IN THE CONSUMER DISPUTES REDRESSAL FORUM, KOLLAM
DATED THIS THE 28th DAY OF JANAUARY 2020
Present: - Sri.E.M.Muhammed Ibrahim, B.A, LLM. President
Smt.S.SandhyaRani. Bsc, LLB ,Member
Sri.Stanly Harold, B.A.LLB, Member
CC No.83/16
Babu : Complainant
S/o Chothy
Alampally Veedu
Chandanathoppu P.O
Kollam.
[By Adv.Vinayachandran.V]
V/s
- Managing Director : Opposite parties
Muthoot Fincorp Ltd.
Registered Office-MuthootCentre
Punnen Road,
Thiruvananthapuram-695039.
- Manager
Muthoot Financial Corporation Ltd.
Branch Office
Chandanathoppu P.O
Kollam.
[By Adv.Thomas John Morris]
FAIR ORDER
E.M.MUHAMMED IBRAHIM , B.A, LLM,President
This is a case based on a consumer complaint filed u/s 12 of the Consumer Protection Act.
The averments in the complaint in short are as follows:-
The 1st opposite party is a licensed Pawn Broker and having branches all over the Union of India. The 2nd opposite party is one of its branch offices. The 1st opposite party running its business through its branches. On 20.10.2014 the complainant pledged his gold necklace having 25.2 gm with the 2nd opposite party and received Rs.45,000/- as loan. On 23.12.2014 and 04.06.2015 he paid Rs.1894/- and Rs.5,443/- respectively as interest. The interest realized by the opposite parties was very high than permitted. On the date of pledging the gold ornaments 2nd opposite party made the complainant to believe that the loan will be automatically renewed from the date of payment of interest and also demanded to pay interest within 12 months from the date of availing loan to obtain the said benefit. The complainant agreed the same and thereby the loan renewed on the date of payment of interest. However on 14.01.2016 the complainant approached the 2nd opposite party to pay interest and to renew the loan as stated above. But the 2nd opposite party refused to receive interest by stating that pledged gold ornaments was subjected to sale through public auction. On the same day the complainant again visited the 2nd opposite party along with his daughter Vidya to enquire about the same and also sought permission to inspect the Pawn Broker’s Book kept by the 2nd opposite party relating the sale of pledged gold ornaments. But the Manager and staffs of the 2nd opposite party ill treated and teased them. It caused much mental agony on them. It is further alleged that the opposite parties conducted the sale of the pledged article without complying with the procedural formalities and without even intimating the complainant regarding the same. Hence the sale is liable to be set aside and the opposite party is liable to return the pledged article to the complainant after receiving the amount due from him. If not possible the opposite party is liable to pay the value of the pledged article after deducting the amount due from him. If the 1st relief is not possible the opposite parties are liable to pay compensation for the pain and loss suffered by the complainant. The pledged article is a precious gold ornament of his daughter. They have no intention to sell the same and pledged the same only to avail the loan amount. The loss suffered by the complainant due to the illegal sale of the gold ornaments is irreparable. Hence he is entitled to get compensation to the tune of Rs.25000/-. The above act of the opposite parties are deceptive and amounts to unfair trade practice. Hence the complaint.
The opposite party No.1&2 resisted the complaint by filing a detailed joint version raising the following contentions. The complaint is not maintainable either in law or on facts. The complainant is not a consumer as defined in the Act. The complainant has no cause of action for filing the present complaint. The opposite parties are mainly engaged in financial business and is a non banking financial institution licensed to take up gold as security to taken up on specific terms and conditions and the loan is allowed for a period of 12 months, and the person pledging the gold ornament is liable either to close the same within the prescribed period or to renew the same by paying up to date interest.
