BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM AT BANGALORE URBAN

 18^th DAY OF NOVEMBER 2016

O R D E R

SRI. P.V SINGRI, PRESIDENT

The complainant has filed this complaint U/s.12 of the Consumer Protection Act, 1986 against the Opposite Party (herein after referred as OP) with a prayer to direct the manager of the Federal Bank Financial Services Ltd., to claim a sum of Rs.8,500/- and interest Rs.252/- only from him and return the gold ornaments pledged by him together with litigation cost.

2. The brief averments made in the complaint are as under:

That on 24.09.2011 the complainant pledged a gold chain weighing 40.30 grams and two bangles weighing 33.60 grams in all 73.90 grams with OP Bank and borrowed a loan of Rs.1,54,000/-.  That the complainant could not service the loan and redeem the pledged articles.  That the total value of the gold ornaments pledged by him is Rs.1,82,000/-.  That the complainant was informed that if at all he fails to redeem the pledged gold articles the same would be auctioned in a public auction.  That the complainant gave his consent for auctioning the gold ornaments and accordingly OP auctioned the gold ornaments and adjusted the sale proceeds against his loan account.  That the OP did not inform the complainant the date, day and the time of the auction conducted by them and also did not inform him as to the sale proceeds collected by such auction.  That the complainant thought that his loan account has been closed since he did not hear anything from OP for several months.  That after about 9-10 months thereafter the complainant again approached OP Bank and pledged gold ring weighing 5 grams 60 mille on 20.03.2013 and obtained loan of Rs.8,500/-.  That after two months thereafter i.e., on 06.05.2013 the complainant approached the OP for redeeming the pledged article and paid a sum of Rs.8,500/- towards principal and Rs.252/- towards interest.  That OP Bank after receiving amount told the complainant that he is yet to pay them Rs.3,385/- towards the previous loan transaction.  For that the complainant told them that the present loan transaction is nothing to do with the previous loan transaction and requested them to return the pledged article.  However OP Bank refused.  Therefore, the complainant has approached the Forum for redressal. 

3. In response to the notice issued, OP entered their appearance through their advocate and filed their version contending in brief as under:

That OP is a company incorporated under the Companies Act, 1956 and is engaged in the business, inter alia of providing loans to customers against security of pledge of gold jewellery/ornaments.  That the complainant availed three loan facilities from OP Bank to the tune of Rs.1,54,000/-, Rs.11,000/- and Rs.8,500/- by pledging his gold ornaments as per the terms and conditions of the said loan facilities and as such the complainant is not a ‘Consumer’ within the meaning of provisions of  Consumer Protection Act, 1986.  That the complainant had availed first gold loan facility of Rs.1,54,000/- from Basaveshwara Nagar Branch, Bangalore of OP by pledging his gold ornaments vide loan account No.GL02003000528.  That the said loan facilities were granted to complainant on the loan application dated 24.09.2011 on the assurance to service the loan facility regularly.  That inspite of several reminders to the complainant to pay the outstanding loan amount, the complainant failed to do so and committed default of the terms and conditions of the said facility including defaults in payment of interest and overdue charges.  That despite repeated notices and reminders and personal follow up by the officers of OP the complainant neglected and failed to make payment of dues.  That in view of the failure on the part of complainant to clear the outstanding, OP was inclined to send demand notice dated 25.02.2012 and 31.03.2012 to the complainant informing the amount overdue towards interest and other charges.

