State Consumer Disputes Redressal Commission
State Bank Of India vs Balveer Kaur on 15 November, 2021
STATE CONSUMER DISPUTES REDRESSAL COMMISSION,
PUNJAB, CHANDIGARH.
First Appeal No.209 of 2021
Date of institution : 15.06.2021
Reserved on : 08.11.2021
Date of decision : 15.11.2021
State Bank of India (Branch Code 50050) having its Branch at Grain
Market, Budhlada, Tehsil Budhlada, District Mansa, through its Chief
Manager.
....Appellant/Opposite Party
Versus
Balveer Kaur wife of Tejwant Singh S/o Kaka Singh, resident of Village
Chak Bhai Ke, Tehsil and District Mansa.
.....Respondent/Complainant
First Appeal against the order dated
17.03.2021 passed by the District Consumer
Disputes Redressal Commission, Mansa.
Quorum:-
Hon'ble Mrs. Justice Daya Chaudhary, President
Mrs. Urvashi Agnihotri, Member
1) Whether Reporters of the Newspapers may be allowed to see the Judgment? Yes/No
2) To be referred to the Reporters or not? Yes/No
3) Whether judgment should be reported in the Digest? Yes/No Argued by:-
For the appellant : Sh. Aseem Kataria, Advocate with Ms. Shalini Kujur, Manager,SBI, Budhlada For the respondent : Sh. J.S. Sidhu, Advocate ..................................................................................
JUSTICE DAYA CHAUDHARY, PRESIDENT The present appeal has been filed under Section 41 of the Consumer Protection Act, 2019 (in short "The Act") by the appellant-First Appeal No.209 of 2021 2
State Bank of India to challenge the impugned order dated 17.03.2021 passed by the District Consumer Disputes Redressal Commission, Mansa (hereinafter called as "The District Commission").
2. Briefly the facts of the case as made out in the complaint are that the complainant approached the District Commission with the grievance that she applied for loan of Rs.3,00,000/- in the month of September 2004 and the loan of Rs.2,59,125/- was sanctioned against mortgage security of residential plot of the complainant. The said loan was to be repayable in total 174 monthly installments of Rs.2500/- each commencing from August, 2005. An amount of Rs.9125/- was charged as insurance premium. The complainant paid all 174 installments well in time and there was no default in payment of the installments. Subsequently, she wanted to have No Objection Certificate (herein after called as "NOC") against the cleared loan amount for getting redemption of mortgaged residential plot, which stood in favour of the OP in the revenue record. The request was not accepted on the ground that the loan amount was not cleared as per record of the OP. An amount of Rs.1,16,884/- was shown to be outstanding. The statement issued by the OP was objected by the complainant, as the same was not as per the terms and conditions of the loan agreement.
3. The complaint filed by the complainant was partly allowed by the District Commission and the demand of outstanding amount including interest to the tune of Rs.1,16,884/- was set aside. A direction was also issued to the OP to issue NOC against loan in dispute and to release the mortgaged property of the complainant. First Appeal No.209 of 2021 3 Compensation of Rs.25,000/- was also awarded to the complainant alongwith fine of Rs.20,000/- for intentionally giving false statement in the reply. The amount of fine was ordered to be deposited in the Consumer Welfare Fund of the District Commission. The compliance of the said order was to be made within a period of 45 days from the date of receipt of the copy of the order.
4. Order dated 17.03.2021 passed by the District Commission has been challenged by the appellant/OP-State of India, Branch Budhlada by raising various grounds.