However the opposite parties would admit that the complainant pledged the gold necklace with the 2nd opposite party on 20.10.2014 and obtained an amount of Rs.45,000/- as loan. As per the conditions of pledge the complainant is liable to renew the loan by paying interest up to 20.10.2015. Inspite of several intimation to renew or close the loan amount the complainant failed to do so and the opposite parties by complying with lawful procedure had publicly auctioned the gold to liquidate the debts due from the complainant to the opposite parties. The allegations of the complainant is that the loan will be automatically renewed on payment of interest is not true. The complainant never approached the 2nd opposite party for renewal of the loan nor to pay interest at any point of time as alleged. The allegation that the complainant along with his daughter visited the office of the 2nd opposite party and demanded to inspect pawn brokers book kept by the 2nd opposite party is not correct. As the opposite party is a non banking financial institution there is no such book termed as Pawn Broker’s Book as kept by ordinary money lenders. As the loan was not renewed the opposite parties had sent notice intimating renewal and thereafter issued notice intimating auction to the complainant. All these notices were deliberately returned by complainant as unclaimed. Thereafter auction notice published in 2 news papers both vernacular and in English as per RBI guidelines and thereafter auction was conducted. Contrary allegations are false and denied by the opposite parties. The opposite parties have acted lawfully. There is absolutely no illegality or irregularity in the procedure complied with by the opposite parties in conducting auction. The opposite parties are not liable to pay any compensation or value of the gold article to the complainant. The complainant has not suffered any loss from the hands of the opposite parties.
In view of the above pleadings the points that arise for consideration are:-
- Is not the complaint maintainable?
- Whether there is any deficiency in service or unfair trade practice on the part of the opposite parties as alleged in the complaint?
- Whether the opposite party has charged very high interest than permitted interest as alleged in the complaint?
- Whether the complainant is entitled to get back the gold pledged or in the alternative entitled to get the value of the gold or less amount due to the 2nd opposite party?
- Relief & costs.
Evidence on the side of the complainant consists of oral evidence PW1, Ext.P1 to P3, Ext.C1 series. Evidence on the side of the opposite parties consists of the oral evidence of DW1 and Ext.D1 to D3 series documents.
Though the case has been specifically posted for filing notes of argument to 22.10.19 and also for hearing the advocated appearing for both sides have neither turned up and argued the matter nor filed any notes of argument. Hence the case has been taken up for order.
Point No.1
The complaint is one filed under Section 12 of the Consumer Protection Act seeking 3 reliefs. The 1st relief sought for is a decree declaring that the sale of pledged article is void and also seeking to set aside the same and direct the opposite parties to return the pledged article to the complainant after receiving the amount due from him on the loan transaction. 2nd and 3rd relief are alternative reliefs. The above reliefs would come within the purview of Section 14(1)(c) &(d) of the Consumer Protection Act 1986. The opposite parties would contend in their joint written version that the complaint is not maintainable on the ground that the complainant is not a consumer as defined in the act. But we find no merit in the above contention. The term consumer is defined under Section 2(1)(d) i&ii of the Consumer Protection Act. However 2(1)(d)ii relating to the hiring of service for consideration. Even if the opposite parties are non banking financial institution the functions of the opposite parties are receiving gold as security and lending loan on interest which amounts to service for consideration. Here in this case even the opposite parties have no case that the complainant has availed the loan on interest by pledging the gold ornament for any commercial purpose. In the circumstance we have no hesitation to hold that the complainant would very well come within the definition of consumer as defined under Section 2(1)(d)(ii) of the Consumer Protection Act. The point answered accordingly.
Point No.2&3
For avoiding repetition of discussion of materials these 2 points are considered together. PW1 has sworn in paragraph 5 of the proof affidavit that while issuing the loan by receiving the gold ornament the opposite party directed the complainant to get release the loan within 12 months or renew the loan by paying up to date the interest within 12 months of the date of pledging the loan and the complainant has agreed for the above terms and availed a loan of Rs.45,000/- by pledging one gold necklace belongs to his daughter weighing 25.2 gm on 20.10.14. Ext.P1 receipt would corroborate the above version of PW1. In fact the opposite parties have no dispute with regard to the gold loan transaction and pledging gold ornaments or regarding the date of lending the gold loan. The further allegation of the complainant is that towards the gold loan he paid interest Rs.1894/- on 23.12.14 and Rs.5443/- on 04.06.15. Ext.P2 and P3 receipts would probabilise the above case of PW1. In view of the endorsement in Ext.P2&P3 receipts it is clear that the complainant has paid up to date interest up to 23.12.14 by paying Rs.1894/- by virtue of Ext.P2 receipt and also up to date interest up to 04.06.15 by paying Rs.5443/- vide P3 receipt. In view of Ext.P2&P3 receipts would clearly indicate that the complainant has cleared the up to date interest of the loan till to 04.06.15.
