State Consumer Disputes Redressal Commission
Manish Sehgal vs L & T Finance Ltd. on 9 September, 2021
Daily Order STATE CONSUMER DISPUTES REDRESSAL COMMISSION, U.T., CHANDIGARH Appeal No. : 222 of 2019 Date of Institution : 30.09.2019 Date of Decision : 09.09.2021 Manish Sehgal R/o House No.5, Sector 15-A, Chandigarh. .. Appellant/Complainant. Versus L & T Finance Ltd. Plot No.174, 4th Floor, Phase-II, Industrial Area, Chandigarh, through its Branch Manager. ....Respondent/Opposite Party. BEFORE: JUSTICE RAJ SHEKHAR ATTRI, PRESIDENT MRS. PADMA PANDEY, MEMBER
MR. RAJESH K. ARYA, MEMBER Present through Video Conferencing:-
Sh. Manish Sehgal, appellant in person.
Sh. Gaurav Sharma, Advocate for the respondent.
PER RAJESH K. ARYA, MEMBER This appeal has been filed by the complainant (appellant herein) against order dated 26.08.2019 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 his consumer complaint bearing No.201 of 2018 was dismissed.
2. The case of the complainant before the District Commission was that in the year 2012, the complainant purchased a vehicle for his personal use and he raised a loan of Rs.2,70,000/- from the opposite party to be repaid in 60 monthly installments of Rs.6,300/- each starting from 15.10.2012 up-till 15.8.2017. He paid all the instalments in time, but, in spite of that, the opposite party showed a sum of Rs.15,000/- in his account as outstanding amount towards loan. However, he made one or two defaults but paid the same through cheques. After completion of installments on 15.8.2017, the complainant approached the opposite party to obtain the No Objection Certificate but the same was not issued and an amount of Rs.15,000/- approximately was shown as outstanding whereas as per the complainant nothing was remained due. The opposite party sent the name of the complainant in defaulters list to the CIBIL which caused him mental and physical harassment. Hence, complaint before District Commission was filed by the complainant.
3. On the other hand, the opposite party contested the complaint by filing reply, wherein, it was stated that that loan facility was sanctioned at the interest rate of 14.79 % vide loan-cum-hypothecation agreement dated 20.09.2012. It was further stated that one installment of Rs.6,300/- is outstanding towards the complainant and the overtime charges which occurred on account of delayed payment of installment of Rs.6,864.53 and total Rs.13,164.53 still outstanding. It is also the case, in nutshell that the consumer complaint is frivolous and this amount is due and the complainant's name was rightly shown in the defaulters list of CIBIL.
4. The parties led evidence in support of their case.
5. After hearing arguments of the parties and going through the record, the District Commission dismissed the complaint, as stated above.
6. We have also heard the Counsel for the parties and have also gone through the record and written arguments.
7. It may be stated here that the District Commission dismissed the complaint of the appellant/complainant on the ground that the complainant failed to show which of the installment paid by him was not reflected in the account statement and if advance installment was paid, it was to be reflected in the account statement or any receipt ought to have been produced by the complainant which was not done. The District Commission further went on to record that there was also default in the payment and as per the agreement entered into inter se parties, some penalty was imposed which was permissible under the terms and conditions of the agreement. It (District Commission) further observed that since the complainant was defaulter, his name was shown in the CIBIL record and unless the pointed out amount is paid by him, the name of the complainant cannot be removed from the defaulter's list. We are not in agreement with the above said observations of the District Commission for the reasons to be recorded hereinafter.
8. In the instant case, following questions emerge for determination by this Commission:-
Whether the complainant is liable to pay the amount of first installment of Rs.6,300/- which was due on 20.09.2012 ?
Whether the opposite party was right in charging exorbitant overdue charges @36% on account of alleged non-payment of the said first installment after a huge delay of more than five years?
