| Final Order / Judgement | DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, BATHINDA CC No. 316 of 27.11.2019 Decided on : 01-06-2023 Ekta Singla aged about 48 years, W/o Sh. Anil Singla, R/o H.No.2228, Madhuban Street, Amrik Singh Road, Bathinda. ........Complainant Versus Muthoot Finance, Bank Bazar, Bathinda through its Bank Manager/ Incharge. .......Opposite party
Complaint under Section 12 of the Consumer Protection Act, 1986 QUORUM:- Sh.Lalit Mohan Dogra, President Sh. Shivdev Singh, Member Present:- For the complainant : Sh. Varun Bansal, Advocate. For opposite party : Sh. Sukhdev Mittal, Advocate. ORDER Lalit Mohan Dogra, President The complainant Ekta Singla (here-in-after referred to as complainant) has filed this complaint U/s 12 of Consumer Protection Act, 1986, ( Now C.P. Act, 2019 here-in after referred to as 'Act') before this forum (Now Commission) against Muthoot Finance (here-in-after referred to as opposite party). Briefly stated the case of the complainant that the complainant had availed a gold loan from the opposite party on dated 24.05.2017 for Rs.1,61,300/- by pledging 87.100 grams of gold vide loan account No.1526. The complainant also availed a gold loan from the opposite party on dated 08.05.2017 for Rs.99,900/- by pledging 51.500 grams of gold vide loan account No. 1413, gold loan on dated 27.04.2017 for Rs.68,200/- by pledging 34.400 grams of gold vide loan account No.1350, gold loan on dated 27.04.2017 for Rs.67,600/- by pledging 34.00 grams of gold vide loan account no.1351, and further gold loan on dated 27.04.2017 for Rs.44,500/- by pledging 22.400 grams of gold vide loan account No.1352. In this way, the complainant had availed total loan of Rs.4,41,500/- in one month from the opposite party by pledging total 228.950 grams of gold in all the aforesaid five loan accounts. The opposite party has issued several certificates/loan sanction letters in the favour of the complainant. It is alleged that the complainant could not re-pay the interest on the said loan amount in installments in time because of the sudden failure in business, financial crises and other unavoidable circumstances, whereas the complainant had always been ready and willing to deposit the said amount of interest with the opposite party. The complainant visited the office of the opposite party in the mid of March, 2019 to deposit the interest amount on said loan availed by the complainant but the opposite party told the complainant that Pledged Gold Ornaments has been taken by their Head office at Delhi and they assured that loan account will be settled and gold oranments will be handed over soon. It is alleged that when there was no response from the opposite party, the complainant again visited the opposite party and was shocked and surprised to know that the opposite party has closed the account after auctioning the pledged Gold Ornaments of the complainant, total weghing 228.950 grams on dated 7.8.2018 for the reecovery of the outstanding dues. Even there was also expensive Neelam, Pukhraj stones and Moti's in some gold articles but the opposite party neither shown the same on record nor returned to the complainant, which means opposite party has also sold out the same. It is also alleged the opposite party were not competent for the same, moreover same was done without adopting any proper procedure. Neither any of account statement had been given to the complainant by the opposite party nor even the complainant was called at the time of auction of the pledged gold ornaments although same was mandatory to auction the pledged gold in the presence of the complainant. Upon asking the same by the complainant that where they have sold his pledged gold ornaments, the opposite party told that it is confidential matter of their system. There are many jewelers on their company panel with whom they perform their sale. The complainant alleged that the opposite party has done the said auction illegally and arbitrarily without any prior knowledge or intimation to the complainant. The opposite party failed to give any prior notice to the complainant before auctioning his pledged gold ornaments according to their terms and conditions mentioned in the Loan sanction letter at clause number 7. Even opposite party had also failed to get the publication affected in any reputed newspaper or by doing any Road show or conduct open Munadi for recovery before auctioning the said alleged pledged gold ornaments of the complainant according to their terms and conditions mentioned in the Loan sanction letter at clause number 8. The complainant alleged that when any sale auction has been done in open, then it is also mandatory to perform videography of the same to maintain transparency or if any E-auction will be done then publication is mandatory but nothing has been