State Consumer Disputes Redressal Commission
Hdfc Ltd. vs Ram Pal Garg on 14 June, 2018
2nd Additional Bench
STATE CONSUMER DISPUTES REDRESSAL COMMISSION,
PUNJAB, CHANDIGARH
First Appeal No. 111 of 2018
Date of Institution : 05.03.2018
Date of Reserve : 06.06.2018
Date of Decision : 14.06.2018
HDFC Limited, Housing Finance Corporation Limited, SCF 8,
Leela Bhawan Market, Patiala, Tehsil and District Patiala through
its Manager/Authorised Signatory.
.Appellant/Op No.1
Versus
1. Ram Pal Garg son of Late Shri Sham Lal,
2. Amit Garg son of Shri Ram Pal Garg,
3. Aman Garg son of Shri Ram Pal Garg,
All resident of Sham Niwas, situated at Banasar Bagh Road,
Patiala Gate, Sangrur, Tehsil and District Sangrur.
....Respondents No.1 to 3/Complainants
4. HDFC Bank Ltd., Head Office : 1st Floor, C.S. No. 6/242,
Senapati Bapat Marg, Lower Parel (W), Mumbai through its
Managing Director/ Manager/ Authorised Signatory.
5. HDFC Bank Ltd., Shop No. 1-2-3, Kaula Park Market,
Sangrur, Tehsil and District Sangrur through its Manager /
Authorized Signatory.
....Performa Respondents
First Appeal against the order dated
18.01.2018 of the District Consumer
Disputes Redressal Forum, Sangrur.
First Appeal No. 111 of 2018 2
Quorum:-
Shri Gurcharan Singh Saran, Presiding Judicial Member.
Shri Rajinder Kumar Goyal, Member
Present:-
For the appellant : Sh. Shekhar Verma, Advocate
For respondent Nos.1 to 3: Sh. Munish Goel, Advocate
For respondent Nos. 4&5: Ms. Ramandeep Kaur, Advocate
GURCHARAN SINGH SARAN, PRESIDING JUDICIAL MEMBER
ORDER
The appellant/Op No.1 (hereinafter referred as Op No.1) has filed the present appeal against the order dated 18.01.2018 passed in consumer complaint No. 660 dated 11.11.2016 by the District Consumer Disputes Redressal Forum, Sangrur (hereinafter referred as the District Forum) vide which the complaint filed by the complainant was allowed with the direction to Op No. 1 to refund the excess amount of Rs. 3,206/- per month so recovered for the period 15.7.2011 to 15.11.2016 alongwith interest @ 9% p.a. from the date of deposit till its refund. They were further directed to pay Rs. 10,000/- as compensation and Rs. 5,000/- as litigation expenses. The order was ordered to be complied within a period of 30 days.
2. Complaint was filed by the complainant under the Consumer Protection Act, 1986 (in short 'the Act') against the Ops stating that in the year 2009, they jointly obtained the services of Ops for getting home loan on a fixed rate of interest and EMI was First Appeal No. 111 of 2018 3 fixed @ Rs. 14,476/-. Subsequently, the loan amount was enhanced and installment of Rs. 18,887/- was fixed by the Ops and the installments was being debited from his saving bank account No. 02621570001183. The complainants were given the copy of the account statement from where the complainants came to know that Op No. 3 has been illegally debiting from the said saving account of the complainant with a monthly installment of Rs. 22,073/- instead of Rs. 18,887/- illegally charging excess amount of Rs. 3,206/- per installment. The said act of Ops amounted to gross negligence. At the time of taking the loan, the Ops had obtained signature of the complainant on number of documents and no opportunity was given to the complainant to go through these documents. The complainants many a times requested the Ops to refund the illegally charged amount and demanded the complete account statement but Ops put of the matter on one pretext or the other and flatly refused to return the excessive amount deducted from his account. Alleging deficiency in services on the part of Ops, the complaint was filed by the complainant seeking directions against the Ops to refund the amount @ Rs. 3,206/- per installment for 65 installments from 15.7.2011 to 15.11.2016 alongwith interest @ 10% and Ops should overhaul the account of the complainant for payment of EMI @ Rs. 18,887/-. They be also directed to pay compensation on account of deficiency in services to the tune of Rs. 50,000/- and Rs. 10,000/- for mental agony and harassment and Rs. 11,000/- as litigation expenses.