9. Undisputedly, as per Loan Offer - Terms & Conditions, Annexure R-3 paced on record by the opposite party in appeal vide MA/524/2021, loan amount of Rs.2,70,000/- was offered, which was to be repaid in 60 equated monthly installments of Rs.6,300/- each as per repayment schedule and the first installment was due on 20.09.2012. The upfront payment/charges were shown as Rs.3,000/-. It may be stated here that at the end of the repayment schedule annexed with the Loan Offer - Terms & Conditions, a Note was appended by the opposite parties, which reads thus:-
"Note:-
Please note that the installments mentioned above must be strictly received on or before the due date. Delay in payment, if any, will attract a penal interest @36% p.a. for the overdue days."
10. Not only above, further as per Clause 2.5 of the aforesaid Agreement, the borrower was further made liable to pay overdue compensation as mentioned in the Annexure appended to the said agreement, which reads thus:-
"2.5 Failure by the BORROWER to pay to the LENDER, the installments in the manner and on the respective due dates and/or any other charges that are/may become payable by the BORROWER under this Agreement, shall render the BORROWER, liable to pay overdue compensation as mentioned in Annexure hereto."
11. We may also point out that not only the opposite party are charging penal interest @36% p.a. for the overdue days in making the payment but as per LOAN CUM HYPOTHECATION AGREEMENT dated 20.09.2012 executed between the complainant and the opposite party, Annexure OP-3, under the heading "TERMS OF THE LOAN" mentioned at Sr. No.1, Clause 'c' under the heading "Upfront Interest", the borrower (complainant herein) has been made liable to pay upfront interest and in the event of the borrower deducting any tax on the upfront interest as per any statute in force at the time of such payment, the borrower shall furnish to the lender a certificate of such tax deduction within a period of one month from the date of such deduction, failing which, the lender shall be entitled to recover from the borrower an amount equivalent to the tax deducted plus interest thereon @36% p.a. computed at monthly rests.
12. Admittedly, as stated above, loan amount of Rs.2,70,000/- was to be repaid in 60 equated monthly installments of Rs.6,300/- each as per repayment schedule and the first installment was due on 20.09.2012. Thus, it is evident from the record that the opposite party was entitled to recover the amount of loan from the complainant starting from 20.09.2012 itself i.e. first installment was to be payable from 20.09.2012 up-till 15.8.2017. The case of the complainant is that at the time of availing of the loan facility, the opposite party had taken one installment in advance and when after payment of all the installments i.e. on 15.08.2017, the opposite party did not issue No Objection Certificate and raised illegal demand of Rs.15,000/-. On the other hand, the opposite party denied receipt of the first installment as stated by the complainant. It is significant to mention here that we did not find any letter/reminder having been sent by the opposite party to the complainant to pay the said first installment. Had the first installment not been paid by the complainant, the opposite party would have definitely intimated the complainant to pay the same but they kept mum in that regard. It is only for the first time, in this case, that after more than five years, the opposite party took a plea that the said first installment has not been received from the complainant. Furthermore, there is another valid reason for this Commission to believe that the first installment had been paid by the complainant to the opposite party. This view of the Commission is supported by the statement of accounts dated 30.04.2018, Annexure C-4, which clearly shows that the opposite party have chosen to demand the installment starting from installment no.2. There is no mention of installment no.1 in the said statement of account. Furthermore, against the column 'Balance', as on 15.10.2012, only an amount of Rs.6,300/- had been shown pending towards the complainant, which was shown as zero as on the same date i.e. 15.10.2012 after receipt of the said amount of Rs.6,300/- vide cheque No.751116. Again the balance as on 15.10.2012 has been shown as zero. Had the first installment been not received by the opposite party, they would have definitely adjusted the second installment towards the first installment and had shown the same in their statement. The case of the complainant stands corroborated from the client statement as on 05.10.2018, Annexure OP -2, that the first installment of Rs.6,300/- was paid in cash as in this statement the advance amount of Rs.6,300/- on account of first installment was shown to have been received against the date 21.09.2012 and the ODC payable has been shown as zero. Thus, it is very much proved on record that the first installment was received by the opposite party in advance in cash and raising demand qua the said installment subsequently alongwith overdue charges (ODC) was totally illegal and arbitrary on the part of the opposite party.
