The Bangalore Urban District Consumer Disputes Redressal Forum has flayed Muthoot FinCorp Ltd. for auctioning off a gold chain pledged by a customer without following due procedure. The firm has been asked to compensate the customer for both the chain itself and for the mental agony he was made to suffer.

Suresh Kumar submitted that he had pledged a gold chain weighing 16 gm with the gold loan firm, for a sum of Rs 11,600. When he went back to redeem the chain along with the amount due, he was asked to return after two weeks as the officials at the firm were unable to locate his chain.

Aggrieved, Kumar approached the Forum, and, as Muthoot did not respond to a notice, orders were passed ex-parte, directing the firm to return the chain to Kumar after collecting Rs. 17,352 from him as interest. Kumar was also awarded Rs. 2000 as litigation costs.

However, Muthoot appealed to the Karnataka State Consumer Redressal Commission, which set aside the Forum’s order but asked it to adjudicate the dispute afresh. The hearing again took place on March 27, 2015.

The complainant produced evidence that showed that an auction of gold was held at the Muthoot office after he had pledged the chain, and the firm could not deny this. The Forum noted that Muthoot had violated Reserve Bank of India guidelines as well as guidelines for Fair Practices Code for NBFCs and had sold the chain in an auction without advertising it in both a vernacular daily and a national one.

Muthoot now has to pay Kumar Rs 10,000 for causing him inconvenience and mental agony and Rs 5,000 towards litigation costs, apart from the value of the chain, with interest, after collecting from him the interest on the loan.


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