While modifying the order of the state commission, the national consumer disputes redressal commission (NCDRC) directed IDBI Bank Ltd to pay Rs1 lakh, the full value of its deep discount bond series-I (issued in 1992), with 9% interest to a bondholder, who did not receive the call notice given by the lender for redemption of these bonds.
In an order, Dr Inder Jit Singh (presiding member) of NCDRC says, "...although we are not in agreement with the observations and findings of the state commission and the district forum that IDBI Bank did not have the right to redeem the bond before maturity and only allottee has such right, and that IDBI Bank cannot compel the respondent or allottee of any bond to redeem or surrender the bond against his will before the maturity date and it is the discretion of the bondholder to prematurely redeem the bond or to wait for its maturity, on account of reasons of lack of valid individual or personal communications to the respondent or allottees, which was mandatory, in addition to the newspaper publication, the respondent or allottee in the instant case is entitled to claim the full face value of Rs1 lakh of the bond after the 25 years i.e. 31 March 2007 along with interest from 1 April 2007 till the actual date of payment."
"…in the absence of any proof of service under postal certificate (UPC) to the respondent (bondholder) herein, and in a situation of the respondent denying any such communication, we are of the view that there was no valid communication to the bondholder about IDBI Bank exercising its redemption option after 10 years, which was mandatory, in addition to the newspaper publication," the bench says.
Referring to IDBI Bank's offer document, Dr Singh observed that in the absence of any specific mention of mode of communication in case of redemption before maturity, there is no reason for IDBI Bank not to resort to the same mode of communication, i.e., registered post, for communication to the allottees, its decision to exercise the redeem option at the end of 10 years. "In the instant case, the IDBI did not communicate to the allottees such a decision, which is mandatory in addition to newspaper publication, by registered post. Rather, it chooses to send such communication through UPC."
The case is related to the redemption of IDBI unsecured bonds by Chandigarh-based Surjit Kaur. In January 1992, IDBI Bank issued deep discount bond series-I with an issue price of Rs2,700. Ms Kaur bought one bond with a face value of Rs1 lakh for a 25-year tenure up to 31 March 2017. These bonds had an option of surrender or redemption after every five years at the deemed face value of Rs5,700 as of 31 March 1997, Rs12,000 on 31 March 2002, Rs25,000 on 31 March 2007 and Rs50,000 as of 31 March 2012.
However, on 10 August 2001, IDBI Bank issued public notices in leading newspapers for exercising call options for these bonds. It asked bondholders to claim the redemption amount by surrendering the original certificate. IDBI Bank says interest would be paid on maturity or redemption amount at the savings bank rate after 31 March 2002, the call option date.
IDBI Bank told NCDRC that it also issued individual letters to all the subscribers in September 2001, i.e., six months before the call option date. It submitted that it sent a similar letter to Ms Kaur under UPC on 30 September 2001 at her address in the Bank's records. IDBI Bank says it also published reminder notices in 2002, 2003, 2006, 2007, 2010 and 2011 but Ms Kaur did not approach to redeem her bond.
After the 25-year tenure for the bond was over, Ms Kaur approached IDBI Bank for redemption. After scrutinising its records, IDBI Bank informed her via two emails that the redemption value of her bond is Rs17,000 along with interest as the scheme was redeemed vide call notice in August 2001. IDBI Bank asked her to submit all the documents to its agent, Karvy Computer Shares Pvt Ltd, for encashment.
Not satisfied with the response from IDBI Bank, Ms Kaur filed a complaint before the Chandigarh district consumer disputes redressal forum. While allowing the complaint, the district forum directed IDBI Bank to pay Rs1 lakh maturity value of the bond with an interest of 9% from 31 March 2017 and Rs10,000 as litigation cost to Ms Kaur.
Aggrieved by the order, IDBI Bank filed an appeal before the Chandigarh state consumer disputes redressal commission, which was dismissed on 1 November 2019.
IDBI Bank then approached NCDRC.
During the hearing, it submitted that the deemed face value of the bond at the end of the 10-year period, i.e., on 31 March 2002, was Rs12,000, comprising the issue price of Rs2,700 plus discount and interest of Rs9,300. Ms Kaur never approached the Bank to surrender the bond but approached only in 2017, claiming the full maturity.
The counsel for Ms Kaur submitted that she had no knowledge of IDBI Bank calling for redemption of the bond schemes prior to maturity dates. She did not receive any communication from the Bank either. "IDBI Bank also has not transferred the amount of the bond to my account with the same Bank."
Referring to a judgement from the Supreme Court, Ms Kaur submitted that when a notice is sent under certificate of posting- UPC, it is obligatory on the part of the sender to prove the service of notice given the statement on oath given by the addressee denying receipt of any such notice.
After hearing both sides and perusing documents available on record, Dr Singh from NCDRC observed that IDBI Bank admitted that, despite repeated publications in newspapers over the years, starting with 2001, including the publication during 2002, 2003, 2006, 2007, 2010, 2011, and incurring huge expenses on such publications, still, a large number of subscribers have not come forward to get their bond redeemed.
"This goes to show that newspaper publications alone, howsoever widely and repeatedly done, as claimed by IDBI Bank, have not been effective and sure means of communication to the bondholders. Ideally, IDBI Bank at the first instance in 2001 itself, when it decided to exercise its option to redeem the Bond, should have sent notices to bondholders by registered posts rather than UPC," he noted.
Further, the bench says, "The contention of IDBI Bank that Ms Kaur approached after 16 years from the date when the call notice has been issued in 2001 is not valid as Ms Kaur approached them (IDBI Bank) in 2017 means she approached the Bank when the 25-year bond issued in 1992 became due for redemption in 2017. Hence, this cannot be called a delay on the part of Ms Kaur in approaching IDBI Bank to claim the face value of the bond in question."
Referring to the apex court judgement in the Fakir Mohd case, NCDRC ruled that Ms Kaur is entitled to get the full face value of the bond, i.e., Rs1 lakh on completion of 25 years as of 31 March 2017, along with interest from 1 April 2017 till the actual payment.
(Revision Petition No179 of 2020 Date: 17 August 2023)