Mumbai, April 6 The Maharashtra State Consumer Disputes Redressal Commission has criticized Standard Chartered Bank for attempting to profit from its own "procedural negligence" while charging a customer interest on money that was never actually received.
The SCDRC recently dismissed the bank's appeal against a district commission's ruling that found the bank guilty of "unfair trade practices" and "deficient service."
"The bank could not benefit from its own failure to comply with RBI norms, nor should the consumer be penalized for the bank's procedural lapses," it said in the order delivered last month.
The appellant's failure to refund the processing fees despite the failed transaction and the admitted non-disbursal of funds "represents a clear deficiency in service", it added.
"Processing fees are typically earned for the successful execution of a financial service. Retaining these fees, while simultaneously imposing interest on a ghost balance, indicates a lack of bona fide intent on the part of the appellant," the state consumer commission said.
The dispute began in 2012 when a yarn processing business unit sought to transfer its overdraft facility from Bank of India to Standard Chartered for a higher credit limit of Rs 8 crore.
As per the complaint, Standard Chartered bank issued a pay order to BOI to facilitate the takeover but the latter refused to accept it alleging that Standard Chartered had failed to follow mandatory Reserve Bank of India (RBI) guidelines regarding credit information sharing.
Despite the transaction failing at the threshold and the funds never leaving the control of Standard Chartered, it levied interest on the "credit" entry as if the money had been disbursed. The bank also refused to refund a Rs 6,50,000 processing fee, claiming it was non-refundable, the complainant said.
The proprietorship then filed a complaint against the bank before South Mumbai District Commission, which in 2018 passed a ruling in favour of the complainant. Standard Chartered Bank was ordered to refund the processing fee of Rs 6,50,000 with interest of 8 per cent per annum from September 2012.
The bank was also asked to refund Rs 2,70,179 charged as interest as well as pay Rs10,000 as compensation for mental agony and Rs 5,000 for litigation.
The SCDRC rejected the bank's plea against the South Mumbai District Commission's order after finding "no infirmity".
Based on the facts of the case, the state commission's own conclusion was that "since the instrument was rejected at the threshold, no legal transfer of funds ever occurred".
The SCDRC said an entry made on September 29, 2012 (transaction date) is "paper reality only" and that the funds never left the control of Standard Chartered. Therefore, charging interest on an amount that the respondent never actually received or had the power to utilize "is inherently unjust and constitutes an unfair trade practice".
Thus, the district forum correctly identified that the customer should not be penalized for the bank's non-compliance with RBI norms, the state commission said.