According to the complainant as he paid interest the loan will be automatically renewed and accordingly the loan was renewed on 04.06.15 when he paid interest till that date and on completion of the next 6 months he approached the opposite party on 14.01.16 for the purpose of paying interest up to that date and get the loan renewed. But the 2nd opposite party has refused to receive interest by alleging that the pledged gold ornament was sold in public auction. According to the complainant the above auction sale is illegal and therefore the Forum has to set aside the illegal auction and direct the opposite party to return the gold ornaments. The 2nd opposite party would resist the above claim and would contend that as per the terms and conditions of the pledge the complainant was liable to renew the loan paying interest up to 20.10.15. The complainant was reminded on several times to renew or close the loan amount but he fail to do so and therefore the opposite parties by complying with legal formalities publically auctioned the gold ornament to liquidate the debts due to the opposite party. To substantiated the above contention the opposite parties would rely on the oral evidence of DW1 and Ext.D1 to D3 series documents.
It is further contented that the loan is granted for 12 months and if the customer fails to renew the loan as agreed the opposite parties are legally entitled to sell the gold ornament in public auction and realize the debt due from the complainant. It is also contended that the loan does not get automatically renewed as on the date of payment of interest.
Now we shall consider whether the alleged auction of pledged gold ornament by the opposite parties is legal and proper and also in compliance of the terms and conditions stipulated in the pledge document . Ext.D1 document is a photocopy of the pledg document. Ext.P1 is the original application for gold loan cum pledged document. The condition No.1 in Ext.P1 gold loan application is that the loan amount with interest has to be repaid within 12 months or within a shorter period as directed. The 2nd condition is that if it is not repaid as stipulated under condition No.1 the opposite party is entitled to sell the pledged gold ornaments on public auction. Condition No.5 is that if the complainant fails to pay the interest continuously for 6 months the opposite party is entitled to realize interest @ 12% p.a for the amount of interest defaulted. In view of the above terms and conditions it is clear that the gold loan has been availed for 12 months and the complainant is liable to pay the interest periodically and if interest is not paid for 6 months continuously the opposite party is entitled to realize penal interest @ 12% p.a for the defaulted interest apart from the normal interest agreed. However the above condition would not authorize the opposite party to sell the pledged gold ornaments if payment of interest is defaulted for 6 months.
It is further to be pointed out that Ext.P1 loan application the terms regarding interest is very vague. As per Ext.P1 document the complainant has to repay the loan amount within a maximum period of 12 months together with interest @ 22% p.a. The 2nd clause is that the interest will move to 24% if regular interest is not remitted monthly which is against the condition that the maximum 12 months period is available to repay the loan with interest @ 22%. It is further stated in Ext.P1 that if annualized rate of interest which is not specified at that place if not remitted continuously for 3 months the rate of interest will go up to 27% p.a from the date of default. If interest is not remitted continuously for 6 months the rate of interest will go up to 30% p.a from the date of default and additional interest @ 12% will be charged to the entire defaulted interest.
It is clear that the complainant has cleared the interest for the first 3 months on 23.12.2014 and later paid the interest for the next 6 months on 04.06.15 which is evident from Ext.P2&P3 documents. DW1 has also admitted that the complainant has paid interest up to 04.06.15. According to the complainant at the time of availing loan the opposite party has made him to believe that if interest is paid the loan will be automatically renewed and he was under the impression that when he paid the interest up to 04.06.2015 the loan will be automatically renewed and that is why he has waited for another 6 months and approached the complainant on 14.01.2016 along with interest. The contentions of the opposite parties in the written version also would go to show that the complainant has to renew the loan by paying interest. The only condition stipulated to renew the loan is payment of interest which has been admittedly done by the complainant. The complainant has no role in the process of the renewal of loan except payment of interest. Nowhere in Ext.P1/D1 it is stated that the complainant along with up to date interest has to make any separate application to renew the loan. In the circumstances we are inclined to accept the case of the complainant that he paid interest up to 04.06.2015 and renewed the loan.
