A district consumer court in Himachal Pradesh has penalized HDFC Bank Rs 47,500 for unfair trade practice and service deficiency after the lender arbitrarily turned down a Rs 1.99 crore commercial loan application shortly after requiring a local businessman to execute property mortgage papers.
The Hamirpur District Consumer Disputes Redressal Commission, comprising President Hemanshu Mishra and members Sneh Lata and Joginder Mahajan, ruled on July 17 that the bank created a “legitimate expectation” of sanction by subjecting the applicant to extensive administrative and legal procedures, only to issue a blanket rejection 13 days later.
The dispute stems from a credit application submitted in September 2024 by Tilak Raj Soni, proprietor of Hamirpur-based Archit Trading Company. Soni sought Rs 1,99,90,000 from HDFC Bank to establish a commercial store. Following instructions from bank representatives, who conducted multiple site inspections and financial verifications, Soni collected property records and executed a mortgage deed on October 9, 2024. However, on October 22, 2024, the bank issued an unreasoned rejection letter without providing objective grounds.
Legitimate Expectation Created
Addressing the lender’s conduct, the commission noted that while financial institutions retain commercial discretion in evaluating credit proposals, they cannot act in an arbitrary, whimsical, or non-transparent manner. The panel observed that compelling a borrower to complete mortgage formalities and incur legal expenses moves the process beyond routine file evaluation, generating a justifiable expectation that the loan will be approved.
Ex-Parte Proceedings and Alternate Approval
The commission also highlighted that another commercial bank approved and disbursed an identical loan based on the exact same documentation within 10 days of HDFC Bank’s decision. This contrast, the forum stated, pointed to administrative arbitrariness and a lack of bona fide appraisal by HDFC Bank.
HDFC Bank did not contest the allegations before the consumer forum. After receiving formal notices, the lender failed to submit a written response within the statutory 45-day timeframe and did not send a representative to the hearings. As a result, the commission proceeded unilaterally, treating the applicant’s affidavit and supporting evidence as unrefuted.
Financial Loss Claim Denied
While holding HDFC Bank liable for service deficiency, administrative harassment, and financial distress, the panel declined to grant the Rs 25 lakh in business losses claimed by the entrepreneur. Soni argued that the refusal forced him to delay his store opening from January 2025 to April 2025. However, the commission ruled that the projected loss was speculative because it lacked supporting audited balance sheets or concrete financial records.
Consequently, the forum partly allowed the complaint, directing HDFC Bank to pay Rs 40,000 in compensation and damages, along with Rs 7,500 to cover litigation costs.
