Kupwara Consumer Commission Orders Cooperative Bank To Honour OTS, Issue No Dues Certificate

The District Consumer Disputes Redressal Commission, Kupwara, Jammu and Kashmir, comprising President Peerzada Qousar Hussian and Member Nyla Yaseen, held Baramulla Central Cooperative Bank guilty of deficiency in service in a dispute concerning the reversal of a ₹50,000 One-Time Settlement (OTS) of a loan originally amounting to ₹2 lakh, taken by the complainant's deceased husband.

Facts:

The complainant's husband, Gh Sarwar Shah, had obtained a business loan of ₹2 lakh in 2009, sponsored by the KVIB Kupwara, for his business unit. According to the complainant, he initially repaid the loan through regular instalments. However, in 2013, he suffered a serious illness, which adversely affected his business and his ability to continue making repayments.

The complainant stated that her husband subsequently died in 2019, leaving the loan outstanding. She claimed that the family's financial condition deteriorated significantly following his death, as he had been the sole source of income.

According to the complaint, the bank subsequently offered a One-Time Settlement (OTS) of ₹50,000 against the original loan amount of ₹2 lakh. The complainant accepted the settlement and deposited the agreed amount. The bank also issued settlement-related documents.

However, despite the settlement payment, the bank allegedly reversed its position and issued fresh demand notices seeking recovery of ₹5 lakh from the complainant. She contended that the demand was arbitrary and unjustified, particularly given that she had complied with the settlement terms and was facing severe financial hardship.

The complainant approached the District Consumer Commission seeking ₹5 lakh for deficiency in service, ₹2 lakh for mental agony and frustration, and ₹1 lakh towards litigation expenses.

The bank was served with notice but did not appear before the Commission or submit its written version. Consequently, the matter proceeded ex parte against the bank.

Observation and decision:

The District Consumer Disputes Redressal Commission, Kupwara, observed that Shareefa Begum had paid the agreed One-Time Settlement (OTS) amount of ₹50,000 against her deceased husband's original loan of ₹2 lakh. Despite this, Baramulla Central Cooperative Bank issued fresh demand notices seeking ₹5 lakh. The Commission held the bank's actions arbitrary, unjust and legally unsustainable.

Allowing the complaint, the Commission directed the bank to honour the settlement, close the loan account subject to verification of payment, withdraw the ₹5 lakh demand notices, cease recovery proceedings and issue a No Dues Certificate. It also ordered the bank to pay ₹20,000 as compensation and ₹10,000 towards litigation expenses within 30 days of service of the order, failing which the total awarded amount would carry 5% annual interest from October 15, 2026, until realization.