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When The Banker Is Always Right

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Sharan Ranganathan looked at the State Forum's order: "District forum judgement is correct and no deficiency in service from the Bank's side." So there he was, back in the dog house without a bone to chew. Only a few days ago, the District Forum, too, had smashed his petition.

Sharan was an ordinary professional, led an ordinary life, did ordinary stuff, and thought ordinary thoughts. His life revolved around his mother, wife, daughter and employer. He was also a secretary of the society for clean roads in Komley Nagar. Every Saturday, he took a round of the streets, told the teams what needed to improve, then came home to a hearty tiffin of upma and peaberry coffee. At 6 pm, he drove the three women of his family to the local Balaji temple, where they sat in contemplation for 30 minutes while his little daughter ran about making a terrific racket with her anklets and ‘vande mataram' sung in soprano, the only song she knew, learnt at play school.

One day Sharan did the most extraordinary act. He hired a lawyer. For the Ranganathan family, it was a serious move, but they were clear that they had done right. His mother Gomati looked at him through bleary eyes and gasped, "Lawyer-ah?" When Sharan explained to her his helplessness, she said, "Words like ‘police', ‘vakeel', were not even spoken in our house. We minded our own business and lived our small lives. Your father would have been proud of you. Go, get that lawyer. We will see!"

This is what happened. Sharan lived with his family in a rented apartment. Now that the little one was growing up, he decided it was time to buy his own place. He earned well, was an associate VP, would be able to commit to an EMI... and so it was that he scouted around and found a decent apartment in Horizon View, a rather good property developed by Gem Builders.

Next, Sharan submitted an application for a housing loan to a bank on 31 January. It was a poignant moment as he sat with the bank manager below a very poor print of the Father of the Nation. Partha Dharma, the bank manager, drummed his fingers at the foot of Sharan's application... Presently, he placed another form before Sharan. "You will have to first buy Ulip worth Rs 30,000," he said. Sharan was surprised. "Eh? Why?" he asked. Dharma laughed a tinkling laugh, "Bank has to achieve targets, no? To serve you! So each home loan applicant has to take this Ulip. Their agent is sitting there by the water cooler. Fill the form, hand over the cheque, and bring the receipt to me."

Sharan felt the beginnings of an unhappy feeling inside. This was undue coercion and an unfair trade practice. He disliked dishonesty. He hated it when he was unable to protest. So he grappled with his soul and paid for the Ulip. Next came the need to have the new property at 9B Horizon View surveyed by the bank. The bank manager said, "But you will have to pay the conveyance charges. If not, it cannot be done." The tinkling laughter had gone.

Sharan looked at the man, his brass designation plate, numerous gold rings, perfectly trimmed moustache... With a withering look towards the Mahatma in the frame above, Sharan submitted to coercion, and handed over a copy of the sale deed. Nine days later, on 9 February, at 8.10 pm, the loan for Rs 18 lakh was sanctioned, which he would repay in 240 months at an interest of 9.25 per cent. Sharan was relieved. He circled 9 February on his calendar and offered sincere prayers at the Balaji temple.

The next morning, Sharan went to the bank's lawyer's office to collect the draft of the sale deed. The lawyer, looking at the papers, told Sharan, "The following changes must be made to this sale deed. One, the original buyer James Joyce's name must appear on the first page of the sale deed. Two, the car park with the apartment must be on the deed, and, three, the sale deed should be not for Rs 7 lakh + Rs 29 lakh — which no doubt is the consideration paid by Joyce to Gem — but the guideline value on which the stamp duty has been assessed, that is, of Rs 21 lakh, must replace the amounts on the sale deed.".

So a war had begun between the main bank and its branch. The main bank wanted the builder to add more clauses, which he refused to do. So although the branch had sanctioned the loan, by morning, when Sharan went to the bank to take the sale deed, the bank lawyer had pulled the rug.

Now to get a fix on the variety of numbers in this transaction: Apartment 9B had been a direct purchase by James Joyce as a first sale from the builder Gem. James had paid Gem Rs 7 lakh under a sale deed for the undivided land; and Rs 29 lakh under a construction agreement; that is, Rs 36 lakh in all. Both documents — sale deed and construction agreement — were attached to Sharan's loan application. James was now selling the apartment to Sharan for Rs 45 lakh.

Since he was selling so soon after initially buying it, James had not registered the apartment in his name, but he had paid the transfer charges to Gem Builders. Under law, the flat would need to be registered at a value called ‘guideline value', on which he would need to pay the stamp duty. Accordingly a demand draft was made out by Sharan favouring the registrar's office and given to Gem. All transactions were in white money.

These very documents had been the bank lawyer's basis for verification, ("We were not supposed to go through another lawyer as per the bank's instruction") whereafter the bank had sanctioned the loan. Now, the same bank lawyer was displeased. This was not making sense... Leaving work, he ran to Gem Builders, but Gem declined to make any change to the sale deed. "This is the deed format that every buyer has and it has worked quite well for all of them."

