Competition Commission of India
Mr. Mir Jawwad Ali, California vs Standard Chartered Bank Ltd. & Ors on 21 November, 2011
COIVIPETITION CUIVIIVIISSION OF INDIA (Case No. 35/2011]- . Dated: November 21, 2011 Mr. Mir Jawwad Ali 41222, Malcolmson Street, Apartment No. 3, Freemont, California, 94538, USA informant 1. Standard Chartered Bank Ltd. 90, M. G. Road, Mumbai 2. Hongkong & Shanghai Banking Corporation Ltd. S2/60, l\/l.G. Road, Mumbai 3. Citibank, S.D., Begumpet, tlyderahiacl 4. HDFC Bank Ltd. 6-1-=73 Lakdi- Ka-Pul, Hyderabad 5. ICICI Bank Ltd., Sandra (East), lvlumbsai 6. Royal Bank of Scotland, Che-tpet, Chennai 7. Kotak Mahindra Bank Ltd. 227, Nariman Point, Mumbai 8. Barclays Bank Plc., Worli, Mumbai 9. HDFC Ltd., Churchgate, Eviuinbai 10. India Bulls Financial Services Ltd. Lower Parel (west), Mumbai 11. Fullerton India Credit Company Ltd. Chakala, Andheri (East), Mumbai 12. lndo Pacific Housing Finance Ltd. 'Dist. Centre, Saket, New Deihi 13. The Indian Banks Association Cuffe Parade, Muinbai Opposite Parties Order under Section 26(2) of the Competition Act, 2002
Kw.
. . . _ ,.a=';-s._ . . . .
1. The information in the present,,cavse.\ enjieceived by the Commission from Mr. l\/Ilf r 5:' « :1 ' ~:s.\ V nai2rt")'c_>n 13.07.2011 under Section 19 (1) (a) of ._i Jawwad Ali (hereinai'tei' referrer/Id t_,_c',_i;""as ( , the Competition Act, 2002 (hereinafter referred to as "the Act"). The case relates to the alleged cartelization and abuse of dominant position by M/s Standard Chartered Banks (SCB) and others (hereinafter referred to as "Opposite Parties") in the retail mortgage/home loan market in lnclia.
2. The facts and allegations as stated in the information, in brief, are as under:
2.1 As per the information, the informant is a Non--Resident lndian (NRl) having his residence at 41222, l\/lalcolmson Street, Apartment No. 3, Freemont, California, USA. The Opposite Parties are the banking and non--banl<ing financial companies registered under the Companies Act, 1956 and, inter alia, are engaged in the provision of various banking and other financial services in India.
2.2 As per the information, a home loan amount of Rs. 20, 00,000/-- (Rupees Twenty Lakh only) was sanctioned by SCB in favour of the informant during 2005 with the agreed floating rate of interest of 8.25% per annum. The said loan amount was disbursed to the informant in two tranches; Rs. 14, 68,500/-- (Rupees Fourteen Lakh Sixty Eight Thousand Five Hundred) on 01.09.2005 and Rs. 5, 31,500/- (Rupees Five Lakh Thirty One Thousand Five Hundred) on 28.01.2006. The repayment schedule of the said loan amount was fixed on the basis of Equated l\/lonthly installment (El\/ll) in 240 months.
2.3 With a view to foreclose the aforesaid loan account, the informant had written a letter to SCB regarding his outstanding principal amount. The SCB in its letter dated 16.09.2010 replied that the informant had to pay an outstanding principal amount of Rs. 18,41, 331.23 (Rupees Eighteen l_akh Forty One Thousand Three Hundred Thirty One and Twenty Three Paise only) along with the foreclosure charges of Rs. 50820.74/-- (Rupees Fifty Thousand Eight Hundred Twenty and Seventy Four Paige only) to foreclose the loan account. 2.4 According to the informant, SCB has adopted the flat method of accounting for the interest component of El\/ll instead of diminishing balance method because of which its loan repayment period has been exterid.,e'd.fftlofWa'fiTja\dditional 3 to 4 years. it has also been submitted that SCB has cliarged"na'gre..r ' "of (around 20.5% per annum) than the ' '-'51 -9.: i aaniiutrn) .- ~«_ agreed rate of interest (8.2S% tip 10.00%
7. 4
\\_= ' L' i' 2.5 it has also been submitted by the informant that he along with other Opposite Parties have formed a cartel in the home loan market so as to levy pi'e--closure charges, excess rate of interest and other bank charges from the customers. As per the informant all the Opposite Parties are adopting following illegal andanti--competitive practices:
i. All the Opposite Parties are charging higher rate of interest than the contractual rate of interest from the customer.
ii. All the Opposite Parties are uniformly charging interest on penal interest in the name of bounce charges.
iii. All the Opposite Parties are following the illegal front end method of accounting. iv. All the Opposite Parties are compoundinginterest on monthly basis. v. All the Opposite Parties are debiting the interest tax components on to their loanee's BCCOUWCS.