done by the opposite party in present case. Even according to the executive, they have sold the pledged gold ornaments to their own jeweller(i.e on panel jeweller for which opposite party has also not provided the complainant any photograph which is gross violation. It is also alleged that the complainant repeatedly requested the opposite party to admit the lawful claim of the complainant and return the aforesaid pledged gold ornaments but no action has been taken by the opposite party Under the compelling circumstances, the complainant got served legal notice upon the opposite party, but opposite party did not give any reply to the said notice, which means opposite party has nothing to say in this matter as they have done so with malafide intention to extort more and more money. The complainant further alleged that the opposite party has auctioned the pledged gold ornaments of the complainant without remitting the fixed sale fax for the same and it amounts to unfair trade practice and goes against the principles of Banking procedures. Moreover the opposite party has not shown/given/issued any record for the actual amount received by the sale of said alleged pledged gold ornaments. The complainant alleged that due to the aforesaid act on the part of the opposite party, the complainant has suffered from the grave mental tension, agony, harassment and financial loss and as well as suffered huge loss of reputation in the eyes of her family members and relatives for which he claims damages/compensation to the tune of Rs.1,00,000/-.. On this backdrop of facts, the complainant has prayed directions to the opposite parties to restrain the opposite party from claiming further amount of account gold loan from the complainant and return the total pledged gold ornaments of the complainant wighting 228.950 grams including expensive Neelam, Pukhraj stones and Moti's or its value at the present market rate and pay Rs.1,00,000/- as compensation and Rs.20,000/- as litigation expenses. Upon notice, the opposite party put an appearance through counsel and contested the complaint by filing written reply raising preliminary objections that the present complaint is not maintainable as the complainant has no cause of action. That the complainant is guilty of misleading this Commission and in presenting distorted version of the correct facts. That the complainant has got no locus standi and cause of action to file the present complaint. That the complainant has not come to this Commision with clean hands and has suppressed true and correct facts. It has been pleaded that the true facts of the matter are that the opposite party company is a Non Banking Financial Company duly incorporated under the Companies Act of 156 and registered under the Reserve Bank of India (RBI). The complainant approached the opposite party for financial assistance by way of loan facility i.e. on 24.5.2017 for Rs.1,61,300/- vide loan account No. 1526, by pledging 87.100 Gms gold, on dated 8.5.2017, for Rs.99,900/- by pledging 51.500 Gms gold vide loan account No. 1413, on 27.4.2017, for Rs.68,200/- by pledging 34.400 Gms gold vide loan account No.1350, on 27.4.2017 for Rs.67,600/- by pledging 34.00 Gms gold vide account No. 1351, on dated 27.4.2017 for Rs.44,500/- by pledging 22.400 Gms vide loan account No. 1352 and the said gold was kept towards collateral security, securing repayment of the said loan. As per the terms of the said loan contracts, the tenure agreed was for a period of 6 months and the Complainant was liable to repay his loans along with the accrued interest thereupon within the said contractual period of 6 months. It has been pleaded that complainant had availed the said loan after fully comprehending all the terms and conditions applicable on the said loan and upon her own free will. The Complainant had availed the said loans from the opposite party upon representation and assurance that she shall honour her obligations and undertakings under the terms of the said loan contracts. However, after availing the said loans, the Complainant failed/ avoided/ neglected to adhere to the terms of the said loan repayment and committed defaults. Consequently, the opposite party was constrained to issue pre-auction legal notice dated 17.7.2017 to the complainant calling upon her to repay the outstanding dues in respect of the said loan on or before the date scheduled for auction. The Complainant was duly notified vide the said notice that in case the complainant would fail to repay the dues in respect of the said loans on or before the date scheduled for auction, then in that event, the opposite party shall be constrained to sell/auction/dispose off the ornaments pledged against the said loans for realization of its dues towards the said loan accounts. The opposite party has further pleaded that