State Consumer Disputes Redressal Commission
Balwant Singh vs Uco Bank on 4 January, 2022
STATE CONSUMER DISPUTES REDRESSAL COMMISSION,
PUNJAB, CHANDIGARH.
First Appeal No.99 of 2020
Date of institution : 13.02.2020
Reserved on : 21.12.2021
Date of decision : 04.01.2022
Balwant Singh, aged about 63 years S/o Kirpal Singh S/o Arjan Singh,
R/o Village Buttar, Tehsil and District Faridkot.
....Appellant/Complainant
Versus
UCO Bank, Branch at opposite Balbir Hospital, College Road,
Faridkot, Tehsil and District Faridkot, through its Branch Manager.
.....Respondent/Opposite Party
First Appeal against the order dated
09.12.2019 passed by the District Consumer
Disputes Redressal Forum (now
'Commission'), Faridkot.
Quorum:-
Hon'ble Mrs. Justice Daya Chaudhary, President
Mrs. Urvashi Agnihotri, Member
1) Whether Reporters of the Newspapers may be allowed to see the Judgment? Yes/No
2) To be referred to the Reporters or not? Yes/No
3) Whether judgment should be reported in the Digest? Yes/No Argued by:-
For the appellant : Sh. Piyush Sharma, Advocate for Sh. Tarun Sharma, Advocate with Sh. Balwant Singh, in person For the respondent : Sh. V.K. Gupta, Advocate with Ms.Shelly Sachdeva, Sr. Manager(Law) ..................................................................................
JUSTICE DAYA CHAUDHARY, PRESIDENT Miscellaneous Application No.330 of 2021 This application has been filed by the respondent-Bank for placing on record the copy of sanction, deed of hypothecation and copy of amortization schedule.First Appeal No.99 of 2020 2
2. For the reasons recorded in the application, the same is allowed and the said documents attached with the application are taken on record as Annexure R-1 to R-3.
Miscellaneous Application No.935 & 1028 of 2021
3. Said applications have been filed by the respondent-Bank for a direction to the appellant/complainant to deposit the total outstanding amount.
4. There is no settlement arrived between the parties in the present case. Moreover, the OP-Bank has already received the amount of Rs.3,28,000/- in lieu of interest, accordingly, there is no merit in these applications and the same are hereby dismissed. Miscellaneous Application No.943 of 2021
5. This application has been filed by the appellant for issuing the direction to the respondent-Bank to issue 'No Objection Certificate' after receiving the amount of Rs.3,28,000/-.
6. The matter is still under consideration, accordingly, no direction can be issued at this stage. Disposed of at this stage. Main Case:
7. The appellant-Balwant Singh has filed the present appeal under Section 15 of the Consumer Protection Act, 1986 (in short 'The Act') for setting aside the impugned order dated 09.12.2019 passed in Consumer Complaint No.146/2019 whereby the complaint filed by him was dismissed by the District Consumer Disputes Redressal Forum, Faridkot (in short, now the "District Commission").
8. Briefly the facts of the case as made out in the complaint are that the complainant raised a loan of Rs.35,70,000/- from First Appeal No.99 of 2020 3 respondent/OP-UCO Bank for construction of green house (Poly House) for growing vegetables. The rate of interest was 11.95% per annum, which was a simple interest and repayment of the loan was scheduled to be paid in half yearly installments. An amount of Rs.44,000/- was charged as processing fee. The OP/respondent took 10 blank cheques from the complainant as security. Out of total loan amount, the complainant paid Rs.31,00,000/- by way of instalments and never remained defaulter while paying the instalments. It has further been mentioned in the complaint that subsequently, he came to know that the respondent/OP charged compound interest as well as penal interest from the complainant, whereas it was a case of simple interest. The OP/respondent-Bank was requested to charge simple interest @11.95% per annum through half yearly instalments, but still request was not accepted. Thereafter also a number of requests were made but there was no result. Hence, the complainant filed the complaint before the District Commission for redressal of his grievance but the same was dismissed vide order dated 09.12.2019
9. Said impugned order dated 09.12.2019 is subject matter of challenge in the present appeal. There was delay of 22 days in filing of the appeal. Delay in filing of the appeal was condoned vide order dated 17.02.2021 subject to deposit of costs of Rs.1000/-, which was deposited by the appellant.
