J&K Bank Liable For Disbursing Loan To Third Party Without Borrower's Consent: Kupwara Consumer Commission

The District Consumer Disputes Redressal Commission, Kupwara, comprising Peerzada Qousar Hussain (President) and Ms. Nyla Yaseen (Member), held J&K Bank liable for deficiency in ser-vice for disbursing the loan amount to a third party without the complainant's consent. The Com-mission partly allowed the complaint and held that the initiation of recovery proceedings and charging of EMIs on the entire loan amount, without lawful disbursement, amounted to deficiency in service.

Brief Facts

The complainant, Nasir Ud Din Zargar, was sanctioned a loan of Rs. 10 lakhs under the PMEGP scheme through J&K Bank (Opposite Party No. 2), Branch Old Chowk, Kupwara. Pursuant thereto, the complainant submitted a GST bill for an amount of Rs. 1.20 lakhs, which was duly disbursed in his favour, while the remaining loan amount continued to remain with the bank.

The complainant neither gave any further consent nor approached the bank for any additional dis-bursement. However, the bank disbursed Rs. 6.05 lakhs to a third party, Al Nawaf Pharma (Oppo-site Party No. 1), allegedly without his consent and without valid supporting documentation. It was further alleged that Rs. 2 lakhs was deducted from the guarantors' accounts.

Upon discovering such unauthorized disbursement, the complainant approached the bank on mul-tiple occasions, and although assurances were allegedly given by bank officials that no install-ments would be deducted from the guarantors' accounts, the bank proceeded to deduct an amount of Rs. 2 lakhs from the guarantors' accounts, allegedly in violation of RBI guidelines.

Aggrieved, the complainant approached the Commission alleging deficiency in service.

J&K Bank contended that the complaint had been instituted with an ulterior motive to stall the re-covery of the outstanding loan amount and to harass bank officials. The bank further argued that Al Nawaf Pharma possessed a valid and subsisting GST registration. Furthermore, it was submitted that the reliefs sought by the complainant were beyond the permissible scope of the Commission's jurisdiction. The counsel contended that the loan had been sanctioned in the year 2021 only after obtaining due consent from the complainant.

Observations of the Commission

The Commission observed that the sanction of a loan of Rs. 10 lakhs to the complainant and the disbursement of only Rs. 1.20 lakhs were undisputed. The Commission noted that the bank failed to produce any plausible evidence to establish that it had obtained the complainant's consent for disbursing the remaining amount to Opposite Party No. 1.

The Commission held that the bank acted negligently and arbitrarily in disbursing the loan without proper authorisation. It further held that recovery proceedings and charging EMIs on the entire loan amount, without lawful disbursement, amounted to deficiency in service.

It observed that a borrower cannot be held liable for amounts not received. Accordingly, the com-plainant's liability was restricted to Rs. 1.20 lakhs along with applicable interest. The guarantor was also held not liable for the unauthorised disbursement.

The Commission partly allowed the complaint and directed the bank to conduct an internal en-quiry against the officials involved, release the remaining loan amount in accordance with RBI guidelines, and refund the amount deducted from the guarantors along with 5% interest.

Case Title: Nasir Ud Din Zargar v. Al Nawaf Pharmaceutical & J&K Bank, Old Chowk Kupwara

CC No: 33/C/2024

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