after taking the loan facility from the opposite party, the complainant, while continuing to enjoy the use of the said money, started making defaults in repayment of monthly installments. As the complainant committed defaults in making payment of monthly installments, thus, in accordance with its contractual rights as well as rights available to it under the law, the opposite party has a valid and legitimate right to sell/auction the ornaments pledged in respect of the said loans in question for realization of its dues in respect of the said loan. It is also pleaded that as on 13.3.2019, a sum of Rs.2,19,179/- towards the loan account No. 1526, was due and payable by the complainant towards the said loan account, but the complainant failed to repay the same, so the opposite party was constrained to auction the pledged gold ornaments for a sum of Rs.2,13,414/- and after adjusting the auction proceeds, a further sum of Rs.5,765/- is still due and payable by the complainant towards the said loan. Similarly on 13.3.2019, a sum of Rs.1,36,589/- towards the loan account No. 1413, was due and payable by the complainant towards the said loan account, but she failed to repay the same as well, so the opposite party was constrained to auction the pledged gold ornaments for Rs.1,31,454/- and after adjusting the auction proceeds, a further sum of Rs.5,135/- is still due towards the said loan. Similarly, on 13.3.2019, a sum of Rs.93,913/- towards the loan account No. 1350, was due and payable by the complainant towards the said loan account, but she failed to repay the same, so the opposite party was constrained to auction the pledged gold ornaments for Rs. 89,715/- and after adjusting the auction proceeds, an amount of Rs.4,198/- is still due towards the said loan. Similarly on 13.3.2019, a sum of Rs.93,087/- towards the loan account No.1351, was due and payable by the complainant towards the said loan account. But she failed to repay the same, so the opposite party was constrained to auction the pledged gold ornaments for a sum of Rs.88,931/ and after adjusting the auction proceeds, an amount of Rs.4,156/- is still due and payable towards the said loan. Similarly on 13.3.2019, a sum of Rs.61,291/ towards the loan account No. 1352, was due and payable by the complainant towards the said loan account, but she failed to repay the same, so the opposite party was constrained to auction the pledged gold ornaments for Rs. 58,590/- and after adjusting the auction proceeds, an amount of Rs.2,701/ is still due towards the said loan, and the said amount is recoverable from the complainant. Further preliminary objections are that the complaint is totally misconceived and has been filed in gross misuse of the process in law. That the complainant is not a consumer as the transactions between her and the opposite party were of a commercial nature. That the complainant has not approached this Commission with clean hands and that she is estopped from filling the present complaint by her own act and conduct. That the complaint is false, frivolous and vexatious. That the relationship between the complainant and the opposite party is that of a "Pawnor" and a "Pawnee". The Complainant has pledged gold ornaments as collateral security for the purposes of securing repayment of a loans availed by her from the opposite party Company, which is a Non Banking Finance Company, registered with the Reserve Bank of India. The opposite party has pleaded that in the case of default committed by the pawnor, that is the Borrower, the pawnee that is the Lender, is entitled under law to sell/auction the pledged articles, after serving a reasonable notice of sale to the pawnor/the Borrower/the complainant in the present case. On merits, the opposite party has denied all the averments of the complainant. In the end, the opposite party prayed for dismissal of complaint. In support of her complaint, the complainant has tendered into evidence her affidavit dated 26.11.2019 (Ex. C-1) and documents (Ex.C-2 to Ex.C-16). In order to rebut the evidence of complainant, the opposite party has tendered into evidence affidavit dated 28-2-2020 of Mahesh Bansal (Ex. OP-1/26) and the documents (Ex. OP-1/1 to Ex. OP-1/25). The learned counsel for the complainant has argued that complainant had obtained total loan amount of Rs. 4,41,500/- from the opposite party by pledging 228.950 gms of gold through different loan account vide different certifcates Ex. C-2 to Ex. C-6. It is further argued that due to failure of business and financial crisis, the complainant was unable to repay the loan installments. However, she has no intention, not to repay the loan. It is further argued that in March 2019, when the complainant visited the opposite party for deposting interest amount, after taking some time, it was disclosed by