10. Learned counsel for the appellant submits that the appellant/complainant has already paid an amount of Rs.31,00,000/- by way of installments and he was never a defaulter. The complainant First Appeal No.99 of 2020 4 paid an amount of Rs.44,000/- as processing fee, whereas same was not required to be paid. Inspite of paying an amount of Rs.31,00,000/- still amount by way of monthly instalments was demanded for repayment of the loan. Action of respondent/OP is not only contrary to the terms and conditions of the Agreement but also it is a case of 'deficiency in service' and 'trade mal practice'. The appellant/complainant also deposited some amount in lump sum but that amount has not been taken into consideration. Learned counsel also submits that due to bad weather, the agricultural activities were affected and no income was accrued, which also affected the income of the appellant/complainant. At the end, learned counsel for the appellant submits that case of the appellant could have been considered under any of the schemes of the Bank known as 'one time settlement' etc. etc.. The account of the appellant has not been declared NPA whereas the accounts of similarly situated loanees were declared NPA. It is a case of clear cut discrimination. During the pendency of the case an amount of Rs.7,98,000/- was also paid by the appellant/complainant to the respondent/OP-Bank under the orders of this Commission. However, the respondent/OP-Bank is not considering the case of the appellant being at par with other similarly situated persons which amounts to not only discriminatory but also contrary to the policies framed by the RBI for the defaulters.
11. Learned counsel for the respondent/OP has opposed the submissions made by learned counsel for the appellant. He also submits that there was a default on the part of the appellant in repaying the loan amount. The case of the appellant was not First Appeal No.99 of 2020 5 considered as it was not falling within the parameters of the schemes of the Bank where interest was waived of or cases of such like nature were considered. Learned counsel further submits that the purpose of loan was for setting up a green house for cultivation of vegetables and total loan amount was to be paid in 84 equated monthly installments of Rs.62,924/- each from December, 2015 with interest @11.95% at the base rate of 9.95% plus 2%. Learned counsel also submits that as per HO Circular dated 01.04.2012, Bank is entitled to charge processing charges and documentation charges from the complainant. The OP- Bank did not charge any penal interest from the complainant but the Bank is entitled to charge compound interest. The appellant/complainant mortgaged 48 kanals of agriculture land as collateral security and all expenses of same were to be borne by the borrower or mortgagor. The terms and conditions were made aware to the appellant and the same were signed by him and the amount was paid by the appellant/complainant, as per terms and conditions of the Loan Agreement. Learned counsel has denied any deficiency in service on the part of respondent/OP and prayed for dismissal of the appeal with costs.
12. Heard arguments of learned counsel for both the parties. We have also perused the impugned order as well as other documents available on the record.
13. Admittedly, the complainant obtained loan amount of Rs.35,70,000/- from the OP-Bank for constructing green house project (Poly House) for cultivation of vegetables. It is also admitted case that First Appeal No.99 of 2020 6 the loan amount was to be repaid in total 84 equated monthly installments of Rs.62,924/- each starting from December, 2015, which was converted into half yearly installment on the request of the appellant/complainant, vide Ex.OP1/5. The main grievance of the appellant/complainant is that rate of interest was simple @11.95% per annum but the OP-Bank charged compound and penal interest from the complainant. On the other hand, learned counsel for OP-Bank denied that Bank has not charged any penal interest.
14. The first issue to be decided by this Commission is as to whether OP-Bank charged simple rate of interest or floating rate of interest? The simple rate of interest is fixed from beginning to the end and cannot fluctuate during the whole loan period. On the other hand a floating interest rate is one which changes periodically. The rate of interest moves up and down, or 'floats', reflecting the economic or financial market conditions. Often, it moves in random with a particular index or benchmark, or with general market conditions. In the present case, the OP charged floating rate of interest, as per condition No.1 of Annexure-1 (the terms and conditions of the loan agreement), which is reproduced as under:-
"1. The rate of interest is subject to revision/change from time to time as per HO/RBI guidelines."
