State Consumer Disputes Redressal Commission
Indiabulls Financial Services Limited vs Dr. Boola Singh Sidhu on 2 March, 2017
STATE CONSUMER DISPUTES REDRESSAL COMMISSION,
PUNJAB
DAKSHIN MARG, SECTOR 37-A, CHANDIGARH.
First Appeal No.391 of 2014
Date of institution : 07.04.2014.
Date of decision : 02.03.2017.
1. Indiabulls Financial Services Limited having its Registered
Office : F-60, Malhotra Building, 2nd Floor, Connaught
Place, New Delhi-110001, through its Managing Director.
2. The Branch Manager, Indiabulls Financial Services Limited
(Now known as Indiabulls Housing Finance Limited), Guru
Kashi Marg, Bathinda.
....Appellants/Opposite parties.
Versus
Boota Singh Sidhu son of Raj Singh resident of # P-8, Giani Zail
Singh College of Engineering & Technology, Dabwali Road,
Bathinda now Dean (Academic) Punjab Technical University,
Jalandhar(Punjab).
....Respondent/Complainant.
First Appeal against order dated
13.01.2014 of District Consumer
Disputes Redressal Forum, Bathinda.
Quorum:-
Hon'ble Mr. Justice Paramjeet Singh Dhaliwal, President
Mr. Harcharan Singh Guram, Member
Present:-
For the appellants : Sh.P.M.Goyal, Advocate
For the respondent : Sh.R.K.Bhatti, Advocate
HARCHARAN SINGH GURAM, MEMBER :
This appeal has been preferred by the appellants/OPs (hereinafter referred to as "opposite parties") against order dated 13.01.2014 passed by District Consumer Disputes Redressal Forum, Bathinda (in short, "District Forum"), vide which the complaint filed by complainant under Section 12 of the Consumer First Appeal No.391 of 2014 2 Protection Act, 1986 was allowed against OPs No.1&2, by observing that OPs have increased number of installments from 120 to 141 instead of increasing the amount of EMI without taking any prior consent from the complainant, which amounts to deficiency in service. The OPs have increased the rate of interest even when the Reserve Bank of India has decreased the rate of interest but this benefit was not given to the complainant. It has been held that the interest should be increased or decreased as per the RBI guidelines. In reply to legal notice issued by the complainant, OPs have admitted that they have increased the rate of interest at their own and with regard to number of installments, the same were increased from 120 to 141. The OPs pleaded that the complainant had given his option to increase, whereas, no such option as given by the complainant was placed on record by the OPs. Hence, they cannot of their own without issuing any notice to the complainant or without seeking the consent of the complainant can increase/decrease the number of installments. The complaint was allowed and OPs were directed to pay `10,000/- as cost and compensation.
2. It would be apposite to mention at the outset that hereinafter the parties will be referred, as have been arrayed before the District Forum.
3. Brief facts of the case are that Dr.Boota Singh son of Sh.Raj Singh was in need of financial assistance and in the month of March/April, 2011, he approached OP No.2 for granting him First Appeal No.391 of 2014 3 financial assistance i.e. loan against property. He averred that after thorough discussions with officials of OPs No.1&2 and after perusing all the documents regarding ownership of the complainant over the said property measuring 500 Sq.yards situated at Housefed Colony, Dabwali Road, Bathinda, agreed to grant loan of `35,00,000/- to him at a interest rate of 12% per annum. He completed all the documents and the OPs sanctioned the loan of `35,00,000/- to him. It was pleaded that OPs without his consent increased the loan amount from `35,00,000/- to `35,25,000/- and also increased the rate of interest from 12% to 12.50% p.a. Though originally they had agreed to sanction the loan @ 12% p.a. which was to be repayable in 120 installments and was to be repaid with an EMI of `51,598/- per month. It was pleaded that due date of the payment of first EMI was fixed for repayment as 01.06.2011. He was left with no option but to keep silent, as he had spent sufficient amount after completing all the formalities of the OPs. He averred that he was paying EMIs regularly and this fact was admitted by the OPs in their reply to his legal notice dated 27.07.2013. He further averred that when he came to know about his cheque bounced due to non-matching of his signature, then he paid the installment in cash to the opposite parties vide receipt dated 15.12.2012. He further agitated that the OPs at their own increased the installments to be paid by him from 120 to 141 as monthly installments in an arbitrarily manner without following the rules and regulations as issued by RBI from time to time. He further averred that OPs had again increased the EMIs First Appeal No.391 of 2014 4 of his loan and were demanding illegally an additional amount of `15,00,000/- from him. He gave a representation to the OPs for setting right loan amount and also sent email on 11.04.2013. However, the OPs gave vague reply to his email