DISTRICT CONSUMER DISPUTES REDRESSAL FORUM-I,

U.T. CHANDIGARH

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Ajit Pal Singh, r/o H.No.179-A, United Coop. H/B Society, Sector 68, Mohali.

…..Complainant

                                      V E R S U S

1.       Muthoot Finance Pvt. Ltd., 28/856 B5- Alpha Lane Kadavanthara, Cochin – 682020, through its Managing Director.

2.       Muthoot Finance Pvt. Ltd., SCO No.80-81, Sector 17-C, Chandigarh, through its Branch Manager.

……Opposite Parties

QUORUM:   P.L.AHUJA                                                  PRESIDENT

                   RAJINDER SINGH GILL                                MEMBER

                   DR.(MRS) MADANJIT KAUR SAHOTA         MEMBER

Argued by: Sh.A.K.Bakshi, Counsel for complainant.

                     Sh.Mrigank Sharma, Counsel for OP No.1.

                     OP No.2 exparte.

PER P.L.AHUJA, PRESIDENT

1.                Sh.Ajit Pal Singh, complainant has filed this consumer complaint under Section 12 of the Consumer Protection Act, 1986, against Muthoot Finance Pvt. Ltd. & Anr. - Opposite Parties (hereinafter called the OPs), alleging that he availed a personal loan from OPs on 31.1.2009 by pledging gold ornaments weighing 180 grams for the purpose of marriage of his daughter. The said loan was returnable on 31.10.2009 and the copy of receipt issued by OPs is Annexure C-1. The marriage of the daughter of the complainant took place on 22.2.2009 and, thereafter, he remained busy with various rituals and his health also did not remain good and he could not contact the OPs for return of loan and taking back the ornaments. After March, 2010, the complainant visited the office of OPs many times for settlement of loan amount but he was turned down every time on one pretext or the other.  The complainant sent letters dated 14.11.2011 and 29.11.2011 – Annexure C-2 and C-3 to the OPs for settlement of the loan amount and return of ornaments but no reply was sent by the OPs. It has been alleged that on 6.12.2011 the complainant visited the office of OP No.2 and he was informed that his gold ornaments have already been auctioned in October, 2010. Such an auction took place without due notice to the complainant, though the office of the OPs is situated on the upper floor of the office of the complainant. It has been also contended that the price of gold on 31.10.2010 was above Rs.19,800/- and on the date of loan, it was Rs.13,347/- per 10 gms. It has been contended that the OPs are liable to return the excess amount generated by them in the so called auction.

2.                Notice of the complaint was given to the OPs. OP No.2 did not appear, despite service and it was proceeded exparte on 22.8.2012.

3.                OP No.1 in its written statement has admitted that the complainant had availed loan bearing account No.PPL-4594 dated 31.1.2009 and pledged gold ornaments by way of collateral security. It has been averred that in utter defiance of the terms of the repayment of the said loan, the complainant had failed/avoided/neglected to repay the said loan and OP No.1 was constrained to call upon the complainant to make the payment in respect of the said loan. OP No.1 also issued a legal notice dated 28.6.2010 to the complainant through its Counsel vide speed post, calling upon him to repay the outstanding dues and in case of default, the pledged ornaments would be sold in public auction on 15.7.2010. However, despite the said notice the complainant failed to pay the outstanding dues. As such OP No.1 was constrained to sell/dispose off/auction the said ornaments in the public auction on 15.7.2010. A sum of Rs.2,26,805/- was realized from the auction of the pledged ornaments, which was adjusted against the dues payable in respect of the said loan account. On the date of auction on 15.7.2010, a sum of Rs.2,40,833/- was payable by the complainant to OP No.1 and after adjusting the said sum of Rs.2,26,805/- a further sum of Rs.14,028/- is still due and payable by the complainant. It has been averred that the complaint is not maintainable and liable to be dismissed.   

4.                In his rejoinder, the complainant has pleaded that the OPs never issued any legal notice dated 28.6.2010 nor any such notice was ever delivered to him. It has also been stated that the auction was not conducted as per copy of the guidelines obtained from the website of RBI – Annexure C-5.  It has been further stated that the gold rate as on the date of alleged auction was Rs.18,450/- per 10 gms and the total price of 180 gms comes to Rs.3321000/- (Rs.3,32,100/-) and not Rs.2,26,805/- as claimed by the OPs.

5.                The parties led evidence in support of their contentions.

6.                After appraising the entire evidence and hearing the arguments of the learned Counsel for the parties, we are of the opinion that the complaint merits acceptance.

7.                It is the admitted case of the parties that the complainant took a personal loan of Rs.1,55,000/- from the OPs vide loan No.0004594, copy of declaration of which is Annexure C-1 on 31.1.2009 by pledging 180 gms of gold ornaments. The copy of rules and regulations on the back of Annexure C-1 shows that in the event of borrower failing to settle transactions within a period of 12 months ornaments will be sold without any reference to the borrower to compensate for the loan amount and the interest due. If ornaments are auctioned at a price, which is lower than the amount due, the borrower will have to compensate the losses incurred by paying the differences. If the ornaments are auctioned at a higher price than what is due, the surplus amount will be refunded to the borrower. If losses are incurred on sale, the borrower will be held responsible for the same. The lender shall not be responsible for loss, if any, caused by such sale of pledged ornaments.

8.                As per the above rules and regulations, since the complainant had taken the loan on 31.1.2009, he was required to settle transaction on or before 30.1.2010. However, the complainant did not settle the loan amount till that date. The complainant has produced letters dated 14.11.2011 and 29.11.2011 – Annexure C-2 and C-3 to prove that he made a request to OP No.2 to release his gold jewellary  after taking the full amount with interest. We feel that in accordance with the condition No.3 of rules and regulations – Annexure C-1, the OPs were authorized to auction the gold ornaments after 30.1.2010 because the complainant did not settle the transaction before the due date.