5. Learned counsel for the appellant/OP submits that the complaint was not maintainable before the District Commission as the complainant did not come under the definition of 'Consumer', but this aspect has not been taken into consideration. Learned counsel also submits that the impugned order is also liable to be set aside, as respondent/complainant had received the notice dated 30.01.2020 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (in short as "SARFAESI Act") as the appellant-Bank had already initiated action under SARFAESI Act, as the loan amount of the complainant was declared as Non Performing Asset (in short as "NPA") on 28.12.2019. Learned counsel further submits that the complainant was well aware about this fact as the remedy to approach the Debt Recovery Tribunal, Chandigarh was available to her by way of filing securitization application under SARFAESI Act, but that remedy was not availed. It is also the argument of the learned counsel for the appellant/OP that the complainant did not approach the District Commission with clean First Appeal No.209 of 2021 4 hands as true facts were not mentioned in the complaint. The complainant paid total 174 EMIs @Rs.2500/- per month, which was assessed at the time of execution of loan agreement, but the rate of interest was changing. An amount of Rs.1,16,884/- was still outstanding and this fact has not been brought to the notice of the District Commission. The complainant was also given opportunity on her request to clear the outstanding amount due to revision of interest till 31.03.2021 as is clear from request letter dated 21.01.2021, annexed as P-4 with the appeal. At the end, learned counsel for the appellant submits that it is settled law that any document produced in evidence is to be read in toto not in parts. As per Clause one of para No.2 of the Agreement dated 21.10.2004, it was mentioned that EMI of Rs.2500/- includes interest, whereas Clause 2(b) states that interest was not a part of EMI of Rs.2500/-. Learned counsel for the appellant has summed up his argument by stating that the impugned order partly allowing the complaint filed by the respondent/complainant is not based on proper appreciation of evidence and the documents available on the file and the same is liable to be set aside.
6. Learned counsel for the respondent/complainant has opposed the submissions made by learned counsel for the appellant- Bank and also submits that order passed by the District Commission is well speaking and reasoned and no interference is required. Learned counsel also submits that the appeal has been filed by the appellant on the basis of false and fabricated documents and the certain documents have been produced before this Commission for the first time. Those documents were not produced before the District First Appeal No.209 of 2021 5 Commission. Learned counsel further submits that an argument was raised that the loan account of complainant was declared as NPA on 28.12.2019, whereas neither any decision was intimated to the complainant nor this ground was taken before the District Commission. It has also wrongly been mentioned that notice was received by the complainant on 30.01.2020, whereas no notice was served upon her. Even no such notice was produced before the District Commission. Learned counsel for the respondent/complainant also submits that the question of declaring the loan account as NPA was never the issue as there was no default of any EMI. The amount of interest was to be paid separately and EMI was to be of Rs.2500/- towards principal amount only, whereas factually it is incorrect as the sanctioned loan amount was Rs.2,59,125/-. The amount so deposited by the respondent/complainant in total 174 installments comes to Rs.4,35,000/-, which is much more to the principal amount. The appeal filed by the appellant/OP is liable to be dismissed with cost.
7. Heard arguments of learned counsel for the parties and we have also perused the impugned order dated 17.03.2021 passed by the District Commission and other documents available on the file. The main issue involved in the present case is as to whether the sanctioned loan amount was to be paid by including or excluding the interest. The terms and conditions of the loan agreement are necessary to be perused. The relevant condition of the agreement is reproduced as follow:-
"Interest on the amount of the loan shall be applied at the rate of 2.75% p.a. below long term prime lending rate (hereinafter referred to as 'LTPLR') rising and falling therewith, with quarterly First Appeal No.209 of 2021 6 rests calculated on the daily outstanding balance of the loan amount. Provided always that the Bank shall be entitled, from time to time and at any time, without notice to me/us, to vary and change the rate of interest depending on the changes in LTPLR and/or the rests of interest and such revised, varied and changed rate and/or rests of interest shall always be construed as agreed to be paid by me/us and hereby secured and application such revised, varied and change rate and/or rests of interest on the outstanding loan amount shall be deemed to be sufficient notice to me/us of such revision, variation and change which shall be binding on me/us."
From perusal of above said clause of the loan agreement dated 21.10.2004 (Ex.C-1) and the statement of account (Ex.C-4) it is proved that the loan was sanctioned to the respondent/complainant on floating rate of interest. The appellant/OP nowhere has stated before the District Commission as well as before this Commission that the interest on loan was to be paid at floating rate by the respondent/complainant. It is also not disputed that the loan availed by the respondents/complainants was to be paid in total 174 installments. However, because of opting floating rate of interest the same was necessary to be reviewed from time to time during the period of payment. The purpose for issuing the statements of account containing the information of change of rate of interest and number of installments due was just to inform the borrowers of burdening with higher EMIs and due installments.