That the complainant was liable to pay an interest of Rs.3,079/- for the loan amount of Rs.1,54,000/- in 12 monthly installments which would commence from 24.10.2011 and on 24.09.2012 and the principal loan amount was repayable by the complainant on the date of maturity.  That despite notice complainant failed to pay the outstanding amount and therefore OP vide notice dated 23.04.2012 recalled the entire loan facility by invoking clause-3 of the terms and conditions of the loan facility and called upon the complainant to redeem the said gold ornaments and pay the total due amount of Rs.1,74,343/- within 7 days excluding accumulated and penal interest/charges.  That the complainant was also informed under the said notice that if he fails to comply with the demands made in the said notice, OP shall be constrained to initiate appropriate legal action against him for recovery of overdue amount including enforcement of its security interest by way of sale/liquidation of pledged gold.  That on failure of the complainant to comply with the requisitions contained in the above notices, the Auctioneer of OP M/s.B.Jawahar Auctioneers had sent notice dated 16.05.2012 before auction intimating the date of auction and also afforded an opportunity to the complainant to pay the outstanding amount.  That the notice of auction was also published in vernacular and English newspaper on 22.05.2012 by OP.  Despite the same complainant failed to clear the dues and hence OP having left with no other option against the gold ornaments pledged by the complainant.  That despite auction of gold ornaments pledged by the complainant after following due process of law, OPs suffered loss of Rs.6,770/-.  That OPs sent a post sale notice dated 03.07.2012 to the complainant and called upon him to pay the deficit amount within 15 days from the date of notice.

That the complainant had approached OP for the second loan facility vide loan application dated 20.03.2012 and on the basis of the said application OP granted him a loan of Rs.8,500/- vide account No.GL02003002252.  That as per the terms and conditions of the loan facility the above said amount of Rs.6,770/- in the previous loan account No.GL02003000528 was debited in the second account vide two debit entries i.e., Rs.3,850/- dated 18.04.2013 and 06.05.2013 as OP has a right to retain the security offered towards loan against any other liability due to the company by the borrower and the same has been enunciated in clause-6 of the terms and conditions of the loan agreement to which the complainant has agreed by putting the signature.

That the complainant came to branch office of OP to redeem the ornaments pledged in the new account and he was also asked to pay the deficit amount of Rs.6,770/- but instead of paying the requisite amount he has approached this Forum with ill intention and to avoid his liability.  That the complainant by making false and baseless allegations has filed this complaint on untenable grounds which is liable to be dismissed.  Therefore, OP prays for dismissal of the complaint with costs.      

4. The points that arise for our determination in this case are as under:

        5. The complainant as well as OP tendered their evidence by way of affidavit in support of the respective contentions.  Both the parties have filed documents in support of their case.  Written arguments have been filed.  We have perused the sworn testimony of both the parties, other materials placed on record including the authorities relied upon by OP.

6. Our answer to the above issues are as under:

REASONS

7.  It is not in dispute that on 24.09.2011 complainant borrowed a loan of Rs.1,54,000/- by pledging a gold chain weighing 40.30 grams and two bangles weighing 33.60 grams with OP.  It is also not in dispute that the complainant was unable to redeem the pledged articles.  Therefore he was intimated by the OP that if at all he fails to redeem the pledged articles by paying loan amount together with interest the articles so pledged by him would be sold in public auction and the sale proceeds will be adjusted with the outstanding loan amount.  It is also not in dispute that the complainant consented for the auctioning of the gold articles pledged by him on 24.09.2011 and accordingly the same have been auctioned by the OP as per the procedure laid down for the said purpose.

8. Again the complainant approached the OP Bank on 20.03.2013 and borrowed a loan of Rs.8,500/- by pledging a gold ring weighing 5.60 grams.  Complainant has produced relevant documents pertaining to the said pledge.  However, OP has produced the loan application and other relevant documents pertaining to both loan transactions including the loan application filed by the complainant.

9. Complainant claims that on 06.05.2013 when he went to OP Bank to redeem the pledge by paying principal amount of Rs.8,500/- and interest amount of Rs.252/-, OP Bank contended that he is yet to pay a sum of Rs.3,385/- pertaining to the previous loan transaction and unless he clears the said arrears he would be able to redeem the pledged article.

