1.      The Appellants filed the instant Appeal under section 51 of the Consumer Protection Act, 2019 (the Act”), against the Order dated 01.03.2023 passed by the learned State Consumer Disputes Redressal Commission, Karnataka. (“State Commission”) in Consumer Complaint No. 156 of 2018, wherein the State Commission partly allowed the Complaint of the Complainant (Respondent herein) against the Opposite Parties (Appellants herein).

2.      For convenience, the parties in the present matter are being referred to as per position held in the Consumer Complaint. The appellants are described as Opposite Parties (OPs) and the respondent is described as the Complainant.

3.      Brief facts of the case, as per the complainant, are that he approached Shree Mata Co-operative Credit Society Ltd, managed by OPs, for financial assistance to develop his agricultural land. The OPs, operating under the Karnataka Co-operative Societies Act and the Multistate Co-operative Act, approved a loan of Rs.3,00,00,000, secured by the complainant’s title deeds, and agreed to an interest rate of 14% p.a. The loan was disbursed under A/c No. 645 and was to be repaid through 60 EMIs. Subsequently, he discovered that unauthorized withdrawals amounting to Rs.4,68,600/- were made from his account for various funds that he did not authorize. Additionally, Rs.3,00,000/- was withdrawn, but no cash was provided to him. The OPs allocated shares worth Rs. 9,000/- but did not provide him share certificates or dividend. He paid regular instalments to the OPs at interest @ 14% per annum and 16% per annum in case of default, as stipulated in the mortgage deed. Despite requesting a detailed calculation sheet, the OPs failed to provide one. When sought to close the loan account, OPs demanded Rs.69,85,678/- towards interest, claiming that interest was due until January 2016. It is the case of the complainant that interest was charged @ 21% per annum, contrary to the agreed rates. He paid excess interest amounting to Rs.38,18,819 and that the OPs collected Rs.4,67,600 and Rs.3,00,000 in cash without any basis. Consequently, he alleged a deficiency of service and sought a refund of the excess amounts paid by him, along with compensation.

4.      In their reply before State Commission, the OPs denied the averments and contended that the complainant approached OP society for financial assistance and a loan of Rs.3,00,00,000 was sanctioned on 14.10.2014 by executing mortgage/loan deed and three sureties. The agreed rate of interest was 18% per annum and, in case default 20% per annum was payable in 60 EMIs. After the loan was sanctioned, he did not heed to repay the loan as agreed. On 31.03.2015 he made a part payment towards the principal amount of Rs.4,110 and interest of Rs.2,98,890. Further, on 19.01.2016 he made part payment of Rs.14,232 towards principal and interest of Rs. 69,85,678, as against Rs.2,99,95,890/-. Thereafter, on 15.12.2017 he paid total outstanding amount of Rs.2,94,79,658 and interest of Rs.1,17,13,141. The said amount was paid based on the requests made by him as a one-time settlement and OPs have also provided a rebate of Rs.5,00,000 to him towards interest. It was the case of the OPs that after paying the loan amount along with interest, he filed this false complaint for wrongful gains and alleged deficiency in service. No excess amounts were collected. What was paid was as per agreement between the parties. There is no consumer and service provider relationship between them.

5.      The learned State Commission vide order dated 01.03.2023 partly allowed the complaint against OPs with the following observations:

“In the absence of any materials placed before this Commission, we draw an inference that the Opposite Parties have collected excess rate of interest against the RBI norms, we noticed here that, the loan was sanctioned for the purpose of development of agricultural land. We do not consider the rate of interest collected by the Opposite Parties is in accordance with the RBI rules and regulations, we hold the Opposite Parties have collected excess rate of interest from the complainant, when he offered to pay at onetime payment/ settlement that to prior to completion of 60 months. Therefore, it is clear deficiency of service on the part of the Opposite Parties in collecting the excess interest to the tune of Rs.38,18,819/- and they are liable to pay the same to the complainant. We noticed that, no cogent evidence produced by the complainant to show that an amount of Rs.4,67,600/- was withdrawn by OP to invest on VF LLMF SWMF DEMS FUND LLMSD and also with drawn cash of Rs.3,00,000/- by OP. Hence the claim cannot be accepted. Accordingly, the complaint is allowed in part with costs and we proceed to pass the following:

ORDER

The complaint is allowed in part with cost of Rs. 10,000/-. The Opposite Parties No.1 to 3 are directed to refund an amount of Rs.38,18,819 with interest @ 6% per annum on the said amount from the date of payment till the date of realization. Further the Opposite Parties No.1 to 3 are directed to comply the above order within 30 days from the date of receipt of this order. Failing which, the payable amount shall carry interest @9% p.a. from the date of default till realisation.”

