State Consumer Disputes Redressal Commission
Icici Bank Limited vs Manoj Kumar on 26 March, 2018
Daily Order 2Nd ADDITIONAL BENCH STATE CONSUMER DISPUTES REDRESSAL COMMISSION, PUNJAB, CHANDIGARH. First Appeal No.753 of 2017 Date of Institution: 06.11.2017 Order Reserved on : 12.03.2018 Date of Decision: 26.03.2018 1. ICICI Bank, Opp. Stock Exchange Market, Feroze Gandhi Market, Ludhiana, through its Branch Manager/Branch Head/Authorized Signatory. 2. ICICI Home Finance Company Limited, Regd. Office ICICI Bank Towers, Bandra-Kurla Complex, Mumbai-400051 SCO 129-130, Sector 9, Chandigarh through its Branch Manager/Branch Head/Authorized Signatory. Filed through Shri Dinesh Garg Manager Legal. Appellants/Ops 1. Manoj Kumar son of Sh. Mohan Tiwari. 2. Ranjana Tiwari wife of Manoj Kumar, Both residents of H.No.14778/2, Street No.14, Bhagwan Nagar, Dholewal, Ludhiana. Respondents/complainants First Appeal against order dated 07.08.2017 passed by the District Consumer Disputes Redressal Forum, Ludhiana. Quorum:- ShriGurcharan Singh Saran, Presiding Judicial Member. Shri Rajinder Kumar Goyal, Member Present:- For the appellant : Sh. Sandeep Suri, Advocate For the respondent : Sh. K.K. Sharma, Advocate RAJINDER KUMAR GOYAL MEMBER :- ORDER
The appellants/complainants (hereinafter referred to as complainants) have filed the present appeal against the order dated 07.08.2017 passed in Consumer Complaint No.324 of 13.05.2015 by District Consumer Disputes Redressal Forum, Ludhiana (herein referred as District Forum) vide which the complaint filed by the complainants was allowed in terms that the Ops will charge the announced/notified floating rate of interest only from complainant and not in excess of that. The notified/announced rates must be disclosed by Ops to complainant for period from 2012 onwards by sending the copies of the written announcement/notification within 30 days from the date of receipt of copy of order. After such intimation in writing to complainant by Ops at the address given in the title of the complaint, Ops will calculate as to how much amount is due; how much is paid and how much is left. Copy of the statement of both loan accounts as recalculated will be sent by Ops to complainant within 45 days from receipt of copy of this order so as to enable the complainant to make payment of due amounts. If any amount, found to be paid in excess by complainant to Ops, then the excess charged amount by Ops be returned/reimbursed to complainant within 30 days from preparation of the statement of both loans accounts. Compensation for mental harassment and agony of Rs.20,000/- and litigation expenses of Rs.5000/- were allowed in favour of complainant and against Ops. Payment of these amounts be made by Ops to complainant within 30 days from the date of receipt of copy of order.
2. Complaint was filed by the respondent/complainant under Consumer Protection Act, 1986 (in short, "the Act") against the OPs on the averments that the complainant availed a housing loan of Rs.3,98,000/- in August 2005 by executing loan agreement dated 25.07.2005 with Ops. Sanction letter pertaining to the said loan account No.LBLUD00001106807 was issued by Ops specifically mentioning that rate of interest will be charged on floating rate of interest basis. Thereafter, complainant took another housing loan amounting to Rs.3,00,000/- on the same property bearing plot no.14778/2 street No.14 Bhagwan Nagar Dholewal, Ludhiana on the same terms and conditions vide sanction letter No.LBLUD00001241203 issued by Ops. As such the second loan was also availed on floating rate of interest. But thereafter Ops became dishonest and they at their own converted the floating rate of interest to flat rate of interest with respect to both loans. Thus, interest charging was alleged to be in excess of agreed rate. Request was made for charging agreed rate i.e. floating rate of interest at the time of agreement, but to no effect. Complainant also served a legal notice dated 31.03.2015 through counsel finding deficiency in service and adoption of unfair trade practices on the part of Ops, the complaint was filed before the District Forum with the prayer to direct the Ops to adjust/return the excess illegally received amount from the complainants with respect to the both loan accounts along with compensation for mental harassment and agony Rs.2,00,000/- and adequate litigation expenses. It was also pleaded in the complaint that before charging excess rate of interest, notice or information to the complainants for change of rate of interest was never given.