13. In our considered opinion, the complainant is not liable to pay anything to the opposite party as on the date as he had already paid all 60 monthly equated installments of Rs.6,300/- each. Raising illegal demand on this account and not issuing No Due Certificate by the opposite party is deficiency in rendering service and unfair trade practice on its part.
14. Now coming to the second aspect of the case as to the charging of such an exorbitant interest rate of 36% by the opposite party on the overdue amount, it may be stated here that the opposite party is a Non-Banking Financial Corporation (NBFC) and the main concern of this Commission is as regards charging of such an exorbitant overdue rate of interest by NBFCs while granting personal loans etc.
15. Bare perusal of Annexure appended to the Loan Agreement dated 20.09.2012, Annexure OP-3, at Page 80 of the District Commission file transpires that the columns against 'Upfront Interest' and 'Overdue Compensation (% p.a.) have been left blank and nothing is mentioned therein. When nothing has been mentioned in the columns meant for 'Upfront Interest' and 'Overdue Compensation (% p.a.) in the aforesaid Annexure, then, the stipulations as regards the same in the Loan cum Hypothecation Agreement, Annexure OP-3, cannot be made applicable and enforced upon the complainant.
16. To illustrate the conduct of the opposite party in charging such an exorbitant rate of interest in a manner to extract as much as amount it could from the pocket of the complainant, it is necessary to reproduce relevant paras and calculation as mentioned in tabular form in the affidavit dated 17.12.2020 of Sh. Naveen Jain, Divisional Legal Manager of the opposite party as:-
"5..........
Calculation of Dishonoured Installments details as per Transaction Response Report Received from NPCI:-
Amount of installments Due Date of Installments Sequence Number Transaction I.D Date of Dishonor Installments Dishonor Charges 6300/-
15.12.2013 2023924919 664470697 16.12.2013 500/-
6300/-
15.04.2014 2026186406 698101267 15.04.2014 500/-
6300/-
15.04.2014 2026306399 699954993 23.04.2014 500/-
6300/-
15.06.2015 2036626550 1070659521 15.06.2015 500/-
Calculation for charges received from the complainant:-
Installments dishonor Over Due Charges @36% P.A. Legal Notice Charges Total Received 2000/-
4,150/-
150/-
6300/-
6.xxxxxxxxxxx
7. That total amount which was to be paid by the complainant/appellant till 30.4.2018 as per (Annexure C-4) is 6300/- (Amount of Installment) X 60 (Tenure) = 3,78,000 + 2000 (Cheques dishonored Charges) + 8,157/- (Over Due Charges @36% P.A. as per Agreement OP-3) + 150 (Legal Notice Fee) = 3,88,307/-.
8. That the complainant/appellant paid upto 30.4.2018 (Annexure C-4) 59 installments X 6300 = 3,71,700 + 2000 (Cheque dishonoured Chares) + 4,150 (Over Due Charges) + 150 (Legal Notice Fee) = 3,78,000/- whereas the complainant has to pay Rs.3,88,307/-."
17. From perusal of above, it is very much clear that the opposite party charged overdue charges @36% not only on the installments dishonor charges of Rs.2,000/- but also on the first installment of Rs.6,300/-, which it had already received and which was not payable by the complainant at all, as discussed in the earlier part of the order. The overdue charges @36% on overdue amount was calculated as Rs.4,150/- were shown as paid and overdue charges on Rs.6,300/- installment calculated as Rs.4,007/- were shown as pending. No doubt, the complainant paid the amount of Rs.3,78,000/- to the opposite party. However, he did not pay the illegal demand of the first installment of Rs.6,300/- plus overdue charges of Rs.4,007/-, which in our considered opinion, he rightly did as he was not required to pay anything to the opposite party.
18. Not only above, it is important to mention here that one of the pleadings of the opposite party as stated in its written statement is very much contrary to its own document. The opposite party in Para No.1 of the preliminary submissions in its reply has pleaded that that the loan was sanctioned @14.79% rate of interest. The said pleading, inter-alia, reads thus:-
"1........That the said loan facility was sanctioned under Loan Account No.APC153161R1200548936 @14.79 rate of interest vide loan cum hypothecation agreement dated 20.09.2012 which was duly accepted by borrowers by appending his signature............"