6.      Being aggrieved by the impugned order dated 01.03.2023 passed by the Ld. State Commission, OPs (appellants herein) have filed this present Appeal no. 476 of 2023 seeking to:

“Set aside the judgment and Order dated 01-03-2023 in Complaint Number 156/2018 passed by the Karnataka State Consumer Disputes Redressal Commission, Bangalore and dismiss the complaint with exemplary cost in the interest of justice and equity.

  Pass any other order or direction as this Hon'ble Court deems just and proper under the facts and circumstances of the case including award of cost in the interest of justice and equity.”

7.      In the grounds of the instant appeal, the Appellants/OPs have mainly contended the following:

1. The State Commission failed to consider that the dispute involved the rendition of accounts and a commercial dispute for recovery of excess interest on a loan. Thus, the case does not fall under the Consumer Law, as defined under Section 2(1)(d) of the Act.
2. The State Commission overlooked specific conditions of the loan granted, the mode of payment, and the monthly instalments.
3. The State Commission concluded the case without considering the arguments of OPs that the complainant had repaid the entire loan amount prior to completion of 60 months without examining the statement of accounts and notices issued to the respondent.
4.           The State Commission erred in passing the order based solely on the complaint without considering the objections raised by OPs. The complainant's allegations that the OPs charged an excess rate of interest against RBI guidelines were erroneous. The loan in question was for a commercial purpose, involving development of agricultural lands into non-agricultural lands for sale as plots, which did not fit the definition of a consumer transaction and this fact was suppressed by the complainant.

8.      Upon the notice of memo of appeal, the Respondent/Complainant filed his reply and reiterated the facts in his complaint and stated that availability of arbitration as remedy did not debar him from approaching the Consumer Forum in case of deficiency in services rendered to him by a service provider if there has been an adoption of unfair trade practices. He referred to Section 17 of the Act and averred that this Commission had the jurisdiction to decide the complaint.

9.      In his arguments, the counsel for Appellants/OPs asserted that the State Commission misconstrued definitions in the Act, leading to an erroneous judgment. The complainant sought recovery of excess interest on a cash credit loan, which amounted to a commercial dispute for rendition of accounts, thus being outside this Commission’s purview. He emphasized that the grant of relief for rendition of accounts in bank transactions was not within the ambit of the Consumer Protection Act and such reliefs could only be pursued through a civil court suit. He relied on M/s. House of Dubary vs. New Bank of India & Ors., 1991(1) CPR 216 (NC); Triloki Nath Singla vs. ICICI Bank Limited, decided on 21.06.2013 and ICICI Bank Ltd. vs. Naresh Kumar Sharma decided on 25.02.2022. The State Commission erred in holding that he repaid the loan within 60 months without reviewing the statement of accounts and EMI payments. Relying on The Secretary, E & NF Railway Junior Co-operative Credit Society Limited, Eastern Railway v. Sri Jyotish Chandra Sarkar & Anr., (2024) SCC OnLine Cal 1688, he asserted that since the State Commission lacked jurisdiction its Order should be set aside in the interest of justice and equity.

10.    Per contra, the learned counsel for complainant reiterated facts from the complaint and argued that the complainant was charged excessive interest, which was only communicated orally and never provided the accounts. At the time of sanctioning loan, neither the details of sanction order nor the loan covenants were made available to him. The OPs had purportedly agreed to an interest rate of 14% per annum and 16% per annum for defaulted instalments, with repayment in 60 EMIs. However, the complainant later discovered that the actual interest charged was 21% per annum to settle the loan and avoid further interest accrual, he paid the full amount. Despite requests for recalculation of the loan account, OPs did not provide any information thereby, delaying the closure of account. As per circulars from Dept of Co-operation, Govt of Karnataka, the maximum allowable interest rates were 14% per annum for secured credit and 16% per annum for unsecured credit. Despite this, the OPs charged him over 21% per annum on the secured loan, resulting in an excess payment of Rs.38,18,819 in interest. Additionally, the OPs debited Rs.4,67,600 on 16.10.2014 and Rs.3,00,000 from his savings account, amounting to a total loss of Rs.45,86,419. He argued that the copy of the application form returned to the complainant did not specify any interest rate. However, OPs later presented a different copy of the application form to the State Commission stating interest @ 18% & 20% respectively. Appreciating the findings of the State Commission, he argued that it rightly disregarded this document as it was inconsistent with the form provided to the complainant. He further highlighted that the interest charged by the OPs amounted to Rs.1,89,94,709 for a loan period of three years, even after a rebate of Rs.5,00,000/- was applied, this amount was excessively high, especially considering the loan's original duration of five years. Even if he had defaulted on all his instalments, such a high interest charge would still be unjustifiable. Arguing the objection regarding the maintainability of the complaint, he asserted that the same was fundamentally misconceived and should be rejected. The remedy under this Act is an additional remedy and does not preclude the complainant from seeking redressal through this Commission. He relied on Veena Singh (dead) through LRs v. District Registrar/ Addl Collector (F/R) & Anr, (2022) 7 SCC 1; Secretary, Thirumurugan Co-operative Agricultural Credit Society v. M. Lalitha (Dead) Through LRs. & Ors., (2004) 1 SCC 305; and Smt. Kalawati & Ors. v. M/S. United Vaish Co-operative Thrift & Credit Society ltd., 2001 SCC OnLine NCDRC 14, and argued that the present dispute did not fall within the ambit of a dispute touching the constitution, management or business of a multi-state cooperative society. Hence, the jurisdiction of this commission is not barred and prayed that the final order passed by the State Commission be upheld, and the appeal be dismissed.

