BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM AT BANGALORE URBAN

    21^st DAY OF JANUARY 2019

O R D E R

SRI. S.L PATIL, PRESIDENT

The complainant has filed this complaint U/s.12 of the Consumer Protection Act, 1986 against Opposite Party (herein after referred as OP) with a prayer to direct OP to release all the Gold jewelleries of the complainant as per the items mentioned in the pledge No.0104390700715857 by accepting the principle and interest amount, to pay compensation and damages of Rs.10,00,000/- towards mental agony, to pay a sum of Rs.5,000/- towards cost of the legal notice and Rs.10,000/- towards proceedings of the complaint and to pay interest @ 18% p.a from the date of complaint till the date of actual handing over all the Gold jewelleries.

2. The brief allegations made in the complaint are as under:

OP is running the business of lending finance to customer by pledging the Gold ornaments and jewelleries under the proprietorship of Manappuram Fiance Ltd., at Johns Church Road (Coles Park) Branch ID 439 Bharathi Nagar, Bangalore City.  That on 27.06.2014 complainant approached OP seeking for financial assistance by pledging his Gold jewellary.  OP agreed for the same and lent Rs.3,14,500/- as loan by pledging the gold jewellary weighing 166.40 grams bearing No.0104390700715857 dated 27.06.2014, pawn ticket No.32456844 classification as normal Gold, D Classification D3 Scheme name B1+ maturity dated 26.06.2015.  That after availing loan the complainant started paying interest to OP till 04.06.2015 the complainant has paid interest monthly thereafter the complainant has not paid interest till 03.06.2016.  That due to financial problem complainant could not pay the further interest till 01.06.2016 and with great difficulties the complainant had arranged the entire amount and approached the OP on 01.06.2016 in order to release the gold jewelleries but the complainant was shocked to hear from the OP that the OP has already auctioned all his jewelleries some six months ago.  That the OP has not intimated about the auctioning of the jewelleries and has not sent any of the prior notice or intimation to the complainant about the decision taken by the OP to auction the jewelleries of the complainant.  The complainant ha paid interest to the OP i.e., from 11^th August 2014 to 29^th October 2014 and 3^rd March 2015 and 4^th June 2015.

That by keeping all the jewelleries of the complainant and after receiving interest from the complainant, the OP had no curtsey to inform the complainant by sending prior notice on the complainant by informing about auctioning of the jewelleries but the OP has cheated and misappropriated to the complainant all his gold ornaments and thereby caused breach of contract and caused mental agony to the complainant.  That when OP has now shown any interest, the complainant had approached the jurisdiction Bharath Nagar Police Station and lodged complaint against the OP but the police have stated to approach before the Civil Court as the matter is civil in nature and registered as NCR No.187/2016.  That due to financial difficulties the complainant could not pay the interest thereafter when he arranged the entire amount to release all his jewelleries for the sake of his son’s marriage.  But it was learnt from the OP that all his jewelleries has been auctioned six months ago.  Complainant got issued legal notice to OP dated 30.06.2016 calling upon the OP to return and release all the jewelleries of the complainant by receiving loan amount with interest within seven days from the date of receipt of the notice.  The notice sent by complainant as duly served on OP but after receipt of the said notice, OP neither returned the jewellery nor replied to the said notice and he has not responded to the said notice so far.  The complainant has left with no other option approach the Forum for appropriate relief.

3. In response to the notice issued, OP appeared through their advocate and filed their version contending in brief as under:

The complaint is not maintainable either in law or on facts.  The complainant is not a ‘consumer’ as defined by section 2(1)(d) of C.P Act.  The complainant has not purchased any goods or availed any services of the OP.  The complainant had taken loans from the Company by pledging gold ornaments as security for the same and the relationship between the complainant and OP is one that of ‘debtor’ and ‘creditor’ and hence, the transactions are only specific contracts and to not fall within the purview of Consumer Protection Act.  That as per the conditions 21 of the loan agreement, it is specifically agreed between the parties that all disputes, differences and/or claim arising out of or touching upon the gold loan, whether during its subsistence or thereafter, shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory amendments thereof and shall be referred to the Arbitration of the Arbitrator appointed by the OP.  Since the case of the complainant is pertaining to accounts and its legal consequences, the same will not fall within the purview of this Forum.  The Forum constituted under the Consumer Protection Act is not the proper Forum for taking accounts and deciding the amount due to any of the parties which is to be done by the regular court of competent jurisdiction.  OP is a Non Banking Finance Company (NBFC) registered with the Reserve Bank of India under the provisions of Chapter III B of Reserve Bank of India Act 1934 and it is licensed to conduct financial business as per the provisions of the said Act and it is having more than 3300 branches all over India.  The complainant approached OP on 27.06.2016 for financial assistance and availing loan of Rs.3,14,500/- by pledging of 166.4 grams of ornaments in pledge No.0104390700715857 in the scheme mentioned and for the period mentioned therein are true.  That the complainant started paying the interest regularly till 04.06.2015 is denied as false.  The complainant was very much irregular in paying the interest and there was much irregularity in paying the interest and the complainant has not paid any interest on the loan since 04.06.2015, which can be seen from the statement of account of the complainant maintained by OP.  That due to financial problems the complainant could not pay the further interest till 01.06.2016 are denied as false and the complainant is strict proof of the same.  When the complainant had arranged for the entire amount and approached the OP on 01.06.2016 in order to release all the gold jewelleries is also denied as false.  That the complainant was shocked to hear from the OP that the OP has already auctioned all the jewelleries of the complainant some six months ago is also denied as false.  That the OP has informed the complainant about the auctioning of his gold jewelleries through phone calls, SMS and by personal visits.  Since the complainant did not respond and did not come forward to pay the due amount, the OP without having an alternate has sent a registered letter with acknowledgment due, to the address given by the complainant.  The said notice sent to the complainant was returned to the OP on 09.07.2015 with a shara/endorsement as ‘Not Claimed’.  In this regard the OP has also published the notice of auction of the gold ornaments on 31.07.2015, in New Indian Express daily newspaper (Bangalore edition), clearly intimating all the defaulted borrowers regarding auctioning of the gold jewelleries.  The averment of the complainant that his ornaments have been auctioned without prior intimation is concocted and baseless.  The complainant had paid interest to the OP on 11.08.2014, 29.10.2014, 03.03.2016 and 04.06.2016 are admitted to be true.

As per the terms and conditions of the loan the complainant ought to have redeemed the above said gold loans on or before the due date as mentioned in the pawn tickets.  Otherwise the complainant is liable to be charges interest at the increased rate as shown in the pawn ticket, which was agreed by the complainant.  All the terms and conditions of the loan agreement were explained to the complainant and the complainant had voluntarily executed the loan agreement and obtained the gold loans whereby he has strictly adhere to his part of the contractual obligation in repaying the interest with principal within the loan tenure as agreed by him in the loan agreement.  Since, the complainant has not paid the interest regularly and since the period of loan had expired, the OP had sent due notices to the complainant periodically, demanding the remittance of loan amount along with interest.  Notices were sent to the given address of the complainant requesting the complainant to pay the due amount and to settle the loan amount.  But the complainant had not cleared/settled the loan in time as per the terms and condition of the loan.  As per the terms and conditions of the loan agreement signed by the applicant, “if the full repayment of loan is not made within stipulated time, the company shall have the right to sell the ornaments at the risk of borrower by public auction”.  The complainant did not release the pledges within the stipulated time, irrespective of sending periodic notices, registered auction notices.  But the complainant had not made any effort to redeem the pledged gold within the time stipulated in the auction notice.  The list of the pledges, which would be sent for auction, had also been displaced in the notice board in the branch.  In spite of the best efforts of the OP, complainant did not come forward to settle the loan.  As on 07.09.2015, the complainant was liable to pay outstanding due amount of Rs.3,58,623/- towards loan.  Having left with no other remedy, the OP auctioned the gold ornaments in auction on 07.09.2015 as per the terms and conditions of the loan agreement, for a sum of Rs.3,61,740/-.  After adjusting the settlement amount towards the auction amount, there was a surplus amount of Rs.3,117/- and a cheque for the said amount was sent to the given address of the complainant.  That the gold was auctioned at a sale price of Rs.2,390-36 per gram.  The auction was conducted due to the inaction of the complainant in repaying the loan amount within the agreed loan tenure. Even though the tenure of the loan was one year, the OP auctioned the gold ornaments more than two months after the expiry of the loan tenure.  That the complainant even after being under obligation to repay the loan amount with accrued interest thereon has not bothered to repay the amount to the OP.  As such due to the default of the complainant the gold ornaments have been auctioned in public auction.  As such the OP is not liable to return the gold ornaments and to compensate the complainant in any way.  OP has not committed any deficient service as alleged in the complaint.  OP is not liable to compensate the complainant.  The transaction between the complainant and OP is Pawnor and Pawnee wherein the Contract Act is squarely applicable.  On the account the complainant is bound by the contract for loan as agreed by her.  The complainant has not fulfilled his contractual obligation.  The complainant has come forward with a false complaint with wild allegations against the OP.  There are no merits in the complaint.

For the reasons mentioned above, OP prays for dismissal of the complaint with costs.