First Appeal No. 111 of 2018 4
3. Upon notice, Op Nos. 1 & 3 appeared and filed their written reply whereas Op No. 2 was proceeded ex-parte vide order dated 20.12.2016 by the District Forum. Op No. 1 in its reply took the preliminary objections that the District Forum did not have the territorial jurisdiction to entertain this complaint because the agreement was executed at Patiala and loan was disbursed at Patiala; the complaint is barred by limitation; the complainant has challenged the increase in installments from the year 2011 and the complaint was filed in the year 2016, therefore, it is barred by limitation; the complaint is not maintainable as the complainants violated the terms of the loan agreement; at the time of availing of the loan, the customers have the choice either to have opted for fixed rate loan or variable loan and the complainants at the time of getting the loan had opted for variable rate. At that time, the prime lending rate was 14% per annum and he was given benefit negative spread/ discount of 4% p.a. and was charged interest @ 10% p.a. Thereafter, the rate of interest was charged as per prime and retail lending rate, therefore, no deficiency in service on the part of Ops. On merits, it was stated that the complainant availed housing loan of Rs. 20 Lacs on floating rate of interest. Initially the loan was Rs. 15 Lacs and EMI was fixed @ Rs. 14,476/-. Subsequently on 22.9.2009, the complainants availed the balance amount of Rs. 5 Lacs and EMI was fixed @ Rs. 18,867/-. As per Clause 2(e), the quantum of EMI was increased from 18,867/- to Rs. 22,073/- on increase in Prime Lending Rate as imbalance had occurred in the interest and principal component of EMI. The First Appeal No. 111 of 2018 5 complainants have paid installments from 1.7.2011 till date, therefore, they were aware of the change in the quantum of EMI. They were informed about the change in the next rate on 1.7.2011. The legal notice dated 18.5.2016 was addressed to HDFC Bank Ltd., which was never received by Housing Bank. There is no deficiency in service on the part of this Op. Complaint is without merit, it be dismissed.
4. Op No. 3 in its reply took the preliminary objections that this Op has been unnecessarily dragged into uncalled litigation; the complainants have no locus-standi or cause of action to file this complaint against this Op and that the Forum has got no jurisdiction to try and decide this complaint. On merits, it was denied that this Op illegally debited the saving bank account of the complainant with monthly installment of Rs. 22,073/- instead of Rs. 18,887/-. It was also denied that Op No. 3 illegally charged amount of Rs. 3,206/- per installment. The loan was taken by the complainant from Op No. 1 and as per the instructions of Op No. 1, this Op debited the installments from the saving bank account of the complainant as settled between the complainants and Op No.1. It was denied that this Op obtained the signatures of the complainants on various blank/printed papers. The contract of interest is between the complainant and Op No. 1. There is no deficiency in service on the part of this Op. Complaint is without merit, it be dismissed.
5. Before the District Forum, the parties were allowed to lead their respective evidence.
First Appeal No. 111 of 2018 6
6. In support of his allegations, the complainants had tendered into evidence documents Exs. C-1 to C-6. On the other hand, Op No. 1 had tendered into evidence affidavit Ex. Op-1 and Annexures R-1/1 to R-1/5. Op No. 3 had tendered affidavit Ex. Op- 3/1.
7. After going through the allegations in the complaint, written version filed by the Ops, evidence and documents brought on the record, the complaint filed by the complainants was allowed as referred above.
