In a recent consumer dispute case of Canara Bank (Erstwhile Syndicate Bank) v/s Jai Kumar Mittal, a national commission modified a State Consumer Commission's order, partially allowing an appeal filed by a bank against a complainant. This case sheds light on the intricacies of fixed deposit (FD) renewals, a consumer's responsibilities, and a bank's obligation to provide transparent information. The dispute revolved around two fixed deposits, a special "SYND 500 VCC" scheme, and the interest rate applicable during the lapsed period after their maturity.
The Background of the Dispute:
The complainant, Mr. Mukesh Choudhary, had two FDs of Rs. 50 lakhs each, which matured in January 2020 with a total maturity amount of approximately Rs. 1.1 crore. The FDs were part of a unique scheme that, according to the bank, did not have an auto-renewal feature. After the FDs matured, the bank sent a default SMS notification to the complainant, but he did not act on it.
It was only in September 2020—about eight months after maturity—that the complainant requested a renewal. The bank renewed the FDs for another year at the then-prevailing interest rate of 5.4%. Subsequently, the bank paid interest for the lapsed period (January to September 2020) at a rate of 4.5%. This rate was based on the interest for FDs of 180 to 365 days.
Feeling aggrieved by the lower interest rate of 4.5% compared to the original 6.8%, the complainant filed a complaint with the State Consumer Disputes Redressal Commission, New Delhi, after a failed attempt with the Banking Ombudsman.
State Commission's Ruling and the Appeal:
The State Commission, after noting that the bank had not credited the maturity amount to the complainant's account and had not provided documentary proof for this action, ruled in favor of the complainant. It held the bank deficient in service for failing to pay the maturity amount on time. The commission directed the bank to:
- Pay the total maturity amount of Rs. 1.09 crore.
- Pay the differential interest amount of Rs. 2,66,721 (the difference between what the complainant claimed was due and what the bank had paid).
- Award Rs. 1 lakh for mental agony and harassment.
- Award Rs. 50,000 as litigation costs.
The bank appealed this decision, arguing that the State Commission had erred by not considering its written statement and by placing an "uncalled for onus" on the bank. The bank maintained that the complainant was negligent for not submitting the original FD certificates within the stipulated time. The terms of the FD clearly stated that if the overdue period exceeded 14 days, the interest rate for renewal would be the prevailing rate on the date of maturity or renewal, whichever was less.
The National Commission's Modified Decision:
The national commission acknowledged that the State Commission had made an error by not considering the bank's written statement, which was filed during the COVID-19 pandemic and was therefore within the extended time limit set by the Supreme Court.
Upon reviewing the case, the national commission found that the complainant had not provided any material evidence to show that the bank was obligated to either auto-renew the FDs or credit the maturity amount to his savings account without him surrendering the original certificates.
However, the national commission also found the bank’s reasoning for adopting the 4.5% interest rate for the lapsed period to be "unexplained and unsubstantiated." The bank's reliance on a September 2020 rate for a renewal request made in August 2020, and its justification for using a 180-365 day interest period when the FDs were ultimately renewed for a full year, was deemed lacking in objective basis.
Ultimately, the national commission upheld the finding of deficiency in service, but for different reasons than the State Commission. It concluded that the interest for the lapsed period should be calculated at 5.4%, the same rate at which the FDs were actually renewed and accepted by the complainant, rather than the original 6.8%. The commission also considered the State Commission's compensation awards to be on the higher side and reduced them.
In a partial allowance of the bank's appeal, the national commission modified the State Commission's order by:
- Nullifying the direction to pay the maturity amount of Rs. 1.09 crore, as new FDs had already been issued and the matter was moot.
- Reducing the compensation for mental agony from Rs. 1 lakh to Rs. 25,000.
- Reducing the litigation costs from Rs. 50,000 to Rs. 10,000.
- Maintaining the finding of deficiency in service but modifying the basis for it and the calculation of interest for the lapsed period.
This case serves as a crucial reminder for both consumers and financial institutions. Consumers should be diligent about their investments, understanding the terms and conditions, especially those related to maturity and renewal. At the same time, banks must ensure that their policies are transparent and that any actions taken, such as calculating interest for a lapsed period, are based on clear, objective, and justifiable grounds.
Consumer Protection Act, 1986