on 16.04.2013, wherein they stated that the rate of interest was increased at their own level and OPs were not bound by RBI guidelines. He further averred that when RBI had reduced the interest rate by 0.5% in the month of March, 2013 and again decreased the rate of interest by 0.5% then the OPs had failed to decrease the same rather it had followed the procedure which was in its favour. He further averred that OPs have got his house loan insured by paying a sum of `25,000/- as insurance premium for the insurance policy taken by the OPs in order to protect the loan amount availed by him to the extent of `35,00,000/- and had increased the sanctioned loan amount from `35,00,000/- to `35,25,000/- at their own. He further averred that he was entitled to get the rate of interest reduced to 12% p.a. or any other rate as per RBI guidelines on the above loan amount and was entitled to get the installment reduced from 141 to 120 with the amount of `51,598/- per month as per original agreed terms and conditions between them. He further averred that due to above said illegal act on the part of OPs he suffered mental tension and agony and financial loss due to the wrong action and conduct on the part of the OPs. On failure to get his grievances redressed by OPs, he filed his consumer complaint in the District Form and sought directions be issued against OPs to reduce the number of installments from 141 to 120 to keep the First Appeal No.391 of 2014 5 amount of installment as `51,598/- per month as per the terms and conditions of the first contract entered between them to change interest @12% p.a. to reduce the loan amount from `35,25,000/- to `35,00,000/- and refund the interest, as per RBI directions when the same awas reduced and to pay `5,00,000/- as compensation for causing agony.
4. In order to rebut allegations in the complaint filed by the complainant, the OPs tendered their reply by way of taking preliminary objections that the present complaint was not maintainable in the present form. The complainant had no locus standi to file the complaint. He did not approach the District Forum with clean hands and had suppressed the facts from the Forum and District forum did not have the jurisdiction to try and entertain the present complaint. It was pleaded that there was no deficiency in service nor unfair trade practice on their part and prayed that the complaint filed by the complainant is nothing but an abuse of process of law and as such, the same was liable to be dismissed with exemplary cost. It was pleaded that the complainant was not empowered by any law to take the benefit of his own wrong and would not be able to take any advantage under the guise of aggrieved person. It was pleaded that the complainant had filed the fictitious complaint against it and unnecessarily harassed them by dragging them into uncalled for litigation as such the complainant filed by the complainant deserved to be dismissed with special costs to the tune of Rs.10,000/- as provided under First Appeal No.391 of 2014 6 section 26 of the Act. It was pleaded that the complainant opted for a floating rate of interest, which was opted by him and he did not opt for the fixed rate of interest. The floating rate of interest was fixed as per the Prime Lending Rate/Lap Floating Reference Rate as such the rate of interest was bound to change whenever there was a change in the Prime Lending Rate (PLR)/Lap Floating Reference Rate (LFRR). It was averred that as per the Fair Practice Code adopted by the company, they were sending individual intimation regarding Prime Lending Rate (PLR)/Lap Floating Reference Rate (LFRR) changes and the same are notified and displayed on the website of their company. This method of intimation was also specified in the loan agreement. The real facts in the complaint pertains to that the complainant availed loan facility of `35,25,000/- under loan account No.HLAPBAT00085499 as loan against property at floating rate of interest. It is averred that the loan was sanctioned and disbursed to him and the complainant agreed to the terms and conditions of the loan agreement dated 21.04.2011. The said loan was disbursed to him @ 15.75% minus 3.25% and as per this rate it was @ 12.50% and it was payable in 120 installments by way of `51,598/- as EMI per month. It was made clear to him that if there will be any change in Prime Lending Rate (PLR), the rate of interest may increase from time to time and also installment amount and tenure of the loan may be changed accordingly. It was averred that Prime Lending Rate (PLR) at the time of disbursement of the loan was @15.75%, thereafter the PLR was First Appeal No.391 of 2014 7 increased from 15.75% to 16.50% p.a. then the rate of interest of the complainant was increased from 12.50% to 13.25% with effect from 01.06.2011. It was to be repayable from the month of July, 2011. However, the Lap Floating Reference Rate (LFRR) was again changed form 1st July, 2011 from 16.50% to 17% and