8. Aggrieved with the order passed by the learned District Forum, the appellant/Op No. 1 has filed the present appeal.
9. We have heard the learned counsel for the appellant Sh. Shekhar Verma, Advocate, learned counsel for respondent Nos. 1 to 3 Sh. Munish Goel, Advocate, learned counsel for respondent Nos. 4 & 5 Ms. Ramandeep Kaur, Advocate and have carefully gone through the record of the case.
10. It has been stated that earlier the complaint filed by the complainant was dismissed on the ground of limitation. The respondents/complainants challenged the order before the Hon'ble Commission and vide order dated 14.9.2017 the Hon'ble State Commission was pleased to hold that the complaint in its entirety not barred by limitation. However, the District Forum has failed to consider the issue of limitation and erroneously decided that complaint in toto, falls within the limitation period.
11. The Hon'ble Supreme Court in its judgment reported in 2012(1) R.C.R. (Civil) 676 "Khatri Hotels Private Limited Vs. First Appeal No. 111 of 2018 7 Union of India (SC)" held that period of limitation will begin from the date when the right to sue accrue for the first time. The complainants in its complaint in para No. 3(b) has referred that on 16.3.2016 when he obtained the copy of the account statement, he came to know that instead of Rs. 18,887/-, the installment of Rs. 22,073/- is being deducted from his saving bank account opened with Op No. 3. At the time of advancing the loan, it was agreed that the installment will be recovered from the saving bank account of the complainant with Op No. 3. In the loan account, in case the installments is being deducted in the auto system from the saving bank account of the loanee then every year copy of the statement of loan account is required to be supplied by the financial institution to the loanee but in this case, there is no pleading on behalf of Op No. 1 that every year the loan account statement was being supplied to the complainant. Although the averments stated in para No. 3(b) of the complaint has been denied and it has been stated that the installments @ Rs. 22,073/- is being deducted from 1.7.2011. It has been further stated that notice dated 1.7.2011 was sent to the complainants. No doubt that this notice has been placed on the record but it has not been stated vide which mode the notice was sent to the complainants. No postal receipt has been placed on the record. It has not been stated that this notice was delivered personally to the complainant or through other mode, therefore, service of the notice has not been proved on the record. Then in case the notice is not served upon the complainants then version of the complainants is to be First Appeal No. 111 of 2018 8 admitted that he came to know about enhanced rate of EMI when he got the copy of the statement of account. There is no case of the Ops that every year the statement of account was being supplied to the complainant. In case the cause of action is taken from the date of knowledge then the complaint filed by the complainant is within limitation. We do not agree with the plea raised by the counsel for the appellant/Op No.1 that the complaint filed by the complainant is not entirely within limitation.
12. It has been further argued by the counsel for the appellant that at the time of taking the loan, the complainants opted for adjustable/variable rate of interest and accordingly, the rate of interest was changed as per the agreement. After enhancement of the rate of interest, in case the installment is not enhanced then it affects amortization of the principal component, therefore, the EMI was rightly enhanced, which fact has not been rightly appreciated by the District Forum. In case we go through the agreement, amortization has been referred in Point 2.6 and Clause (d) & (e) reads as under:-
"2.6 Amortisation
(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 First Appeal No. 111 of 2018 9 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.
(e) Notwithstanding anything to the contrary contained in this Agreement, having regard to the AIR for the time being, HDFC shall be entitled to increase the EMI amount suitably if;
(i) the said EMI would lead to negative amortization (i.e. EMI not being adequate to cover interest in full), and / or
(ii) the principal component contained in the EMI is inadequate to amortise the loan within such period as determined by HDFC.
The borrower shall be required to pay such increased EMI amount and the number thereof as decided by HDFC and intimated to the borrower by HDFC."