When Sharan told the bank lawyer this, the latter shrugged and said, "Well, then the loan cannot be disbursed." Sharan was shell shocked.

Now there was no loan, and, as is wont to happen in the lives of those buying their first house, Sharan was running back to back so that the day he would get the loan cheque he would retire his tenancy, and the same day Joyce would give that cheque to the seller of his new house and simultaneously hand over 9B to Sharan. The planning was so tight, there was not even half a day to bargain. So, as luck went, his tenancy was handed to the next tenants, Joyce was unable to pay for his new property, and hence did not hand over 9B.

Net net, as they say, Sharan, his wife, mother and daughter were on the streets. Harried by the amount he had already spent on a loan that was moonshine, Sharan asked that the loan processing fees, property surveyor charges, and the taxi money be repaid. The bank refused.

And thus, the Ranganathan family hired a lawyer, who filed a case against the bank and the builder in the consumer court.

In the consumer court —
The court: The bank insisted on including some more clauses in the sale deed, which was not agreed to by the builder. The builder contended that it was a standard draft of the sale deed. Thus there was difference of opinion between the bank and the builder over the contents of the sale deed, and because of this, the sale deed could not be executed. The bank had also suggested that Joyce's name be on the sales deed. But the builder did not agree...

Sharan's counter: Not true! James Joyce's name does appear on the sale deed! But the bank wanted it moved on page one. Gem refused to make any changes. How does it make the sale deed invalid?

Bank's lawyer: Although James had assigned his right to the flat in favour of Sharan, the deed of assignment did not adequately protect the interest of our customer Sharan. It was only fair to make the assignor James, a party to the sale deed.

And, how was he protecting my interest when he asked me to buy Ulips? thought Sharan.
The Builder argued that he had sold 700 apartments using the same sale deed format. Point being made was that this was a standard sale agreement and nearly 55 per cent of the buyers had availed bank loans and were now cooking in those flats and watching IPL as well.

Sharan: The document that was used by everyone and technically called the sale agreement was for the land value only, and there was a construction agreement that was always appended to it. The bank had seen the land agreement, the construction agreement, assured itself that the cost of the apartment to the original buyer was Rs 36 lakh, that the guidance value was Rs 21 lakh, and that was how they were sanctioning me Rs 18 lakh and not Rs 7 lakh as loan!

Bank: Gem had reduced the consideration for the sale to Rs 7 lakh for the purpose of registration. This violated the provision of the Stamp Act. This was why we wanted the inclusion of Joyce as a confirming party so that our esteemed customer Sharan Ranganathan's interests were protected!

Sharan: Disagree! Not tenable. Because James Joyce's name does appear in the sale agreement. Two, the builder has not changed any value. Stamp duty has been paid on the guideline value, that is, the value that the local authority demanded as legal and correct. What was more, the builder had even taken a demand draft from me favouring the local authority. Bank has seen copy of that DD. So a claim that there was a violation of the Stamp Duty Act or any kind of defrauding of the government, is mischievous.

 When the Court sought to blame the builder, Gem got upset and said that the issue at hand was non-disbursement of loan that concerned the bank and Sharan and had nothing to do with Gem Builders. Hence, if the loan was not sanctioned by the bank, the builder could not be dragged to court or held liable for anything.

Sharan argued that the instrument germane to sanctioning the loan was the sale deed. But since others had availed of bank housing loans on an identically constructed/worded agreement, this was a non-issue that the bank was raising without grounds.

The consumer court held: "There is no dispute. If we probe the facts of the case, it shows that the bank proposed to sanction the loan on the builder executing the sale deed in favour of the complainant, Sharan. The difference arose only over the contents of the sale deed. The bank has insisted that James Joyce, who is the assignor, should be made a party to the sale deed."

Sharan: Disagree! The loan was sanctioned a month ago based on exactly these three documents. James appeared on the last page then too. These were seen by the same lawyer, for which he took a hefty charge as survey fees, processing fees, etc. The bank gave me a letter sanctioning the loan. So there is no question of ‘proposed to sanction'.

So here was a unique situation. Sharan was the aggrieved party because he had applied for a loan and paid all kinds of monies to have it sanctioned. It was sanctioned but not disbursed. The bank was blaming the builder, and vice versa. And in a quaintly derived verdict, the court went on to say, "These things go to show that the parties could not agree about the contents of the sale deed and because of that the transaction could not materialise. The bank wished to protect the consumer's interest and its own. After all, they are giving the loan for a property, which was the subject matter of a disputed sale deed.

Since the deed was defective, and both Sharan and Gem also did not agree to the changes, the loan could not be completed. Hence, it cannot be said that it is a deficiency in service by the bank."

