Delhi State Consumer Commission Finds Kotak Mahindra Bank Deficient In Service For Auctioning Pledged Gold Jewellery

The Delhi State Consumer Disputes Redressal Commission, comprising Justice Sangita Dhingra Sehgal (President) and Ms. Bimla Kumari (Member), has dismissed an appeal filed by Kotak Mahindra Bank Ltd., thereby upholding the finding of deficiency in service against the Bank for auctioning a borrower's pledged gold jewellery without any contractual authority. The Commission observed that the Sanction Letter governing the gold loan did not contain any clause authorising auction of the mortgaged ornaments in the event of default, and therefore, the Bank's action lacked legal justification. Brief Facts The complainant, Mrs. Sarmila Sharma, had availed a gold loan of ₹77,000 from Kotak Mahindra Bank Ltd. on 29.02.2020 for construction of her house, by pledging 35.90 grams of gold jewellery valued at ₹1,04,103.41. Between 15.03.2020 and 15.01.2022, she deposited a total amount of ₹29,097.59 towards repayment. It was stated that the complainant received a letter dated 27.10.2021 warning that failure to pay interest of ₹3,260 would result in auction or sale of the pledged jewellery. The complainant paid the said interest amount on the same date. However, despite this, the Bank allegedly sold the pledged gold ornaments on 30.03.2022, a fact which, according to the complainant, came to her knowledge only on 26.07.2022. Aggrieved by the auction, the complainant approached the District Consumer Disputes Redressal Commission, alleging deficiency in service and unfair trade practice, particularly on the ground that no prior notice of auction was given and no information regarding the rate, date, or manner of sale of the gold jewellery was disclosed. She sought refund of the loss suffered, compensation for harassment, interest, and litigation costs. Order of the District Commission The District Commission noted that although the Bank had collected the complaint copy, it failed to file any reply and remained unrepresented, as a result of which the complainant's version went uncontroverted. Relying on the principle that a borrower has the right to be informed of the auction process, including the rate and date of sale, the District Commission held the Bank deficient in service. Accordingly, the Bank was directed to pay the value of 35.90 grams of gold at the prevailing market rate (as on the date of the order), after adjusting the outstanding dues. Aggrieved by this decision, the Bank filed an appeal before the State Consumer Disputes Redressal Commission, Delhi. Contentions of the Opposite Party (Kotak Mahindra Bank Ltd.) The Bank argued that the complainant had accepted the terms and conditions of the Sanction Letter dated 29.02.2020 and that a loan recall notice dated 17.02.2022 had been issued due to non-payment of dues. It was further submitted that the pledged gold was auctioned in accordance with law, and that after adjustment of dues, an excess amount of ₹9,357.17 remained, which the complainant was asked to collect. Observations and Decision of the Commission The Commission observed that the concept of “deficiency in service” under Section 2(11) of the Consumer Protection Act, 2019 includes any shortcoming, omission, or deliberate withholding of relevant information by a service provider. On perusal of the record, the Commission noted that although the Bank had issued a loan recall notice, the Sanction Letter dated 29.02.2020 did not contain any clause authorising auction of the mortgaged jewellery in the event of default. The Commission held that the Bank failed to establish any contractual or legal basis for auctioning the pledged ornaments, rendering its plea of absence of deficiency untenable. Agreeing with the reasoning of the District Commission, the State Commission found no ground to interfere with the impugned order. Accordingly, the appeal filed by Kotak Mahindra Bank Ltd. was dismissed. Case Title: Kotak Mahindra Bank Ltd. vs. Mrs. Sarmila Sharma Case No.: FA/191/2024 Click Here To Read/Download Order

Delhi State Consumer Commission Finds Kotak Mahindra Bank Deficient In Service For Auctioning Pledged Gold Jewellery

Praveen Mishra

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