On the contrary, the opposite party in Annexure to the Loan Agreement dated 20.09.2012, Annexure OP-3, at page 80 of the District Commission's record has mentioned the Flat Rate of Interest as 8%. Thus, both the pleading of sanctioning of loan @14.79% to the complainant and Flat rate of interest @8% as mentioned in Annexure to Loan Agreement, Annexure OP-3, are contrary to each other and thus an unfair contract.
19. We may further state here that Clause 'c' at Sr. No.1 under the heading "TERMS OF LOAN" mentioned in LOAN CUM HYPOTHECATION AGREEMENT dated 20.09.2012, Annexure OP-3, envisages that in the event of the borrower deducting any tax on the upfront interest as per any statute in force at the time of such payment, the borrower shall furnish to the lender a certificate of such tax deduction within a period of one month from the date of such deduction, failing which, the lender shall be entitled to recover from the borrower an amount equivalent to the tax deducted plus interest thereon @36% p.a. computed at monthly rests. However, in the instant case, the complainant (borrower) has not deducted any tax at source on the upfront interest. Hence, no TDS certificate was required to be furnished by the complainant to the opposite party. As such, no question of payment of interest @36% equivalent to the tax deducted at source on the upfront interest arises at all. Therefore, charging of higher rate of interest @36% by the opposite party was totally arbitrary and contrary to the terms and conditions of the LOAN CUM HYPOTHECATION AGREEMENT dated 20.09.2012, Annexure OP-3 and hence an unfair agreement.
20. In our view, incorporation of such like conditions of charging penal interest @36% P.A. in the Repayment Schedule appended to Loan Offer Letter and in the agreement too and further in failure of any default in timely payment of installment, to further charge overdue compensation, which are highly detrimental to the interest of the borrower/consumer (complainant in the instant case), are with the sole purpose to take undue advantage and enriching itself (opposite party) by extracting as much as money from the pocket of the complainant, which is his hard earned money. NBFCs, like the one as the opposite party in the instant case, have shown no concern towards the poor consumers and exploiting them by charging unconscionable higher rate of interest. The consumers are put in disadvantage position by enforcing such clauses in the Loan Agreements. It is, thus, clear that there are certain clauses in the loan agreement which are apparently not in conformity with the RBI guidelines, however, these clauses constitute unfair trade practice on the part of the opposite party. Also the agreement itself becomes voidable as certain provisions of the agreement are not in conformity to the provisions in the Annexure appended to the said agreement. The NBFCs have to be transparent and the rate of interest and manner of arriving at the rate of interest to different categories of borrowers should be disclosed to the borrower or customer in the application form and communicated explicitly in the sanction letter etc.
21. The Hon'ble Supreme Court of India has in the case of Pioneer Urban Land & Infrastructure Ltd. Vs. Govindan Raghavan, Civil Appeal No.12238 of 2018 decided on 02.04.2019 held that incorporation of one-sided clauses in a builder-buyer agreement constitutes an unfair trade practice as per Section 2(r) of the Consumer Protection Act, 1986. The Hon'ble National Consumer Disputes Redressal Commission in the case of India Bulls Housing Finance Ltd. & Anr. Vs. Boota Singh Sidhu, Revision Petition No.2884 of 2017 decided on 17.11.2017 has clearly held that certain clauses in the loan agreement which are apparently not in conformity with the RBI guidelines, constitute unfair trade practice and such an agreement itself becomes voidable as certain provisions of the agreement are against the law of the land. Further in the case of Fortuna Foundation and Engineers and Consultants Pvt. Ltd. Vs. RBI and Anr., W.P.(C) 1161/2010 decided by High Court of Delhi on 28.10.2013, it was observed that "While regulating the credit system of the country to its advantage, the RBI cannot ignore the interests of the borrowers from Non-Banking Financial Companies and if it is satisfied that a particular Non-Banking Financial Company, is charging interest at unreasonable rates or it is levying charges which are not called for or the extent of such charges are levied by the financial institution concerned is unreasonable, the RBI would be very much within its jurisdiction in issuing appropriate direction(s) to the financial institution concerned to modify its rate of interest or charges as the case may be......"
