State Consumer Disputes Redressal Commission
Dilbagh Singh vs The Chief Executive Officer, Hdfc Bank on 25 February, 2022
Daily Order STATE CONSUMER DISPUTES REDRESSAL COMMISSION, U.T., CHANDIGARH Appeal No. : 234 of 2019 Date of Institution : 16.10.2019 Date of Decision : 25.02.2022 Dilbagh Singh son of Late Sh. Hoshiar Singh, Resident of HE- 38, Phase-I, Mohali. Dinesh Chahal son of Sh. Dilbagh Singh, Resident of HE- 38, Phase-I, Mohali .....Appellants/Complainants. Versus The Chief Executive Officer, HDFC Limited, Raman House, H.T. Parekh Marg, 169, Backbay, Reclamation, Church Gate, Mumbai-400020. The Manager (Operations), HDFC Limited, SCO 153-155, Sector 8-C, Madhya Marg, Chandigarh - 160008. The Assistant Manager, The National Housing Bank (NHB), Department of Regulation and Supervision (Complaint Redressal Cell), 4th Floor, Core-5A, India Habitat Centre, Lodhi Road, New Delhi - 110003. ...Respondents/Opposite Parties. Appeal under Section 15 of Consumer Protection Act, 1986 BEFORE: JUSTICE RAJ SHEKHAR ATTRI, PRESIDENT. MRS. PADMA PANDEY, MEMBER.
MR. RAJESH K. ARYA, MEMBER.
Argued by: (Through Video Conferencing):
Sh. Dilbagh Singh, appellant No.1 in person (physically) and also on behalf of appellant No.2.
Mrs. Rupali Shekhar Verma, Advocate for respondents No.1 & 2.
Respondent No.3 ex-parte vide order dated 09.12.2019.
PER RAJESH K. ARYA, MEMBER This appeal has been filed by the complainants (appellants herein), namely, Sh. Dilbagh Singh and Sh. Dinesh Chahal against order dated 26.09.2019 passed by District Consumer Disputes Redressal Forum-I, U.T., Chandigarh (now District Consumer Disputes Redressal Commission-I, U.T., Chandigarh) (in short 'District Commission'), vide which, their consumer complaint bearing No.722 of 2017 was dismissed by the District Commission.
2. Briefly stated the facts before the District Commission were that Complainant No.1, along with his son (Complainant No.2), had jointly taken a loan of Rs.5.50 lakh and Rs.10 lakh in the loan account Nos.601086507 and 601130262 in the year 2011 for purchasing a property measuring 192 sq. yards bearing Plot No.97, situated in the Old Mata Gujri Enclave (adjoining to Sunny Enclave), Mohali, Punjab, for a period of 10 years at floating rate of interest, repayable in 120 equal EMIs as Rs.7,577/- and Rs.13,078/- respectively and the 1st EMI was commencing w.e.f. March, 2011. They regularly paid the installments at the variable rate of interest without any default at any time since March, 2011. As per the repayment details for the year ending 31st March 2016, they were shocked to know that the balance EMIs for 73 months were still left to be paid. It was further averred that despite opting for the floating rate of interest and reduction in interest rate, the number of EMIs ought to have been reduced but it remained same for the period fixed earlier. As such, the complainants filed a complaint before the District Commission alleging the aforesaid acts as deficiency in service and unfair trade practice on the part of the Opposite Parties.
3. On the other hand, Opposite Parties No.1 & 2 (respondents No.1 & 2 herein), namely, The Chief Executive Officer, HDFC Limited and the Manager (Operations), HDFC Limited, in their reply, pleaded that the rate of interest has been charged as per agreements inter se parties and there was no violation of any terms and conditions thereof. It was further pleaded that the complainants were duly informed about their obligations as per the loan agreements.
4. Similarly, Opposite Party No.3 (respondent No.3 herein), namely, The Assistant Manager, The National Housing Bank (NHB), in its reply, pleaded that the grievance of the complainants was taken up with Opposite Parties No.1 & 2, who stated that they had explained the complainants vide their mail dated 23.03.2017 regarding rate of interest and retail prime lending rates and its spreads. It was further pleaded that as per the information received from the Opposite Parties No.1 & 2, the complainants were also explained about the rate of interest rewriting/conversion option. It was further pleaded that due to the limited and facilitative role of Opposite Party No.3 under the Grievance Redressal Policy in the loan related complaints, the complaint was closed.
