Bank should fully settle FD claims CONSUMER PROTECTION

An agriculturist couple, Haribhau Naik and Vimal Naik, had invested ~32.06 lakh and ~20.60 lakh, respectively, in fixed deposits (FDs) with Navodaya Urban Co-operative Bank in Nagpur.

On maturity, the couple surrendered their FD receipts. The bank credited the maturity proceeds to their savings bank account but did not allow them to withdraw the amount. So, the couple issued a legal notice. When the bank ignored it, the couple approached the Reserve Bank of India (RBI) and the commissioner and registrar, department of co-operation, Government of Maharashtra. These authorities were of no help. Finally, they filed complaints before the Maharashtra State Commission, seeking a refund of the maturity value of their deposits, along with interest at 12 per cent per annum, compensation and costs.

The bank put in an appearance through its advocate but did not file a reply. The State Commission decided the complaint ex parte and ordered the bank to pay the maturity value with annual interest of 12 per cent from the date of the complaints till payment. Additionally, ~1 lakh was awarded as compensation and ~10,000 towards litigation costs.

The bank challenged this order and produced a letter in which it had offered to refund the amount with interest currently applicable, in 24 instalments. The National Commission observed the letter was silent about the time frame and frequency of the instalments. On a query from the Commission, the bank’s chief executive officer filed an affidavit, stating the process of closure of the bank had commenced in 2015. So, it had been restrained from undertaking routine banking operations without RBI’s prior approval under Section 35A of the Banking Regulation Act. Hence, it had refused withdrawal of the amount. And, the amount had been only notionally credited.

The bank explained that due to problems in recovery of loans advanced, it did not have sufficient funds to repay. It expressed willingness to deposit ~10 lakh with the Commission and pay the balance in 24 equal instalments but did not mention the time frame for making payment.

The National Commission observed the bank had not contested the complaint before the State Commission. Its conduct and its silence constituted an admission of the veracity of the allegations in the complaint. Thus, deficiency in service was established.

The Commission observed the bank was taking shelter behind RBI’s directives, ignoring the fact that the restrictions were imposed due to its own malfunctioning. Thus, accountholders were suffering for its own negligence and acts of omission and commission. The Commission observed that as the bank was willing to deposit ~10 lakh, it ought to have mobilised funds and applied to the RBI for permission to repay the couple.

Accordingly, by its order of September 12, 2017, delivered by B C Gupta for the Bench, along with S M Kantikar, the National Commission dismissed the bank’s appeal and confirmed the order of the State Commission.

The bank said that it could not repay as the RBI had restrained it from doing routine operations