Sri Shyamal Gupta, Member

The case of the Complainant, briefly narrated, is that, he availed of loan worth Rs. 16,19,000/- from the OPs against pledging of gold ornaments.  Though he repaid periodical interest on some occasions, however, owing to financial stringency, he could not repay the entire loan in time.  Subsequently, on receipt of notice from the OPs, he urged them to bear with him for some time. However, the OP threatened to liquidate the pledged ornaments and ultimately sold out the same without prior intimation to him.  Aggrieved with such action of the OPs, this complaint case is filed.

The case was contested by the OPs through their Ld. Advocate.  In their WV, the OPs submitted that the instant loan was repayable within 12 months.  However, the Complainant was very erratic in repaying the said loan from the very beginning for which several notice was issued to him.  Despite such notice, as the Complaint did not take any positive step, the pledged ornaments were liquidated through auction sale following due process of law.  Further case of the OPs is that, as that proceeds realized through such auction sale was not sufficient, the Complainant was asked to repay the residual amount which has still not been paid by him.  The OPs denied any laches or deficiency in service on their part.

The core issue to be decided in this case is whether the Complainant deserves any relief, or not.

Apart from hearing both sides, we have gone through the material on record carefully.

In this case, the Complainant pledged his gold ornaments with the OPs for availing financial assistance for a sum of Rs. 16,19,000/-.  According to the Complainant, market value of the pledged gold as on the date of taking loan was approx. Rs. 22,99,000/-. Admittedly, the Complainant was a defaulter and accordingly, the OPs had every right to take suitable measures to realize outstanding due from the Complainant.  Needless to say, however, is that, such measures ought to adhere to relevant statutory provisions.

It appears, the RBI has formulated detail guidelines regarding auction sale of pledged gold from time to time which is binding on the part of the NBFCs like the OPs.

Some of the salient features of said guideline are appended below:

* The gold pledged can be auctioned only through auctioneers approved by the NBFC's board.

* 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.

* The auction should be conducted in the same town or taluka in which the branch that has extended the loan is located.

* 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 day average closing price of 22 carat gold as declared by The Bombay Bullion Association Ltd. (BBA) and value of the jewellery of lower purity in terms of carats should be proportionately reduced.

* It will be mandatory on the part of the NBFCs to provide full details of the value fetched in the auction and the outstanding dues adjusted and any amount over and above the loan outstanding should be payable to the borrower.

Besides, the Association of Gold Loan Companies (India) too prescribed a Fair Practice Code and it is directed that Members of the Association shall adhere to the said Code without any exception and this self- regulation is integral to the continued membership in the Association. According to the said code,

a)Auctioneer shall serve an auction notice to the pledger by registered post A/D intimating the date of auction before 21 days of the proposed date of auction.

b) Advertisement showing the details of accounts listed for auction with date, time and venue shall be issued in at least two prominent Local News Paper, one in a vernacular language and the other in a national daily by the auctioneers.

c) The pledger shall be given an opportunity to redeem the gold after paying the loan dues till the close of business hours of the preceding working day of the date of proposed auction.

The OPs though submitted some documents in this connection, significantly, no such document is placed before us to show that the Complainant was duly apprised of the exact time and venue of auction as mandated in the abovementioned guideline/fair business code.  Because of this, the Complainant was virtually left with no such opportunity to make a last ditch effort to save the precious ornaments from getting auctioned. Further, no such document is also forthcoming before us to show that such auction was done in strict compliance of Regulatory norms.  As it appears, post auction, the OPs did not voluntarily intimate the detail particulars of auction to the Complainants.  Last but certainly not the least, although auction was supposed to be held in the same town or taluka in which the branch that had extended the loan is/was located, it appears, in this regard too the RBI directive was thrown to the windows.  The OPs though furnished photocopies of paper advertisements, the same being totally illegible, we could not independently figure out, whether the same pertained to the pledged gold of the Complainant or someone else and most importantly, whether said insertions conformed to relevant statutory norms in all respects.  According to the Fair Practice Code of the Association of Gold Loan Companies (India), the OPs were required to serve an auction notice to the Complainant by registered post A/D intimating the date of auction before 21 days of the proposed date of auction. In this regard too, no supporting documentary proof is furnished on behalf of the OPs.

All these violations, to our mind, make it palpable that the OPs indulged in unfair trade practice.  At the same time, we cannot lose sight of the fact that the Complainant too was at fault as he did not repay the loan even after receipt of repeated notice from the OPs. Accordingly, we are inclined to allow the case in part.

Considering all aspects, we direct the OPs to pay Rs. 3,00,000/- as compensation to the Complainant within 40 days from this day and withdraw all demand notices in respect of the subject loan accounts under intimation to the Complainant.  Non compliance of this order within the aforesaid stipulated period shall warrant payment of simple interest @ 9% p.a. over the sum of Rs. 3,00,000/- for the entire period of default.