the opposite party that gold pledged by the complainant has been sold on 7-8-2018 for outstanding dues and the complainant was supplied loan ledger as on 13-3-2019 regarding auction of gold ornaments which are Ex. C-7 to Ex. C-11. It is further argued that alleged auction proceedings carried out by the opposite party is only eyewash and manadatory requirements of the auction were not complied with by the opposite party. Since the opposite party has itself violated the very basic principle of auction, as such, alleged auction carried out by the opposite party is no auction in the eyes of law. It is further argued that opposite party has not given any notice to the complainant even as per Clause No. 7 of loan santion letter. The opposite party failed to get the publication effected in any reputed news paper or by carrying any road show or to conduct open Munadi before auction. Even Clause No. 8 was also violated. Even mandatory videography was not performed and incase of e-auction, publication is again mandatory. Moreover, the jewellery seems to have been sold to their own jeweller by the opposite party. Since the auction is only sham transaction, the complainant is ready to deposit the entire loan amount alongwith due interest. As such complainant seeks return of her pledged gold ornaments weighing 228.950 gms including expensive Neelam, Pukhraj stones and Motis alongwith compensation. In support of his submissions, learned counsel for the complainant has relied upon the judgements: Hon'ble State Commission, Kerala in Appeal No. 128/2020 decided on 3-03-2011 case titled K V George Vs. Muthoot Finance Ltd., wherein it was held that registered notice was not served by the opposite party before auction of the gold ornaments, as such, the opposite party was directed to return gold ornaments to the complainant. Hon'ble State Commission, U.T. Chandigarh, in First Appeal No. 554 of 2013 decided on 1-1-2014 case titled Muthoot Finance Ltd., Vs. Sanjiv Kumar : In this case also, for want of proper notice, auction proceedings were held to be void. Hon'ble State Commission, Uttarakhand, Dehradun, in First Appeal No. 118/203 decided on 18-3-2019 case titled Ms. Esha Sharma Vs. Muthood Finance Ltd., : In this case also, Finance Company was held deficient in auction of gold ornaments without proper intimation to the complainant. Hon'ble State Commission, Maharashtra, in First Appeal No. RBT/FA/12/1030 case titled Director, Muthoot Finance Vs. Shahnawaz Hiraz Hussain : In this case, it was held that auction proceedings without proper publication of notice is not valid. Learned counsel for the opposite party submitted written arguments wherein it has been stated that the complainant had availed five loans amounting to Rs. 1,61,300/- on 24-5-2017, Rs. 99,900/- on 8-5-2017, Rs. 68,200/- on 27-4-2017, Rs. 67,600/- on 27-4-2017 and Rs. 44,500/- on 27-4-2017 respectively. As per terms of the loan contract, the tenure agreed was for a period of six months and complainant was liable to repay her loans alongwith accrued interest thereupon within the said contractual period of six months. The complainant had availed the loan after fully comprehending all the terms and conditions applicable on the loan and upon her free will but after availing the loan, she failed/avoided/neglected to adhere to the terms of the said loan repayment and committed defaults. Consequently, the opposite party was constrained to issue pre-auction legal notices all dated 17-7-2018 to complainant through its counsel vide registered post calling upon her to repay the outstanding dues failing which the opposite party shall be constrained to sell/auction/dispose of the ornaments pledged against the said loans for realizsation of its dues. The opposite party has also mentioned in the written arguments that opposite party has acted within the framework of law. The complainant committed defaults as she failed to adhere to the terms of repayment of loans availed by her from the opposite party. As per provisions of the Indian Contract Act, in order to recover the dues, lender/pledgee can dispose of the pledged articles, after issuing notice to the pledger/borrower. The opposite party has also submitted that since the ornaments which were pledged by the complainant, as collateral security were auctioned on account of commission of default on the part of the complainant, the question of returning the same does not arise. The opposite party has also pleaded that there is no deficiency in service on its part as the opposite party has followed proper procedure and took action as per agreement executed between the parties and has prayed for dismissal of complaint. We have heared learned counsel for the complainant and gone through the written arguments submitted by learned counsel for the opposite party. It is admitted