Chandigarh State Commission Holds Axis Bank Liable For Delay In Loan Disbursement, Failure To Produce Documents And Lack Of Communication

Brief Facts:

Mr. Ashok Kumar (“Complainant”) sought a housing loan from Axis Bank (“Bank”) and submitted the necessary documents along with a processing fee of Rs. 2950/-. Assurances were given by the bank that the loan process would be completed within 15 days before the land registration deadline of July 5, 2021. However, the Complainant faced delays and hurdles, including a request for additional proof of local address by the bank. Despite continuous efforts and document submissions, the Complainant was eventually informed by the bank that the loan couldn't be granted due to non-identification of the land. Consequently, the Complainant's earnest money was forfeited. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission I, U.T., Chandigarh (“District Commission”) and filed a consumer complaint against the bank.

In response, the bank asserted that the financial sanction for the loan was approved on July 12, 2021, based on the Complainant's financial credentials. However, the disbursement of the loan required the submission of property documents within 180 days, followed by legal and technical verification. It claimed that the land in question was not identifiable on-site and did not meet the necessary legal and technical criteria for loan disbursement, as specified in Clause 1 of the loan sanction letter.

The District Commission dismissed the complaint, stating that the Complainant failed to provide concrete documentary evidence rebutting the bank's claim that the loan couldn't be released due to non-identification of the land. The Complainant challenged the decision of the District Commission in the State Consumer Disputes Redressal Commission (“State Commission”). The Complainant argued that the District Commission overlooked the bank's promises. He further contended that the District Commission's decision neglected evidence of the bank's lack of communication on the reasons for non-disbursal and the delayed disclosure of terms and conditions.

Conversely, the bank, argued that the sanction letter issued on July 12, 2021, was only a financial sanction based on the Complainant's financial credentials which were valid for 180 days. The property documents were required to be submitted within this period, and the legal and technical verification was to be conducted afterwards. It maintained that the identified property did not meet the necessary criteria.

Observations by the State Commission:

The State Commission held that the District Commission erred in dismissing the complaint. It noted that the Power Home Sanction Letter revealed that the bank approved a facility for the Complainant, which was valid for 180 days, with an equated monthly instalment (EMI) fixed at Rs. 11,629/-. It held that the bank, in its reply, failed to specify the property disclosed by the Complainant and provide details of the verification process.

It held that the onus lied on the bank to demonstrate that the property disclosed by the Complainant for loan approval was not identifiable on-site and did not meet the legal and technical requirements for loan disbursal. During the proceedings, it issued directions to the bank to produce the entire original loan application, sanction letter, rejection, and all related documents. In response, the bank submitted an affidavit, asserting that, as per the bank's document destruction process, the original file was disposed of after a specified period of 210 days. It noted that in an era dominated by digital processes, where financial institutions routinely scan and store documents in computer systems, the absence of such information raised suspicions.

It held that despite charging a processing fee and sanctioning the loan, the Complainant was left uninformed about the disbursal of the loan amount and the status of the property verification. Therefore, it held the bank liable for deficiency in services. It directed the bank to refund the processing fee amount of ₹ 2,950/- to the Complainant and pay a lump-sum compensation of ₹ 25,000/-.