9.                The next question that arises for consideration is whether the auction of jewellary was conducted in accordance with rules and after following the principles of natural justice or not. The learned Counsel for the complainant has produced a copy of the guidelines issued by RBI - Annexure C-5 and has contended that in case of auction of jewellary, the same should be transparent and adequate prior notice to the borrower should be given and the auction should be announced to the public by issue of advertisements in at least two newspapers. Further gold pledged is to be auctioned only through auctioneers approved through the board. He has contended that these guidelines were not followed by the OPs while conducting the alleged auction and the same is illegal. He has further contended that no legal notice dated 28.6.2010 was received by the complainant from the OPs nor the OPs have produced any copy of the said notice or any proof of delivery of the alleged notice to the complainant. The learned Counsel for the complainant has vehemently argued that the conduct of the OPs shows deficiency in service on their part.

10.              On the other hand, the learned Counsel for the OPs has urged that as per conditions on the declaration – Annexure C-1, the complainant was bound to settle the transaction within a period of 12 months, otherwise ornaments could be sold by way of auction and since in this case, the transaction was not settled by the complainant within due time and the complainant did not make any request for repayment of the loan till 14.11.2011, the OPs could not sit over the security forever. He has contended that the guidelines of the Reserve Bank of India – Annexure C-5 were issued on 26.3.2012 and the same were not applicable to the public auction, which took place on 15.7.2010. He has further argued that the auction was conducted as per rules and an amount of Rs.2,26,805/- was realized and since a sum of Rs.2,40,833/- was payable by the complainant to the OPs, therefore, a further sum of Rs.14028/- is still due towards the complainant. The learned Counsel for the OPs has strenuously argued that there is absolutely no deficiency in service on the part of OPs and rather it is the complainant, who is guilty of violation of the terms and conditions of gold loan transaction.

11.              We have given our thoughtful consideration to the rival contentions. We are of the view that since the complainant failed to settle the transaction within a period of 12 months of availing the personal loan of Rs.1,55,000/- on 31.1.2009, therefore, the OPs were justified in selling the ornaments of the complainant in auction as per Condition No.3 of rules and regulations for gold loan transaction mentioned in Annexure C-1. As rightly contended by the learned Counsel for the OPs, the Guidelines on Fair Practices Code for NBFCs – Annexure C-5 are not applicable to the auction conducted by the OPs because the same were issued on 26.3.2012 while the auction in question took place on 15.7.2010. However, we do feel that it was the duty of the OPs to conduct the public auction of the ornaments of the complainant in a transparent manner and to issue a prior notice to the complainant about the date and time of the said auction. Furthermore, the OPs should have also prepared a detailed record of the auction to ensure that the auction was conducted in a fair manner safeguarding the interest of the complainant. However, in the instant case, the OPs have not produced any evidence, which could show that as alleged in their written statement, they issued a legal notice dated 28.6.2010 to the complainant through their Counsel vide speed post calling upon him to repay the outstanding dues on or before 14.7.2010 and in case of failure on his part, the pledged ornaments shall be sold in public auction on 15.7.2010. The OPs have not produced the copy of the legal notice, the copy of the postal receipt of speed post or any record of public auction. The OPs have also not produced any document, which could show as to how much amount was payable by the complainant to the OPs on the date of auction. The evidence on record shows that the OPs have miserably failed to prove that they called upon the complainant to make the payment in respect of the said loan. Thus, the alleged auction by the OPs was not conducted in a transparent and fair manner to ensure that the interests of the complainant were safeguarded. In the absence of any prior of notice of auction to the complainant, the auction proceedings are illegal. However, since the auction has already taken place, we feel that the complainant is certainly entitled to get the market price of the gold as on the date of auction i.e. 15.7.2010. The complainant in his rejoinder has alleged that the gold rate as on the date of alleged auction was Rs.18,450/- per 10 gms and the total price of 180 gms of gold comes to Rs.3,32,1000/- (Rs.3,32,100/-) and not Rs.2,26,805/- as claimed by the OPs. The complainant filed a rejoinder on 13.12.2012 and the OPs have not produced any document indicating the market price of the gold as on 15.7.2010 to infer that the gold price mentioned in the rejoinder of the complainant is not correct. Accordingly, we hold that the market rate of 180 gms of gold of the complainant was  Rs.3,32,100/- on 15.7.2010 and since the OPs have adjusted only an amount of Rs.2,40,833/- towards the repayment of loan, therefore, the complainant is certainly entitled to get the remaining amount of Rs.91,267/- from the OPs along with interest. There is definite evidence on record to prove the deficiency in service on the part of OPs because the OPs auctioned the gold ornaments of the complainant below the market rate.

12.              For the reasons recorded above, the complaint is allowed. OPs are directed to make payment of an amount of Rs.91,267/- along with interest @9% to the complainant from the date of auction i.e. 15.7.2010 till realization. OPs shall also make payment of an amount of Rs.10,000/- to the complainant as compensation for harassment and mental agony. They shall also make payment of an amount of Rs.5500/- towards litigation costs to the complainant. The liability of the OPs shall be joint and several.

13.              This order shall be complied with by the OPs within one month from the date of receipt of its certified copy, failing which, OPs shall be liable to refund the above said awarded amount to the complainant along with interest @ 12% p.a. from the date of auction i.e. 15.7.2010 till realization, besides costs of litigation.

14.              The certified copies of this order be sent to the parties free of charge. The file be consigned.