3. Upon notice, the Ops appeared and filed their joint written reply pleading that the complaint was not maintainable because Ops have never changed the interest rate from floating rate of interest to flat rate of interest. Complaint was filed with malafide intention. Efficient and diligent services were provided by Ops to the complainant. Admittedly two loan accounts in question were contracted by the complainants. Monthly installment of first contracted loan of Rs.3,98,000/- was Rs.3804, but in case of any change in floating rate of interest, tenure and amount of installment was bound to vary. In case, there was any increase in the rate of interest then the same to be adjusted by increasing the tenure or by increasing the monthly installment, but if the rate of interest is lowered then the adjustment by way of decreasing the tenure or decreasing the monthly installments. Admittedly both loans were advanced on floating rate of interest. At the time of sanction of first loan floating reference rate was 8.75 % and as such complainants were liable to pay 8%. Floating rate of interest is dependent on availability of funds, cash liquidity in the market and CRR fixed by the RBI as well as on various other polices of the Government, RBI and the Bank. So floating rate of interest can change due to these circumstances. In the second contracted loan of Rs.3,00,000/- monthly installment of Rs.3236/- was payable and increase or decrease of floating rate of interest liable to have same consequences as are referred above. It was denied that Ops were charging flat rate of interest. Other averments of the complaint were denied and prayed to dismiss the complaint.
4. Before the District Forum the parties led their respective evidence.
5. The learned counsel for the complainant No.1 Sh. Manoj Kumar tendered in evidence his affidavit Ex.CA, whereas complainant No.2 Smt. Ranjana Tiwari tendered her affidavit Ex.CB along with documents Ex.C1 to Ex.C7 and thereafter, complainant No.1 Sh. Manoj Kumar closed the evidence. On the other hand, counsel for Ops tendered in evidence affidavit Ex.RA of Sh. Vidya Sagar along with documents Ex.R1 to Ex.R7 and thereafter, closed the evidence.
6. After going through the allegations as alleged in the complaint, written version filed by OPs evidence and documents brought on record the complaint filed by the complainant was allowed as referred above.
7. Aggrieved with the order passed by the learned District Forum the appellants/complainants have filed the present appeal.
8. We have heard the learned counsel for the parties and have persued the record carefully.
9. It was argued by the counsel for the appellants/Ops that the order passed by the District Forum is illegal, null and void and is liable to be set aside. Two housing loans i.e. first loan of Rs.3,98,000/- @8% and second loan of Rs.3,00,000/- @ 8.75 % at floating rate of interest were contracted between the parties. The floating rate is fixed according to FRR+Margin. Later on FRR had changed from time to time, accordingly, floating rate was charged. It was further argued by the counsel for the Ops that according to Section 21-A of the Bank Regulation Act, rate of interest charged by the Banking Company, subject to scrutiny by the Court. In this regard, he has referred to the judgment of Hon'ble Supreme Court in 1994 (3) SCALE 46 "Corporation Bank Vs. D.S. Gowda and Anr." and has referred to restriction, which reads as under:-
"Restriction - whether in view of insertion of Section 21-A Courts are precluded from subjecting transactions entered into between banks and borrowers from scrutiny with view to give relief - Court cannot reopen any account maintained by bank relating to transaction with its customers on ground that rate of interest being charged is excessive - Section 21-A restricted such power of Court - but if rate observed in violation of RBI direction then Court disallow such excess interest and can give relief to party."
10. No doubt that under Section 21-A of the Banking Regulation Act, the Courts does not have the right to go for scrutiny of the rates fixed by the Bank but in view of the judgment relied upon by the counsel for the Ops i.e. "Corporation Bank Vs. D.S. Gowda and Anr." (supra), it has been mentioned that if rate observed is in violation of RBI direction then Court disallow such excess interest and then can give relief to the party. Therefore, the right of the bank to fix the rate of interest is not arbitrarily but subject to RBI instructions. Role of the RBI has been defined under Section 35A of the Banking Regulation Act, 1949, which provides as under:-
"35-A. Power of Reserve Bank to give directions.-- (1) Where the Reserve Bank is satisfied that -
in the public interest; or (aa) in the interest of banking policy; or to prevent the affairs of any banking company being conducted in a manner 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, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.
