|
|
|
|
|
|
|
|
|
When you take a loan from a bank, do you ever bother to go through those countless pages of printed matter that is thrust before you to sign? If you do wade though the legalese and understand what is being said, you will probably never sign those papers!
A recent case decided by the apex consumer court is an example. Here, the consumer pledged shares valued at Rs 29 lakh for a loan amounting to 65 per cent of the value. Since the value of the shares fluctuates, the agreement with the bank was that whenever there was a shortfall in the securities, the consumer had to furnish additional securities to make up the deficit. The bank would give 15 days notice for such corrective action on the part of the consumer and if he failed to take the necessary steps, the bank will sell the shares. And it would not be liable for any loss on account of such sale! And the bank did sell the shares — while the consumer complained that it was done without giving him notice and that he had incurred huge losses on account of the sale at a low price, the bank argued that in its letter asking the borrower to regularise the transaction, it was made clear that on his failure to do so within 10 days, the bank would sell the shares. So no further notice was required, the bank contended. The apex consumer court disagreed and said a separate notice of sale should have been given to the borrower. The commission said that Sections 171 and 176 of the Contract Act make it amply clear that the holder of the lien may sell the pledged goods only on giving the pawn or “reasonable notice” of the sale. Ordinarily, 15 days notice ought to be treated as “reasonable notice” for the purpose of Section 176 of the Contract Act. Even if the loan agreement did not mention the period of notice, this has to be followed, the National Consumer Disputes Redressal Commission said. The commission pointed out that in this case, the earlier four communications issued by the bank were all intimations given to the borrower, for the purpose of regularisation of the account. Thus, they cannot be treated as notice of sale as required under Section 176 of the Contract Act. The bank, therefore, committed an illegality in selling the shares without the consent of the borrower and without giving a reasonable notice. This amounts to deficiency in the banking service, the commission held. It also referred to the observations of the Division Bench of the Calcutta High Court in “Cooperative Hindustan Bank Ltd. vs Surendra Nath Dey (AIR 1932 Calcutta 524)” in which it was observed that the proper interpretation of Section 176 was to hold that notwithstanding any contract to the contrary, notice has to be given for the sale of the pledged goods/securities. The Division Bench had also observed that it shall be a “reasonable notice of the sale”. The mere intimation that if compliance is not made, the bank will arrange for the sale of hypothecated stock did not constitute notice as required under Section 176 of the Contract Act, the Bench had said. In conclusion, the commission said the consumer was entitled to recover the difference between the highest trading price of the scrip which prevailed on April 17, 2001, and the price at which the shares were sold by the bank, along with 12 per cent interest. It also asked the bank to pay the consumer Rs 30,000 as compensation for mental agony and Rs 10,000 towards costs. Earlier, in several cases pertaining to vehicle finance, the National Commission had made it clear that banks cannot re-possess or sell the vehicle without adequate notice to the consumer.
|
||
|
|
||
CONSUMERS BEWARE!
Banks, in their eagerness to protect their interests, would have drawn up terms and conditions that suit them best, never mind whether they are fair to the consumer. For example, banks declare in unambiguous terms, their right to sell the pledged goods or property in case of ‘default’ by the borrower. But there will be complete ambiguity on what constitutes ‘default’ leading to the sale of the pledged goods by the bank. Will the bank acquire the right to sell even if there is one failure on the part of the borrower? Or if there is a delay beyond the due date? You will not find answers to these questions in the agreement. Similarly, you will not find any reference to the legal requirement of issuing adequate notice to the consumer before selling the pledged property.