Karnataka Consumer Commission Says Bank Must Pay for Full Value of Stolen Gold Jewellery
The Karnataka State Consumer Commission has ruled that a bank cannot limit compensation to only the value of the gold when jewellery pledged for a gold loan is stolen while in the bank’s custody. The bank must also pay for the making charges and the value of stones in the jewellery.
Case Involving Canara Bank
The case involved Canara Bank’s Bukkapattana branch in Tumkur district. A borrower had pledged gold jewellery with the bank to take two gold loans. The jewellery was kept in the bank’s custody but was later stolen during a robbery.
The Karnataka State Disputes Redressal Commission dismissed the bank’s appeal and upheld the earlier order directing Canara Bank to pay an additional ₹88,362 with 9% interest. The bank was also ordered to pay ₹30,000 as compensation and ₹10,000 towards legal expenses. The order was passed on July 30, 2026, in Appeal No. 556/2020, Branch Manager, Canara Bank v. B.K. Balaraju.
Borrower Took Two Gold Loans
B.K. Balaraju took two gold loans from Canara Bank’s Bukkapattana branch on August 30, 2017. He pledged 120.80 grams of gold for one loan and 133 grams for the second loan. Both loans were for ₹1.50 lakh each. The jewellery remained with the bank until it was stolen during a robbery.
Bank Paid Only Gold Value
After the robbery, Canara Bank offered to settle the matter by paying the value of the gold. For the first loan, the bank calculated the net gold weight as 90 grams and valued it at ₹2,600 per gram. It paid around ₹1,56,033. For the second loan, the jewellery weighed 133 grams in total, while the net gold weight was calculated at 85 grams. The bank valued the gold at ₹2,500 per gram and calculated the amount at around ₹2,12,500.
Borrower Asked for Additional Amount
Balaraju argued that the bank had not fully compensated him because jewellery has additional value beyond its gold content. He asked for another ₹88,362, including 20% towards making charges and 3% towards the value of stones.
After the bank refused to pay the additional amount, he approached the Tumkur District Consumer Commission. He alleged deficiency in service and unfair trade practice.
District Consumer Commission Ruled in Borrower’s Favour
The Tumkur District Consumer Commission allowed the complaint on July 3, 2020. It directed Canara Bank to pay ₹88,362 with 9% interest from August 29, 2018. The bank was also ordered to pay ₹30,000 as compensation and ₹10,000 towards litigation expenses. Canara Bank then challenged the order before the Karnataka State Consumer Commission.
Bank Challenged Additional Payment
Canara Bank argued that it had already paid the value of the net gold. The bank also said that the borrower had not provided documents to prove the claimed 20% making charges and 3% value of the stones.
The bank argued that there was no deficiency in service and requested the State Commission to cancel the District Commission’s order.
State Commission Rejects Bank’s Argument
The State Commission rejected the bank’s arguments. It said that when gold jewellery kept in a bank’s custody is lost because of theft or robbery, the bank has a responsibility to settle the value of the jewellery at the prevailing rates.
The commission said that the value should not be limited to the raw gold. It should also include making charges and the value of stones used in the jewellery.
Making Charges Need Not Be Separately Proved
The commission also rejected the bank’s argument that the borrower had to produce a specific invoice proving the making charges.
It observed that making charges are normally added to gold jewellery. Therefore, the bank was responsible for considering these charges when the jewellery was lost while under its custody.
Canara Bank’s Appeal Dismissed
The Karnataka State Consumer Commission dismissed Canara Bank’s appeal and confirmed the order of the District Consumer Commission.
The bank must therefore pay the additional ₹88,362 with 9% interest, along with ₹30,000 compensation and ₹10,000 towards litigation expenses.
What the Ruling Means for Gold Loan Customers
The ruling is important for people who pledge jewellery to banks for gold loans. It makes a distinction between the value of raw gold and the value of jewellery as an ornament.
In this case, the bank calculated compensation based only on the net gold weight and the prevailing gold rate. The consumer commission held that this did not fully represent the value of the lost jewellery because it also included making charges and the value of stones.
However, the ruling does not mean that every case involving stolen gold jewellery will automatically receive the same compensation. The amount will depend on the facts and evidence of each case. The decision does make it clear that compensation for jewellery lost while in a bank’s custody may not always be limited to the net value of the gold.