accordingly, rate of interest for complainant increased from 13.25% to 13.75%. It is seen from the written reply submitted that the Lap Floating Reference Rate (LFRR) continued to increase in the month of August, 2011 from 17% to 17.5% and accordingly rate of the interest of the complainant was increased from 13.75% to 14.25%. It was further averred that LFRR did not increase from 1st August, 2011 till August,2013 and then interest was increased from 17.50 to 18% and his rate of interest was changed from 14.25% to 14.75% and then the last change was w.e.f.01.09.2012 from 18% to 18.50% and his rate of interest was increased from 14.75% to 15.25%. It was averred that due to increase in Prime Lending Rate (PLR) from time to time, the tenure of the EMIs were changed accordingly. This was done according to the amortization clause as agreed in the loan agreement, which was accepted and signed by the complainant. It was pleaded that no excess interest was charged in the account of the complainant, but it was only charged in lieu of changes on account of Prime Lending Rate (PLR) and Lap Floating Reference Rate (LFRR) rates being increased by the company. It was further contended that though initially the amount of `35,00,000/- were sanctioned to the complainant since loan was to be insured against any eventuality First Appeal No.391 of 2014 8 happening to the complainant. He did not come forward to pay the insurance amount in lieu of securing his loan amount then additional loan amount was extended to the extent of `25,000/- and the documents were duly prepared for `35,25,000/- and `25,000/- were paid as insurance premium to the insurance company in order to safeguard him. It was further averred that the complainant was given a relief of margin of -3.25% from Prime Lending Rate (PLR) and Lap Floating Reference Rate (LFRR) rates. It was wrong on his part to state that no relief was passed on to him and prayed that the complaint be dismissed with special cost to the tune of `1,00,000/- as the same was filed on a false and frivolous complaint under section 26 of the Consumer Protection Act.
5. Both the sides produced evidence in support of their respective averments before the District Forum, which after going through the same and hearing learned counsel on their behalf, allowed the complaint, vide aforesaid order. Aggrieved by the impugned order, OPs No.1&2 filed the present appeal in this Commission.
6. We have heard learned counsel for the parties and have also carefully gone through the records of the District Forum.
7. Counsel for the appellant argued that the District Forum had wrongly decided the complaint in favour of the complainant while ignoring the evidence brought on record. He argued that as per the loan agreement executed between them, First Appeal No.391 of 2014 9 the amount of EMI was retained at `51,598/-, but period of installments were changed due to change in Prime Lending Rate (PLR)/Lap Floating Reference Rate (LFRR).
8. During the course of arguments, a query was raised to the counsel for the appellants that whether appellant-company is governed by instructions issued by Reserve Bank of India or not. It was replied that RBI instructions are duly applicable on the appellants company.
9. On the other hand, counsel for the respondent argued that as per RBI guidelines issued to commercial banks and to non- financial banking finance companies, the RBI has directed them not to increase the interest rates at their own accord when loans are given at floating rate of interest. Without sending a notice and providing a time period to switch the loan to another bank, if the rate is considered by the consumers as not acceptable to be paid by them. He further argued that exhibits placed on record regarding sending of letters relating to change of interest was never sent and no postal receipts were appended on the record. Even when it is stated that the notices were sent through courier companies, no booking receipt for having booked the letters to be sent through a particular courier company was placed on the record. As such in absence of booking receipts of the courier companies and confirmation of the customers for having received the courier letters by putting across their signatures on the second copy of the courier receipt. In absence of these receipts, it cannot First Appeal No.391 of 2014 10 be presumed that appellants have informed the complainant that the interest rate stands changed as per the increase in rate of interest. He further argued that RBI had given instructions to all the banks that written consent of the borrower is required for effecting any change in the rate of interest. He argued that as per schedule B of the agreement, the rate has been stated as 12.50% but OPs have not placed on record the original sanction letter by which the loan was sanctioned and the same was not placed on record in order to mislead the District Forum. Thus, an adverse inference is to be drawn against them.