4. The complainant in support of his case tendered his affidavit evidence reiterating the allegations made in the complaint.  One Sri.Chethan H.N S/o Narasimhashetty, Area Head, Bangalore-9 Area of OP tendered his evidence by way of affidavit.  Both parties produced certain documents.  Written arguments have been filed.  We have also heard oral arguments.

5. The points that arise for our consideration are:

        6. Our answer to the above points are as under:

REASONS

7. Point No.1:-   We have briefly stated the contents of the complaint as well as the version filed by OP.  In the instant case pledging of the gold ornament by the complainant for availment of the loan from the OP is not in dispute.  It is also not in dispute that the OP is the finance corporation governed by the rules and regulations of the RBI guidelines.  The claim of the complainant is that, the OP has auctioned the said ornaments without complying the procedures that itself is illegal, hence sought for the reliefs.  Looking to the contents of the complaint as well as version filed by OP, it is evident that complainant is a debtor, OP is a creditor.  When there is a relationship between complainant and OP is that of the ‘debtor’ and ‘creditor’, under such circumstances the complainant is not come within the purview of the section.2(1)(d) of the C.P Act.  In this context, we directly placed reliance on the following 3 reported decisions:

1)  III (1997) CPJ 3 (NC) in the case of Standard Chartered Bank vs. P.N.Tantia & Ors., wherein it is held as under:

7. We have considered the relevant contentions of the parties and have given our thoughtful consideration to the entire matter. The State Commission observed that the Bank acted as share’s bank of the Complainant in as much as the shares of different companies were kept hypothecated or pledged with bank against cash credit facility up to the sanctioned limit granted by the bank could be availed of by the Complainant and thus by advancing loan to the Complainants in exchange of bank interest, the bank rendered service to the respondents for consideration earned by way of interest on account of the loan of Rs.2,40,000/- advanced in this regard. Therefore, the Complainants were con-submersing service of the bank for consideration by way of payment or interest for the loan received from it by pledging the shares of different companies.

8. In our opinion, the approach of State Commission was not legally correct. In the normal course of business it is not the function of the bank to indulge in for the sale and purchase of the shares. Sec.176 of the Contract act provides as under:

176: Pawnee’s right where pawner makes default – if the pawner makes default in payment of the debt, or performance, at the stipulated time, of the promise, the respect of which the goods were pledged, the pawner may bring a suit against the pawnee upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing ledged, on giving the pawner reasonable notice of the sale.

If the proceeds of such sale are less than the amount due in respect of the debtor promise, the pawner is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawner.

9. The rights and duties of the pledger and a pledgee are set out clearly in Sec.176. it is in the discretion of the pawnee either to file suit for recovery of the debit and retain the pledged goods as collateral security or in the alternative to sell the pledged goods after giving reasonable notice to the pawner. Apart from this right conferred upon the bank, the bank had no other legal right to sell the shares on behalf of the Complainants. Even otherwise it was not obligatory on the part of the bank to oblige the Complainant by selling his shares. The bank could file a suit for the recovery of the debit and retain the pledged goods as a collateral security. In view of this, we are of the opinion that it was a relationship of a creditor and a debtor so far as pledged shares were concerned. As such, the question of hiring of service of the bank would not arise in such an eventuality. No doubt, the bank could exercise the right conferred on it in accordance with law. The remedy of the pawner for an improper sale of pledged property is for recovery of damages. Measure of damages is loss actually sustained. If the sale was not effected in terms of their instructions, or it was Complainant could proceed against the bank by way of a civil suit for recovery of damages on account of the loss suffered by them. The Complainant could not resort to the remedies provided under the Consumer Protection Act, 1986. Even otherwise, we find the State Commission awarded a compensation of Rs.20,000/- without any basis. No material was placed on the record by the Complainant in support of their case that they had suffered a loss, if any, on account of the alleged improper sale of shares by the bank. We re of the opinion that the State Commission exercised its jurisdiction illegally and with material irregularity and its order cannot be sustained in law. In the result, we allow this revision petition, set aside the orders passed by the State Commission as well as the District Forum and dismiss the complaint of the Complainant with the observation that the Complainants, if they so desire, can pursue their remedy in a competent court of law. However, we, make no order as to costs.

2) II (2002) CPJ 20 (NC) in the case of D.K.Lalwani & Ors. Vs. The President, Indian Bank Mutual Fund and Anr., wherein it is held as under:

1. Miscellaneous petition for restoration of the revision petition which was dismissed in default on 27.08.01 is allowed and the revision petition is restored to its original number.

