the Managing Director of the defendant company affixed as one of the numerous signatures (about 100 each by the Managing Director as Managing Director, Managing Director as a person, Director as a person, Gurantor as person - each about a 100 signatures, on each of the dozen occasions when the bank pressed documentation during the period 1996- 2001), passed off as routine, affixed in trust that the bank was above suspcion.
c) The company became concerned about the validity of the applicant bank's accounting practices after it became known that at least two branch level officials were under investigation for financial impropriety.
d) If the applicant bank is so certain that its books and practices are square, it would not be so evasive from this petiton. In the context of the facts pertaining to the administrative history of the particular branch of the applicant bank, the defendant considers it vital that the bank produces a fair and proper comprehensive statement of accounts that would present an accuarate picture which would substantiate or withdraw the claim presented to the Tribunal.
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