8. It is a settled proposition of law that Contract has to be read as a whole and the terms of Contract cannot be read or construed in isolation. However, the Bank has to follow the RBI guidelines. The Banks are also supposed to inform the loanees about the guidelines issued by RBI from time to time, fixed rate of interest and floating rate of interest and any increase/decrease, number of First Appeal No.209 of 2021 7 installments as well as rate of interest to the loanees so that they are well aware about their liabilities as well as capacity to pay the installments as per their financial condition. In this case the loan agreement (Ex.C-1) was signed by the complainant on 21.10.2004. The Reserve Bank of India has issued guidelines on Fair Practices Code for Lenders, vide Circular No.DBOD. Leg. No.BC. 104/09.07.007/2002-03, dated 05.05.2003 to all Scheduled Commercial Banks / All India Financial Institutions and the relevant portion is as under:-
"A. (i) Applications for loans and their processing XXXXX
(ii) Loan appraisal and terms/conditions XXXXXX
c) Terms and conditions and other caveats governing credit facilities given by banks/financial institutions arrived at after negotiation by lending institution and the borrower should be reduced in writing and duly certified by the authorized official. A copy of loan agreement along with a copy of each all enclosures quoted in the loan agreement should be furnished to the borrower.
(iii) Disbursement of loan including changes in terms and conditions:
Lenders should ensure timely disbursement of loans sanctioned in conformity with the terms and conditions governing such sanction. Lenders should give notice of any change in the terms and conditions including interest rates, service charges etc. Lenders should also ensure that changes in interest rates and charges are effected only prospectively.
9. It is also the settled proposition of law that Courts cannot re-open any account maintained by the Bank relating to transactions of First Appeal No.209 of 2021 8 its customers to know whether the rate of interest is on excessive side or not. In case the rate of interest is in violation of RBI guidelines, in that situation Courts disallow such excess interest and can give relief to the party. As per provisions of Section of Banking Regulation Act, 1949, the power is with the Reserve Bank of India to give directions in the interest of public or in the interest of banking policy or to prevent the affairs of any banking company being conducted to the detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company or to secure the proper management of any banking company generally.
10. By considering said provisions such directions have been issued to the banking company from time to time and the same are bound to be complied with as per spirit of the direction. Even the Reserve Bank of India may do so on its own motion and modify or cancel any direction issued in this regard.
11. The same issue was there before the Hon'ble Apex Court in case "Central Bank of India Vs. Ravindra & others" 2002(1)SCC- 367, wherein it was held by the Hon'ble Supreme Court, which as under:
"50. Though we have answered the question of law before us, but we cannot leave the matter at that alone without sounding notes of caution, lest our view of the law should be misconstrued and misapplied. Before we do so, it would be appropriate to refer to the decision of this Court in 'Corporation Bank v. D.S. Gowda' in some detail.
51. The Banking Regulation Act, 1949 empowers the Reserve Bank, on it being satisfied that it is necessary or expedient in the public interest or in the interest of depositors or banking policy so First Appeal No.209 of 2021 9 to do, to determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular and when the policy has been so determined it has a binding effect. In particular, the Reserve Bank of India may give directions as to the rate of interest and other terms and conditions on which advances or other financial accommodation may be made. Such directions are also binding on every banking company. Section 35-A also empowers the Reserve Bank of India in the public interest or in the interest of banking policy or in the interests of depositors (and so on) to issue directions generally or in particular, which shall be binding with effect from 15-2-1984. Section 21-A has been inserted in the Act, which takes away power of the court to reopen a transaction between a banking company and its debtor on the ground that the rate of interest charged is excessive. The provision has been given an overriding effect over the Usury Loans Act, 1918 and any other provincial law in force relating to indebtedness."