From perusal of contents of complaint and appeal, it appears that complainant has no knowledge about the floating rate of interest. Whereas, it is the duty of the Bank to apprise the loanee about the rate of interest charged as per guidelines of the RBI. The Reserve Bank of First Appeal No.99 of 2020 7 India has issued guidelines on Fair Practices Code for NBFCs, vide Circular No.RBI/2012-13/416, DNBS.CC.PD.NO.320/03.10.01/ 2012-13, dated 18.02.2013 to all NBFCs and the relevant portion is as under:-
"A. (i) Applications for loans and their processing
(a) All communications to the borrower shall be in the vernacular language or a language as understood by the borrower.
(b) .........
(c) .........
(ii) Loan appraisal and terms/conditions The NBFCs should convey in writing to the borrower in the vernacular language as understood by the borrower by means of sanction letter or otherwise, the amount of loan sanctioned along with the terms and conditions including annualised rate of interest and method of application thereof and keep the acceptance of these terms and conditions by the borrower on its record. As complaints received against NBFCs generally pertain to charging of high interest / penal interest, NBFCs shall mention the penal interest charged for late repayment in bold in the loan agreement.
It is understood that in a few cases, borrowers at the time of sanction of loans are not fully aware of the terms and conditions of the loans including rate of interest, either because the NBFC does not provide details of the same or the borrower has not time to look into detailed agreement. Not furnishing a copy of loan agreement or enclosure quoted in the loan agreement is an unfair practice and this could lead to disputes between the NBFC and the borrower with regard to the terms and conditions on which the loan is granted.
First Appeal No.99 of 2020 8
NBFCs are, therefore, advised to furnish a copy of the loan agreement preferably in the vernacular language as understood by the borrower along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction/disbursement of loans." The complainant had signed the loan documents in vernacular language i.e. Punjabi. Learned counsel for OP-Bank has submitted that the complainant was fully aware about the repayment schedule and repayment of interest. But there is no evidence available on record which shows that OP-Bank had furnished the copy of loan agreement to the complainant or he was informed about the rate of interest by way of sending communication in vernacular language.
15. It is also relevant to mention that during the proceedings, learned counsel for the respondent-Bank has stated before this Commission that as per his information OP-Bank charged simple interest @11.60% per annum. Moreover, vide M.A. No.935 of 2021, the respondent-Bank prayed that the appellant be directed to pay outstanding amount of Rs.10,30,425.17/- including simple interest. Whereas as per the loan documents placed on record by the respondent-Bank in additional evidence shows that the rate of interest is floating and the respondent-Bank specifically pleaded in para No.4 of the written reply before the District Commission that there is no loan in banking industry to which simple interest is applicable. In view of this we are of the considered view that the OP-Bank has been changing the stand, as per its convenience which amounts to 'deficiency in service'.
First Appeal No.99 of 2020 9
16. RBI has also issued circulars from time to time as to how the floating rate of interest on loans is to be charged. The relevant part of one of its circular No.DBOD.Dir.BC.6/13.03.00/2007-08 dated 02.07.2007, is referred as under:-
"2.5.1. 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."
There is also no document on record whereby the OP-Bank informed the complainant about the change of rate of interest whereas from perusal of Loan Section (Annexure R-3), it is clear that the OP-Bank charged/changed rate of interest from time to time. The OP-Bank has not sent any communication in vernacular language to the complainant with regard to charging of compound interest. This act of OP-Bank amounts to 'deficiency in service' and violation of guidelines issued by the Reserve Bank of India. The Delhi State Consumer Disputes Redressal Commission in its judgment of case "Mr. Vishnu Bansal Vs. ICICI Bank Ltd." (III)2021 CPJ-99 has held in paras No.16 and 17 as under:-
First Appeal No.99 of 2020 10
"16. Returning to the facts of the present case, the Opposite Party had the power to change the rate of interest charged or change the number of the EMIs, however, the Complainant was never apprised about the fact that the rate of Interest had been increased or the number of the EMIs has been changed. The Opposite Party was duty bound to disclose the aforesaid information to the Complainant in order to provide the complainant the option to either close the account or shift the account.
