Bank Liable for Failing to Inform Borrower of Online Subsidy Process, State Commission Modifies Compensation: Rajasthan SCDRC - 2025-08-23

Bank Held Liable for Not Informing Borrower of Online Subsidy Norms, Compensation Reduced by State Commission

Jodhpur: The Rajasthan State Consumer Disputes Redressal Commission has held the Bank of Baroda liable for a 'deficiency in service' for failing to properly process a borrower's subsidy application and not informing him about the mandatory switch to an online application system.

While upholding the District Commission's finding of negligence, the State Commission, presided over by Justice Devendra Kachhawaha, partially modified the relief. It reduced the compensation for financial loss from the full subsidy amount of ₹11.64 lakh to ₹5 lakh, reasoning that the grant of a subsidy is not an absolute right and its approval was not guaranteed.

The bench, also comprising members Mr. Nirmal Singh Medatwal and Mr. Sanjay Tak, maintained the award of ₹2 lakh for mental agony and ₹5,000 for litigation costs, and further awarded ₹10,000 for appeal expenses.

Background of the Case

The complainant, Anup Kumar, Director of Krishna Marbocraft, had secured a loan of ₹80 lakh from the Bank of Baroda. He subsequently applied for a capital subsidy of ₹11.64 lakh under the central government's Credit Linked Capital Subsidy Scheme (CLCSS) for MSMEs.

Kumar submitted his application offline to the bank's Abu Road branch on December 1, 2014, well before the scheme's deadline of December 31, 2014. The bank was responsible for forwarding this application to the Ministry of MSME. Despite assurances, the application never reached the ministry, depriving Kumar of the potential subsidy. He filed a complaint with the Sirohi District Consumer Commission, which ruled in his favor, ordering the bank to pay the full subsidy amount as compensation, along with damages for mental agony.

Both parties filed appeals before the State Commission: the bank sought to overturn the order, while Kumar sought enhanced compensation.

Arguments from Both Sides

Bank of Baroda's Arguments: The bank raised several objections, arguing: - The complainant, being a commercial enterprise, does not qualify as a 'consumer'. - The subsidy application was invalid as it was submitted offline, whereas an Office Memorandum dated October 1, 2013, had made online submissions mandatory. - The complaint was barred by the statute of limitations. - Granting a subsidy is a discretionary power of the government, not an enforceable right, and the bank cannot be held liable for its non-disbursal.

Complainant's Arguments: Anup Kumar’s counsel contended: - The bank's failure to forward the application to the ministry was a clear deficiency in service. - The bank never informed him about the requirement for an online application. - The bank itself admitted its nodal office was unaware of the new online system, which is why they accepted his offline form. - The compensation awarded by the District Commission for mental agony was inadequate.

Commission's Analysis and Ruling

The State Commission meticulously analyzed the arguments and evidence. It dismissed the bank's preliminary objections regarding jurisdiction and the complainant's status as a 'consumer,' upholding the District Commission's findings that the loan was for self-employment.

The pivotal issue was the bank's negligence. The Commission highlighted an Office Memorandum from the Ministry of MSME dated October 1, 2013, which mandated online applications. The memorandum also placed a duty on nodal banks to train their relevant offices and disseminate this information.

The Commission noted, "There is no pleading or documentary evidence on record from the Bank of Baroda to prove that such training was provided as a nodal bank, or that the complainant was informed that an online application was mandatory for obtaining the subsidy since October 1, 2013."

The Commission found the bank's own admission that its nodal office was unaware of the online system to be a critical failure. This negligence led to the acceptance of an offline form and its subsequent failure to reach the concerned ministry. This failure to guide the borrower correctly and process the application properly constituted a clear deficiency in service.

However, the Commission modified the compensation amount. It observed that even if the application had been submitted correctly, the subsidy grant was not guaranteed.

In its reasoning for reducing the compensation, the Commission stated, "The disbursement of subsidy was to be decided by [the Ministry] according to rules and guidelines. Therefore, an order directing the Opposite Party No. 2 [the Bank] to pay the entire subsidy amount of ₹11.64 lakh cannot be considered justified."

Acknowledging a roughly 50% chance of the application's approval had it been processed correctly, the Commission deemed it fair to award ₹5 lakh as compensation for the financial loss caused by the bank's negligence.

Final Order

The State Commission partially allowed both appeals, modifying the District Commission's order. The final relief granted to Anup Kumar is as follows: - ₹5,00,000 for financial loss (in place of ₹11.64 lakh). - ₹2,00,000 for mental agony (as originally awarded). - ₹5,000 for original litigation costs (as originally awarded). - ₹10,000 for appeal expenses.

The Bank of Baroda was directed to pay the total amount within two months from the date of the decision.