In para No.55 of the judgment, it was further observed as under:-
"(5) The power conferred by sections 21 and 35-A of the Banking Regulation Act, 1949 is coupled with duty to act. The Reserve Bank of India is the prime banking institution of the country entrusted with a supervisory role over banking and conferred with the authority of issuing binding directions, having statutory force, in the interest of the public in general and preventing banking affairs from deterioration and prejudice as also to secure the proper management of any banking company generally. The Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is, and it ought to be, aware of all relevant factors, including credit conditions as prevailing, which would invite its policy decisions. RBI has been issuing directions/circulars from time to time which, inter alia, deal with the rate of interest which can be charged and the periods at the end of which rests can be struck down, interest calculated First Appeal No.209 of 2021 10 thereon and charged and capitalised. It should continue to issue such directives. Its circulars shall bind those who fall within the net of such directives. For such transaction which are not squarely governed by such circulars, the RBI directives may be treated as standards for the purpose of deciding whether the interest charged is excessive, usurious or opposed to public policy."
and ultimately, the Hon'ble Apex Court laid down the law as under:-
"(a) the Apex Court has noticed instances of unscrupulous, unfair and unhealthy dealings without generalising the same.
The Court has specifically observed that instances of unscrupulous, unfair and unhealthy dealings can be multiplied. But such issues are left open to be adjudicated upon in appropriate cases as and when they actually arise for decision. The present case is an instance of charging usurious rate of interest, which is unfair trade practice.
(b) The Banking Regulation Act, 1949 empowers the Reserve Bank to lay down the policy in the public interest and it has binding effect on the banks. The Reserve Bank of India is entitled to give directions as to rate of interest to be charged and other terms and conditions on which advances or other financial accommodation may be made.
(c) The power conferred by sections 21 and 35-A of the Banking Regulation Act, 1949 is coupled with the duty to act. The Apex Court considered the RBI as a watchdog of finance and economy of the nation, and presumed that it ought to be aware of the relevant factors including the prevailing credit conditions, which would invite its policy decision.
(d) Charging of interest should be reasonable. Further, penal interest can be charged only once for one period of default and, therefore, cannot be permitted to be capitalized. It would be opposed to public policy.
(e) The Court has specifically stated that unscrupulous banks may resort to charging of interest even on monthly rests. It is, First Appeal No.209 of 2021 11 therefore, required to be clarified that such unscrupulous banks should not be permitted to charge interest on credit cards on monthly rests.
(f) The Court has observed that most of the banks press into service long-running documents wherein the borrowers fill in the blanks, at times without caring to read what has been provided therein, and bind themselves by the stipulations articulated by the best of legal brains. In our view, such practice also would be an unfair trade practice.
(g) Further, despite our repeated suggestion, the learned Counsel for the RBI failed to find out what could be considered as usurious rate of interest on the basis of which the RBI had issued circulars to banks. There was no response except to say that with regard to rate of interest RBI has deregulated the same."
12. RBI has also issued circulars from time to time as to how the floating rate of interest on loans is to be charged. The relevant part of one of its circular No.DBOD.Dir.BC.6/13.03.00/2007-08 dated 02.07.2007, is referred as under:-
"2.5.1. Banks have the freedom to offer all categories of loans on fixed or floating rates, subject to conformity to their Asset Liability Management (ALM) guidelines. In order to ensure transparency, banks should use only external or market based rupee benchmark interest rates for pricing of their floating rate loan products. The methodology of computing the floating rates should be objective, transparent and mutually acceptable to counterparties. Banks should not offer floating rate loans linked to their own internal benchmarks or any other derived rate based on the underlying. This methodology should be adopted for all new loans. In the case of existing loans of longer/fixed tenure, banks should reset the floating rates according to the above method at the time of review or renewal of loans accounts after obtaining the consent of the concerned borrower/s."First Appeal No.209 of 2021 12
13. In this way, the appellants/OPs have not complied with the guidelines issued by the RBI from time to time and terms and conditions of the Agreement as well. This Commission has held in Jarnail Singh's case (supra) that "in case the floating rate of interest has been increased by the OP without any notice/consent of the complainant, the same is not legal in view of the observations made above. In these circumstances, the OP cannot enhance rate of interest without any intimation/consent from the borrowers." It is pertinent to mention that said judgment has attained finality as no appeal was preferred by the OP-Bank against said judgment. The Delhi State Consumer Disputes Redressal Commission in its judgment of case "Mr. Vishnu Bansal Vs. ICICI Bank Ltd." (III)2021 CPJ-99 has held in paras No.16 and 17 as under:-
"16. Returning to the facts of the present case, the Opposite Party had the power to change the rate of interest charged or change the number of the EMIs, however, the Complainant was never apprised about the fact that the rate of Interest had been increased or the number of the EMIs has been changed. The Opposite Party was duty bound to disclose the aforesaid information to the Complainant in order to provide the complainant the option to either close the account or shift the account.