Sharan argued: "Fair, then kindly let the bank explain how were the terms agreeable when they sanctioned the loan. It was on the basis of the sanction that we made other financial decisions that are now irreversible. The Hon'ble Judge may please know that between the sanctioning of the loan and the date the disbursement was refused, that is, 15 hours, those documents have not undergone any change!"

But the court continued: "Hence we are of the opinion that the complaint is liable to be dismissed and this is being held against the complainant Sharan Ranganathan."

Sharan sat there looking at the airbrushed photos of various Gandhis on the walls, and asked himself: what am I doing here? How did I reach this state where I have to hear people like these conclude so strangely?

The judge continued: "The complaint is frivolous... because even though the bank wanted to give the loan, it could not as the sale deed could not be executed. Hence, the bank cannot be blamed and the transaction did not fail due to its fault or omission. Yet the complainant has filed a complaint. We hold such a complaint to be frivolous... and it is a fit case to invoke Section 26 of the Consumer Protection Act 1986 and to impose a fine of Rs 10,000 payable by Sharan to each of the opposite parties: the bank, its lawyer and the builder..."

This was most bizarre. Sharan looked at all of them — the strange banker, the stranger judge. The strangest of them all was the Mahatma... what is he doing here? Distraught, Sharan asked his lawyer, "If the sale deed was germane to the loan transaction, how did the bank sanction the loan? Where are their checks and balances? Or was that just a ploy to get me to buy the Ulip? Is not the subsequent refusal to disburse the loan after sanctioning it a contravention of its contractual responsibility to me?

Sharan argued, "How do I get blamed for a sale deed that is not tenable, that I had no hand in preparing? Did they tell me the deed was defective when I presented my loan application? No! They accept it, survey the property, charge me for legal services, make me buy a Ulip and then say ‘Oh but...!' Yet, the only one who can make changes to the sale deed is Gem. But they claim ‘standard practice'! Therefore, if that is standard practise, and 400 other residents have availed of loans from banks, how is it my fault? How does it become a frivolous complaint? Worse, I am being asked to pay them fine money? If this is not insane, what is?"

Sharan's HR head, Daksh Sirur was appalled: "This is like a nightmare! But here it is, at our doorstep... We the educated, literate with our IIMs and IITs and MITs, sit passively, fumbling! No wonder my brother refuses to have children! This kind of future would be a curse on them!"

Meanwhile Sharan ran to another bank, X, and applied for a loan, this time at 10.5 per cent. The loan was processed in due course and disbursed too. With this higher rate, Sharan was out of pocket by Rs 4 lakh, including all the freebie money he had paid the previous bank. Bank X had also examined the sale deed, the construction agreement and the agreement between Joyce and Sharan, and found them all suitable to extend the Rs 18 lakh-loan.

Sharan's divisional president Gautam Vasisht had been shaken by the verdict and the penalty on Sharan. "I don't believe this!" he had said. He read out from the second page of the "Court's Order", which was duly stamped and signed by all kinds of ‘responsible' human beings. "Daksh, listen to this. ‘The bank approved of the loan, but did not disburse it for reasons known best to them.' This is how they begin their Order. I am taken aback. What on earth is that supposed to mean? Seriously, I would ask you to take our legal department's help and fight this on the back of ‘verdict that is contradictory to understanding'. If they aver that they do not know why the bank has refused to disburse the loan, how the heck can they give a verdict that Sharan's complaint is frivolous or even that the bank ‘cannot be blamed and the transaction did not fail due to its fault or omission'? So where does that verdict come from? Either the court does not know why the bank refused the loan, or it does. Which is it?

"Then again, listen to this. Here, in para two of their Order, it says, ‘The complainants (Sharan) were in urgency to take the loan and because of that they were asked to simultaneously process the loan application without waiting for legal opinion and... have proceeded simultaneously.' This order assumes the bank's intentions by saying complainant was in a hurry! But that cannot explain why it sanctioned the loan, isn't it? There is a darn sanction letter in writing and stamped, for heaven's sake. How does a bank do that? Wow, and look at this Daksh, did you read the sanction letter? You can nail the bank on this. Nowhere does it say that this is a conditional sanction! If anything, read the last line in the sanction: ‘Please note the above sanction is valid for only three months.' Nothing more!"

Daksh: All this points to a complete absence of ethical people management — at the bank, at the builder's, at the court. Each of them has held on to his argument, and together they are seeking to drive the nail into Sharan's coffin. Who are these people answerable to? It is as if all these bodies exist to provide employment to various humans but not to perform a duty. Who will audit their decisions and verdicts?

Who owns their respective consciences? This is the state of almost all of India. Nobody does a values check before acting. No questions of ethics have ever been resolved in our country. Everybody acts from behind the fig leaf of a damn designation. Who will bell the person behind that designation?"

Classroom Discussion
Why is the delivery of justice seen as victory or defeat, and not as fairness?

(This story was published in Businessworld Issue Dated 07-11-2011)