Bank liable for reneging on settlement of dues

Case Study: Ajay Singh Chauhan took a loan from Citibank. He defaulted in making payments of some EMIs. On 27th April, 2007, the bank offered a structured repayment plan for settlement of the entire dues. As per the offer, the entire outstanding would be considered as settled on payment of Rs 40,000, provided the amount was paid by the following day and Chauhan paid the amount the same day.

On 21st May, 2008, Citibank sent a letter demanding a further payment of Rs 30,000. On being questioned, the bank said its dues could not be considered as having been settled since Chauhan had not returned a signed copy of the bank’s letter accepting its offer.

Chauhan then filed a complaint before the Jaipur District Forum alleging deficiency in services and the complaint was contested by the bank. The forum upheld the complaint and ordered a “no dues” certificate to be issued. Further, considering the bank’s conduct, Citibank was ordered to pay Rs 10 lakh, out of which Rs 1 lakh would go to Chauhan as compensation for harassment and mental agony. The remaining 

Rs.9 lakh was meant for the Rajasthan State Consumer Welfare Fund. In addition, Chauhan was also awarded Rs 20,000 towards litigation costs.

The bank challenged this order before the Rajasthan State Commission but its appeal was dismissed. Citibank then filed a revision petition, contending Chauhan was a perpetual defaulter in paying EMIs.

The National Commission observed that the question of being a habitual defaulter was not relevant, as the issue was about the validity of the settlement. The commission noted there was no dispute about Chauhan having paid Rs 40,000 within the time given in the offer. The commission held Citibank’s demand for a further amount, made after more than a year, was not justified and did not behove a bank of its stature.

On 6th March, the commission held Chauhan was entitled to get a “no dues” certificate. It also considered the award of Rs 1 lakh as compensation and Rs 20,000 towards cost payable to Chauhan was justified. However, the penal compensation payable to Rajasthan State Consumer Welfare Fund was reduced to Rs 50,000/.

Conclusion: A bank cannot renege from its settlement offer when the borrower clears dues in the stipulated period.

Jehangir B Gai

ePaper, The Times of India, Bombay, April 2, 2018, Page 4:

(The author is a consumer activist and has won the Govt. of India’s National Youth Award for Consumer Protection. His email is


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