11.    I have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by learned counsels for both the parties.

12.    Undisputedly the dispute in question is with respect to the functioning of the OP cooperative society formed under the Multi-State Cooperative Societies Act, 2002. Therefore, the first issue to be determined is whether consumer forum has jurisdiction over disputes involving cooperative societies under the Multi-State Cooperative Societies Act, 2002?

13.    Admittedly, the complainant is a member of the OP society. There had been a transaction between the complainant and OPs wherein the former mortgaged his title deeds to the latter against which a loan amount of Rs.3,00,00,000/- was sanctioned to him for development of his land and was to be paid through 60 EMIs. The complainant stated that the interest rate decided between the parties was 14% p.a. and the OPs claim the same to be 18% per annum and 20% per annum, in case of default. The parties failed to produce the mortgage deed to examine the liabilities of the parties, rate of interests applicable and its tenability. While the complainant stated that necessary documents were not provided to him, the OPs failed to produce the same. Even if there is an agreement, the same cannot be in violation of the Act under which the OPs Society is run or the RBI directives in this regard. It is stated that, RBI guidelines prescribe the maximum interest that can be charged against such loan is @ 14%. Anything charged beyond would amount to an unfair trade practice. At the same time, it is also undisputed that the complainant did not produce any evidence to establish unauthorised withdrawal of Rs.4,67,600/- from his account by the OPs along with Rs.3,00,000/- cash.

14.    As regards contention whether a consumer forum has jurisdiction to try a complaint against a Credit Cooperative Society governed by Multi-State Cooperative Act, it is well settled position, normally, the jurisdiction of this fora is over and above the general/ special laws. Thus, the State Commission exercised the jurisdiction. However, in The Secretary, E & NF Railway Junior Co-operative Credit Society Ltd, Eastern Railway v. Sri Jyotish Chandra Sarkar & Anr., CO. No.3243 of 2013, decided on 20.02.2024, the High Court of Calcutta has held:

“14. Thus, in view of the specific embargo created under the Special Act, the District Consumer Forum was not competent to pass any order and as such District Consumer Disputes Redressal Forum and the State Consumer Disputes Redressal Commission, West Bengal erred in law in entertaining the application of the opposite party no.1.”

15.    Perusal of Clause (b)(1) of Section 84 of the Act reveals that a dispute between a member, past member and persons claiming through a member, past member or deceased member on the one hand and the multi-state co-operative society, its board or any officer, agent or employee on the other hand touching the management, constitution or business of the society would be referred to arbitration. The petitioner is a Multi-State Society governed under the Multi State Act. The remedy of arbitration provided under section 84 is a statutory and is binding on all parties mentioned therein.”

16.          As regards arbitration, perusal of Section 84 of the said Act would bring out 2 conditions for its applicability in the present case:

1. Dispute should be between a member and multi-state society.
2. Such dispute should relate to the management, constitution or business of the society.

17.  In the present case, undisputedly the first condition is met. As regards the second condition whether the dispute in the present case is of such nature that relates to the management, constitution or business of the society, it is to be noted that the OPs being a credit society, the acts of lending and borrowing falls within its domain of regular business. Therefore, the second condition is also met.

18.    Following the judgment of the High Court of Calcutta in the case of E & NF Railway Junior Co-operative Credit Society Limited, Eastern Railway (Supra) in a similar case, mandating arbitration under Section 84 of the Multi-State Act for disputes related to management or business of such cooperative society, I find that the dispute involving the rendition of accounts and excess interest on a loan between the parties fell under the business domain of the cooperative society, thus requiring to be adjudicated by arbitration.

19.    In view of the foregoing, the Consumer Forum does not have jurisdiction to entertain the present complaint as same should be dealt by way of arbitration as stipulated in Multi-State Cooperative Societies Act, 2002. Thus, the order of the learned State Commission dated 01.03.2023 is set aside and the Consumer Complaint is dismissed. Accordingly, the First Appeal No.476 of 2023 is allowed.

20.    Needless to say, the Respondent/Complainant has right to approach appropriate legal fora to seek relief in respect of the grievances against the Appellant/ OP Society. He may also seek benefit of the provisions of Section 14 of the Limitation Act, 1963 in doing so.

21.    There shall be no order as to costs. All pending Applications, if any, also stand disposed of accordingly.