State Consumer Disputes Redressal Commission
The Branch Manager, Muthoot Fincorp ... vs C.Josphin Mary, Nagercoil. & Another. on 26 February, 2018
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IN THE CIRCUIT BENCH OF THE TAMILNADU STATE CONSUMER DISPUTES
REDRESSAL COMMISSION, MADURAI.
Present: THIRU.K. BASKARAN, PRESIDING JUDICIAL MEMBER
THIRU.S.M. MURUGESSHAN, MEMBER
F.A.No.97/2016
(Against the order of the District Forum, Kanyakumari at Nagercoil passed in
C.C.No.47/2014, dated 06.09.2016)
MONDAY, THE 26th DAY OF FEBRUARY 2018.
The Branch Manager,
Muthoot Fincorp Limited ( Pappachan Group)
5/57-B, Main Road,
Thiyagarajan Complex,
Eathamozhi & Post, Alagappapuram Post,
Kanyakumari District. Appellant/1st Opposite Party
Vs
1. C. Josphin Mary,
W/o. Christian Jeyapaul,
39, 4/4B, First Cross Street,
Timber Depot Road,
Ranithottam,
Nagercoil - 629 001. 1st Respondent/Complainant
2. The Tasildar,
Agatheeswaram Taluk,
Collector Office Campus,
Kanyakumari District,
Nagercoil - 620 991. 2nd Respondent /2nd Opposite party
Counsel for the Appellant/1st Opposite party : Mr. P. Pethu Rajesh, Advocate
Counsel for the 1st respondent/Complainant : Called absent
2nd Respondent/2nd Opposite Party : Given up
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This appeal coming before us for final hearing on 02.02.2018 and on hearing
the arguments of the appellant side and on perusing the material records, this
Commission made the following:-
ORDER
THIRU.K. BASKARAN, PRESIDING JUDICIAL MEMBER.
1. The 1st opposite party having suffered an order at the hands of the District Forum, Kanyakumari at Nagercoil has filed this appeal before this Commission.
2. Parties are referred to here as they stood arrayed in the District Forum for the sake of convenience.
3 The factual background culminating in this appeal is as follows;-
That the complainant had filed a complaint against the 1st opposite party, Muthoot Pincorp Ltd., and the 2nd opposite party Tahsildar, alleging, inter alia, that the 1st opposite party being a financial institution had charged exorbitant rate of interest and also arranged to sell the pledged jewels in auction in spite of the complainant having remitted a sum of Rs.20,448/- and hence the 1st opposite party should be directed to release the jewellery after receiving the principal loan amount of Rs.60,000/- and reasonable rate of interest less Rs.20,448/- paid by the complainant and to pay a sum of Rs.50,000/- towards compensation for mental agony suffered by the complainant.
4. The complaint was resisted by the 1st opposite party by contending that the complainant had not paid the agreed interest as per the terms and conditions of the jewel loan and that the 1st opposite party being a financial institution had followed all 3 the lawful procedures to bring the pledged articles for sale and hence there was no deficiency in service on the part of the 1st opposite party.
5. That the 2nd opposite party was exonerated by learned District Forum by order dated 30.06.2015 in C.M.P.No.102/2015.
6. After perusing the materials available on record and on hearing the arguments of both sides, the learned District Forum had partly allowed the complaint directing the 1st opposite party to return the pledged gold jewelleries weighing 26.7 grams to the complainant on the complainant paying the principal loan amount of Rs.60,000/- with simple interest at the rate of 12% per annum less Rs.20,440/- already paid by the complainant and to pay compensation of Rs.4000/- for the mental agony suffered by the complainant in addition to costs of Rs.1000/-. Feeling aggrieved by the above order of the District Forum, the 1st opposite party has come before this Commission by way of this appeal.
7. The point for consideration in this appeal is (1) Whether the Tamil Nadu Prohibition of Charging Exorbitant Interest Act could be pressed into service regarding the interest charged by the appellant/1st opposite party?