5. The order passed by the District Commission, dismissing the complaint, has been assailed by the appellants/complainants - Sh. Dilbagh Singh & Sh. Dinesh Chahal on the ground that the benefit of reduced rate of interest automatically being an agreement on floating rate of interest was not passed on to the appellants/complainants and respondents No.1 & 2/opposite parties No.1 & 2 exceeded even beyond that period to recover the loan amount by April/May 2002 by charging exorbitant rate of interest in highly arbitrary manner and without any justification against the terms and conditions of the agreement on floating rate of interest. It has further been stated that the District Commission failed to understand the concept of floating rate of interest and the concept of RPLR. It has further been stated that respondents No.1 & 2/opposite parties No.1 & 2 have been charging interest @12.85% currently from the appellants/complainants as compared to all other Banks and HFCs, which are currently charging 8.35% to 8.50% from new customers. It has further been stated that with the reduction of repo rate, the interest rates have to be adjusted downwards and the benefit of the reduced rate of interest, accordingly, has to be passed on to the customers automatically, which benefit has not been passed on to the appellants/complainants. It has further been stated that it being an agreement involving floating rate of interest, the tenure of repayment schedule is bound to change. It has further been stated that HDFC's Retail Prime Lending Rate (RPLR) cannot be increased unilaterally and arbitrarily without any justification by respondents No.1 & 2/opposite parties No.1 & 2. It has further been stated that while increasing the rate of interest, respondents No.1 & 2/opposite parties No.1 & 2 neither took the consent of the appellants/complainants nor informed them of the same. It has further been stated that the methodology of charging conversion fee for getting reduced interest rates is also in contravention to the very concept of floating rate of interest agreement. It has further been stated that the rate of interest has to be decreased or increased automatically being a floating rate of interest and no conversion fee is required to be paid as per this concept. The appellants/complainants relied upon the judgment of Hon'ble National Consumer Disputes Redressal Commission, New Delhi in the case of India Bulls Housing Finance Ltd. Vs. Boota Singh Sidhu' to contend that the Bank or the Financial Institution cannot enhance the rate of interest unilaterally and without the consent of the borrower. It has further been stated that the District Commission has failed to notice all the aspects of the case and dismissed the complaint simply in a casual manner without application of mind and as such, the impugned order passed by the District Commission is liable to be set aside being illegal and unjustified.
6. On the other hand, on behalf of respondents No.1 & 2, it has been stated that the issue in question as regards floating rate of interest cannot be adjudicated unless the contract between the parties is appreciated in its correct perspective. It has further been stated that as per the contract between the parties, the complainant would be charged a negative 'spread' on applicable RPLR (Retail Prime Lending Rate) and the concept of negative 'spread' means discount on the RPLR, which is essentially guided by market factors and personal profile of the customers taking into consideration the risk factors in recovery of the loans. It has further been stated that in a given set of loan accounts sanctioned on the same date for the same amount, negative 'spread' can differ for various customers. It has further been stated that there are two Loan Accounts, 1st is a Housing Loan Account (No.601130262) and the 2nd is a Home Equity Loan/Personal Loan (No.601086507) and both these loan accounts cannot be treated as same. It has further been stated that the housing loans always carry a lesser rate of interest than the personal loans and this explains the difference in the negative 'spread' as it is 5.25% for the Housing Loan and it is 4% on Personal Loan. It has further been stated that the respective negative 'spreads' have duly been mentioned in the schedule attached to both the loan agreements and this had been agreed by the complainants. It has further been stated that there is no challenge to the agreements at all rather at Page No.16 of the complaint, the allegation is that the agreement has been violated. It has further been stated that once, there is no allegation that the agreement is bad in law, then, the parties are bound by the agreement. It has further been stated that complete amortization charts were placed on record for both the loan accounts before the District Commission in reply to the application dated 19.06.2019, indicating therein that during the currency of the loans, the complainants were passed on the benefit of change in interest rates strictly as per the agreement between the parties and these documents are part of the records as Annexures R-7, R-8 and R-9. It has further been stated that before this Commission, latest information as regards rate of interest and Retail Prime Lending Rate (RPLR) has been placed on record alongwith affidavit dated 16.12.2021, which would show that there has been increase in RPLR on 13 occasions and there has been decrease in RPLR on 11 occasions and corresponding negative 'spread' has been applied. It has further been stated that thus, the rate of interest charged from the complainants has increased or decreased according to the applicable RPLR minus negative 'spread' and this was the agreement between the parties and there is no violation of the same.
