Consumer Fora Cannot Decide Fraudulent Pledge Disputes; FDR Deposits Not Per Se "Commercial Purpose": Supreme Court
Court notes that FDR may become ‘commercial’ if linked to credit facilities but consumer status cannot be decided amid disputed pledge.
Justice Pamidighantam Sri Narasimha, Justice Manoj Misra, Supreme Court
The Supreme Court has held that consumer fora cannot adjudicate disputes involving allegations of fraudulent pledge of Fixed Deposit Receipts (FDRs), while also clarifying that mere placement of funds in an FDR does not automatically amount to a ‘commercial purpose’ under the Consumer Protection Act, 1986. The Court accordingly upheld the dismissal of a consumer complaint, though it found the reasoning of the National Consumer Disputes Redressal Commission (NCDRC) to be partly flawed.
The Court clarified that where a deposit is used to leverage credit facilities such as overdrafts for business operations, it may acquire a commercial character. In the present case, since there was a serious dispute as to whether the FDR had been pledged for availing credit facilities, the question of whether the appellant qualified as a ‘consumer’ could not be conclusively determined in summary proceedings.
Justice Pamidighantam Sri Narasimha and Justice Manoj Misra adjudicated on two principal issues. The first issue was whether the appellant, being a body corporate, could be treated as a “consumer” while availing banking services in the nature of a fixed deposit. “A bank renders multiple types of service. Accepting cash deposits from customers and paying interest thereon is the most basic of services rendered by a bank, as ordinally all cash deposits yield interest. Therefore, merely because a deposit earns interest, it does not mean that the deposit was made for a commercial purpose because there may be other reasons to deposit the money in a bank and those may have nothing to do with generation of profit. For example, holding of cash by a person beyond a limit may not be permissible under the statutory framework. Therefore, he may have to deposit the money notwithstanding whether his intention is to earn profits. Besides, banking service may be utilized for safe-keeping of money as keeping cash is fraught with risk. Thus, merely because a fixed deposit receipt earns interest does not mean that the banking service availed is for a commercial purpose. To this extent, we do not agree with the view of NCDRC”, the Bench noted.
While dealing with the second issue that whether the nature of allegations raised in the complaint could be adjudicated under the summary jurisdiction of consumer fora, it observed, “It is thus settled that the burden to prove deficiency in service is on the complainant, and deficiency in service is different from criminal or tortious acts of the service provider. Though one of the objects of the 1986 Act is to provide speedy and simple redressal to consumer disputes, its object is not to deal with complex factual issues pertaining to criminal or tortious liability in a summary manner”.
Advocate Shreyas Gacche appeared for the appellant and Advocate Vaibhav Dang appeared for the respondent.
As per the facts, a complaint was filed by the appellant company alleging that it had deposited ₹9 crore with the respondent bank as a fixed deposit in 2014.
While interest on the deposit was initially credited, the bank later informed the appellant that an overdraft facility of ₹8.10 crore had been sanctioned against the FDR. Suspecting fraud and unauthorised creation of the overdraft, the appellant lodged complaints with the authorities and sought reversal of the transaction.
The bank, however, maintained that the FDR had been validly pledged and subsequently adjusted the maturity proceeds towards the outstanding dues, remitting only the balance amount.
Therefore, being aggrieved, the appellant approached the NCDRC alleging deficiency in service, but the complaint was dismissed on the ground that the appellant was not a ‘consumer’ as the transaction was for a commercial purpose.
The Bench, thus, noted, “…the main grievance of the appellant appears to be qua adjustment of proceeds of the FDR against the amount outstanding in the overdraft account. Thus, what is clear from the complaint allegations is that the Bank had acknowledged the FDR and had accounted for the interest payable thereon but, instead of releasing the maturity proceeds in favour of the appellant, it had set up a subsequent contract of pledge of that FDR for according overdraft facility to the appellant. According to the appellant this pledge is a fraudulent act and amounts to an offence. In such circumstances, the complaint allegations as they stand cannot be adjudicated upon in a proceeding under the 1986 Act as those allegations could appropriately be addressed in a regular criminal or civil proceeding. Hence, the complaint as framed is not maintainable”.
“…we are of the view that NCDRC was justified in dismissing the complaint even though the reasons recorded by it for such dismissal may not be entirely correct”, it held.
Cause Title: Sant Rohidas Leather Industries And Charmakar Development Corporation Ltd. v. Vijaya Bank [Neutral Citation: 2026 INSC 264]
Appearances:
Appellant: Prashant R Dahat, Shreyas Gacche, (Arguing counsel), Sourabh Gupta, Puneet Yadav, Priya Mittal, T. R. B. Sivakumar, AOR, Advocates.
Respondent: Vaibhav Dang, (Arguing counsel), Amrendra Kumar Mehta, AOR, Ranpal Awana, D N Ojha, Advocates.