DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, PALAKKAD
Dated this the 27th day of July, 2023
Present : Sri. Vinay Menon V., President
: Smt. Vidya A., Member
: Sri. Krishnankutty N.K., Member Date of Filing: 06/03/2021
CC/47/2021
Mohammed Ibrahim,
S/o Muhammed Ali,
Alif Manzil, Chullimada,
Kanjikode Post, Palakkad - 678621 - Complainant
(By Adv. M/s. T.C. Abhijith & Sivaprakash K.)
Vs
Bajaj Finserv,
# 151, 1st floor,
A&P Complex, Stadium Bye pass Road,
Sulthanpet, Palakkad – 678001. - Opposite party
(By Adv. Sidharthan)
O R D E R
By Sri. Vinay Menon V., President
- Pleadings of complainant, abridged, are that the complainant was offered a personal loan by the opposite party which he availed believing the promises of the O.P. that the interest rate is 8%. Thereafter he availed the said loan for Rs.1,40,000/- but Rs.1,28,403/- alone was credited to his account. Upon enquiry it was informed that Rs.11,597/ was the processing fee. Even though at the initial stages the loan repayment was punctual due to Covid pandemic there were irregularities. The OPs used to levy Rs.605/- as default penalty. During Covid lockdown period he was provided with two months moratorium without his concurrence. He also came to notice that the rate of interest was exorbitant. The complainant pleads for repayment of the excess amount paid by way of usurious interest and penalty.
- The OPs filed details version contending that this Commission has no jurisdiction to entertain this complaint as the relation between the complainant and OP is that of debtor and creditor and not that of consumer and service provider. The present transaction is purely commercial and contractual in nature. Further this dispute pertains to accounts and therefore is not maintainable. The complainant did not maintain enough money in his account and this was the cause for dishonouring of cheques. The interest was levied based on the contract entered into between the parties; therefore they sought for dismissal of the complaint.
- The following issues arise for consideration.
- Whether the complaint is bad for non-joinder of necessary parties?
- Whether the complainant is a ‘consumer’ and the dispute raised by the complainant a ‘consumer dispute’ as envisaged under the Consumer Protection Act?
- Whether this Commission has jurisdiction to entertain the complaint?
- Whether the O.P. was charging excessive interest that the permissible rate?
- Whether the O.P. is justified in debiting an amount of Rs. 605/- as cheque bouncing charges?
- Whether there is any deficiency in service on the part of the O.P.?
- Reliefs as to cost and compensation?
- Any other reliefs?
4. (i) Complainant filed proof affidavit and marked Ext.A1.
(ii) OPs filed proof affidavit. Exts.B1 to B3 were marked.
Issue No. 1
5. The primary contention of the opposite party is that Bajaj Finserv is just a brand name and not the name of the opposite parties. The name of opposite parties are Bajaj Finance Ltd., Bajaj Finance Ltd. is a company constituted under the Companies Act. There is no entity as Bajaj Finserv.
6. It can be seen that from the documents produced, the name of Bajaj Finserv is affixed on the documents handed over to the complainant. The complainant, being a layman can’t be expected to be in a position to understand the legal technicality relating to a corporate person or the brand name.
7. From the pleadings of the complainant it is very clear that the grievance of the complainant is against the person who sanctioned loan to him. There is no variation in the address. If we are to hold that this complaint is not maintainable for such a mere error on the part of a layman in understanding the technicalities allied with Brand names and legal names, it would be nothing but injustice.
8. Such a mistake on the part of the complainant has not prevented the opposite party from understanding the nature of pleadings and from claiming responsibility to answering the pleadings made by the complainant.
9. Hence, we hold that even if the complainant has made a mistake with regard to the name of the complainant, such a mistake is not fatal or vital, warranting dismissal of the complaint.
Issue Nos. 2
10. The second objection raised by the opposite party is that the relationship between the complainant and OP is that of a lender and borrower and cannot be termed to be a consumer - service provider relationship. Therefore they sought for dismissal of the complaint.
11. Section 2(42) of the Consumer Protection Act, 2019, dealing with the definition of ‘service’ includes ‘facilities in connection with banking and finance’. Therefore the contention of the opposite party relying on some decisions made as early as 2006 will not apply to this case. The relationship between the complainant and the opposite party is that of consumer - service provider.
Issue No. 3
12. In view of the findings in Issue Nos.1&2, we hold that this Commission has jurisdiction to entertain this complaint.
Issue No. 4
13. Complainant’s case is that the opposite party has levied an exorbitant interest. Opposite party contended that the interest was charged in accordance with a contractual agreement entered into between the parties. Both complainant and opposite party has produced the statement of account pertaining to the complainant’s loan account. These documents are marked as Ext.A1 & B2. Both these documents revealed the annualized rate of interest to be 34%. And this interest is levied on Rs. 1,40,000/-
14. 2 questions that needs to be answered to conclude this Issue are:
(1) Whether the interest rate of 34% charged on the loan account is legal, albeit being contractual in nature?; and
(2) Whether interest is payable on Rs. 1,40,000/-?