Clause 2.6(e)(ii) will reveal that borrower shall require to pay such increased EMI amount and the number thereof as decided by HDFC and intimated to the borrower by HDFC. Except Ex. R-1/5, no other document has been placed on the record. Therefore, in case the EMI of the complainant has been varied by the Op, they have violated the term and conditions of the loan agreement referred above by not giving the intimation regarding enhancement of EMI. According to Section 21-A of the Bank Regulation Act, rate First Appeal No. 111 of 2018 10 of interest charged by the Banking Company, subject to scrutiny by the Court. In this regard, he has referred to the judgment of Hon'ble Supreme Court in 1994 (3) SCALE 46 "Corporation Bank Vs. D.S. Gowda and Anr." and has referred to restriction, which reads as under:-
"Restriction - whether in view of insertion of Section 21-A Courts are precluded from subjecting transactions entered into between banks and borrowers from scrutiny with view to give relief - Court cannot reopen any account maintained by bank relating to transaction with its customers on ground that rate of interest being charged is excessive - Section 21-A restricted such power of Court - but if rate observed in violation of RBI direction then Court disallow such excess interest and can give relief to party."
13. No doubt that under Section 21-A of the Banking Regulation Act, the Courts do not have the right to go for scrutiny of the rates fixed by the Bank but in view of the judgment relied upon by the counsel for the Ops i.e. "Corporation Bank Vs. D.S. Gowda and Anr." (supra), it has been mentioned that if rate observed is in violation of RBI direction then Court disallow such excess interest and then can give relief to the party. Therefore, the right of the bank to fix the rate of interest is not arbitrarily but subject to RBI instructions. Role of the RBI has been defined under Section 35A of the Banking Regulation Act, 1949, which provides as under:-
First Appeal No. 111 of 2018 11
"35-A. Power of Reserve Bank to give directions.-- (1) Where the Reserve Bank is satisfied that -
(a) in the public interest; or
(aa) in the interest of banking policy; or
(b) to prevent the affairs of any banking company being
conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or
(c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions. (2) The Reserve Bank may, in representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancellation shall have effect."
and that question came up for consideration before the Hon'ble Apex Court in the case "Central Bank of India Vs. Ravindra & Ors.", (2002) 1 SCC 367 wherein the Hon'ble Supreme Court observed as under:-
"50. Though we have answered the question of law before us, but we cannot leave the matter at that alone without sounding notes of caution, lest our view of the law should be First Appeal No. 111 of 2018 12 misconstrued and misapplied. Before we do so, it would be appropriate to refer to the decision of this Court in 'Corporation Bank v. D.S. Gowda' in some detail.
51. The Banking Regulation Act, 1949 empowers the Reserve Bank, on it being satisfied that it is necessary or expedient in the public interest or in the interest of depositors or banking policy so to do, to determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular and when the policy has been so determined it has a binding effect. In particular, the Reserve Bank of India may give directions as to the rate of interest and other terms and conditions on which advances or other financial accommodation may be made. Such directions are also binding on every banking company. Section 35-A also empowers the Reserve Bank of India in the public interest or in the interest of banking policy or in the interests of depositors (and so on) to issue directions generally or in particular, which shall be binding with effect from 15-2-1984. Section 21-A has been inserted in the Act, which takes away power of the court to reopen a transaction between a banking company and its debtor on the ground that the rate of interest charged is excessive. The provision has been given an overriding effect over the Usury Loans Act, 1918 and any other provincial law in force relating to indebtedness."First Appeal No. 111 of 2018 13
14. In para No. 55 of the judgment, it was further observed as under:-
"(5) The power conferred by sections 21 and 35-A of the Banking Regulation Act, 1949 is coupled with duty to act. The Reserve Bank of India is the prime banking institution of the country entrusted with a supervisory role over banking and conferred with the authority of issuing binding directions, having statutory force, in the interest of the public in general and preventing banking affairs from deterioration and prejudice as also to secure the proper management of any banking company generally. The Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is, and it ought to be, aware of all relevant factors, including credit conditions as prevailing, which would invite its policy decisions. RBI has been issuing directions/circulars from time to time which, inter alia, deal with the rate of interest which can be charged and the periods at the end of which rests can be struck down, interest calculated thereon and charged and capitalised. It should continue to issue such directives.
