Jodhpur District Commission Holds AU Small Finance Bank For Failure To Sanction Requested Amount Despite Issuing Acceptance Letter

Brief Facts:

Mr. Deepak Kumar (“Complainant”) applied for an overdraft loan of Rs. 1,30,00,000/- from the AU Small Finance Bank Limited (“Bank”) for his electronic shop to support his livelihood. The bank approved a letter of acceptance for Rs. 1,30,00,000 and subsequently issued another letter of acceptance for Rs. 1,25,00,000/-. However, the Complainant objected to the approval of a loan which was less than what he applied for. The bank rejected the claim made by the Complainant. The Complainant claimed a processing fee of Rs. 1,53,400/-, which had been paid for the loan application, along with the return of documents such as security cheques, identification papers, and stamp papers. Despite the Complainant's demands, the bank refused to return the requested sum and documents. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission-II, Jodhpur, Rajasthan (“District Commission”) and filed a consumer complaint against the bank.

In response, the bank contended that the Complainant did not fall within the category of a consumer, as he had availed the bank's services for commercial purposes. The bank argued that before the Complainant availed the services for commercial purposes, it was communicated to the Complainant that the processing fee would not be refundable.

Observations by the District Commission:

The District Commission held that due to the disbursement of an amount lower than the approved loan from the bank, the Complainant faced incapacity in availing of the loan. It held that the bank failed to distribute the sanctioned loan amount to the Complainant. Further, it held that the bank does not have the right to charge the Complainant for processing without providing the loan facility.

Considering that the Complainant was engaged in a sole proprietorship business for his livelihood, the District Commission held that the bank was liable for deficiency in services and unfair trade practices. evident that there were deficiencies and errors in the services provided by the defendant bank. Consequently, it directed the bank to refund Rs. 65,000, half of the processing amount along with Rs. 5,000 compensation for mental agony and litigation costs.