Question No. 1
15. It goes without saying that the opposite party is a Non-Banking Finance Company. Section 2 (7) of Kerala Money Lenders Act, 1958 (KML Act) defines a money lender as a person whose main or subsidiary occupation is the business of advancing and realizing loans or acceptance of deposits in the course of such business and includes any persons appointed by him to be in charge of a branch office or branch offices or a liaison office or any other office by whatever name called. Thus opposite party NBFC is a money lender as contemplated under the KML Act. This view has the support of the Hon’ble High Court of Kerala in view of its DB decision reported as Sundaram Finance Ltd., V/s. State of Kerala and Ors (2009 (4) KLT 833).
16. S.3 of The Kerala Prevention of Charging Exorbitant Interest Act, 2012, prohibits charging exorbitant interest. ‘Exorbitant interest’ is defined in this Act as an interest at a rate more that the rate specified in S. 7(1) of Kerala Money Lenders Act. S.7(1) of KML Act states that no moneylender shall charge interest on any loan at a rate exceeding 2% above the maximum rate of interest charged by Commercial banks on loans granted by them.
17. Though both the parties have not adduced any evidence regarding the maximum rate of interest charged by Commercial banks, we take notice that the maximum interest levied by Commercial Banks are not anywhere in the vicinity of 30%. Thus we can see that levying of interest @34% is in gross violation of provision of Kerala Money Lenders Act, 1958 and The Kerala Prevention of Charging Exorbitant Interest Act, 2012.
18. As per S.23 of Indian Contract Act, 1872, a consideration or object of an agreement is lawful, unless it is forbidden by law; or if it is of such a nature that, if permitted, it would defeat the provision of any law; or it is fraudulent or involves or implies, injuries to the person or property of another; or the court regards it as immoral or opposed to public policy. In each of the above cases the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
19. As we have already found that levying of interest at the rate of 34% is violative of the provision of statues, we hold that the agreement, insofar as it relates to the interest portion levied at 34%, to be usurious and exorbitant and hence illegal, defeating the purpose of statutes and opposing public policy.
Question No. 2
20. The 2nd question to be answered is whether interest can be levied on Rs.1,40,000/-, when the actual amount disbursed is only Rs. 1,28,403/-.
21. S. 2(3) of The KML Act, 1958 defines “Interest” to include the return to be made over and above what was actually lent, whether the same is charged or sought to be recovered specifically by way of interest or otherwise. Here the key phrase is “what was actually lent”.
22. The loan amount, per documents, is Rs. 1,40,000/-. Rs. 11,597/- never left the possession of the O.P. Hence it cannot be said that Rs. 11,597/- ‘was actually lent’ in the strict and legal sense as contemplated under the KML Act. The amount that ‘was actually lent’ was only Rs.1,28,403/-
23. Hence charging interest on amounts that was not lent, ie. Rs. 11,597/-, is against statutory provisions.
Issue No. 5
24. The complainant has not adduced any evidence to prove that levying of Rs.605/- as penalty charges for dishonouring of cheques is illegal. Thus we are unable to answer this issue.
Issue No.6
25. Apropos the findings in issue number 4 we hold that there is gross deficiency in service and unfair trade practice on the part of opposite party.
Issue Nos. 7 & 8
26. In view of the findings above we hold that the complainant is entitled to the following reliefs:
1) The opposite party is directed to restructure the loan account by
(a) Reducing the interest rate to permissible level of not more than 2% above the maximum rate of interest levied by commercial banks; and
(b) Reducing the principal amount to Rs.1,28,403/-.
2) The complainant will be liable only to pay the balance payment in accordance with such restructured account, if at all any amount is due.
3) The complainant will be entitled to interest@10% from the date of sanction of loan i.e. 28/6/2019, till date of repayment on such amounts illegally levied over and above the amounts statutorily permissible.
4) Considering the gravity of illegality, the complainant is awarded a compensation of Rs. 2,50,000/- (Rupees Two lakhs fifty thousand only)
5) The complainant shall be entitled to a cost of Rs.50,000/- (Rupees Fifty thousand only)
6) The above order shall be complied by M/s Bajaj Finance Ltd. within a period of 45 days from the date of receipt of this order, failing M/s Bajaj Finance Ltd. shall pay an amount of Rs.500/ per month or part thereof as solatium to the complainant.
27. This complaint stands allowed on the above terms.
Pronounced in open court on this the 27th day of July, 2023.
Sd/-
Vinay Menon V
President
Sd/-
Smt. Vidya A.
Member
Sd/-
Krishnankutty N.K.
Member
APPENDIX
Exhibits marked on the side of the complainant :
Ext.A1 – Original Statement of Account issued from O.P.
Exhibits marked on the side of the opposite party:
Ext.B1 – Copy of Specific Power of Attorney
Ext.B2 – Copy of PLCS agreement
Ext.B3 – Copy of Statement of Accounts pertaining to the complainant.
Court Exhibit: Nil
Third party documents: Nil
Witness examined on the side of the complainant: Nil
Witness examined on the side of the opposite party: Nil
Court Witness: Nil
NB : Parties are directed to take back all extra set of documents submitted in the proceedings in accordance with Regulation 20(5) of the Consumer Protection (Consumer Commission Procedure) Regulations, 2020 failing which they will be weeded out.