2.6 The informant has further submitted that the Opposite Parties have major presence in the Grade- l metropolitan cities in lndia and together command over 60% to 70% of the housing loan market. Thus, the Opposite Parties enjoy dominant position in the housing loan market in the Grade -- i metropolitan cities in india.
2.7 it has also been submitted that the Opposite Parties are abusing their dominant position by charging exorbitant rate of interest, holding the properties of the loanee's by way of security, signing blank cheques etc. As per the informant, the said conduct of the Opposite Parties amounts to abuse of dominant position which is anti--competitive as per the provisions of Section 4 of the Act.
3. The Commission considered the present information in its meetings held on 26.07.2011 and 24.08.2011. On cazeful consideration of all the relevant material" and evid '" ' '.
on record, the Commission notes that activities being performed by the Opposite Parties are covered in the definition of 'enterprise' uiidersection 2 (h) of the Act. in the present case, the service in question provided by thefifaknyks is.;.tihe,Iysei"vice of retail mortgage loan provided by the Opposite Parties and other ldaiflginégiandi;nori?ba'n'l<ii'iVg financial companies in india.
4. The Commission notes that based facts['of:,thei case, the issue which emerges for \ consideration is whether by levying f'oi'ecliosluf'i'e charges, higher rate of interest than the contractual rate of interest and other charges the Opposite Parties have violated the provisions of Section 3 and/or Section 4 of the Act.
. The Commission observes that for an agreement to exist there has to be an act in the nature of an arrangement, understanding or action in concert including existence of an identifiable practice or decision taken by an association of enterprises or persons. There is nothing on record which shows that SCB has been imposing pre-payment penalty and other charges in pursuance of some agreement entered into by it with other banks or non--banking financial institutions. ln the light of these facts, the commission is of the opinion that the provisions of Section 3(3) are not applicable in the instant matter. Further, there is no case of any vertical agreement either which may be said to be violative of provisions of Section 3(4) of the Act in the whole matter.
. With regards to applicability of Section 4 of the Act in the matter, the Commission is of the opinion that the alleged conduct of SCB and other Opposite Parties does not fall within the ambit of Section 4 since none of the Opposite Parties individually is in a dominant position in the relevant market. The provisions of Section 4(1) prescribe that no enterprise or group shall abuse its dominant position. 'Group' for the purposes of Section 4 as per explanation (c) to the said Section 4 has been assigned the same meaning as given in Clause (b) of Explanation to Section 5. The Commission notes that the Opposite Parties in this case do not qualify to be called as enterprise falling in same group within the meaning of the said provisions. Since there is no case of dominance either individually or in group by these banks, any question of abuse within the meaning of provisions of Section 4 does not arise in the matter.
.The Commission also observes that issues involved in the instant inforination have been dealt in a number of cases decided by it earlier, viz; l\/lRTP Case no. DGlR/2007/lP/104--RTPE Case No. 33/2007, Case Nos. 15/28, 16/28, 13/28, 12/28, 2/28, Case Nos. 7/28, 25/28, 8/28, 9/28, 10/28, Case No. 05/2009, Case No 15/2009, Case i\lo. 12/2010 and Case No. 28/2010 wherein no contravention oi either Section S_or Ser'it;ton.4 has been found to be established. \
8. in view of the foregoing, the Corninission"lis'oflthe;.c.ofns.i.de*.i'b_r:l view that the allegations made in the information do not tall within the n_ii<isclt'i,e"tii .ol,tll €l'ElT-'él",<.;--§§33CtlOlT 3 or Section 4 of the Act 'E ,. l ' :'\. ::'Z l ,_ .\ ' .
K' g and pr/mafac/e no case is made out for making a reference to the Director Genera! (D6) for conducting investigation into this matter under Section 26 (.1) of the Act. 9 Accordingiy, the Commission deems it fit to close the proceedings of the case under Section 26(2) of the Act.
10. The Secretary is directed to communicate the decision of the Commission to the informant accordingly.
ri i a.) U1 ii¥/ieintz 'A$.3is'i'Ai\i'i'oi \ ' "C/Ompeiition COi'.1'ifi'iiSS.'Oi'i in(;'s;».i