NCDRC Directs HSBC Bank To Pay Rs. 15 Lakhs Compensation For Negligence And Deficient Service

The NCDRC allowed and disposed of a consumer complaint against HSBC Bank. The Presiding Member, Dr. Inder Jit Singh fined HSBC to pay Rs. 15 Lakhs as compensation for the mental agony, harassment, and damage to the complainants' reputation and an additional Rs. 1 Lakh to cover the litigation costs.

Moreover, it is also required to provide a 'No Dues Certificate' and appropriately update the complainants' CIBIL records, indicating that the loans have been settled and there are no outstanding amounts to be paid.

Brief Facts:

The Complainants had availed loan facilities from the HSBC Bank linked to the savings account in 2007-08 which has now been illegally frozen. The bank had confirmed the closure of the loan accounts after the complainants made payments for the outstanding amounts.

However, when the complainants attempted to withdraw money they were informed that the transaction was declined as the KYC details were not updated as required and a temporary restriction was placed on the account. On their visit to the Bank Branch to update the details, they were informed that the updates had already been done in May 2015. Instead, they were informed that there were outstanding amounts of Rs. 92,210/- in loan account 1 and Rs. 90,031/- in loan account 2, both linked to their savings account.

Complainant No. 1 sent an email to the Bank, attaching closure letters and requesting the removal of restrictions on their savings account. They also attached a financial statement showing no pending borrowings. The complainants warned that if any issued cheques were dishonored due to the account blockage, the Bank would be held responsible for the consequences, including criminal charges and public embarrassment. In November 2015, the Bank returned two cheques, despite sufficient funds being available in the account, causing further harm to the complainants.

In response to the email, the Bank reiterated that an outstanding amount in loan account 1 and demanded payment, assuring that upon receipt, they would update the complainants' status on CIBIL. The Complaint was lodged for the Bank's negligent and deficient service in performing its duty causing loss and harm.

Contentions of the Parties:

The Bank contends that it never informed the complainants about the outstanding amounts in the old loan accounts. Instead, the reason for freezing was the non-updation of KYC documents which were pending in March 2015 as per RBI guidelines. The bank sent multiple reminders to update KYC documents to the complainants, failure of which would result in temporary restrictions on the account. However, no response was received and the bank had no choice but to impose temporary restrictions on debit operations.

Complainant No.1 eventually submitted his documents in late November 2015, and his records were updated accordingly. The documents of complainant No.2 were still pending. The bank informed the complainants about the requirement to zeroize the account for CIBIL records through email. The request to unfreeze the account is not possible without the KYC documents or changing the CIBIL status. When the loan accounts were settled, the bank, as a goodwill gesture, wrote off the outstanding amounts in 2009 and 2010 and updated the CIBIL status as "Settled."

The complainants argued that the bank's categorization of them as high-risk customers without evidence of unusual activity was illegal and caused harm. They stated that the bank failed to provide proper notice for KYC updates, sending generic messages instead mandated as per RBI KYC guidelines. The Bank’s attempt to dissociate the loan transaction from the temporary freeze on the savings account was unsuccessful as the complainants provided email evidence showing that the KYC details were already submitted in May 2015, contradicting the bank's claim. An email on 26.11.2015 confirmed the complainants' KYC update as of 30th May 2015.

Observations by NCDRC:

The Commission found no evidence to support the Bank's classification of the complainants as high-risk customers or their request for regular KYC updates. The Bank initially admitted the update of KYC but later changed its stance, casting doubt on its credibility. The demand for additional amounts was unjustified as the loan accounts were settled in 2009 and 2010. No requests were made by the complainants to alter their CIBIL status or pay outstanding amounts. The unwarranted freezing of the account harmed the complainants' reputations and exposed them to legal consequences. The complainants' KYC was already updated at the time of freezing the account, and the Bank's actions of reopening the CIBIL issue and maintaining the freeze were incorrect and negligent.

The Commission relied on the Supreme Court judgment of J.J. Merchant and Ors. Vs. Shrinath Chaturvedi to refute the Bank's argument that the compensation amount is excessive and should be decided by a civil court. The Supreme Court has clarified that a delay in disposing of the complaint is not a valid reason to reject it and refer the complainant to a civil court. It emphasized that even when factual issues need to be addressed, justice can still be served in summary proceedings.

NCDRC ordered the Bank to compensate the complainants for humiliation, embarrassment, and reputational damage. The joint savings account must be unfrozen within a week, allowing normal operations. The Bank is instructed to not demand further payments to close the loan accounts and must update its records accordingly. All payments must be made within 30 days, failure of which will result in a 9% per annum interest rate until paid.

Case: Anil Milkhiram Goyel & Anr v. HSBC Limited

Counsel for Complainants: Mr. Pulkit Deora, Mr. Vdit Gupta, and Mr. Prachi Gupta

Counsel for Respondents: Mr. Devmani Bansal with Mr. Shresth Sethi

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