Gold loan jewellery stolen from bank? Consumer court ruling explains your compensation rights

If jewellery pledged against a gold loan is stolen while it is in the lender’s custody, can the borrower claim only the value of the gold, or can they also seek compensation for making charges and the value of stones? A recent ruling by the Karnataka State Consumer Disputes Redressal Commission has provided clarity on the issue, ruling in favour of a borrower whose jewellery was robbed from a Canara Bank branch.

The case involved a borrower from Karnataka’s Tumkur who opened two gold loan accounts with a Canara Bank branch in August 2017. He pledged two gold items against each account and took a loan of ₹1.5 lakh under each account. The jewellery pledged for the first loan weighed 120.80 grams, while the jewellery for the second loan weighed 133 grams, according to an ET report.

The jewellery remained in the bank’s custody but was later robbed, according to the bank’s submission. After discovering the incident, the bank informed the borrower through a letter dated July 26, 2018, and offered to compensate him for the value of the gold.

How the bank calculated the gold value

For the first loan account, the bank calculated the gold value at ₹2,600 per gram and paid ₹1,56,033 based on a net gold weight of 90 grams. For the second account, the jewellery had a gross weight of 133 grams and a net gold weight of 85 grams. The bank calculated the gold at ₹2,500 per gram and paid around ₹2,12,500.

The borrower, however, argued that payment for the gold content alone was not enough. He sought an additional ₹88,362, including 20% towards making charges and 3% towards the value of stones in the jewellery, approaching the District Consumer Commission.

The District Commission ruled in his favour in July 2020 and directed Canara Bank to pay the additional ₹88,362 with 9% interest from August 29, 2018. It also ordered the bank to pay ₹30,000 as compensation and ₹10,000 towards litigation expenses.

Canara Bank then challenged the order before the Karnataka State Disputes Redressal Commission. The lender argued that it had already paid the value of the net gold and was not liable to pay the additional amount towards making charges and stone value. It also argued that the borrower had not produced documents to establish the claimed 20% making charges and 3% stone value.

Why Karnataka State Commission dismissed bank’s appeal

The Karnataka State Commission dismissed the bank’s appeal and upheld the District Commission’s order. The commission said that when gold ornaments kept in a bank’s custody are lost through robbery or theft, it is the bank’s duty to settle their value at prevailing rates, including making charges and stone value.

The commission also rejected the argument that the borrower needed to produce an invoice specifically showing the making charges. It held that making charges are ordinarily levied on gold ornaments and therefore are liable to be paid in such circumstances.

As a result, Canara Bank was ordered to pay the borrower ₹88,362 with 9% interest, along with ₹30,000 as compensation and ₹10,000 towards litigation expenses.

For gold-loan borrowers, the ruling is important because it shows that compensation may not necessarily be limited to the net gold value when pledged jewellery is lost from a lender’s custody. The Karnataka State Commission’s ruling specifically recognised making charges and stone value as part of the value that the bank was required to settle in this case.