10. Complainant contends that, OP Bank has no right to claim any amount pertaining to the previous loan transaction dated 24.09.2011 as he was never informed by the OP Bank as to the said arrears at any point of time prior to 06.05.2013.  Therefore he prays for an order directing the OP Bank to permit him to redeem the pledge of gold ring made on 20.03.2013 by accepting the principal amount together with interest amount as on 06.05.2013.  OP contended that after due intimation to the complainant as per law the gold ornaments pledged by him on 24.09.2011 were auctioned and the sale proceeds were adjusted to the loan account of the complainant.  However the amount fell short of Rs.6,770/- which the complainant was liable to pay.  It is further contended by the OP that, the complainant was intimated by way of a letter calling upon him to pay the said deficit amount of Rs.6,770/-.  However he did not respond and failed to repay the said amount which is still outstanding in his loan account.  It is further contended by the OP that, as per the terms and conditions of the loan transaction the Bank has right to retain the security offered by the borrower to his loan against any other liability due to the Bank by the borrower or guarantor whether such liability has been demanded or not.  The learned advocate for the OP brought to our notice clause-2 as well as clause-6 of the terms and conditions governing the loan transaction for more clarity.  Clause-2 and 6 of the terms and conditions governing both the loan transactions of the complainant with OP are extracted below.

“2) In case the EMI amount is not paid on or before the due date, the ornaments will be put to auction or disposed off by private negotiation and the proceeds will be adjusted towards the liability under the loan account.  In case the proceeds are not sufficient to discharge the liability in full, the borrower and his/her assets will be liable for the deficit.

3).

4) .

5) .

6) The company has the right to retain the security offered to this loan against any other liability due to the company by the borrower or guarantor whether such liability has been demanded or not”.

11. Referring to the above said clauses of the terms and conditions of the loan transaction, learned advocate for the OP submitted that, in case the proceeds of the auction are not sufficient to discharge the liability in full, the borrower and his/her assets will be liable for the deficit amount.  He further argued, referring to clause-6 of the terms and conditions that the OP has right to retain the security offered by the borrower to his loan against any other liability due to the company by the borrower or guarantor.  Therefore he argued that the OP rightly debited the deficit amount of Rs.6,770/- to the subsequent loan transaction dated 20.03.2013.  He further contended that, the demand made by the OP for payment of deficit amount of Rs.6,770/- pertaining to the first loan transaction is in accordance with the terms and conditions governing the said loan transaction.  Admittedly the complainant has signed the application for loan in both these transactions only after agreeing to the terms and conditions mentioned in the loan application.  Complainant did not deny any of the terms and conditions mentioned in the loan application which he has signed while availing the loan.  In such circumstances, we are of the opinion the complainant is certainly bound by the terms and conditions governing the said loan transaction.

12. The learned advocate for the OP to substantiate the contention taken up in the version, placed reliance on a judgment rendered by the Hon’ble High Court of Andhra Pradesh reported in AIR-1999-A.P-367, a judgment rendered by Ho’ble Tamil Nadu State Consumer Disputes Redressal Commission, Madras reported in II (1992) CPJ 801, a judgment rendered by the Hon’ble Allahabad High Court reported in AIR 1996, 165.  Perused the above cited authorities.

13. In the judgment rendered by the Hon’ble High Court of Andhra Pradesh referred supra, the Hon’ble High Court while deciding a issue similar to the one on hand has opined as under:

5. Section 171 of the Indian Contract Act deals with general lien of bankers, factors, wharfingers, attorneys and policy-brokers.  It provides that bankers, factors, wharfingers, attorney of a High Court and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to the effect.  Sections 173 and 174 of the Act deal with pawnee’s right of retainer of the goods pledged.  Section 173 provides that the pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise but for interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged.  Section 174 provides that the pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged, but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee.

In Kunhan Mayan and others v. The Bank of Madras, (supra) a Division Bench of the Madras High Court had to deal with a case where the plaintiff deposited certain jewels with the defendant-bank to secure certain debts.  Afterwards he paid the secured debts and demanded the return of the jewels while being otherwise indebted to the bank.  It was held that the plaintiff was not entitled to recover the jewels without discharging the other debts unless he proved that the defendant agreed to give up the general lien.  The Court held as follows:

“The rule of law with regard to general liens is clearly laid down in the 171^st Section of the Contract Act.  Bankers have such a lien on things bailed with them unless their is a contract to the contrary.  It was for the plaintiff in this case to prove the existence of such contract.

