Imagine this case: You have taken a loan against your gold. That gold is lying with the bank. Then in a bank robbery the gold is stolen. Who is responsible for the loss? Who pays? In one such case, a man challenged the bank and won the case.The issue was eventually considered by a consumer commission, which delivered a ruling on how the value of jewellery lost while in a bank’s custody should be settled.So, what happens if gold jewellery pledged against a gold loan is stolen from the bank? For a borrower, the loss can raise a bigger question than simply recovering the value of the gold. Should the bank pay only for the metal, or should the compensation also cover making charges and the value of stones?A Tumkur resident in Karnataka faced this very situation and chose to challenge the bank’s settlement.
Pledged gold jewellery stolen : What exactly happened
The Tumkur resident had opened two gold loan accounts with a Canara Bank branch in August 2017. He pledged two gold items against each loan account, according to an ET report. The jewellery pledged under the first account weighed 120.80 grams, while that under the second weighed 133 grams. He borrowed Rs 1,50,000 against each account.The jewellery remained in the custody of the Canara Bank branch but was subsequently robbed, according to the bank’s submission, the report said. After discovering that the gold articles had been stolen, the bank wrote to the borrower on July 26, 2018, offering to pay him the value of the gold.
- For the first loan account, the bank valued the gold at Rs 2600/g and paid Rs 1,56,033 towards the gold value, based on a net gold weight of 90 grams.
- Under the second loan account, the jewellery had a gross weight of 133 grams and a net weight of 85 grams. The Canara Bank branch valued the gold at Rs 2500/g and paid the borrower around Rs 2,12,500.
The borrower, however, sought an additional amount to account for the jewellery’s making charges and stone value. He claimed 20% towards making charges and 3% for the stone value, seeking a further payment of Rs 88,362.He then approached the District Commission, alleging deficiency in service and unfair trade practice.Jayesh H, Co – Founder at Juris Corp told ET that determining the appropriate compensation in such cases can be a matter of debate, particularly over whether the borrower should receive the market value, replacement value or the actual cost incurred by the pledgor.“The bank’s liability is almost absolute in such cases. As regards awarding, making charges etc., even if not from replacement value perspective, it’s equally applicable as regards costs incurred by the pledgor.”He said a complainant should be in a position to establish the total costs incurred in relation to the jewellery.
What did the District Commission rule?
After hearing the case, the District Commission allowed the complaint in July 2020.It directed the bank to pay the additional amount claimed by the borrower, along with Rs 30,000 as compensation and Rs 10,000 towards litigation expenses, within 45 days.The commission noted that the borrower had alleged that the bank had not paid the 20% making charges and 3% stone value and had refused to settle the remaining amount. After considering the facts and circumstances, it ordered the lender to pay an additional Rs 88,362, along with 9% interest from 29.08.2018.
Bank challenges ruling
The bank then challenged the District Commission’s decision before the Karnataka State Disputes Redressal Commission.Canara Bank argued that it was not responsible for paying the additional amount contending that there was no deficiency in service since it had already paid the value of the 85 grams of gold.“The complainant, without any documents, is demanding payment of 20% making charges and 3% stone value; the same cannot be payable. The net value of the gold was already paid, but the District Commission failed to appreciate the said facts and allowed this appeal,” it said.The bank further argued that the District Commission’s order was not legally sustainable and that there had been no deficiency in service. It therefore asked the State Commission to set aside the District Commission’s order.
Why the State Commission ruled in favour of the borrower
The Karnataka State Disputes Redressal Commission rejected Canara Bank’s appeal and upheld the District Commission’s order. “We are of the opinion that the order passed by the District Commission is in accordance with law,” the State Commission stated.The commission emphasised that when jewellery kept in a bank’s custody is lost through robbery or theft, the bank has a duty to settle its value at the prevailing rates. This value, it said, should include both the making charges and the value of the stones.The State Commission also held that the bank cannot insist on an invoice as proof that making charges had been imposed on the jewellery. It noted that making charges are levied on gold ornaments as a matter of course and are therefore payable.“If the ornaments which are in the custody of the Appellant Bank were lost either by way of robbery or by theft, it is bound on duty on the Bank to settle the value of the Gold Ornaments at prevailing rates, which includes the making charges and also stone value,” the Karnataka States Disputes Redressal Commission said.Accordingly, the Canara Bank branch was directed to pay the borrower:
- Rs 88,362 along with 9% interest
- Rs 30,000 as compensation
- Rs 10,000 towards litigation expenses