Sri Shyamal Gupta, Member

Aggrieved by the Order dated 22-01-2016 passed by the Ld. District Forum, North 24 Parganas in CC/474/2015, whereof the complaint has been allowed, this Appeal u/s 15 of the Consumer Protection Act, 1986 is filed by the OP, M/s Manappuram Finance Ltd.

Briefly stated, case of the Complainant is that, he took a gold loan for a sum of Rs. 6,90,000/- from the OP by pledging 303.4 g. hall-marked gold ornaments.  Although he was repaying EMIs braving great financial distress, he was surprised to receive a purported notice dated 14-01-2015 issued by the OP intimating that auction of the pledged gold has been completed.  Although the Complainant lodged strong protest, it did not yield any positive result; hence, the complaint. 

The OP since did not contest the case, the complaint was decided ex parte.

Decision with reasons

Heard the Ld. Advocates of both sides at the time of hearing and also gone through the documents on record.

Ld. Advocate for the Appellant argued that due notice before auction of the pledged securities was issued by it besides inserting notice in a daily newspaper.  It is further submitted by the Ld. Advocate that as the Respondent did not repay the loan in time, the Appellant was compelled to take drastic step to realize the outstanding due.

Ld. Advocate for the Respondent, on the other hand, argued that as per RBI guideline, no financial institution is entitled to receive any public deposit without specific sanction and order passed by the RBI and at the same time NBFCs are not permitted to keep gold as pledged or to sell the same in auction without the permission of Gold Controller because as per Gold Control Act, in order to deal or sale or even keep gold, one must possess lincence from the Gold Controller.  He wondered, if the Appellant possess due licence of the Gold Controller and RBI in this regard.  The Ld. Advocate further argued that in accordance with law, while publishing public notice in newspaper, detail particulars of concerned loan like loan account no., outstanding amount, details of pledged gold and its expected value and demand for sale must be there.  The Ld. Advocate asserted that nothing of that sort was there.  

At the very outset, it bears mentioning that the Reserve Bank of India formulated a Guideline on Fair Practices Code for NBFCs vide No. DNBS.CC.PD.No.266 /03.10.01/2011-12 dated March 26, 2012. The RBI again on September 16, 2013, by issuing another notification being no. DNBS.CC.PD.No.356/03.10.01/2013-14 incorporated some additional stipulations in respect of auctioning of pledged gold jewellery. 

The Appellant has not furnished relevant documents on record to show that it ensured religious compliance of aforesaid guideline as was obligatory on its part.  Although the Appellant has placed on record copy of a unsigned pre-auction notice dated 17-02-2014, in absence of requisite proof of dispatch/delivery of the said purported notice, Appellant’s claim of due service of the same upon the Respondent cannot be accepted. According to RBI guideline, 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. We have not come across due compliance of this obligation by the Appellant too. According to RBI guideline, the loan agreement must contain details regarding auction procedure.  For some obscure reasons, the Appellant has refrained from furnishing on record any copy of the concerned loan agreement to show that it did not deviate the Regulatory directive.

Such deviation of Regulatory directive vitiates the entire auction process.  Accordingly, by allowing the instant complaint, the Ld. District Forum committed no jurisdictional error.  However, its order to return the concerned gold ornaments to the Respondent does not seem to be a practical proposition.   Also, punitive damage amount @ Rs. 100/- per day appears to be too harsh.  In view of this, we are constrained to tweak the instant order to some extent.

The Appeal, thus, succeeds in part.

Hence,

O R D E R E D

The Appeal stands allowed on contest in part.  The impugned order is modified as under:

The Appellant shall pay the equivalent sum of 303.4 g. gold of similar specification to the Respondent after adjusting outstanding due as on the date of auction to the Respondent along with simple interest @ 9% p.a. on the balance amount payable to the Respondent from the date of auction till full and final payment is made.  A detail statement of account in this regard should be provided to the Respondent without fail. That apart, the Appellant shall pay compensation and litigation cost for a sum of Rs. 50,000/- and Rs. 20,000/-, respectively.  The Appellant shall ensure due compliance of this modified order within 40 days hence.