It being incumbent on the plaintiff to show that the bank had agreed to give up the general lien to which by law a bank is prima facie entitled, I must say that in my opinion the plaintiff has failed in his proof.”

9. In State Bank of India, Kanpur v. Deepak Malviya, MANU/UP/0042/1996 : AIR1996All165, learned single Judge of the Allahabad High Court, after considering various precedents including the decision of the Supreme Court in Syndicate Bank v. Vijaykumar (supra), Kunhan v. Bank of Madras (1896) 1LR 19 Mad 234, and also the decision in Jagadishwar Reddy’s case (supra), field; that pledge is only a form of bailment and all pledges are bailment.  The banker’s lien contemplated by Section 171 as such is specific provision relating to banker’s lien and has an overriding effect on general provisions of Section 174 which provide for relationship of pawnee and pawner in respect of pledged goods.  The banker’s lien will carry over to such pledges and bank can retain pledged goods, if the debtor had not cleared his amount in connection with another loan.

14. The Hon’ble High Court while distinguish the provisions contained in Section-171, 173 and 174 of the Indian Contract Act has categorically opined that in a case like one on the hand the bankers undoubtedly have general lien on all the securities deposited with them as bankers by a customer/borrower unless there is an express contract or circumstances that show an implied contract, inconsistent with the lien.  In the instant case on hand there is clause-6 of the terms and conditions which governs the loan transaction in question OP has a right to retain the security offered to his loan against any other liability due to the company by him.  Thus in view of the provisions contained in section.171 of Indian Contract Act, we are of the opinion that, OP company justified in debiting the deficit amount of Rs.6,770/- to the loan transaction of complainant dated 20.03.2013.

15. The Hon’ble Tamil Nadu State Consumer Disputes Redressal Commission, Madras in a case between Branch Manager, Canara Bank versus P.Moovendan referred supra while dealing with similar issue has held as under:

“We therefore hold that the appellant/opposite party is entitled to retain the jewels as a lien under Section 171 of the Indian Contract Act.  Further in the case on hand, the complainant has himself executed Exhibit B2.  Agreement under which the Bank is entitled to hold this jewel as security for any other liability payable by the complainant in respect of any financial advance granted and owing and that may be owing hereafter to the bank on any account whatsoever whether solely or jointly with others and whether as principal debtor or as surety.  This is a contract to the contrary within the meaning of Section 171 of the Contract Act.  On the ground as well, the opposite party is entitled to withhold these jewels as security for the discharge of the earlier loan.”

16. In view of the ratio laid down in the above cited authority, we are of the opinion that, the OP Bank is justified in debiting a sum of Rs.6,770/- to the loan account No.GL02003002252.  The complainant having agreed to the terms and conditions as mentioned in the loan application now cannot contend that OP has no powers to debit the deficit amount of Rs.6,770/- in his loan transaction availed by him on 20.03.2013.

17. Therefore, we don’t find any merits in the complaint and the same is liable to be dismissed.  Accordingly point No.1 is answered.

18. The order could not be passed within the stipulated time due to heavy pendency. 

19. Point No.2) in view of the discussions made above, we proceed to pass the following:    

  O R D E R

The complaint filed by the complainants U/s.12 of the Consumer Protection Act, 1986 is dismissed.  The parties to bear their own costs.

Furnish free copy of this order to both the parties.

(Dictated to the Stenographer, got it transcribed and corrected, pronounced in the Forum on this 18^th day of November 2016)

MEMBER                                                              PRESIDENT

Vln* 

Witnesses examined on behalf of the complainant dated 13.08.2013.

1. Sri.Eraiah,

Documents produced by the complainant:

Witnesses examined on behalf of the Opposite party dated 28.08.2013.

1. Sri.Gopal Krishna  

Document produced by the Opposite party:

MEMBER                                                              PRESIDENT

Vln*