Failure To Issue No Objection Certificate Despite Loan Repayment, Ernakulam District Commission Holds Kotak Mahindra Prime Liable

Brief Facts:

The Complainant purchased a brand-new Honda City car through a hire purchase loan from Kotak Mahindra Prime's branch in Kochi. This loan, amounting to Rs. 5,00,000/-, was to be repaid in 60 equal monthly instalments of Rs. 8,595/-. The Complainant arranged for Kotak Mahindra Prime to debit these instalments directly from his bank account at SBI, Kathrikadavu, utilizing the Electronic Clearance Services (ECS). Until December 2018, these monthly debits occurred without issue. However, in January 2019, Kotak Mahindra Prime informed the Complainant that the December 2018 and January 2019 EMIs could not be processed due to a technical problem. It assured the Complainant that no penal interest would be charged due to this fault. It further requested a payment of Rs. 21,190/- for these two instalments, along with two additional cheques and a signed NACH for future clearances. The Complainant paid this amount.

Subsequently, the Complainant received a letter from Kotak Mahindra Prime stating that the March 2019 EMI was not received. The Complainant then issued a cheque as requested. The subsequent instalments up to July 2019 were successfully processed through ECS. However, on August 22, 2019, the Complainant received a lawyer's notice from Kotak Mahindra Prime indicating that the July and August 2019 EMIs weren't collected and demanded immediate payment. The Complainant responded to this notice but Kotak Mahindra Prime again reported a technical error preventing the ECS from processing the July to October 2019 instalments. They reassured the Complainant that no ECS charges would be levied and requested two more cheques and signed NACH forms. The Complainant refused to provide these two cheques. He instead issued a final cheque for Rs. 10,595/-, covering the last instalment of the loan.

The Complainant contended that the entire loan amount, inclusive of interest, was fully repaid by November 5, 2019. He attributed any delays in EMI collection to Kotak Mahindra Prime's technical issues and not to his fault. The Complainant also stated that Kotak Mahindra Prime failed to issue a No Objection Certificate (NOC) to release the vehicle from hypothecation and that its actions negatively impacted his CIBIL score. Feeling aggrieved, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Forum Ernakulam, Kerala (“District Commission”) against Kotak Mahindra Prime.

In response, Kotak Mahindra Prime admitted that the Complainant took a car loan in 2014 for Rs. 5,00,000/-. It argued that the Complainant was responsible for ensuring timely repayment of all EMIs and agreed to pay additional charges in case of default. It labelled the Complainant a gross defaulter, citing missed payments in June 2016, September 2018, December 2018, and from January to October 2019, although it acknowledged that the defaults in 2019 were due to technical issues with the ECS mandate. Despite these defaults, it argued that it waived ECS return charges for the months affected by technical problems as a goodwill gesture.

Observations by the District Commission:

The District Commission noted that the entire loan, including interest, was cleared by the Complainant on 05/11/2019, yet Kotak Mahindra Prime failed to issue a No Objection Certificate (NOC) for releasing the vehicle from hypothecation. The District Commission noted that this impacted the Complainant's credit score.

Further, the District Commission noted that Kotak Mahindra Prime disputed these claims verbally, but documentary evidence including bank statements demonstrated adequate funds in the Complainant's account during the disputed periods. Therefore, the District Commission held Kotak Mahindra Prime liable for deficiency in services.

Consequently, the District Commission instructed Kotak Mahindra Prime to issue an NOC. Additionally, Kotak Mahindra Prime was directed to pay a compensation of Rs. 25,000/- to the Complainant along with Rs. 10,000/- for litigation costs.

Case Title: P.M Joshi Vs Kotak Mahindra Prime Ltd.

Case Number: CC/22/132

Date of Pronouncement: 29th May 2024