8. Point:- Both parties are admitting the facts such as the complainant availed jewel loan of Rs.60,000/-by pledging her gold jewels weighing 26.7 grams with the appellant/1st opposite party on 26.06.2012 as evidenced by Ex A1 loan card and had paid a sum of Res.20,448/- as could be seen from Ex A2 on 26.06.2013 towards the loan account and that as the complainant had not redeemed the jewelleries within the 4 stipulated period, the appellant/1st opposite party had issued Ex A3 notice known as pre-auction notice calling upon the complainant to pay the outstanding loan amount and to redeem the pledged jewellery and another similar notice was issued under Ex A4 and that the complainant had rushed and complained to the Superintendent of Police, Kanyakumari District and other authorities.
9. It can be seen from the records, available and submission made by the learned counsel for the appellant that the jewelleries pledged under Ex A1 have not yet been sold in auction and they are still remaining in the custody of the 1st opposite party. The only grievance of the appellant/1st opposite party in this appeal is that the appellant/1st opposite party being a non-banking financial company is not amenable to the provisions of the State Act like the Tamil Nadu Money Lenders Act and Tamil Nadu Prohibition of Charging Exorbitant Interest Act and that the appellant company is wholly governed by the provisions of the Reserve Bank of India Act 1934 and he particularly Chapter III (B) of the said Act. As the company was registered under section 45-I(a) of the Reserve Bank of India Act he would submit that if the State Acts are held to be applicable to the Money Lenders and not to a non-banking financial company like the appellant then there is no question of any deficiency in service or adoption of unfair trade practice on the part of the appellant/1st opposite party in as much the appellant had charged the interest as permitted by the Reserve Bank of India and followed the prescribed procedure before bringing the pledged jewels for auction and hence the complaint ought to have been dismissed. In support of this contention, he relied on the decision of the Division Bench of the Hon'ble High Court of Gujarat at Ahmedabad in Special Civil 5 Application No.6223 of 2011. In this case law, a similar non-banking financial company namely M/s. Sundaram Finance Company Limited was directed by the Government of Gujarat to be governed by the provisions of the Gujarat Money Lenders Act and hence, the said financial company namely M/s. Sundaram Finance Company Limited filed a petition before the Hon'ble High Court of Gujarat at Ahmadabad wherein it was held that the Reserve Bank of India Act was enacted by the parliament as per entry 38 of the Union List of VII Schedule to the Constitution of India and Chapter III (B) governed the functioning of non-banking Financial Companies and that the Gujarat Money Lenders Act was enacted by the State Legislature as per entry 38 of the State List in the VII Schedule of Constitution of India for governing the Money Lending and Money Lenders and as such the State Legislature did not have legislative competence to encroach into the legislative competence of the parliament and hence the provisions of Gujarat Money Lenders Act and the provisions of the Gujarat Money Lenders Act that seek to control the non-banking Financial Company registered under the Reserve Bank Act with the matter of carrying on their business under Chapter III(B) of Reserve Bank Act are ultra virus the Constitution of India for legislative incompetence of the State Legislature. The Hon'ble High Court of Gujarat had also further held as follows;-
"According to Entries No.38 and 43 of List I of the 7th Schedule of the Constitution, the Parliament has the exclusive jurisdiction over the subject of Reserve Bank of India and the incorporation, regulation and winding up of the trading corporations including the banking, insurance and financial corporation but not including the co-operative Societies. Similarly, under Entry No.30 of List 6 II of 7th Schedule, the State Legislature has the exclusive authority of enacting any legislation relating to money lending and money-lenders and relief of agricultural indebtedness.
Chapter IIIB ( Sections 45-H to 45-OB) of the Reserves Bank of India Act aims at providing protection to the interest of the depositors and NBFCs whereas the object of GML Act is to provide protection in respect of interest of borrowers/debtors who are involved in the money-lending within the State. There is no dispute that both legislations operate in two separate and distinct fields and unless a situations arises where both the statues are not capable of being obeyed there cannot be any valid objection to the allegation of encroachment upon the field by one over the other.