fact that complainant has availed loan of Rs.4,41,500/- from the opposite party by pledging 228.950 gms of gold ornaments through five different loan accounts vide five different certificates Ex. C-2 to Ex. C-6. It is further admitted fact that complainant had failed to repay the interest on the loan amount in installments. It is further admitted fact that opposite party had sold the pledged gold ornaments of the complainant on 7-8-2018 for recovery of outstanding dues. The only question before this Commission is whether the auction proceedings carried out by the opposite party was valid and if the said auction proceedings have not been carried out as per procedure prescribed, then the consequences of the same. A perusal of condition No. 8 of the loan application shows that in case of failure of the complainant to repay the loan amount, the opposite party shall have right to publish name, detail alongwith photo through publication and whatsoever mode is deemed correct by Finance Company and to recover the loan amount, the Company can also carry on Munadi/ road show or publication/announcement through loudspeaker. But in the present case, the opposite party has itself violated the condition No. 8 of loan agreement. So far as condition No.7 is concerned, the opposite party was under obligation to issue notice to the complainant. To prove the compliance of notice, the opposite party has placed on record photocopy of notices issued by Kohli & Sobti, Advocate (Ex. OP-1/11 to Ex. OP-1/15). The complainant has denied the said notices having been got issued by the opposite party and received by complainant. The learned counsel for the complainant has also made reference to application dated 20-9-2021 as per which, the complainant demanded copy of original legal notice allegedly issued by the opposite party, before initiation of auction proceedings, alongwith postal receipts of legal notice and acknowledgement i.e. proof of delivery of said notices to the complainant. But, surprisingly, the opposite party did not file any reply to the said application rather counsel for the opposite party suffered statement dated 19.10.2021 that opposite party is not in possession of any other document except already produced. The statement is of dated 19-10-2021 meaning thereby that opposite party admit that they are not in possession of copies of original notices and original postal receipts. As such, this Commission has no hesitation in holding that opposite party failed to give proper notice to the complainant before initiating auction proceedings. A perusal of Circular dated 2-7-2-14 issued by Reserve Bank of India (Ex. C-14) shows that Reserve Bank of India has issued guidelines for sale of gold ornaments in case of ' Lending against collateral of gold jewellery'. Guideline (iv) (C) (i) (f) reads as under :- “The Board approved policy with regard to auction of jewellery in case of non-repayment shall be transparent and adequate prior notice to the borrower should be given before the auction date.” According to (iv) (C) (i) (g), “Auction should be announced to the public by issue of advertisement in atleast 2 newspapers, one in vernacular language and another in national daily newspaper.” As per Circular dated 16-9-2013 of Reserve Bank of India (Ex C-15), Clause 17 C (2) - “Auction” - It has been laid down by Reserve Bank of India that “while auctioning the gold, the NBFC should declare a reserve price for the pledged ornaments. The reserve price for the pledged ornaments should not be less than 85% of the previous 30 days average closing price of 22 carat gold as declared by the Bombay Bullion Association Ltd. (BBA).” Even perusal of 'Auction Policy' of opposite party Muthoot Finance (Ex. C-16) in 'General Rules', reveals that it has been laid down that auction proceedings will be completed within 3 months from the loan due date before which the borrower should close the loan. 'Auction Process' – in para 1 it has been mentioned that “Overdue Loan accounts shall be identified and registered notices sent as per the timelines prescribed above. If the borrower fail to repay the dues within the timelines prescribed, such accounts will be marked for auction. In para 2 , it has been mentioned that “Board approved Auctioneers appointed at various centres shall be assigned with the Auction process. As per para No. 3 “Registeed auction notice with acknowledgement due shall be served to all such identified borrowers giving 14 days notice period in order to ensure that sufficient time and opportunity are given to the customer for redemption and to avoid auction sale. Paper publication in a local daily in the local language and in another national daily in English shall be given clearly specifying the place, time and date of auction also giving time for redemption upto the close