7. It has further been stated on behalf of respondents No.1 & 2/ opposite parties No.1 & 2 that the understanding of the complainants is that they should be offered negative 'spread' automatically as is offered to a new customer. It has further been stated here that this course is not available automatically as this is essentially novation of contract and all that is expected from the complainants is to submit a formal application for conversion, which they are aware was in fact offered to them at least on 23.03.2017, Annexure C-9 but they chose not to avail the said benefit. It has further been stated that as per Clause 2.13 of the loan agreement, the process of conversion of rate is part of the agreement. It has further been stated that respondents No.1 & 2/opposite parties No.1 & 2 are governed by the guidelines and policy instructions of National Housing Bank (NHB), a subsidiary of Reserve Bank of India. It has further been stated that similar complaint was submitted by the complainants to NHB on 04.04.2017 and the said complaint was decided and filed/closed on 01.06.2017, Annexure P-13 colly. with the rejoinder. It has further been stated that the law on loss suffered during a contractual transaction is very clear where a person claiming loss has to first ensure that he takes steps to minimize the loss and then claim for compensation, if still there is any resultant loss. It has further been stated that the conduct of the appellants/complainants has disentitled them from claiming any loss on account of alleged higher rate of interest and they could have avoided the consequences but they chose not to avail the opportunity to mitigate the alleged loss.
8. It has further been stated on behalf of respondents No.1 & 2/ opposite parties No.1 & 2 that in the case of India Bulls Housing Finance Ltd. Vs. Boota Singh Sidhu' (supra), relied upon by the appellants/complainants, the challenge was to an order passed by the District Commission accepted by the State Commission and the issue before the Hon'ble National Commission was with regard to the direction passed against the Financial Institution to seek consent of the complainant in the said case regarding increase in the number of instalments or he wants amounts of EMI to be increased and after seeking such consent, the opposite parties in the said case were directed to reschedule the number of instalments and amount of EMIs. It has further been stated that this is not even the issue in the present case and the most important paragraph of the said judgment is Para No.16 wherein, while discussing RBI guidelines, it was observed that interest rate has to be changed annually and if interest rate is changed many times during the year, it be informed as per clause mentioned above. It has further been stated that the process has already been followed in the present case as would be clear from annual statements letters dated 12.04.2011, 10.04.2012, 130.04.2013, 08.04.2014, 10.04.2015 and 18.04.2016 at Page Nos.36 to 70 of the reply and there is no violation of law. It has further been stated that vide the aforesaid communications, the complainants were duly informed from time to time as regards the change in interest rate and communication dated 18.04.2016 has duly been admitted by the complainants in their complaint. It has further been stated that in the rejoinder filed, the complainants never denied receipt of the aforesaid communications. It has further been stated that rather the complainant denied that he ever availed income tax benefit using these communications. It has further been stated that general denial contained in Para 4 of the rejoinder is considered as denial of receipt of above communications and their statement is incorrect as they have themselves placed on record communication dated 18.04.2016 as Annexure C-3. It has further been stated that since the 1st communication was sent to the appellants/complainants on 12.04.2011, therefore, the complaint filed in the year 2017, was barred by limitation. Lastly, it has been stated that the order passed by the District Commission is legal and valid based on true appreciations of facts, documents and law and as such, the same is liable to be upheld.
9. After hearing the Counsel for the parties and having gone through the material available on record and the written arguments very carefully, we are of the considered view that the appeal is liable to be dismissed for the reasons to be recorded hereinafter. Undoubtedly, two loans were sanctioned by Opposite Parties No.1 and 2 to the complainants. Annexure R-1 is the Loan Agreement with Adjustable Rate Home Loan and Annexure R-2 is the Loan Agreement (Equity Loan) for Resident with Adjustable rate. In Schedule appended to 1st Loan Agreement, Annexure R-1, under Clause 2.2 relating to Interest, RPLR minus spread 5.25% is shown as 9.75% per annum and the Interest Rate Revision Cycle is shown as 3 months, whereas in the Schedule appended to the 2nd Loan agreement (Equity Loan), with Adjustable Rate, under the similar Clause 2.2 relating to Interest, RPLR minus spread 4.00% is shown as 11% per annum and the Interest Rate Revision Cycle is shown as 3 months. Thus, both the loans, being of different natures, were at different rates of interest and the properties mortgaged against each of the said loans were the primary securities for the respective loans. We are in agreement with the submission made on behalf of respondents No.1 & 2/opposite parties No.1 & 2 that the housing loans always carry a lesser rate of interest than the personal loans and as per the contract between the parties, the complainants were charged a negative 'spread' on applicable RPLR (Retail Prime Lending Rate). It is not out of place to mention here that the EMI of a floating rate loan changes with changes in market interest rates. If market rates increase, the repayment increases. When rates fall, the dues also fall. The floating interest rate is made up of two parts: the index and the spread. The index is a measure of interest rates generally (based on say, government securities prices), and the spread is an extra amount that the banker adds to cover credit risk, profit mark-up etc. The amount of the spread may differ from one lender to another but it is usually constant over the life of the loan. If the index rate moves up, so does the interest rate in most circumstances and the borrower will have to pay a higher EMI. Conversely, if the interest rate moves down, the EMI amount would be lower. Also, sometimes Banks make some adjustments so that the EMI remains constant. In such cases, when a lender increases the floating interest rate, the tenure of the loan is increased (and EMI kept constant). Some lenders also base their floating rates on their Benchmark Prime Lending Rates (BPLR). We are in agreement with the submission made on behalf of the respondents No.1 & 2/opposite parties No.1 & 2 that in a given set of loan accounts sanctioned on the same date for the same amount, negative 'spread' can differ for various customers. In the instant case, both the Loans i.e. Housing Loan Account (No.601130262) Home Equity Loan/Personal Loan (No.601086507) cannot be treated as same. Perusal of the Agreements shows that the appellants/complainants had agreed for floating rate of interest.