17. Consequently, we are of the view that the increase or decrease in the interest rates by the Opposite Party without taking the consent from the borrower/complainant amounts to Unfair Trade Practice."
Otherwise also it is apparent not only from perusal of ratio of said judgment as mentioned above but also on perusal of guidelines of RBI, that the methodology of computing the floating rates should be objective, transparent and mutually accepted. In case rate of interest is enhanced by the Bank from the agreed rate of interest, the consent of borrower is required to be taken. Even if the loan case of the borrower is to be reviewed on increasing rate of interest, the same should be in the knowledge of the borrower. In the present case the respondent- complainant has not complied with the term No.2 of hypothecation deed.
17. The same issue was before the Hon'ble Apex Court as is evident from the judgment of the case "ICICI Bank Ltd. Vs. Maharaj Krishan Datta & others" Civil Appeal No.5928 of 2015, decided on 03.08.2015. In said judgment, it was held that the intimation of resettling of the interest is required to be given to the complainant. In other judgment titled as "M/s IDBI Bank Ltd. & another Vs. Subhash First Appeal No.99 of 2020 11 Chand Jain & another", Revision Petition No.806 of 2008, decided on 15.10.2012, it was observed by the Hon'ble National Commission 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."
18. The next grievance of the appellant/complainant is that OP-Bank charged Rs.44,000/- as processing fee unlawfully and illegally. Learned counsel for the OP-Bank has submitted that as per HO Circular dated 01.04.2012, Bank is entitled to charge processing charges and documentation charges from the complainant. It is relevant to mention that the Reserve Bank of India has issued the guidelines for Fair Practice Code for Lenders-Disclosing all information relating to processing fees/charges to all Scheduled Commercial Banks/All India Financial Institutions, vide Circular No.DBOD.No.Leg.BC.86/09.07.005/2008-09 dated 25.11.2008, which is reproduced as under:-
"Please refer to our Circular DBOD.No.Leg.BC.65 /09.07.005/2006-07 dated March 6, 2007 wherein banks / FIs were advised that loan application forms in respect of all categories of loans irrespective of the amount of loan sought by the borrower should be comprehensive. It should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in the case of non acceptance of application, pre-payment options and any other matter which affects the interest of the borrower, so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower.First Appeal No.99 of 2020 12
2. It has come to our notice that some banks levy in addition to a processing fee, certain charges which are not initially disclosed to the borrower. It may be mentioned that levying such charges subsequently without disclosing the same to the borrower is an unfair practice.
3. Banks / FIs are therefore advised to ensure that all information relating to charges / fees for processing are invariably disclosed in the loan application forms. Further, the banks must inform 'all-in-cost' to the customer to enable him to compare the rates charged with other sources of finance."
The OP-Bank has neither produced any application form before the District Commission nor before this Commission, whereby the complainant was informed about the charging of processing fee. Accordingly without informing the complainant charging of processing fee of Rs.44,000/- also amounts as 'unfair trade practice'.
19. It is further relevant to mention that complainant requested OP-Bank not to charge compound/penal interest. On the other hand, OP-Bank pleaded in para No.6 of written reply that "there is no law vide which OP Bank can be directed to be charge simple rate of interest. As stated above, no penal interest has been levied. But compounding of interest is as per sanction." There is no mention of charging any compound interest in the terms and conditions of the loan document (Annexure R-1), which is also against the guidelines of the RBI. The respondent-Bank was directed to file fresh up-to-date calculation, vide order dated 06.09.2021. In response thereto, the OP- Bank filed the calculation alongwith M.A. No.1028/2021. There is no detail as to whether the OP-Bank calculated the compound interest, simple interest and floating rate of interest on the principal amount for First Appeal No.99 of 2020 13 the period from April 2019 to August 2021. As per this calculation, the OP-Bank has firstly calculated the interest on the principal amount and showed the outstanding amount as Rs.15,09,425.17 paise and then deducted the amount of Rs.4,70,000/- deposited by the complainant out of this amount not from the principal outstanding amount. Despite the direction issued by this Commission, the OP-Bank has not supplied the detailed break up of interest charged i.e. Rs.3,28,000/-, which was deposited by the complainant which amounts to negligence on the part of OP-Bank. Whereas the appellant/borrower could have deposited the principal amount at any time without paying any foreclosure charges in case of floating rate of interest, as per RBI Guidelines. The appellant/complainant has deposited the total amount of Rs.7,98,000/- under the directions of this Commission, but still amount of Rs.7,11,425.17 paise is pending as principal amount, as per M.A. No.1028/2021 of the respondent-Bank. Whereas, calculation attached with this M.A. shows that this amounts of Rs.7,11,425.17 paise is total outstanding including interest. Moreover, the Banks are not entitled to charge any interest on interest/compound interest/penal interest for the period during the moratorium, as per judgment of the Hon'ble Supreme Court of case "Small Scale Industries Manufactures Association (Regd.) Vs. Union of India and others"
Writ Petition(C) No.476 of 2020, decided on 23.03.2021.