22. We may also state here that earlier also, in the case of Jasmer Singh Vs. The Branch Manager, Fullerton India Credit Co. Limited, Appeal No.65 of 2018 decided by this Commission on 22.05.2019, interest @47% p.a. on the loan amount was being charged by the respondent - Fullerton India Credit Co. Ltd., (NBFC), and this Commission, in order to safeguard the interest of the consumers at large, observed in Paras 16 to 22, 28, 31 to 33, 35 & 36, inter-alia, as under:-
"16. It may be stated here that we are not reopening any transaction between a banking company and its debtor but our prime concern is regarding charging of higher rate of interest by NBFCs, which is unreasonable.
17. Vide its instructions/letters issued from time to time, Reserve Bank of India expressed its concern qua charging of excessive interest by NBFCs.
18. On 24.05.2007, on complaints being received by RBI qua charging of excessive interest by NBFCs, it (RBI) wrote to all the NBFCs including RNBCs, inter-alia, as under:-
"2. Though interest rates are not regulated by the Banks, rates of interest beyond a certain level may be seen to be excessive and can neither be sustainable or be conforming to normal financial practice."
19. Boards of NBFCs were advised to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges and it was also directed to keep in view the guidelines indicated in the Fair Practices Code about transparency in respect of terms and conditions of the loans.
20. Not only this, vide subsequent letter dated 02.01.2009, Reserve Bank of India, in continuation of its letter dated 24.05.2008, in order to regulate the credit system of the country to its advantage, in exercise of powers conferred under Section 45L of Reserve Bank of India, 1934 issued the following directions to NBFCs:-
"a) The Board of each NBFC shall adopt an interest rate model taking into account relevant factors such as, cost of funds, margin and risk premium, etc. and determine the rate of interest to be charged for loans and advances. The rate of interest and the approach for gradation of risk and rationale for charging different rate of interest to different categories of borrowers shall be disclosed to the borrower or customer in the application form and communicated explicitly in the sanction letter.
b) The rates of interest and the approach for gradation of risks shall also be made available on the web-site of the companies or published in the relevant newspapers. The information published in the website or otherwise published should be updated whenever there is a change in the rates of interest.
c) The rate of interest should be annualized rates so that the borrower is aware of the exact rates that would be charged to the account."
21. Thus, RBI advised all the NBFCs to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges.
22. Not only above, the Hon'ble National Consumer Disputes Redressal Commission, New Delhi in the case of Awaz and others Vs. Reserve Bank of India, decided on 24.10.2007, observed as under:-
"From the various circulars issued by the RBI, it appears that the RBI repeatedly emphasized that usurious rates of interest cannot be charged by the banks but it appears that there is no control on this issue and the banks/non-banking financial institutions are exploiting the situation and the concerned officers of RBI appear to be unaware of the same.
We would add that under the Consumer Protection Act, charging of such rates of interest would amount to exploitation of the borrowers needs and to a large extent amount to unfair trade practice."
23 to 26 xxxxxxxx
28. It appears that there is no ready alternative to the rapacious usurer. That is not until and unless decision-makers start thinking about the problem seriously, there will never be an alternative to the pernicious money-lenders like the respondent/ opposite party.
29 & 30 xxxxxx
31. However, Reserve Bank of India does not specify any interest rate nor any ceiling rate. It does specify guidelines of Fair Practices Codes and where complaints are received, these are examined within the parameters of the guidelines.
32. It is need of the hour that RBI should step into and conduct forensic audit of the respondent/opposite party, which is a NBFC and fix a cut of rate, beyond which, NBFCs cannot charge interest to the detriment of the borrower/consumer as cost of funds in the present low interest rate regime cannot be so high.
33. It may be stated here that qua charging of illegal and excessive interest rates, the Madras High Court in the case of Ar. Jeyarhuthran vs The Union Of India, Writ Petition (MD)No.14627 of 2012 decided on 14.11.2014, issued directions to the Reserve Bank of India to look into the matter, in terms of its own Fair Practices Code as well as Circulars and Notifications issued from time to time and referred to above.