(2) The Reserve Bank may, in representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancellation shall have effect."
and that question came up for consideration before the Hon'ble Apex Court in the case "Central Bank of India Vs. Ravindra & Ors.", (2002) 1 SCC 367 wherein the Hon'ble Supreme Court observes 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 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."
11. 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 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, 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. This RBI has issued its circulars from time to time, how the rate of interest is to be charged. In its circular No. DBOD.Dir.BC.5/13.03.00/2006-07 dated 1.7.2006, the loans up to Rs. 2 lakh carry the prescription of not exceeding the Benchmark Prime Lending Rate (BPLR) and on loans above Rs. 2 lakh, banks are free to determine the rate of interest subject to BPLR and spread guidelines. In the same circular dated 1.7.2006, it has been mentioned how the interest rate of loans are to be fixed, is referred as under:-
"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."
13. It was argued by the counsel for the respondent/complainant that methodology of computing the floating rate should be objective, transparent and mutually acceptable means consent of the consumer, in case any rate is enhanced by the bank from the agreed rate of interest. It was argued by the counsel for the Ops that it is applicable at the time of renewal of loss in which the consent of the borrower is required. Even if it is taken so the loan case of the borrower is reviewed when the rate of interest is increased. This question has been settled by the Hon'ble Supreme Court of India in its judgment "ICICI Bank Ltd. Versus Maharaj Krishan Datta and Ors." Civil Appeal No. 5928 of 2015, decided on 3.8.2015, and the order was passed by the Hon'ble National Commission on the following facts:-
"(a) The complainants/respondents herein availed home loan to the extent of Rs. 13,35,100/- from the Appellant bank for purchase of a flat in Zirakpur. The loan was sanctioned vide letter dated 14.11.2005 and it carried an interest @ 7.25% per annum. Later, it was confirmed by the bank that w.e.f. April, 2006 the loan would carry an interest @ 7.75% per annum. (b) It was further case of the complainants/respondents that an additional loan of Rs. 3,00,000/- was sanctioned on 30.10.2006 with an obligation to pay interest @ 8.75% per annum. The grievance expressed by the Respondents was that instead of charging interest at the agreed rate, the bank had charged the same @ 11.25% per annum for the period from 01.04.2007 to 31.03.2008, besides charging interest during pre-EMl period @ 9.5% per annum. Hence, the complainants/respondents filed a complaint before the District Forum, alleging deficiency in the service provided by the Appellant bank to them. (c) Such complaint was resisted by the Appellant bank on the ground that loan was sanctioned on the floating rate of interest, which at the time of sanction was 8.75% per annum and could be enhanced as per the guidelines issued by the Reserve Bank of India and in accordance with the agreement between the parties. (d) The District Forum passed an order in the matter directing the Appellant bank to charge interest @ 7.25% per annum till 31.03.2006 and thereafter @ 7.75% per annum from 01.04.2006 to 30.10.2006 and thereafter @ 8.75% per annum. It further directed that the enhanced rate of interest shall not be more than the rate at which loan is advanced to the new borrowers. It further directed to pay a compensation, as a result whereof, the bank preferred an appeal before the State Commission. The State Commission, by its order dated 19.03.2010, permitted the Appellant bank to vary the rate of interest only as per the variation allowed by the Reserve Bank of India from time to time, granting the complainants benefit of minus 1.5% of the FRR. (e) the State Commission held that in view of the agreement between the parties, payment of interest @ minus 1.5% of the prevalent FRR, which could be reset by the bank based on the guidelines issued by the Reserve Bank of India. It was further held that the intimation of such resetting should be given to the complainants/constituents. The State Commission also affirmed the payment of compensation as well as the cost of litigation as assessed by it. In these circumstances, the Appellant bank filed a Revision Petition before the National Commission and the National Commission dismissed the said petition."