10. Undisputedly, the rate of interest in the instant case was adjustable interest rate i.e. floating one, depending upon FRR as publicly notified from time to time as applicable at the time of disbursement. Further vide letter dated 22.06.2016, Annexure R-4 placed on record of District Commission, whereby, respondents No.1 & 2/opposite parties No.1 & 2 stated to the appellants/complainant that the loans availed by them were at variable/adjustable rate of interest and not a fixed rate of interest. It was also informed to the appellants/complainants that the equated monthly installments (EMI) in the case of loan involving variable/adjustable rate of interest are calculated only to facilitate repayment of a specified amount on monthly basis, which is further subject to change (increase/decrease in Retail Prime Lending Rate). Not only this, as per Clause 2.6(d) of the Loan Agreement relating to 'Amortisation', it was provided as under:-
"(d) Save and except as provided under sub-article (e) below, for administrative convenience the EMI amount is intended to be kept constant irrespective of variation in the AIR and as a result of this the number of EMIs is liable to vary. No intimation shall be given by HDFC as to the number of EMIs required to be paid by the borrower upon each AIR application. Provided however, the information as to the applicable/applied AIR during the financial year of HDFC and the number of EMIs payable from the last AIR application during such year shall be intimated by HDFC to the borrower annually. The borrower shall pay EMIs until the loan together with interest is repaid in full."
It was also intimated in the said letter, Annexure R-4 that during the currency of the loan agreement, any increase or decrease in the rate of interest on account of variation in the prime lending rates would correspondingly increase or decrease the number of EMIs and the differential amount is liable to be adjusted. It was further intimated that the tenure of the loan agreement automatically increase or decrease till such time the entire liability is discharged.
11. Thus, undoubtedly, the rate of interest was floating one subject to change on the basis of increase or decrease in FRR and EMIs could be varied by HDFC DFCHDFCHDCcBank from time to time on account of variation of adjustable amount, due to increase in the rate of interest, as the loan was taken on floating rate of interest. In our view, the appellants/complainants were bound by the terms and conditions of the Loan Agreements, Annexures R-1 and R-2. It is settled law that the Consumer Fora cannot alter the terms and conditions, agreed to between the parties. The agreement is required to be interpreted, in accordance with the terms and conditions, contained therein. The appellants/complainants signed each and every page of the said Loan Agreements and they were fully aware and in knowledge of the terms and conditions of the said Loan Agreements and that the rate of interest was adjustable/floating interest rate. Now at later stage, they could not agitate the issue qua increase in the interest rate, which changed from time to time based on change in FRR. The appellants/complainants, in their complaint, have themselves admitted that the floating rate of interest would be applicable to the loan amounts. Whenever there was increase or decrease in interest rate, change in tenure or EMI, the reset letters/communications were duly sent by the HDFC Bank to appellants/complainants, copies whereof placed on record as Annexure R-3 Colly. (at Pages 36 to 70, renumbered as Pages 102 to 136).
