Sri Shyamal Gupta, Member

Challenging the Order dated 08-03-2017, passed by the Ld. District Forum, Howrah in CC/186/2015, this Appeal is moved by M/s Muthoot Finance Ltd.

The complaint case, to narrate in brief, is that, Complainant availed of financial assistance from the OPs by pledging his gold ornaments.  All on a sudden, the Complainant received an Auction Notice dated 19-09-2013 from the OPs  whereby he was asked to pay outstanding amount to the tune of Rs. 3,10,510/- (approx.) before 25-09-2013, i.d., OPs would liquidate the pledged ornaments through auction on 26-09-2013.  It was also alleged that the interest was wrongly calculated and no Statement of Accounts were provided for better understanding of the matter.  It was alleged that the OPs did not provide him copies of the relevant loan agreements and Statement of Accounts and was trying to sell off the pledged gold ornaments arbitrarily.  Therefore, the complaint case was filed.

The OPs, on the other hand, submitted that in terms of Sec. 173-176 of the Contract Act, 1872, they enjoyed every right to liquidate the pledged ornaments for realization of claimed amount for which they followed due process of law.  The Complainant failed to make due payment despite reasonable opportunities being given to him by these OPs.  The Complainant took loan in the year 2011 which were enhanced from time to time.  The Complainant could not pay the monthly interest; nor he could close down the accounts as per the agreement and filed the complaint case for taking undue advantage.  They claimed that at the time of disbursement of the loans, copies thereof were provided to the Complainant immediately.  In usual course of business, the OPs sent legal notice on 09-09-2013, intimating him to close down the accounts by 25-09-2013 and in default the gold ornaments would be put into auction on 26-09-2013.  The borrower did not turn up and hence, as per the notice, the gold ornaments were auctioned on 26-09-2013, whereof part of the outstanding amount was realized and for the deficit amount, the company vowed to take appropriate legal step in due course of time.

Decision with reasons

As the Respondent did not turn up in spite of due service of notice upon him, the Appeal was heard ex parte.

In course of argument, Ld. Advocate for the Appellants pointed out several discrepancies in the impugned order, e.g., the Ld. District Forum mentioned about Clause Nos. 13, 14, 19 of the loan agreement though there was no existence of such clauses in the purported agreements; in paragraph 5 of the impugned order, the name of the Respondent was mentioned as ‘Prasad Ch. Paul’ instead of ‘Anirban Chatterjee’.

Be that as it may, on going through the material on record, we missed out several important documents those were necessary for proper adjudication of the matter. 

To cite a few examples: the Appellants have not attached any proof of delivery of the notices being issued to the Respondent.  Similarly, access to each of the original agreements was extremely vital in view of the allegation of the Respondent that he took lesser financial assistance from the Appellants. Also important was the detail Statements in respect of each of the loan accounts since their inception. 

Further, it appears that the RBI has devised a Fair Practices Code for NBFCs on 26-03-2012.  Some of the salient features of this Code  is appended below:

“*The NBFCs should devise a system of giving acknowledgement for receipt of all loan applications. 

* The NBFCs should convey in writing to the borrower in the vernacular language as understood by the borrower by means of sanction letter or otherwise, the amount of loan sanctioned along with the terms and conditions including annualised rate of interest and method of application thereof and keep the acceptance of these terms and conditions by the borrower on its record. As complaints received against NBFCs generally pertain to charging of high interest / penal interest, NBFCs shall mention the penal interest charged for late repayment in bold in the loan agreement.

* Not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice and this could lead to disputes between the NBFC and the borrower with regard to the terms and conditions on which the loan is granted.

* NBFCs are, therefore, advised to furnish a copy of the loan agreement preferably in the vernacular language as understood by the borrower along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.

* The loan agreement shall preferably be in vernacular language.

* 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. It should also lay down the auction procedure that would be followed. There should be no conflict of interest and the auction process must ensure that there is arm’s length relationship in all transactions during the auction including with group companies and related entities,

* The auction should be announced to the public by issue of advertisements in at least 2 newspapers, one in vernacular language and another in national daily newspaper.

* As a policy the NBFCs themselves shall not participate in the auctions held,

* Gold pledged will be auctioned only through auctioneers approved by the Board.

* The loan agreement shall also disclose details regarding auction procedure”.

For proper adjudication of this dispute, it is imperative that the Appellants do satisfy religious compliance of aforesaid Code by adducing cogent documentary proof in this regard.

For all these reasons, I remand the case to the Ld. District Forum to adjudicate the matter on the basis of above documents.  In case of failure on the part of the Appellants to part with the requisite documents, the Ld. District Forum may take adverse view against them.

Hence,

O R D E R E D

The Appeal stands allowed ex parte against the Respondent in part.  The impugned order is hereby set aside.  Parties to appear before the Ld. District Forum on 24-01-2019 for submission of requisite documents by the Appellants.