There is no dispute with regard to the fact that the opposite parties being money lender and Pawn Brokers would come within the purview of The Kerala Money Lenders Act 1958 which stands amended on several times. Section 7 of the Kerala Money Lenders Act 1958 would indicate the interest and charges allowed to money lenders including pawn brokers. Accordingly no money lender shall charge interest for any loan at the rate exceeding 2% above the maximum rate of interest charged by Commercial Banks on loan granted by them. As per the latest notification no money lender shall charge interest or any loan at the rate exceeding 18% simple interest p.a and 2% processing charge. The interest to be paid is expected to be shown in pawn ticket/pawn agreement. In view of the above provisions in the Kerala Money Lenders Act it is clear that the opposite party is entitled to charge simple interest @ (18+2)% p.a and 2% service charges. There is no provisions under the provisions of the Kerala Money Lenders Act that compound interest and penal interest for non payment of monthly interest is defaulted. In fact Money Lenders Act would not envisage realization of monthly compound interest and penal interest as stated in P1 agreement. Even if the complainant has signed on P1(D1) document it would not help the opposite party to realize un conscionable interest in violation of the provisions of the Money Lenders Act and Rules.
Though the opposite party would claim that they have charged interest according to the guidelines of the RBI the said guidelines has not been produced to prove that the money lender/pawn broker is entitled to realize un conscionable interest from the person who borrows money by pledging gold ornaments or other articles. In view of the above provisions in the Kerala Money Lenders Act and due to the non production of RBI guidelines the opposite parties who realised un conscionable interest are bound to adjust the excess interest received as per Ext.P2&P3 receipts.
Now we shall consider whether the opposite parties have conducted auction in public after giving due notice to the complainant and also affording opportunity to participate the public in the alleged auction. According to the opposite party auction sale was conducted as per the terms and conditions of Ext.P1/D1 after complying with legal formalities. It is true that DW1 has sworn that complainant was intimated on several times to renew or close the loan amount but he fails to do so. In paragraph 5 of the proof affidavit filed by DW1 it is stated that the complainant had not come forward to pay any interest at any point as alleged. The above averments in the proof affidavit appears to be incorrect in the light of Ext.P2 & P3 documents which would indicate that the complainant has remitted interest up to 04.06.16. Ext.D3 series is the unclaimed auction notice. The details of the loan has been stated a box at the beginning of the notice were in the loan number has been stated as F42810 and date is shown as 04.06.2015 and the amount of loan is shown as 45000/- . Below the above box it is stated that the loan stated above has to be repaid with interest and got release the pledged gold ornaments on or before 17.12.2015 ( and not on the expiry of 12 months from the date of availing loan) or else the pledged gold ornaments will be sold in public auction. The above data shown in the alleged notice (D3 series) itself would indicate that the loan has been renewed up to 04.06.2015.
The above D3 series notice is claimed to have been sent through registered post but the same returned unclaimed which is evident from the postal endorsement. But the address of the loanee (complainant) shown at the face of Ext.P1/D1 and Ext.D3 series notice and the address shown in the post cover substantially differ. As per the address shown over the post cover the letter is addressed to Babu, Aalampalli veedu, Thottinkara, Edavattam, Chandanathoppu P.O, Kollam. In short the name of 2 places Thottinkara and Edavattam are added along with the address of the loanee in the post cover. That may be the reason why the auction notice has been returned un served by stating unclaimed. Rule 16 of the Kerala Money Lenders Rules 1964 prescribes the procedure for conducting auction sale of the pledged property by the Pawn Brokers and money lenders under Section 9 F of the Kerala Money Lenders Act 1958. Accordingly sale of the pledged gold ornaments or other articles shall be sold in public auction after “giving” registered notice with acknowledgment card to the pawner by indicating the details of sale and shall notify to the public at least 2 weeks prior to the date of auction by affixing notice to that effect at the business place of the pawn broker and other public places.
There is absolutely no evidence to prove that notice has been given to the pawner as stated under rule 16(1) of the Rules.
Sub clause 2 of Rule 16 further specifies that the amount raised by sale amount credited to the account of the pawner and an extract of the same showing the balance due on the loan or the excess if any due to the pawner after meeting the loan shall be furnished to the pawner within one week of the date of sale. According to the opposite parties they have sold the gold ornaments in public auction by complying with lawful procedures and liquidated debt due from the opposite party. However the materials available on record would not indicate that the opposite parties has conducted public auction after complying with legal formalities. Ext.D3 series notice claimed to have been sent is a premature notice. In Ext.D3 series it is clearly stated that the loan is dated 04.06.15(renewed on that date by paying up to date interest till that date as per P3 receipt). Hence the opposite parties ought to have waited for 12 months.