2. Complainants are the petitioners before us. Their complaint was dismissed by the District Forum and appeal against that was dismissed by the Madhya Pradesh State Consumer Disputes Redressal Commission. Aggrieved, Complainants have filed this revision petition under clause (b) of Sec.21 of Consumer Protection Act, 1986. Both the District Forum and the State Commission held that the subject matter did not fell within the provisions of consumer protection. Act and as such complaint was not maintainable. Complainants had brought certain IND Ratna units (shares) in their joint names. Their case was that there was delay on the part of the respondents-bank is not splitting the units in marketable lots on which account they had lost money. It had been found units were in the custody of the bank and they were pledged against the loan advanced to the Complainants. No attempt was made by the Complainants to repay the amount. Assuming that there was delay in not splitting units in time for sale in marketable lots, complainants-respondents were not entitled to the return of the units as these were pledged as securities with the bank and the bank was not bound to return the same to the Complainants. It is rightly held that there was relationship of creditor and debtor between the Complainant and respondent-bank. We find no merit in this petition and it is dismissed.

3) I (2000) CPJ 308 (Ker.) in the case of Muthoot Bankers vs. N.Shadadharan, wherein it is held that:

4. It is not in dispute that, the Complainant pledged the gold ornaments on two occasions with the Op and raised two loans. The fact that ornaments were pledged for availing loan having been admitted, the question for consideration is, whether such a transaction could create only a debtor and creditor relationship. The decision of the National Commission in III (1997) CPJ 3 (NC) referred to early, concerned the pledging of shares and availing advance/over-draft facilities. Dealing with the same the National Commission in the contest of the argument by the revision petitioner that the Complainant therein would not be a consumer came to the conclusion that, the transaction would not fall within the provisions of the Consumer Protection Act. In paragraph (10) of the said decision the relative right of the bank and the pawnee is considered, the National Commission observes: The bank could file a suit for the recovery of the debt and retain the pledged good as a collateral security. In view of this, we are of the opinion that, it was a relationship of a creditor and a debtor so far as pledged shares were concerned. As such, the question of hiring of service of the bank would not arise in such an eventuality. No doubt, the bank could exercise the right conferred on it in accordance with law. The remedy of the pawner for an improper sale of pledged property is for recovery of damages. Measure of damages is loss actually sustained. If the sale was not effected in terms of their instructions or it was in violation of the provisions of Sec.176, the Complainant could proceed against the bank by way of civil suit for recovery of damages on account of the loss suffered by them. The Complainant could not resort to the remedies provided under the Consumer Protection Act, 1986. In the decision referred to relied by the Complainant that is 1996 NCJ 289 the question regarding the character of the transaction as such did not arise for determination, neither was a dispute as to whether the Complainant therein was a consumer. As such, there was no occasion for the National Commission to decide the character of the transaction. In that case though the Complainant obtained loan from the bank by pledging gold ornaments, the question was as to the fixing of the quantum of compensation. The argument of the Complainant is in as much as the complaint was not held to be not maintainable, by necessary implication it must be assumed that, the National Commission acknowledged the status of the Complainant therein as consumer. What is binding on this commission is the ratio of a decision. As indicated early, since there was no contest in that decision as to the character of the transaction, naturally the National Commission did not go into that question; then it is not possible to reduce a ratio of the type canvassed by the Complainant herein by implication where the said decisions of the National Commission does not lay down any such ratio. This is more so, as the National Commission has clearly declares the law in this report in the decision in III (1997) CPJ 3 (NC) referred to early. Since the relationship of the Complainant and the Op is that of creditor and debtor, in the light of the decision of the National Commission, we are of the view that, this matter had to be entertained only by a Civil court. In that view, we need not go into the other questions raised in the complaint. We allow appeal 617/98 by the Op and dismiss appeal 764/98. In the facts and circumstances of the case, the parties are directed to suffer their costs.

8. In the light of the decisions cited supra, we come to the conclusion that, relationship between the complainant and OP creating only debtor and creditor relationship.  In this context, we are of the opinion that this matter is to be entertained only by Civil Court.  Accordingly we answer point No.1 in the negative.

9. Point No.2: In view of our findings on point no.1, this issue does not survive for consideration.  Accordingly it is answered.

          10. Point No.3: In the result, we passed the following:         

  O R D E R

The complaint filed by the complainant is dismissed.  Any how an option is left open to the complainant to get redress his remedy by filing suit before the competent court of law having got jurisdiction to try the same.

Looking to the circumstances of the case, we direct both the parties to bear their own costs.

Supply free copy of this order to both the parties.

(Dictated to the Stenographer, got it transcribed and corrected, pronounced in the Forum on this 21^st day of January 2019)

MEMBER                                                              PRESIDENT

Vln* 

Witnesses examined on behalf of the complainant dated 04.11.2016.

Sri.Khadeer Ahmed.

Documents produced by the complainant:

Witnesses examined on behalf of the OP dated 22.12.2016.

               Sri.Chethan H.N

Document produced by the Opposite party.

MEMBER                                                               PRESIDENT

Vln*