What would you do if the gold jewellery you pledged for a gold loan gets robbed at the bank? Would you consider it gone or fight to get the money back? A resident of Tumkur in Karnataka found himself in a similar situation and decided to fight back.But the question was whether he should get the value of his gold back or the full amount, including the making charges and stone value? A recent consumer commission has delivered a judgment that could set the record straight on what should ideally be done in cases like these.“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 has said.Gold jewellery pledged for gold loan gets stolen in bank robberyA man from Tumkur in Karnataka opened 2 gold loan accounts at a Canara Bank branch by pledging 2 items of gold each under both, in August 2017. The gold jewellery pledged for one account weighed 120.80 grams while the other weighed 133 grams, and the man availed a loan of Rs 1,50,000 on each account.This gold jewellery, kept in the custody of the Canara Bank branch, was robbed, according to the bank’s submission. On noticing the robbery of gold articles, the bank issued a letter dated July 26, 2018, to the borrower and offered to pay the gold value.On the first loan account, the bank fixed the gold rate at Rs 2600/g and paid an amount of Rs 1,56,033 (net gold weight of 90 gram) towards the gold value.In the second loan account, the gross weight of the gold was 133 grams while the net weight stood at 85 grams. The Canara Bank branch (at a gold price of Rs 2500/g) paid around Rs 2,12,500 to the borrower.However, the man asked for 20% making charges and 3% stone value, demanding an additional payment of Rs 88,362. He approached the District Commission and filed a complaint alleging deficiency in service and unfair trade practice.What did the District Commission rule?After trial, the District Commission in July 2020 allowed the complaint and directed the bank to pay the additional amount with compensation of Rs 30,000 and Rs 10,000 for litigation expenses within 45 days.It noted that the man alleged that the bank failed to pay 20% of making charges and 3% of stone value and sought payment of the balance amount, which the bank declined. The commission, after appreciating the facts and circumstances of the case, directed the lender to pay an additional Rs 88,362 with 9% interest from 29.08.2018.However, unhappy with the order, the bank approached the Karnataka State Disputes Redressal Commission.Gold jewellery stolen from bank: What is the bank’s liability?Jayesh H, Co - Founder at Juris Corp, explained that in such cases it’s debatable whether it should be the market value or replacement value of gold or cost incurred by pledgor. “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 suggested that any complainant should be able to prove their total costs incurred.What did the bank say on the issue?The lender claimed that it is not liable to pay the additional amount (gold making charges plus stone value), as there is no deficiency in service in paying the gold value worth of 85 grams.“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.Canara Bank added that the order passed by the District Commission is not in accordance with law; there is no deficiency in service. Hence, it requested the State Commission to set aside the same.ET Wealth Online reached out to Canara Bank for a response regarding this case. However, the bank is yet to respond.What did the State Commission say and what is the final order?Karnataka State Disputes Redressal Commission dismissed the bank’s appeal and upheld the order passed by the district commission. "We are of the opinion that the order passed by the District Commission is in accordance with law," the State Commission stated.If the ornaments which are in the custody of the bank were lost either by way of robbery or theft, it is bound on duty of the bank to settle the value of the gold ornaments at prevailing rates, which includes the making charges and also stone value, the commission stressed.It further held that the bank need not expect an invoice to show that the making charges were imposed on the jewellery. It is undisputed that every gold ornament is levied making charges, and the same is liable to be payable.Therefore, the Canara Bank branch has been ordered to pay additional:·Rs 88,362 with 9% interest·Rs 30,000 as compensation·Rs 10,000 as litigation chargesWhy did the borrower win in this case?It’s not surprising that the ruling was in favour of the complainant, said Jayesh H, explaining that pledges should not be mixed up with custody.“Pledgee, i.e., the lender, has a far greater duty than a mere custodian, i.e., a safe deposit vault operator.” In other words, there is a clear legal basis for liability to be fastened on a lender as regards loss of goods. And the liability is as regards the value of the goods.