17. Consequently, we are of the view that the increase or decrease in the interest rates by the Opposite Party without taking the consent from the borrower/complainant amounts to Unfair Trade Practice."First Appeal No.209 of 2021 13
Otherwise also it is apparent not only from perusal of ratio of judgments as mentioned above but also on perusal of guidelines of RBI, that the methodology of computing the floating rates should be objective, transparent and mutually accepted. In case rate of interest is enhanced by the Bank from the agreed rate of interest, the consent of borrower is required to be taken. Even if the loan case of the borrower is to be reviewed on increasing rate of interest, the same should be in the knowledge of the borrower.
14. The same issue was before the Hon'ble Apex Court as is evident from the judgment of the case "ICICI Bank Ltd. Vs. Maharaj Krishan Datta & others" Civil Appeal No.5928 of 2015, decided on 03.08.2015. In said judgment, it was held that the intimation of resettling of the interest is required to be given to the complainant. In other judgment titled as "M/s IDBI Bank Ltd. & another Vs. Subhash Chand Jain & another", Revision Petition No.806 of 2008, decided on 15.10.2012, it was observed by the Hon'ble National Commission that "the concept of floating rate of interest flows from the regulation of rate of interest by the RBI guidelines and not arbitrarily by the service provider without informing or telling the reasons for increasing the rate of interest."
15. In the present case neither the intimation of change of rate of interest was circulated to the borrowers nor any intimation with regard to increase/decrease amount of installment, was informed even orally, as discussed above. Had the information of increase of rate of interest, outstanding principal amount and number of due installments First Appeal No.209 of 2021 14 been in the mind of the respondent/complainant, she could have taken the appropriate step in repaying the loan amount.
16. We are of the considered view that because of inaction on the part of the appellant/OP not only a huge burden has come on the shoulders of the borrower, but it has caused mental and physical harassment by pursuing the litigation and by engaging lawyers for redressal of her grievance. Moreover, the contentions of appellant/OP with regard to initiating of action under SARFAESI Act on 06.02.2020 and declaration of loan account of the complainant as NPA on 28.12.2019 are improved versions, as the District Commission has passed the order on 17.03.2021 and these facts neither pleaded in reply dated 05.03.2020 by the OP before the District Commission nor produced any cogent evidence in this regard. This act of the appellants/OPs, not only amounts to 'deficiency in service', 'unfair trade practice' but also caused 'harassment' to the borrower/complainant. The District Commission has rightly partly allowed the complaint, as referred above and there is no need of interference in the well reasoned order.
17. In view of our above discussions and facts as explained above, we find no merit in the appeal and the same is hereby dismissed.
18. The appellants/OPs had deposited an amount Rs.22,500/- at the time of filing the appeal with this Commission. Said amount, along with interest which has accrued thereon, if any, shall be remitted by the Registry to the District Commission forthwith. The respondent/complainant may approach the District Commission for the First Appeal No.209 of 2021 15 release of the same and the District Commission may pass appropriate order in this regard in accordance with law.
19. The appeal could not be decided within the stipulated period due to heavy pendency of Court cases and non-sitting of this Commission due to pandemic of Covid-19.
(JUSTICE DAYA CHAUDHARY) PRESIDENT (URVASHI AGNIHOTRI) MEMBER November 15, 2021.
MM