34. xxxxx
35. Thus, in our considered opinion, charging of excessive interest, which goes totally against the norms and observations made by the Reserve Bank of India vide guidelines/notifications issued from time to time stating that reasonable interest rate should be charged, the respondent/opposite party indulged into unfair trade practice. Now it is high time, we expect that the Reserve Bank of India should step in to secure the interest of poor consumers and tighten the knot of such free giants, on whom nobody seems to have any control and who are charging exorbitant rates of interest whatever they like.
36. We, therefore, recommend Reserve Bank of India, which is a prime body to regulate the financial advisories in our Country:-
(a) To conduct forensic audit of the respondent/ opposite party and its branches and fix a cut of rate, beyond which, NBFCs cannot go in charging interest;
(b)To impose heavy cost on respondent/opposite party and such like NFBCs, which are still charging exorbitant rates of interest from poor consumers, totally against the guidelines issued by RBI on Fair Practice Code and reasonable rate of interest.
(c) To take punitive action including cancellation of license, if required, against the respondent/opposite party and also such like NBFCs, who are still flaunting RBI Norms."
23. Viewing from all the angles, in the case in hand also, the opposite party, which is NBFC, is charging such an exorbitant rate of overdue interest i.e. 36% from the complainant, which is unfair, unjustified and detrimental to the interest of poor consumer.
24. For the reasons recorded above, we are of the considered opinion that the District Commission wrongly dismissed the complaint without appreciating the facts and evidence on record. The appellant/complainant has suffered immense mental agony and physical harassment on account of deficiency in rendering service and unfair trade practice on the part of the respondent/opposite party, for which, the appellant/complainant is held entitled to compensation of Rs.50,000/-. The respondent/opposite party has been fleecing numerous gullible borrowers with such exorbitant rates, as has been done in the case of the present appellant/complainant and is still continuing with the unfair trade practice despite numerous guidelines issued by RBI from time to time clarifying that the NBFC should charge reasonable rate of interest. For fleecing numerous consumers like the appellant/complainant, we impose an exemplary cost of Rs.1,00,000/- upon the respondent/opposite party, which will be paid to PGIMER, Chandigarh (for treatment of Covid-19 patients) and be deposited in the Poor Patient Welfare Fund (PPWF).
25. In view of the foregoing discussion, the appeal is allowed and the impugned order dated 26.08.2019 dismissing the complaint is set aside. Consequently, consumer complaint bearing No.201 of 2018 is partly allowed with costs and the respondent/opposite party is directed as under:-
(i) To issue 'No Due Certificate" to the appellant/complainant against his loan account, without charging any further amount/installment, within a period of 30 days from the date of receipt of certified copy of this order after closing the said loan account.
(ii) To pay an amount of Rs.50,000/- to the appellant/complainant on account of mental agony & physical harassment and indulgence into unfair trade practice and Rs.11,000/- towards litigation expenses, within a period of 30 days from the date of receipt of certified copy of this order, failing which the aforesaid amounts shall carry interest @9% per annum from the date of filing the complaint before the District Commission till actual realization.
To pay an amount of Rs.1,00,000/- to PGIMER, Chandigarh for treatment of Covid-19 patients, (towards discharge of its Corporate Social Responsibility), which shall be deposited in the Poor Patient Welfare Fund (PPWF) maintained by PGIMER, Chandigarh within 30 days from the date of receipt of certified copy of this order, failing which the same will carry interest @9% p.a. from the date of default i.e. after expiry of period of 30 days till its deposit.
To get the name of the appellant/complainant removed from the defaulters' list of Credit Information Bureau (India) Limited (CIBIL) within 30 days from the date of receipt of certified copy of this order.
26. Certified copies of this order be sent to the parties, free of charge.
27. The file be consigned to Record Room, after completion.
Pronounced 09.09.2021 [RAJ SHEKHAR ATTRI] PRESIDENT (PADMA PANDEY) MEMBER (RAJESH K. ARYA) MEMBER Ad