Bangalore District Commission Holds Axis Bank Liable For Releasing Funds Without Proper Verification

Brief Facts:

Mr. Tarun Agarwal (“Complainant”) entered into an Agreement of Sale with M/s. Faith Inc. to purchase two residential flats for a total consideration of Rs. 47.5 Lacs. Axis Bank sanctioned a home loan of Rs. 38 Lacs to the Complainant on 23.09.2013. As part of the transaction, the Complainant paid an advance amount of Rs. 9,50,000/-. However, issues arose when Axis Bank transferred Rs. 3.82 Lacs to M/s. Faith Inc. without the complainant's explicit instruction to do so. Axis Bank produced a fake email as evidence, claiming that the Complainant had instructed the transfer. Aggrieved, the Complainant filed a consumer complaint in the Bangalore Urban-II Additional District Consumer Disputes Redressal Commission (“District Commission”).

The Complainant alleged that he had paid a total of Rs. 3,60,675/- towards the loan, and he claimed a loss of Rs. 13,10,675, holding the opposite parties (including Axis Bank and M/s. Faith Inc.) liable for this amount. On the other hand, Axis Bank argued that the complainant had applied for a loan of Rs. 38 Lacs to purchase the flats from M/s. Faith Inc. The bank claimed that it disbursed amounts to M/s. Faith Inc. based on the Complainant's instructions, released several tranches of funds. Axis Bank denied any fraudulent activity and maintained that the present dispute did not fall within the purview of the Consumer Forum.

M/s. Faith Inc. contended that the complaint was filed to harass and humiliate them. They argued that they had entered into a development agreement with the Complainant and that he was not entitled to any claims or reliefs against them.

Observations by the Commission:

The District Commission found that the Complainant had established a deficiency of service against both Axis Bank and Faith Inc. because Axis Bank should have been vigilant in granting loans and disbursals. The fact that Axis Bank released funds without proper verification of the project's construction stage constituted a deficiency of service.

Since the project was taken over by Urban Estates after the cancellation of the Joint Development Agreement with M/s Faith Inc., the District Commission noted that it was just and proper for Urban Estates and the owners of the property to compensate the complainant for the refund of the money paid to Faith Inc. and to discharge the loan under the Tripartite Agreement.

Consequently, the District Commission directed Faith Inc., Urban Estates and the owners of the property to refund Rs. 13,10,675/- to the Complainant, along with interest at 9% per annum from the date of the complaint until realization. The outstanding amount towards the Home Loan to Axis Bank was also to be discharged by them. They were directed to get the Home Loan released in their favour or to sell the flats to Axis Bank or its nominees if the bank desired to do so. Further, the District Commission held Axis Bank, M/s Faith Inc. and other opposite parties jointly and severally liable to pay Rs. 10,000 as litigation expenses to the complainant.

Case: Tarun Agarwal vs Axis Bank

Case No.: CC/252/2016

Advocate for the Complainant: Prathap K & others

Advocate for the Respondent: Jai M Patil

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