Borrower took a loan using 103 grams of gold jewels, bank found jewellery fake during a surprise check conducted without his consent, lender ordered to pay gold’s value plus Rs 50,000

A consumer commission in Shimla has ordered a bank to pay a borrower the market value of around 103 grams of pledged 22 carat gold, along with Rs 50,000 in compensation and costs. It found that the bank did not follow RBI rules while carrying out a surprise check on the jewellery.

The borrower had taken a gold loan and later heard from the lender that his jewellery was fake. He told the commission the check was done without his consent or any notice. The commission allowed his complaint in an order announced on 24 September 2026 and found deficiency in service and unfair trade practice on the bank's part.

What Happened In This Gold Loan Case?

The borrower pledged gold jewellery to get a loan. The jewellery was a 22 carat bangle weighing 89.700 grams and a chain weighing 13.500 grams. The order lists the total net weight as 103.537 grams. Later, the lender carried out what it called a periodic surprise verification of the pledged gold. According to the lender, the jewellery was found to be 100 percent spurious. The borrower disagreed and moved the consumer commission.

What Did Borrower Say?

In his complaint, the borrower said nobody explained the terms and conditions of the loan to him when it was sanctioned. He said the surprise verification of his pledged jewellery was done without his consent and without any notice to him. He also told the commission he feared the bank had either changed or tampered with his jewellery during the verification. According to him, a false report was then procured showing the gold was 100 percent spurious.

What Did Lender Say?

The opposite parties filed a joint reply. They said the terms and conditions of the loan were properly explained and provided to the borrower. Their case was that the impurity had been noticed during a periodic surprise verification of the pledged jewellery. Before the commission went into the merits, the bank had also raised preliminary objections to the complaint.

The commission rejected the preliminary objections raised by the opposite parties and moved on to the merits of the case. Its reasoning on the merits rested mainly on RBI directions for gold loans, and on what the lender could and could not prove about consent and about explaining loan terms to the borrower.

What Are RBI Rules On Surprise Verification Of Pledged Gold?

The commission relied on an RBI notification dated 29 September 2025 on lending against gold and silver collateral. Clause 34 of the directions says a lender shall carry out periodic surprise verification of pledged collateral and keep a record of it. The loan agreement must carry a clause taking the borrower’s consent for such checks, including assay, even when the borrower is not present. This has to be specifically told to the borrower when the loan is sanctioned.

Clause 44 says that if the lender damages pledged collateral during the loan, repair cost is borne by the lender. Clause 45 of the same RBI directions says that in case of loss, or any loss from deterioration or a gap in quantity or purity seen during internal audit or otherwise, lenders shall “suitably compensate” the borrower or legal heirs.

What Did Commission Say On Consent And Notice?

The commission said clause 34 clearly obliges a lender to put a consent clause in the loan agreement. It added that when a borrower says surprise verification was done without consent or notice, it is for the lender to prove implied or express consent. The lenders here gave neither a pleading nor any evidence on this point. They also failed to prove that the surprise verification was carried out with consent or prior notice to the borrower, the commission held.

Were Loan Terms Explained To Borrower?

The borrower had pleaded that no terms and conditions were explained at the time of sanction. The commission said the burden was then on the lenders to show that the terms were provided and explained. Their reply said this was done, but it did not say who explained the terms to the borrower. There was no evidence either that a named person explained the loan agreement or supplied a copy. The commission concluded that the bank did not properly follow RBI directions on gold loans.

Why Did Commission Doubt Claim That Gold Was Fake?

The commission noted that the borrower had not taken the loan for the first time. He had taken loans against the same jewellery in 2022 and in March 2023, and pledged some more jewellery in April 2023. In its view, it could not be said the bank sanctioned the loans without checking the purity of the gold.

The commission said impurity found later, behind the borrower’s back, cannot be held against him. It also said the possibility of some foul play by the lenders on the question of purity could not be ruled out. On this basis, it held that the borrower proved deficiency in service and unfair trade practice.

What Did Commission Order?

The commission allowed the complaint. It did not order the pledged jewellery to be returned. Instead, the lender must pay the borrower today’s market rate for the 22 carat gold, a bangle of 89.700 grams and a chain of 13.500 grams, with the order giving total net weight as 103.537 grams. From this amount, the overdue principal loan amount, along with interest at the agreed rate up to date, will be deducted.

Why Was Gold Not Returned To Borrower?

The commission said that in the given facts and circumstances of the case, it did not think it proper to order the return of the pledged gold. It said the borrower was entitled to adequate compensation for the jewellery instead, to be paid by the lenders. That payment is the market value of the gold, minus what the borrower still owes on the loan.

How Much Compensation And Costs Must Lender Pay?

Along with the value of the gold, the lenders have been told to pay Rs 30,000 as compensation for mental harassment and agony. They must also pay Rs 20,000 as litigation costs. Together, these two amounts come to Rs 50,000. The commission said the borrower was entitled to compensation for harassment and agony along with litigation charges because of the deficiency in service and unfair trade practice.

The lenders must comply with the order within 45 days from the date they receive its copy. The order was announced on 24 September 2026. The commission also disposed of all pending applications and directed that a copy of the order be given to the parties free of cost.

Case details: District Consumer Disputes Redressal Commission, Shimla, Himachal Pradesh, order dated September 24, 2026. Bench headed by President Dr Baldev Singh, with members Nidhi Sharma and Ramesh.