The main legal point established in the judgment is that a bank's delay in disposing of pledged shares can constitute negligence, and a consumer is entitled to claim damages for the bank's deficiency in service under the Consumer Protection Act.

D.P. Wadhwa, J.—This appeal is directed against the order dated June 21, 1996 of the National Consumer Disputes Redressal Commission (National Commission) holding that there was no negligence on the part of the respondent Bank in dealing with its security of pledged shares of the appellant or its release in part to him and that the Bank could also not be faulted on its practice not to dispose of shares through brokers not on the approved list of the Bank and lastly that it could not be said that there was any deficiency in service by the Bank as defined in Section 2(1)(g) of the Consumer Protection Act, 1986 (‘Act’ for short). Leave was granted limited to the claim of the appellant to his shares of Castrol Limited pledged with the Bank.

2. On the request of the appellant, Bank sanctioned to him on September 20, 1990 an overdraft limit of Rs. 5,00,000/- against pledge of shares of various companies, value of all the shares being Rs. 10,60,900/- at the relevant time. Out of these numbers of shares of the Castrol Limited were 1400 @ Rs. 200/- per share of the total value of Rs. 2,80,000/-. It is not disputed that as per the guidelines issued by the Reserve Bank of India Banks are allowed to make advance against pledge of shares retaining 50% margin. As per the terms of sanction of the overdraft limit shares were got transferred in the name of the Bank. In due course of time Bank received bonus shares numbering 2,224 of Castrol Limited. It is stated that value of shares also increased manifold. Appellant also paid an instalment of Rs. 1,45,600/- to the Bank against the overdraft limit. Overdraft amount was to be adjusted in three equal instalments. In order to clear the overdraft account the appellant, apart from shares of other companies, requested the Bank to arrange sale of 500 shares of Castrol Limited. This he did by letter dated April 23, 1992.1

3. After 12 days of the receipt of this letter the Bank at Nagpur, where the Overdraft Account of the appellant was maintained, sent a letter dated May 5, 19922 to its Head Office at Bombay (copy of this letter was endorsed to the appellant) agreeing to the terms of the appellant set out in his letter of April 23, 1992. Nagpur Branch received a letter of June 19, 1992 from its Head Office stating that it did not receive the letter dated April 23, 1992 of the appellant and further that the shares were not in the Head Office. By letter dated July 29, 19923 Nagpur Branch of the Bank informed the appellant that Head Office was not holding the shares. It was, however, found that the shares were lying with the Nagpur Branch itself. By this time it appeared that the price of the share fell and the shares could not be sold at the price indicated by the appellant. He, therefore, filed a claim with the National Commission for Rs. 5,09,037.53 in respect of shares of Castrol Limited as under :

“Loss on account of non-sale of 500 shares of Castrol Limited.

a.

Estimated sale price

of 500 shares @

Rs. 2400/- per share

Rs. 12,00,000.00

Deduct price

prevailing on

23.7.92 @ 700/-

per share

Rs. 3,50,000.00

Rs. 8,50,000.00

Deduct amount

of effective debit

balance in O/D

on 30.6.1992

Rs. 3,40,962.53

Rs. 5,09,037.53"

He also filed other claims against the Bank with which we are not concerned in this appeal.

4. There cannot be any doubt if action had been taken by the Bank promptly or within a reasonable time appellant would have been able to clear his overdraft account. About the prevalent price of the share as claimed by the appellant there cannot be any dispute.

5. Bank has submitted before us that relationship between the parties is governed by Sections 172 to 1744 of the Contract Act, 1972 and Bank was within its right to choose the time and place as to when it would like to dispose of the pledged goods and that the only requirement is that before that notice is to be given to pawnor, appellant in the present case. In support of its submissions reference was made to a Division Bench decision o