10. We have given our thoughtful consideration to the arguments of the learned counsel for the parties.
11. In order to decide the controversy in hand, whether the appellants were justified in increasing rate of interest at their own by way of sending alleged intimation to the complainant or not? We have perused the record and find that the letters written by OP to the complainant are appended on the District Forum file. At the same time, we do not find on record any receipts of courier companies for having sent these letters to the complainant. Though there is mention in some of the documents that intimation was sent through Overnight Courier, but we do not find any receipt for having sent these letters by the appellants/OPs bank through courier agencies. As per the RBI guidelines to commercial banks and to Non-banking Financial Companies (NBFCs), it is stated that these institutions will not be able to enhance the interest rate when First Appeal No.391 of 2014 11 the loan was sanctioned at floating rate of interest without giving a written intimation to the borrower and without obtaining written consent of the borrower. If written consent is obtained, then only commercial banks are permitted to enhance the floating rate of interest. As per equity, these instructions of RBI issued to commercial banks will also be applicable to all the financial institutions, who are financing the consumers being a company falling under the category of non-banking financial companies. The RBI vide its direction No.RBI/2006-07/414 dated 24.05.2007 has issued instructions to all non-banking financial companies including residuary non-banking companies about the matter of complaints of charging excessive interest rate by NBFCs as back as 24.05.2007. They were advised to regulate the interest rates and the rate of interest beyond the certain level may be seen to the excessive and can neither be sustainable nor be conforming to normal financial practice. Thereafter, RBI has issued another circular addressed to all NBFCs vide its master Circular No.RBI/2011-12/470 dated 26.03.2012. As per this, master circular guidelines on Fair Practices Code (FPC) for all NBFCs were laid down. In this circular, there is a mention of the guidelines issued by the RBI, vide its master Circular dated 24.05.2007. We have perused the master circular, which was downloaded from our computer to decide the present case at our end. As per the guidelines, an intimation was issued by RBI vide notification No.DBBS/204/CGM(ASR)-2009 dated 22.01.2009. As per this guideline, the rate of interest should be annualised so that First Appeal No.391 of 2014 12 the borrower is aware about the exact rate to be charged in his account by NBFCs. As per the directions, disclosures are to be given in the loan agreements/loan card. As per these directions on loan agreement, following instructions shall be disclosed :-
i) All the terms and conditions of the loan,
ii) that the pricing of the loan involves only three
components viz; the interest charge, the processing charge and the insurance premium (which includes the administrative charges in respect thereof),
iii) That there will be no penalty charged on delayed payment,
iv) That no security deposit/margin is being collected from the borrower.
Further as per the loan card, the following directions have been enumerated, which are as under :-
c. The loan card should reflect the following details as specified in the Non-Banking Financial Company-Micro Finance Institutions (Reserve Bank) Directions, 2011.
(i) The effective rate of interest charged
(ii) All other terms and conditions attached to the loan
(iii) Information which adequately identifies the borrower and
(iv) Acknowledgements by the NBFC-MFI of all repayments including installments received and the final discharge.
(v) The loan card should prominently mention the grievance redressal system set up by the MFI and also the name and contact number of the nodal officer.First Appeal No.391 of 2014 13
(vi) Non-credit products issued shall be with full consent of the borrowers and fee structure shall be communicated in the loan card itself.
(vii) All entries in the Loan Card should be in the vernacular language.