We find that the pith and substance of GML Act is to regulate money-lending which includes the aspects revolving around the borrowers/debtors, rate of interest, molestation of debtor, illegal money lending, unfair practices of recovery etc., On the other hand, the objects and reasons behind the insertion of Chapter III B of the RBI Act are for ensuring more effective supervision and management of the monetary credit system by Reserve Bank. Bu virtue of entries 38 and 43 of the List I of the Seventh Schedule coupled with the passing of RBI Act, the Reserve Bank is enabled to regulate the conditions on which deposits may be accepted by these non-banking companies or institutions and to give any financial institution or institutions directions in respect of matters, in which the Reserve Bank, as the Central Banking Institution of the country, may interfere 7 from the point of view of control over the credit policy. The further object of the incorporation of Chapter III B of the RBI Act was to enhance the power of the Reserve Bank in relation to commercial banks and to extend in certain directions so as to provide for stricter supervision of the operations and working of such banks and institutions.
In our opinion, so long as both the State Law and the Central Law can co-exist without interfering with the other's dominion, there is no problem of encroachment. A State Legislature is entitled to enact law relating to money- lending and money-lenders as provided in Entry No.30 of the List it. Similarly, the Reserve Bank of India is also authorised to exercise its power by virtue of the provisions contained in the RBI Act. In the case before us, the petitioner has been registered under Chapter IIIB of the RBI Act and in the matter of exercising its right as an NBFC, which is the subject matter of the RBI Act, it is bound to follow guidance of Reserve Bank of India and no other State law can interfere with its business activities if it conforms to the provisions of the RBI Act. However, if in addition to its activity which is governed under Chapter IIIB, the petitioner wants to enter into the field of the State laws, it is bound to comply with the relevant provisions of the State laws.
In the case before us, it appears that under Section 45 I of the RBI Act, the word "deposit" has been defined. Similarly, the petitioner also comes within the purview of an NBFC, the petitioner should not be bound by any restriction imposed by any other State law. According to the GML Act, it appears that if an 8 NBFC is registered under the RBI Act, it automatically becomes registered under the GML Act and comes within the purview of the State Legislation. To that extent, in our opinion, the GML Act encroaches upon the provisions of the RBI Act."
10. From the above case law, it can be seen that the State of Gujarat had issued notice to a non-banking financial company namely M/s. Sundaram Finance Company Limited to submit certain documents for perusal which was challenged by the said company and in that case only the above judgement cited supra came to be delivered . We are not able to ascertain the condense of the letters or notice sent by the State of Gujarat to M/s Sundaram Finance Company Limited in that case. But, it has been held in that case law that the State Government of Gujarat can validly legislate any Act to deal with the money lending and money lenders and that such State Act and the Central Act namely Reserve Bank of India Act can co-exist so long as the provisions of the State Act did not encroach upon the provisions of the Central Act.
11. It is pertinent, at his juncture to note that nowhere in the written version filed before the District Forum or in the memorandum of grounds of appeal filed in this case, the appellant/1st opposite party had whispered that as per the provisions of the Reserve Bank of India and as per the terms and conditions of the licence granted to that under Chapter III (B) the Reserve Bank of India Act a financial company can charge any percentage of interest at their whims and fancies' and there is no maximum limit provided in respect of the rate of interest that could be charged from the borrowers. It is equally significant to note that though the 1st opposite party had filed 9 its written version had not filed any proof affidavit in support of their contentions set out in the written version.
