SBI and High Court Judge Loan Account Controversy: Home Loan turned NPA, Read full story

The State Bank of India (SBI) has approached the National Consumer Disputes Redressal Commission (NCDRC) seeking to transfer a consumer complaint filed by Justice J. Nisha Banu, a judge of the Madras High Court. The case, related to a home loan repayment dispute, is currently being heard in Tamil Nadu. SBI requested that the case be moved outside of Tamil Nadu for a fair hearing.

The Background of the Dispute

Justice Nisha Banu had taken a home loan from SBI and had been repaying it over time. However, a dispute arose regarding the repayment of the remaining amount. According to SBI, the judge had not fully repaid the loan despite receiving several reminders. Justice Banu claims that the dispute is linked to a home insurance policy with The New India Assurance Company, which rejected her claim. She has accused both the bank and the insurance company of working together to deny her the insurance benefits.

SBI, on the other hand, argued that the judge had been aware of the insurance policy and that the outstanding loan amount still needed to be repaid. SBI also noted that Justice Banu had received Rs 38 lakh as compensation from the builder for poor construction, which led to the demolition of the building.

Legal Proceedings and Hearing Dates

On August 2, 2024, the NCDRC issued a notice regarding SBI’s transfer request. The case is scheduled for another hearing on September 23, 2024. SBI’s lawyer, Advocate Jitendra Kumar, requested an interim stay on the proceedings in the District Consumer Disputes Redressal Commission (DCDRC) in Madurai. However, the NCDRC was cautious about granting such a stay, emphasizing the need for solid reasons, especially since the case involves a sitting High Court judge.

Home Loan and Insurance Policy Dispute

SBI stated that Justice Banu was paying her Equated Monthly Installments (EMIs), but there were instances where the payments were returned due to insufficient funds in 2018 and 2019. Justice Banu’s complaint, filed in June 2024, alleges that SBI officials and the insurance company had conspired to deny her the benefits of a “Standard Fire and Special Peril Policy.” She claims that the policy was purchased by SBI without her knowledge and that Rs 17,125 was deducted from her loan for this policy.

Justice Banu’s legal team is seeking compensation of Rs 46 lakh, the insured amount, along with interest. They are also requesting Rs 1 crore as compensation for mental agony, the return of all paid EMIs with interest, a refund of the policy cost, and litigation costs of Rs 50,000. Furthermore, they are asking SBI to close her loan account.

SBI’s Defense

SBI contends that Justice Banu was aware of the insurance policy and that she is still required to repay the remaining loan balance. The bank highlighted that the insurance company rejected her claim in 2018, stating that the demolition of the building was not covered under the policy. SBI argues that the relationship between the bank and the insurance company is independent of the debtor-creditor relationship and should not affect the repayment of the home loan.

Timeline of Events

The home loan dispute dates back to October 2010, when Justice Banu, who was a lawyer at the time, took a loan of Rs 29.20 lakh from SBI, to be repaid over 20 years. In 2013, after Rs 20,17,500 had been disbursed, Justice Banu requested that the loan disbursal be stopped due to construction issues. By November 2021, the loan was classified as a Non-Performing Asset (NPA) under RBI guidelines.

Justice Banu’s consumer complaint also mentioned that she received compensation of Rs 38 lakh from the builder for substandard construction, and in 2016, the national consumer forum granted her permission to demolish the partially constructed building.

In her complaint, Justice Banu claims that she was only made aware of the insurance policy after she demolished the building, and that she only received the policy document after sending a legal notice.

Conclusion

This case raises questions about the connection between home loan agreements, insurance policies, and the responsibilities of both the borrower and the bank. With the next hearing set for September 2024, the outcome will have significant implications for both Justice Banu and SBI.