20. As per calculation of respondent-Bank, the complainant has not paid any amount to OP-Bank from April 2019, but despite that the respondent-Bank has not declared the loan account of the complainant as Non-Performing Asset (NPA). There was no stay order First Appeal No.99 of 2020 14 passed by this Commission in this regard during pendency of the appeal. The document placed on record by respondent-Bank alongwith M.A. No.580/2021, shows that OP-Bank has settled the cases of some of the loanees/customers under one time settlement scheme. The appellant/complainant has also requested the respondent-Bank to settle his loan case under one time settlement scheme, but of no avail. This act of respondent-Bank is also discriminatory. In this way, it can be said that the respondent-Bank has not complied with the guidelines issued by the RBI from time to time and terms and conditions of the Agreement as well. Had the information of increase of rate of interest, outstanding principal amount, number of due installments and charging of compound interest been in the knowledge of the appellant/ complainant, he could have taken the appropriate step in repaying the loan amount. The District Commission has failed to appreciate the above said aspects of the case, accordingly the impugned order is hereby set-aside.
21. We are of the considered view that because of inaction on the part of the respondent/OP not only a huge financial burden has come on the shoulders of the complainant, but it has caused mental and physical harassment in pursuing the litigation and by engaging lawyers for redressal of his grievance. This act of the respondent/OP, not only amounts to 'deficiency in service', but 'unfair trade practice' and has also caused 'harassment' to the borrower/complainant.
22. Keeping in view the facts and circumstances of the case as well as the discussion as above and after taking into consideration the First Appeal No.99 of 2020 15 guidelines issued by RBI and case law as discussed above in detail, the appeal is allowed and the respondent-Bank is directed :-
(i) to adjust the amount of Rs.3,28,000/- against the principal amount not towards interest, as the Bank has not furnished any break-up of interest charged;
(ii) not to charge any compound interest from the complainant for the whole period of loan because of action and inaction of OP which has resulted into 'deficiency in service' and 'unfair trade practice' on the part of respondent-Bank, as discussed above;
(iii) by calculating the simple interest @11.95% from December, 2015 without charging any compound interest the appellant/complainant be furnished calculation chart within a period of 15 days from the date of receipt of certified copy of this order and thereafter the complainant shall deposit the amount, if any;
(iv) to refund an amount of Rs.44,000/- charges of processing
fee, as the same was never disclosed to the
appellant/complainant;
(v) to pay an amount of Rs.50,000/- to the
appellant/complainant towards compensation for mental harassment and agony;
(vi) to pay litigation expenses of Rs.25,000/- to the complainant;First Appeal No.99 of 2020 16
(vii) to adjust the subsidy, if any, in the loan account of the complainant; and
(viii) to issue 'No Objection Certificate' to the complainant.
The respondent-Bank is directed to comply with the order within a period of 45 days from the date of receipt of certified copy of the order.
23. The appeal could not be decided within the stipulated period due to heavy pendency of Court cases and non-sitting of this Commission due to pandemic of Covid-19.
(JUSTICE DAYA CHAUDHARY) PRESIDENT (URVASHI AGNIHOTRI) MEMBER January 04, 2022.
MM