12. At the same time, the learned District Forum, has relied on the order of the Madurai Bench of Hon'ble High Court of Madras, reported in 2015 (3) Tamil Nadu Law Notes Journal 203 (Civil) in C.R.P.(NPD) M.D.No.347 & 348 of 2014 between the Muthoot Finance Pvt. Ltd., - Vs - K.S. Ramasamy. In his case law a similar point was raised wherein it was answered by the Madurai Bench of Hon'ble High Court of Madras. In this case law the borrower filed a petition before the Principal District Judge, Trichirappalli contending that he was entitled to the benefits under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act alleging inter alia that the Finance Company namely Muthoot Finance Pvt Limited charged interest at the rate of 36% per annum. Further, the borrower had filed civil suits before the Sub-Court in Trichirappalli and the court had directed the borrower to pay interest at the rate of 12% per annum and that order was challenged by way of revision petition before the Hon'ble High Curt and in that case the financial company had pleaded that it was not a money lender or pawn broker but a non-banking financial company registered under the Companies Act and governed by the Reserve Bank of India and as such it had every right to fix the rate of interest and not accepting the contention of the finance company, the Madurai Bench of the Hon'ble High Court of Madras in its order held as follows;-
"It is an admitted fact that the respondent pledged, on two occasions his jewels and borrowed loan from the petitioner company. It is the contention of the respondent that the petitioner fiancé is claiming exorbitant interest at the rate of 10 26% per annum and therefore, the respondent is entitled to the benefit under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 38/2003. Under Section 5 of the Act, the Debtor is entitled to deposit the money due in respect of the loan received from the Finance together with interest at the rate fixed by under Section 7 of the Money Lenders Act into the court having jurisdiction. The respondent argued that as per section 7 of the Money Lenders Act, no money lender shall charge interest on any loan at a rate which exceeds such rate as the Government may, by notification, fix from time to time. The Notification published in Tamil Nadu Government Gazette Extraordinary, part II Section 2 dated 06.07.1979 speaks about 9% simple interest. Reserve Bank of India also fixed the rate of interest chargeable under section 7 of the Money Lenders Act at 9%. When the Notification speaks about 9% simple interest, the petitioner cannot unilaterally charge more interest. According to the respondent, the petitioner is charging interest at the rate of 26%. If it is so, it is definitely hit by section 7 of the Money Lenders Act taking into consideration non-disputing of the calculation memo filed by the respondent/borrower, the respondent was permitted to deposit the principal amount borrowed by him with simple interest at 9% per annum from the date of borrowing. On such deposit, the respondent was permitted to redeem the jewel. The said common order passed by the District Court is as per the Act. The Tamil Nadu prohibition of Charging Exorbitant Interest Act, 38/2003 was brought for giving relief to the poor borrowers, who are victimized by the Lenders by charging exorbitant interest. If 11 any person comes to the court under section 5 of the Act, he is entitled to the reliefs, provided said borrowers deposit the principal amount and the 9% simple interest as per the existing notification, applying the correct law and also the government respondent and it cannot be found fault with it. It is not as if the petitioner was directed to return the jewels without payment. The principal amount and the amount payable at allowed rate of interest is also to be deposited by the borrower and therefore no prejudice is also caused to the petitioner. This exorbitant interest from the poor victim borrower is in violation of the Special Act. Hence the revision fails.
13. We are of the considered opinion that when there is a judgement of the Hon'ble High Court of Madras directly on the point, we are governed by this judgement and not by the judgement of the Hon'ble High Court of Gujarat cited supra. The learned counsel appearing for the appellant cannot bring to our notice any other case law overruling the judgement of the Hon'ble Madras High Court or by the Hon'ble Supreme Court of India so as to take a different view. Hence, we hold that the judgement of the Hon'ble High Court of Madras, Madurai Bench would squarely apply to the facts of our case and if so held then nothing survives for the appellant to challenge the order under appeal.
14. Hence, we hold that State Acts namely Tamil Nadu Money Lenders Act and the Tamil Nadu Prohibition of Charging Exorbitant Interest Act could be pressed into service in the matter of charging interest by the appellant/financial company in respect of the jewel loan and this point is answered in the affirmative.
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15. In the result, this appeal fails and the same is dismissed. The appellant/1st opposite party shall pay Rs.5000/- to the 1st respondent/complainant as costs in this appeal.
S.M.MURUGESSHAN, K. BASKARAN,
MEMBER. PRESIDING JUDICIAL MEMBER.
Index: Yes/No
TCM/SCDRC/Chennai/Orders/Feb/2018