12. From perusal of this circular, it is evident that the interest rate was to be charged in one year being annually and not on monthly basis as is agitated by the present appellant before the District Forum. However, we have noted from the reply that the interest rate was increased once after 01.08.2011 on 01.08.2013 to the extent of rate from 17.50 to 18%, but then we fail to understand then how another rate of interest was raised from 18% to 18.50% from 01.09.2012 that too with a backdate change, the increased rate of interest applied to the loan account was raised from 14.50 to 15.25% p.a. We also observe that the terms and conditions are printed in a small font, which are not easily readable. We have also perused the loan agreement on page 15 of loan agreement pertaining to default/future interest rate as under :-
3. Amortisation (refer schedule in case of combination of Fixed and Adjustable Rate of interest)
(i) Terms of repayment 120 months.
(ii) EMI Rs.51598/-
(iii) Total number of EMIs :- 120
(iv) Date of Commencement of EMI 01.05.2011
(v) Due date of payment of first EMI 01.06.2011
First Appeal No.391 of 2014 14
However, in the event of advance, the date of
commencement of EMI shall be the corresponding day (to the date specified above) of the month following the month in which disbursement will have been completed. In such a case, the Due Date of Payment of first EMI shall be the corresponding day of the following month to the due date specified above.
(vi) Subsequent EMIs shall be payable at the end of each respective month.
The Borrower/s may, if he so chooses, issue standing instructions to the bank in which the Borrower/s has an account, to debit the account of the Borrower/s every month and credit such account as directed by IFSL, for the value of the EMI due.
In case of Structured Repayment Facility EMI Rs.______/- from ________month to ____month EMI Rs.______/- from ________month to ____month EMI Rs.______/- for the balance term of repayment.
13. From the above, it is clear that in case of structure repayment facility no amount has been mentioned on which date it will be increased on the columns under these parameters are kept blank. Even under Schedule A, terms and conditions applicable to the loans given on fixed rate of interest are kept blank. We have also perused Schedule B. Under schedule B the adjustable rate of interest was mentioned as 12.50% and under the column for the date when it was applicable was left blank. We find majority of the columns in the loan agreement appended on the record are left blank, which remain unfilled and would be filled up at a later date to disadvantage of the borrower. This type of practice of keeping First Appeal No.391 of 2014 15 blank documents can be used by the finance company to the determent of the consumers who were given financial assistance. So, keeping blank documents of loan is also against the principle of natural justice and is a unfair trade practice. Thus, we hold that the financial institutions had increased the rate of interest without written consent of the borrower and of its own accord increased the repayment schedule from 120 months to 128 months as per their letter Ex.R-1/B. Thereafter, these installments were again increased, vide their letter dated 01.07.2011 from 128 to 134 installments. Then again, the installments were again increased, vide letter dated 01.08.2011 from 134 to 141. Thereafter, the installments were again increased vide their letter dated 29.07.2013 from 141 to 146 installments and vide letter dated 29.08.2013., the EMIs were again increased from 146 to 151 EMIs, but they kept the amount of repayment as Rs.51,598/-.
14. We find that during above period, the RBI has also reduced the interest rate in order to keep the interest rates stable, even with regard to portfolio pertaining to housing segment too. Decrease in rate of interest was duly informed to all commercial banks and housing finance companies such as National Housing Bank. We have also perused the written statement, wherein it is stated by the appellants that their company is governed by directions issued by National Housing Bank, which is Nodal Agency for regulating the non-banking finance companies, who are into the business of providing finances under housing First Appeal No.391 of 2014 16 segment. Once the RBI has issued guidelines to Banks to reduce the interest rates then the national housing bank also falls in the category of a bank. This bank is giving rediscounting finances to all the NBFCs engaged in business of housing finances segment in the country, as such the raising of EMIs by the appellants without the consent of the borrower amounts to unfair trade practice, and also violates the RBI guidelines to fix the rate of interest annually instead of increasing it on monthly basis as is admitted by the appellants.
15. Sequel to the above discussions, we do not find any merit in the present appeal and the same is dismissed being devoid of merit.
16. The appeal could not be decided within the statutory period due to heavy pendency of court cases.
(Justice Paramjeet Singh Dhaliwal)
President
March 2, 2017 (Harcharan Singh Guram)
Lb/- Member