Its circulars shall bind those who fall within the net of such directives. For such transaction which are not squarely governed by such circulars, the RBI directives may be treated as standards for the purpose of deciding whether the interest charged is excessive, usurious or opposed to public policy.
and ultimately, the Hon'ble Apex Court laid down the law as under:-
"(a) the Apex Court has noticed instances of unscrupulous, unfair and unhealthy dealings without generalising the same. The Court has specifically First Appeal No. 111 of 2018 14 observed that instances of unscrupulous, unfair and unhealthy dealings can be multiplied. But such issues are left open to be adjudicated upon in appropriate cases as and when they actually arise for decision.
The present case is an instance of charging usurious rate of interest, which is unfair trade practice.
(b) The Banking Regulation Act, 1949 empowers the Reserve Bank to lay down the policy in the public interest and it has binding effect on the banks. The Reserve Bank of India is entitled to give directions as to rate of interest to be charged and other terms and conditions on which advances or other financial accommodation may be made.
(c) The power conferred by sections 21 and 35-A of the Banking Regulation Act, 1949 is coupled with the duty to act. The Apex Court considered the RBI as a watchdog of finance and economy of the nation, and presumed that it ought to be aware of the relevant factors including the prevailing credit conditions, which would invite its policy decision.
(d) Charging of interest should be reasonable. Further, penal interest can be charged only once for one period of default and, therefore, cannot be permitted to be capitalized. It would be opposed to public policy.
(e) The Court has specifically stated that unscrupulous banks may resort to charging of interest even on monthly rests. It is, therefore, required to be clarified that such unscrupulous banks should not be permitted to charge interest on credit cards on monthly rests.
(f) The Court has observed that most of the banks press into service long-running documents wherein the borrowers fill in the blanks, at times without caring to First Appeal No. 111 of 2018 15 read what has been provided therein, and bind themselves by the stipulations articulated by the best of legal brains. In our view, such practice also would be an unfair trade practice.
(g) Further, despite our repeated suggestion, the learned Counsel for the RBI failed to find out what could be considered as usurious rate of interest on the basis of which the RBI had issued circulars to banks. There was no response except to say that with regard to rate of interest RBI has deregulated the same."
15. The RBI has issued its circulars from time to time, how the rate of interest is to be charged. In its Circular No. DBOD.Dir.BC.5/13.03.00/2006-07 dated 1.7.2006, the loans up to Rs. 2 lakh carry the prescription of not exceeding the Benchmark Prime Lending Rate (BPLR) and on loans above Rs. 2 lakh, banks are free to determine the rate of interest subject to BPLR and spread guidelines. In the same circular dated 1.7.2006, it has been mentioned how the interest rate of loans are to be fixed, is referred as under:-
"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 First Appeal No. 111 of 2018 16 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."
16. In another judgment of the Hon'ble National Commission in "M/S IDBI Bank Ltd. & Anr. vs Subhash Chand Jain & Anr.", decided on 15 October, 2012, it was observed 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. Therefore, on the basis of documents, the terms and conditions of the loan agreement and the judicial pronouncements of the Hon'ble Supreme Court and the Hon'ble National Commission, the variation in the rate of interest and in the EMI without notice to the complainants is not justified, therefore, the Op will continue to charge interest @ 10% on the loan amount for the period 15.7.2011 to 15.11.2016.
17. No other point was raised.
18. Sequel to the above, we do not find any merit in the appeal and the same is dismissed with no order as to costs.
19. The appellant had deposited an amount of Rs. 25,000/- with this Commission in the appeal. This amount along with interest accrued thereon, if any, shall be remitted by the registry to the concerned District Forum, after the expiry of 90 days, from the despatch of the certified copy of the order to the First Appeal No. 111 of 2018 17 parties; subject to stay, if any, by the higher Fora/Court; for the release of the above amount and the District Forum may pass the appropriate order in this regard.
20. Order be communicated to the parties as per rules.
(GURCHARAN SINGH SARAN) PRESIDING JUDICIAL MEMBER (RAJINDER KUMAR GOYAL) MEMBER June 14, 2018.
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