of business on the preceding date of proposed auction. Auction Procedure has been descibed as incase of auction scheduled at Branches, following record was to be maintained :- a) Detail of auction participants b) Minutes detailing the auction proceedings c) Bid register indicating the bid rate of all bidders d) Sales Invoice e) Detailed auction record Therefore, this Commission is of the view that while carrying out alleged auction proceedings, the opposite party deliberately failed to comply with its own rules framed for auction as decribed in Ex. C-16 and also violated the rules framed/Guidelines issued by Reserve Bank of India, as mentioned in Ex. C-14 & Ex. C-15. The opposite party has failed to publish auction proceedings to be carried out in one local and one national news paper. The opposite party even failed to carry out the videography or photography of auction proceedings. The opposite party has also failed to place on record detail of participants in the auction proceedings. The opposite party even failed to place on record the detail of auctioned items and register where the detailed of bid price of all the bidders and the last bid price of all the bidders have been recorded and authenticated by Board approved auctioneer. The opposite party has also failed to place on record sale invoice as per their own auction policy and record of sucessful bidder who purchased the jewellery/gold ornaments. Even the aforesaid documents were demanded by complainant through application dated 20-9-2021. The said application was replied by the opposite party and it was stated that no document demanded by the complainant are in the custody of the opposite party meaning thereby that auction proceedings alleged by the opposite party was only a sham transaction and opposite party has itself not followed the rules and conditions of auction. As such, this Commission is of the considered opinion that auction procedure carried out by the opposite party are held to be not valid for want of service of proper notice and publication of auction proceedings in local and national news papers. However, this Commission cannot ignore this fact that complainant has also not complied with the terms and conditions of the loan agreement and failed to deposit the due installments of loan as per loan agreement. It is noticed from the terms and conditions that it is mentioned in the agreement that company shall be entitled to retain the gold ornaments as a bonafide holder of the said ornaments till the borrower has not performed his promise to repay the loan amount. Thus, keeping in view in mind the terms and conditions of the loan agrement, the complainant ought to have repaid the loan with interest and to get back the gold ornaments given as collateral security, but complainant failed to do so. However, this Commission is of the view that Consumer Protection Act being a legislation looking after the interest of the consumers providing better protection of their interest, thus in the instant case, the consumer though has not made the payment of installments, yet this Commission cannot dismiss her case without directing her or rather giving her a chance to repay the loan with interest as per terms and conditions of the agreement. Since in the present case, the complainant has prayed for directions to the opposite party to return gold ornaments pledged by the opposite party as collaterial security and also prayed for determination of the interest as per law. Hence, from the above discussions and after going through the referred case law, this Commission is of the view that complainant is entitled to the relief prayed for. Accordingly, the compaint is partly allowed and opposite party Muthood Fiance Limited is directed to determine the amount of loan with interest due from the complainant after deducting the payment, if any, made by the complainant, within one month after receipt of copy of this order and thereafter the complainant shall be under liability to repay the due amount within one month of such determination of loan amount with due interest. It is further held that on receipt of total amount with interest, the complainant shall be entitled to get back her pledged gold ornaments from the opposite party as per details mentioned in certificates Ex. C-2 to Ex. C-6 or to pay present value of the gold ornaments weighing 228.950 grams. The opposite party shall not impose any penalty while calculating interest on the loan amount. Considering the circumstances of the case, no order is passed as to compensation. The complaint could not be decided within the statutory period due to heavy pendency of cases. Copy of order be sent to the parties concerned free of cost and file be consigned to the record room. Announced : 01-06-2023 ( Lalit Mohan Dogra) President (Shivdev Singh) Member
| |