It is clear from the averments in Ext.D3 notice that loan date (date of renewal of loan) is 04.06.15. Hence the complainant is entitled to get back the pledged article after 12 months by paying agreed interest. But the auction is claimed to have been held immediately after the expiry of 6 months from 04.06.15 which is the date of renewal of the loan. Therefore it is clear that as the opposite party has not waited for a period of 12 months as from the date of renewal of loan as shown in Ext.D3 series and auctioned gold necklace after the expiry of 6 months and odd days from 04.06.15. Hence it is clear that the complainant has shown ugly haste in disposing of the pledged gold ornaments.
Though DW1 would admit that they have published the fact of public auction of the pledged gold ornaments in 2 News Papers, the said paper publication has not been produced in this case. There is nothing on record to indicate that the opposite parties have complied with the RBI guide lines regarding NBFI nor complied with relevant provisions under the Money Lenders Act and Rules. They have also not produced any register/pledge book indicating the date of loan, date of renewal, date of payment of interest, rate and amount of interest till the date of conducting auction. The details regarding auction including the price fetched at the auction the balance amount if any also not produced.
In view of the materials discussed above it is cristal clear that the opposite parties have not auctioned the pledged gold ornaments after complying with statutory formalities as claimed in the version. Even if it was disposed of by auction the said auction is premature, improper and illegal and hence liable to be declared as void and the above act of the opposite parties undoubtedly amounts to unfair trade practice.
It is also brought out in evidence that the gold necklace sold by illegal auction conducted by the opposite parties belongs to the daughter of the complainant. According to PW1 neither the complainant nor the daughter intended to sell the gold necklace which is a precious one upon which the daughter of the complainant is having some affinity and the illegal sale of the same has been caused much mental agony apart from financial loss. Therefore the complainant is entitled to get compensation for the illegal sale of the gold necklace. The opposite parties have not acted in accordance with the terms of P1 agreement and violated the provisions of the RBI Guidelines. Hence there is clear deficiency in service also on the part of the opposite parties.
In view of the reasons stated above we hold that the complainant is entitled to get back the present market value of the gold necklace weighing 25.2 gms pledged as per Ext.P1 document after deducting principal amount and interest legally due to the 2nd opposite party as per the provisions of RBI Guidelines. He is also entitled to get compensation. The points answered accordingly.
Point No.4
In the result the complaint stands allowed directing the opposite party No.1&2 to pay the value of 25.2 gms of gold ornaments as per the present market rate @ 3725/- per gram after deducting the principal amount and interest legally due till the date of expiry of 12 months from 04.06.2015 and processing charge as provided under Section 7(1) &(2) of the Money Lender Amended Act.
The opposite parties No.1&2 are further directed to pay Rs.15,000/- as compensation for the unfair trade practice, deficiency in service and also for the mental agony caused by the opposite parties due to the illegal sale of the pledged gold ornaments.
The opposite party No.1&2 are also directed to pay costs Rs.5000/- to the complainant.
Opposite party No.1&2 are directed to comply with the above directions within 45 days from today from the date of getting free copy of this order failing which the complainant is entitled to recover the above amount except costs along with interest @ 12% p.a except for costs from opposite party No.1&2 jointly and severally and from their assets.
Dictated to the Confidential Assistant Smt. Deepa.S transcribed and typed by her corrected by me and pronounced in the Open Forum on this the 28th day of January 2020.
E.M.Muhammed Ibrahim:Sd/-
S.Sandhya Rani:Sd/-
Stanly Harold:Sd/-
Forwarded/by Order
Senior Superintendent
INDEX
Witnesses Examined for the Complainant:-
PW1 : Babu
Documents marked for the complainant
Ext.P1 : Application for gold loan
Ext.P2 : Gold loan ledger form No.F42810 dated 23.12.14
Ext.P3 : Gold loan ledger form No.F42810 dated 04.06.15
Ext.C1 series : Commission report and Mahazar
Witnesses Examined for Opposite parties:-
DW1 : Vinesh.G
Ext.D1 : Copy of the pledge document dated 20.10.14
Ext.D2 : Regd recall notice dated 20.10.15
Ext.D3 series : Unclaimed auction notice
E.M.Muhammed Ibrahim:Sd/-
S.Sandhya Rani: Sd/-
Stanly Harold:Sd/-
Forwarded/by Order
Senior Superintendent
