Bank, not courier service, responsible for safekeeping of consumers’ documents, holds NCDRC

In directing the ICICI Bank Ltd to compensate the complainant with ₹25 lakh and reconstruction of documents which were entrusted as collateral, the National Consumer Disputes Redressal Commission held that the case was one of deficiency of service by the bank, and not the courier service, which misplaced the documents.

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LAST week, the National Consumer Disputes Redressal Commission (NCDRC) held a bank responsible for losing the original title deed of a property entrusted to it as collateral. 

In the case, the original title documents of a property were kept with the bank, ICICI Bank Limited, which were to be transferred to the bank's central facility. The courier service, Blue Dart Express was entrusted for such transfer. However, during the transit the documents were lost. 

While granting the compensation, the NCDRC held that the safe custody of the documents were the liability of the bank, and not the courier service.

The NCDRC directed the bank, ICICI Bank Limited, to pay a compensation of ₹25 lakh to the complainant. 

The NCDRC said the issue was one of compensation for the deficiency in service by the bank and of "indemnifying the complainant against any future loss".

ICICI Bank was also directed to obtain, at its own expense, all the reconstructed and duly certified copies of the documents handed over by the complainant as security at the time of registration of the sale deed.

The Order was delivered by the NCDRC's presiding member Subash Chandra.

Facts

The complainant, one Manoj Madhusudhanan, was sanctioned a housing loan of ₹1.86 crore in April 2016 for the purchase of a property in Bengaluru. 

Upon execution of the sale deed before the district sub-registrar, the bank retained the sale deed in original, along with certain other documents pertaining to the property.

As the NCDRC notes in its Order, no scanned or true copies were provided to the complainant.

In June 2016, the complainant was informed by the ICICI Bank that the original documents had been lost and that it had initiated the process of tracing the misplaced documents.

In July 2016, the bank informed the complainant that the said documents were lost in transit from Bengaluru to its central storage facility in Hyderabad by the courier service.

The complainant approached the banking ombudsman in August 2016 which directed the bank to pay the complainant a compensation of ₹25,000 towards deficiency of service.

The ombudsman also directed the bank to issue duplicate copies of the documents and publish a public notice regarding the loss.

Significantly, the ombudsman expressly granted the complainant the liberty to pursue other remedies.

Complainant's arguments

After the ombudsman's Order, the NCDRC was approached by the complainant with the prayer to direct the bank to pay an amount of ₹5 crore towards compensation for the loss suffered by misplacing of documents and for the mental agony suffered by him.

The complainant averred that he was a "consumer" under the Consumer Protection Act, 1986, qua the bank having availed of the bank's service of providing loans.

It was, therefore, argued that the loss of the original papers entrusted to the bank as security amounted to "deficiency in service" and hence the bank would be liable to pay the compensation. 

The complainant contended that his title to the property based on recreated papers would be weak in terms of clear title. This would affect its value should he wish to place the property on the real estate market or use it as collateral in future, it was argued.

Regarding the misplacing of original documents, the NCDRC's Order in Citi Bank & Others versus Ramesh Kalyan Durg & Others (2016) was cited.

In Citi Bank, the NCDRC had held that the complainant would be compensated, publication cost shall be borne by the bank and the bank will get certified copies of all documents at its cost apart from suitably compensating and indemnifying the complainant if he suffers in the future due to the loss of the documents.

The complainant also placed reliance on Bank of India versus Mustafa Ibrahim Nadiadwala (2016), under which it was held that the bank is liable to pay compensation to the complainant in cases of misplaced property documents because the value of the property is bound to be affected if the original title deed is lost by the bank.

To clarify, the complainant continued to retain the possession of the said property, a fact recognised by the NCDRC in its Order.

Bank's arguments

On the complainant's quantification of the loss at ₹5 crore, ICICI Bank argued that the amount was grossly inflated and fabricated. The bank stated further that the complainant had deliberately omitted to file a valuation report.

It was further contended that the present matter pertains to loss of title documents and not the loss of any property.

The fact that the matter had already been decided once by the banking ombudsman, and its directions complied with, was cited as a reason to pray for dismissal by the NCDRC.

On the question of liability, the bank noted that the courier service had admitted in a communication on May 25, 2016 that the consignment containing the said documents were lost in transit and despite its best efforts, could not be traced.

It was noted that the courier service had tendered an apology to the bank in July 2016.

Courier service's argument

Placing the service provider agreement between ICICI and Blue Dart Express before the NCDRC, the courier service noted that its liability was limited in the case.

As per the terms of the agreement, its liability for any loss or damage in transit was capped at ₹100 for security documents and ₹50 for non-security documents.

The agreement was further relied upon to state that the bank was the 'principal' and the courier service the 'agent' in the present case.

The courier service contended that there was no privity of contract between the complainant and the courier service, there arises no liability of the courier service towards the complainant.

The courier service also questioned the NCDRC's jurisdiction to adjudicate on the matter. 

Section 21 of the Consumer Protection Act, grants exclusive jurisdiction to NCDRC for handling complaints where "the value of the goods or services and compensation, if any, claimed exceeds rupees one crore".

The courier service, in this regard, argued that the total value of the property cannot be considered in the present matter to decide the pecuniary jurisdiction since the compensation is founded upon the loss of property documents, and not actual property.

Regarding the compensation asked for by the complainant, the courier service argued the amount was not justifiable since the property was valued ₹1.95 crore when it was mortgaged.

NCDRC's conclusions

The NCDRC, in its Order, held that the ICICI Bank was responsible for the custody and security of the original title documents pertaining to the property, and not the courier service. 

The loan agreement between the bank and complainant indicated the same.

"The claim that the complainant is not entitled to damages is not justifiable as the deficiency in service on its part is writ large," said the NCDRC.

The NCDRC agreed with the submissions of the complainant that the legal title to the property stands compromised on account of the loss of original documents by the bank.

"Seeking compensation on the ground of deficiency in service is, therefore, a legitimate claim," the NCDRC ruled.

On the amount of compensation asked for by the complainant, the NCDRC differed with the amount forwarded.

It said, "even if some appreciation of value is considered", the value of the property would not be of the order of ₹5 crore.

"However, the issue is not of fixing a value to a piece of real estate which the complainant is in possession of," the NCDRC continued.

"Rather, it is one of compensation for the deficiency in service and of indemnifying the complaint against any future loss."

With the above conclusions, the bank was directed to: 

• To obtain, at its cost, all the reconstructed and duly certified copies of the documents handed over by the complainant as security and provide them to the complainant;
• To issue an indemnity bond in favour of the complainant regarding these documents;
• To pay a sum of ₹25 lakh as compensation after factoring in the compensation previously awarded by the ombudsman;
• To pay the complainant ₹50,000 as litigation cost.