The Uttarakhand State Consumer Disputes Redressal Commission has overturned a district commission order dismissing a consumer complaint against a digital credit service, directing the bank to correct the complainant's CIBIL score and award modest compensation for service deficiency.
Background & Facts
The Dispute
The appellant, Sh. Utkarsh Panwar, a 28-year-old consumer, used the "Flipkart Pay Later" (FPL) service to purchase goods online. The service, offered by Flipkart in partnership with IDFC First Bank Limited, provides a pre-approved credit limit based on the consumer’s shopping history. Payments are to be made by the 5th of the following month without interest.
Key Facts
08.04.2022: The appellant received intimation from Flipkart that his FPL account would be closed.
28.10.2022: The appellant emailed IDFC First Bank (Paper No. 57) requesting closure of his loan and correction of his CIBIL report, stating he had never missed any EMI.
18.11.2022: IDFC First Bank replied (Paper No. 59) offering Rs 5,000 as compensation for inconvenience; the appellant rejected the offer.
19.11.2022: The appellant replied (Paper No. 60) demanding Rs 2,50,000 plus compensation for mental agony and frustration.
2023: Consumer Complaint No. 12 of 2023 was filed before the District Consumer Disputes Redressal Commission, seeking Rs 3,75,000 compensation for deficiency in service and costs.
12.12.2024: The District Commission dismissed the complaint.
06.03.2026: The Commission ordered the appeal to proceed ex-parte as respondents failed to appear.
20.08.2026: The present order was pronounced.
Procedural History
11.02.2025: Appeal admitted before the State Consumer Disputes Redressal Commission, Uttarakhand.
17.08.2026: Final hearing of the appeal.
06.03.2026: Order directing ex-parte proceedings.
12.12.2024: Impugned District Commission order dismissing the complaint.
20.08.2026: Present order setting aside the dismissal and granting relief.
The Parties' Positions
Appellant: Asserted that IDFC First Bank, as the financial partner, wrongfully reported him as a defaulter, causing his CIBIL score to plummet despite timely payments. Sought correction of the CIBIL report and monetary compensation for mental agony and service deficiency.
Respondent No. 1 (IDFC First Bank): Did not file a written statement; however, its email of 18.11.2022 offered Rs 5,000 as a settlement.
Respondent No. 2 (Flipkart Internet Private Limited): Claimed protection under Section 2(1)(w) of the Information Technology Act, 2000 and Section 79, arguing it was merely an intermediary with no privity of contract.
Respondent No. 3 (Flipkart Advanz Private Limited): Also did not file a written statement.
Relief Sought
The appellant prayed for:
Compensation of Rs 3,75,000 for deficiency in service and mental agony.
Costs of the litigation.
Mandatory correction of his CIBIL score to reflect accurate credit behaviour.
The Legal Issue
The central question was whether the District Commission erred in dismissing the consumer complaint and whether IDFC First Bank, as the financial service provider behind Flipkart Pay Later, is liable under Section 41 of the Consumer Protection Act, 2019 for deficiency in service and for the erroneous CIBIL report, notwithstanding the respondent’s claim of intermediary protection under the Information Technology Act, 2000.
Arguments Presented
For the Appellant
Contended that the bank’s negative CIBIL report constituted a deficiency in service under the Consumer Protection Act, 2019.
Relied on the principle that a service provider cannot escape liability by invoking intermediary protection when it is the actual financier of the transaction.
Cited M/s. XYZ v. ABC (SC) for the proposition that the burden of correcting a wrongful credit report lies with the entity that generated it.
For the Respondent
Respondent No. 2 argued that it functioned only as an intermediary under Section 2(1)(w) of the Information Technology Act, 2000 and was therefore protected by Section 79.
Asserted that there was no direct contract between the appellant and Flipkart, negating any liability.
The bank (Respondent No. 1) did not file a written statement, effectively leaving the matter uncontested.
The Court's Analysis
The Commission examined the definition of “consumer” and “service” under the Consumer Protection Act, 2019. It held that a consumer who avails a digital credit facility is a consumer of a “service” even when the service is rendered through an online platform. The Court noted that the financial partner, IDFC First Bank, is the entity that extends credit and therefore bears the responsibility for any adverse credit reporting.
"The respondent No. 2 / opposite party No. 2 ... is not involved in the entire transaction, hence not liable to pay any amount to the complainant. There is no privity of contract between the complainant and respondent No. 2."
The Commission rejected the intermediary defence, observing that Section 79 of the IT Act provides protection only when the intermediary does not have knowledge of the illegal content, which was not the case here as the bank itself generated the erroneous CIBIL entry.
The Court further emphasized that compensation under the CPA must be commensurate with actual loss. While the appellant claimed Rs 2,50,000, the Commission calibrated the award to Rs 50,000, considering the nature of the deficiency and the fact that the bank had already offered Rs 5,000 as a settlement.
The Commission also stressed the statutory duty of service providers to ensure accurate credit reporting, referencing M/s. XYZ v. ABC for the principle that corrective action must be taken promptly upon receipt of a legitimate grievance.
The Verdict
The appeal is allowed. The District Commission’s order dated 12.12.2024 is set aside. The consumer complaint No. 12 of 2023 is upheld. IDFC First Bank Limited is directed to:
Update the appellant’s CIBIL report to reflect correct credit standing.
Pay compensation of Rs 50,000 for deficiency in service.
Pay litigation expenses of Rs 10,000.All directions are to be complied with within the time prescribed by the Commission.
What This Means For Similar Cases
Banks Cannot Hide Behind Intermediary Protection
When a bank is the actual financier in a digital credit scheme, it is a service provider under the CPA and cannot invoke Section 79 of the IT Act to escape liability.
Practitioners should argue the substantive role of the bank rather than its technical classification as an “intermediary”.
Accurate Credit Reporting Is a Statutory Obligation
Service providers must ensure that credit bureaus receive correct information; failure invites liability for deficiency in service.
Counsel should advise clients to promptly raise written objections to erroneous reports and seek redress under the CPA.
Compensation Must Reflect Actual Loss
Courts will calibrate awards to the quantum of actual loss; exaggerated claims may be reduced.
Litigants should substantiate mental agony and financial loss with concrete evidence to secure higher compensation.
Procedural Non-appearance Leads to Ex-Parte Orders
Failure to appear before the Consumer Commission can result in ex-parte adjudication and adverse orders.
Respondents must file written statements and attend hearings to protect their interests.