14. In para No. 10 of the above judgment, it was observed by the Hon'ble Supreme Court that they find that the grounds advanced before us by Mr. P. Chidambaram, learned senior counsel, in our opinion, have to be accepted and accordingly we allow the appeal, set aside the order so passed by the National Commission and confirmed the order so passed by the State Commission, in which it was held that intimation of resetting of the interest should be given to the complainant. There is another judgment of the Hon'ble National Commission "M/S IDBI Bank Ltd. & Anr. vs Subhash Chand Jain & Anr.", decided on 15 October, 2012 in which, it was observed 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. Counsel for the Op has also relied upon the judgment of the Hon'ble Supreme Court in "Syndicate Bank versus R. Veeranna and others" (2003) 2 Supreme Court Cases 15 that if agreement makes express provision for enhancement of rate of interest, bank need not put borrower on notice. But the regulation of the RBI has come in the year 2006, it has been held by the Hon'ble Supreme Court in the judgment "ICICI Bank Ltd. Versus Maharaj Krishan Datta and Ors." (supra). In that circumstances, this judgment cannot be relied upon.
15. Counsel for the Op contended that with the change in the rate of interest, the intimations Exs.R2 to R6 were sent to the complainant. No doubt that Ops have placed these documents on the record but how these were intimated to the complainant has not been referred either in the written statement and no mode of intimation has been referred in the letter itself. No postal receipt has been placed on the record how it was sent. No extract of the dispatch register of the Bank has been placed on the record that on various dates these letters were dispatched to the complainant. However, on the basis of these documents, it cannot be observed that these letters were actually sent to the complainant. Therefore, this fact fortifies our view that whenever there is change in the floating rate of interest, the bank is required to give a notice to the borrower, that is why these letters were referred by the Ops on the record, although it is a different matter that they have not been able to prove on the record how these notices were sent to the complainant.
16. It was further argued by the counsel for the Ops that the increase/decrease in interest is depicted from the table Ex.C-5 was in the notice of the complainant. It is seen from the table that initially the interest rate for first loan account of Rs.3,98,000/- was 8% w.e.f 01.10.2005. The interest rate was increased to 8.5%-9.5%-10%-12%-12.75%-13.50% w.e.f 01.11.2008. The interest rate was deceased to 13% w.e.f from 01.02.2009 and further decreased to 12% w.e.f 01.08.2009. The interest rate was again increased to 12.50% w.e.f from 01.11.2010 and further increased to 13%-13.75%-14.25% and 15% w.e.f. 01.06.2012. The interest rate was decreased to 14.75% w.e.f 01.08.2012 and again increased to 15% w.e.f 01.11.2013. Similarly the interest rate was increased/decreased for the second loan account of Rs.3 lakh as per table Ex.C-6. Therefore, the interest rate was charged on the floating rate of interest as per contract.
17. In the nutshell, we are of opinion that the Bank is at liberty to fix the rate of interest according to the instructions of RBI. However, the bank is required to put the borrower on notice as and when the rate of interest is increased so that he may have choice to continue his account with the bank in the enhanced rate of interest. In the present case, the rate of interest was increased from 8% to 15% in the first loan and 8.25% to 15% in the second loan account. In case the intimation would have been given to the complainant/borrower then it was his discretion whether to continue the loan account with the Ops or not. By not doing so, the Ops are deficient in service. In this context, the order passed by the District Forum is justified.
18. Sequel to the above, we do not see any merit in the appeal and the same is dismissed with no order as to costs.
19. The appellant No. 2 had deposited an amount of Rs. 12500/- with this Commission in the appeal. This amount along with interest accrued thereon, if any, shall be remitted by the registry to the concerned District Forum, after the expiry of 90 days, from the despatch of the certified copy of the order to the parties; subject to stay, if any, by the higher Fora/Court; for the release of the above amount and the District Forum may pass the appropriate order in this regard.
20. The appeal could not be decided within the statutory period due to heavy pendency of Court cases.
21. Order be communicated to the parties as per rules.
(Gurcharan Singh Saran) Presiding Judicial Member March 26, 2018 (Rajinder Kumar Goyal) PK/- Member