12. Not only this, as per the latest information regarding rate of interest and Retail Prime Lending Rate (RPLR) placed on record alongwith affidavit dated 16.12.2021, goes on to prove that RPLR increased on 13 occasions and there has been decrease too in RPLR on 11 occasions and corresponding negative 'spread' had been applied. As such, the rate of interest charged from the appellants/complainants increased or decreased according to the applicable RPLR minus negative 'spread' and there was no violation of any term and conditions of the Loan Agreement(s). It is also proved on record vide amortization charts for both the loan accounts, Annexures R-7, R-8 & R-9, placed on record before the District Commission, that during the currency of the loans, the appellants/complainants were duly passed on the benefit of change in interest rates strictly as per the Loan Agreements executed between the parties. We are in agreement with the view held by the District Commission that the changes in HDFC's Retail Prime Lending Rate (RPLR) are updated on its website (Annexure R-5) and therefore, the allegations of the appellants/complainants that respondents No.1 & 2/ Opposite Parties No.1 & 2 charged more rate of interest, unilaterally, than stipulated in the Agreements, were not well founded. It may be stated here that as regards intimation qua change in interest rate, the Hon'ble Apex Court in Syndicate Bank's case (supra) has held as under:-
"The High Court while holding that the party is bound to pay the interest at the agreed rate took the view that the bank could not automatically change the increased rate of interest merely on the basis of rise of interest on account of RBI circulars. It is not a case of automatically charging the increased rate of interest; change of higher rate is based on agreement between the parties. The high court was clearly in error in holding that the principles of natural justice were violated on the ground that the defendants were not put on notice before enhancing the rate of interest when the parties are bound by the terms of the contract."
13. Similar is the view held by Hon'ble National Commission in ICICI Bank Vs. Ganga Singh Shekhawat case (supra), wherein it was held that "Thus, it becomes clear that even without notice petitioner was entitled to enhance rate of interest on the basis of rise of interest by RBI."
14. Counsel for the respondents No.1 & 2/opposite parties No.1 & 2 cited Murlidhar Chiranjilal Versus Harishchandra Dwarkadas and another, (1962) 1 SCR 653 : AIR 1962 SC 366, wherein the Hon'ble Apex Court opined that "We are therefore of opinion that this is not a case of the special type to which the words "which the parties knew, when they made the contract, to be likely to result from the breach of it" appearing in s. 73 of the Contract Act apply. This is ,in ordinary case of contract between traders which is covered by the words "which naturally arose in the usual course of things from such breach" appearing in s. 73. As the respondent had failed to prove the rate for similar canvas in Kanpur on the date of breach it is not entitled to any damages in the circumstances. The appeal is therefore allowed, the decree of the High Court set aside and of the trial court restored with costs to the appellant throughout."
15. Further, the ratio held in the case of India Bulls Housing Finance Ltd. Vs. Boota Singh Sidhu' (supra) is not at all applicable to the facts of the instant case.
16. Even otherwise, record reveals that no request was ever made by the appellants/complainants to respondents No.1 & 2/opposite parties No.1 & 2 to execute a conversion agreement for conversion in existing loan accounts by paying the applicable conversion fee plus tax on principle outstanding despite the fact that they were given such an offer by the Bank on 23.03.2017, Annexure C-9. However, they chose not to avail the said benefit as part of the loan agreement under Clause 2.13 thereof. Thus, we endorse the view expressed by the District Commission that in case, the appellants/complainants wished to make any change in the rate of interest, they could have paid nominal conversion fee along with the application. We further find nothing wrong with the observation of the District Commission that the appellants/complainants are trying to wriggle out of the contractual obligations and they cannot plead contrary to the agreed terms and conditions of the loan agreements.
17. It may also be stated here that the issue qua floating rate of interest has already been dealt with by this Commission, under similar situation and facts, in the cases of ICICI Bank Limited Vs. Ashwani Bhalla, Appeal No.188 of 2019 decided on 13.12.2021 and Gurmeet Singh Vs. ICICI Home Finance Limited & others, Appeal No.74 of 2020 decided on 29.11.2021, wherein similar view was taken by this Commission that the consumers are bound to pay the EMI on per floating rate of interest in terms of the loan agreement/offer letter and they cannot resile from the agreement.
18. In view of the foregoing discussion, the appeal filed by the appellants/complainants is liable to be dismissed and the impugned order is liable to be upheld being sustainable in the eyes of law.
19. For the reasons recorded above, this appeal being devoid of any merit, is dismissed, with no order as to cost. All pending miscellaneous applications stand disposed of having become infructuous.
20. Certified copy of this order be sent to the parties free of charge.
21. File be consigned to the Record Room after completion.
Pronounced.
25.02.2022.
(RAJ SHEKHAR ATTRI) PRESIDENT (PADMA PANDEY) MEMBER (RAJESH K. ARYA) MEMBER Ad