1.      This revision petition has been filed by the petitioner India Bulls Housing Finance Ltd. & anr., against the order dated 02.03.2017 of the State Consumer Disputes Redressal Commission, Punjab, (in short ‘the State Commission’) passed in First Appeal No.391 of 2014.

2.      Brief facts of the case are that the petitioner changed the number of EMIs for repayment of loan taken by the respondent/complainant.  It was alleged by the complainant that the bank has taken unilateral decision without taking consent of the complainant.  The complainant filed a complaint bearing No.CC 340 of 2013 before the District Consumer Disputes Redressal Forum, Bathinda, (in short ‘the District Forum’).  The case was contested by the opposite parties/petitioner on the ground that the number of EMIs can be changed by the bank as per the agreement entered between the parties.  The District Forum after considering the submissions of both the parties allowed the complaint vide its order dated 13.01.2014 as under:-

“10.  Therefore in view of what has been discussed above we are of the considered opinion that there is deficiency in service on the part of the opposite parties.  Hence this complaint is accepted with Rs.10,000/- as cost and compensation against the opposite parties.  The opposite parties are directed to seek the consent from the complainant regarding the increase in the number of instalments or he wants the amount of EMI to be increased.  After seeking his consent, the opposite parties will reschedule the number of installments and amount of EMI after adjusting the amount already paid by the complainant in his loan account and fix the rate of interest as agreed in the loan agreement as per RBI guidelines and furnish him the full detail regarding the increase/decease rate of interest since the date of disbursement of the loan till this order.

        The compliance of this order be done within 45 days from the date of receipt of the copy of this order.”

3.      Aggrieved by the order of the District Forum, the opposite parties/petitioners herein preferred an appeal bearing No.391 of 2014 before the State Commission, which was dismissed vide its order dated 02.03.2017.

4.      Hence the present revision petition.

5.      The learned counsel for petitioners mentioned that there is a provision in the loan agreement that the loaner institution can increase or decrease the number of EMIs based on the prevailing interest rate and for that no consent of the loanee is required.  The learned counsel stated that both the fora below have not appreciated this fact that the court or forum cannot rewrite the agreement in this regard.  Learned counsel further submitted that where the provision for floating  interest/instalments is there in the agreement, it can be unilaterally changed without the consent of the loanee.  Learned counsel stated that this view has been upheld by the Hon’ble Supreme Court in judgment of Indian Bank Vs. Blue Jaggers Estates Ltd. and Ors., AIR 2010 SC 2980, wherein it has been observed:

“16. The argument of the learned counsel for the respondents that the rate of interest is unconscionable, expropriatory and contrary to law also merits rejection because at no stage the respondents had questioned the terms on which loan and other financial facilities were extended by the appellant. That apart, after having enjoyed those facilities for more than one decade, the respondents cannot turn around and raise an argument based on the judgments of this Court in Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986) 3 SCC 156 and Delhi Transport Corporation v. D.T.C. Mazdoor Congress and others 1991 Supp. (1) SCC 600. It must be remembered that the respondents were not in a position of disadvantage vis-`-vis the appellant. If they so wanted, the respondents could have declined to avail loan and other financial facilities made available by the appellant. However, the fact of the matter is that they had signed the agreement with open eyes and agreed to abide by the terms on which the loan, etc. was offered by the appellant. Therefore, the doctrine of unconscionable contract cannot be invoked for frustrating the action initiated by the appellant for recovery of its dues.

6.      Learned counsel for the petitioner further cited the judgment of Hon’ble Supreme Court in Syndicate Bank Vs. R.Veeranna and Ors., AIR 2003 SC 2122, wherein it has been observed:

“6.  We have carefully considered the submissions made by the learned counsel for the parties. The trial court rejected the claim of the plaintiff as regards the interest on the grounds that there was absolutely no record to show that at any time the defendants agreed to pay any higher rate of interest than the agreed rate on the said three loans taken by them. We must point out at once that this observation of the trial court runs contrary to the very agreements Ex. P-I, P-5 and P-11. Further, the acknowledgements made by the defendants in 1978 also indicate that the defendants acknowledged their liability of the amount due and the amount had been calculated on the basis of the enhanced rate of interest. Observations of the trial court that the Bank arbitrarily increased the rate of interest and charged the higher rate also do not stand to the reason in the light of the evidence placed on record including the afore- mentioned documents. In our view, the trial court was wrong in saying that the interest could not be enhanced without the consent of the defendants on the face of the agreements to Ex. P-l, P-5 and P-11. The rate of interest was enhanced as per the agreement between the parties and there was no question of taking separate consent from the defendants again.”

7.      Learned counsel for the petitioners further stated that the petitioners have not filed the present revision petition for the cost of Rs.10,000/- but have filed to challenge the order of the fora below in respect of the consent to be obtained from the loanee, when the agreement does not provide for any such consent.

8.      Learned counsel for the petitioners states that there is delay of 71 days in filling the present revision petition and the same may be condoned. The application for condonation of delay has been filed, which reads as below:-

“4.  That the Petitioner herein was under the bonafide belief that a free copy of the impugned order would be received by the Petitioner, however, the same was not furnished.  After the passage of reasonable time, the Petitioner Company applied for certified copy of the impugned Order dated 02.03.2017, which was only received by the Petitioner on 07.06.2017.  It is submitted that as the same were received in the midst of summer vacation, therefore the same could only be considered once the winter vacation were over.  When the said Order was evaluated by the legal department of the Petitioner subsequent to which it was decided that the said Order deserved to be challenged having failed to consider the facts of the case and apply the law as it is prevailing today to the said facts.

5.  In furtherance of the said decision, the Petitioner instructed its counsels to draft a Revision to challenge the said decision.  Accordingly the counsel drafted an Appeal and sent the same to the Appellant for verifications and approval on 20.08.2017. The Appellant conveyed certain corrections in the said draft on 28.08.2017 and the same were to be incorporated in the draft.   

9.      Learned counsel for the respondent stated that revision is highly time barred and no proper explanation for delay has been given and therefore, the revision petition be dismissed only on this count. 

10.    Learned counsel appearing on behalf of the respondent/complainant states that he opposes the admission of the revision petition.  He states that the District Forum has only asked the opposite parties/petitioners to take the consent from the complainant for increasing the number of installments.  He further states that complainant has no objection in giving this consent.  The order of the District Forum is not causing any prejudice to the petitioners as the learned counsel for the petitioners has already accepted that petitioners have not filed this revision petition for waiving of the cost of Rs.10,000/- and complainant is already giving consent.  So nothing remains.

11.    It was further stated that both the fora below have given concurrent findings and the scope under the revision petition is quite limited in such cases.  Cost of Rs.10,000/- is very petty amount and does not require to be dealt with at the level of National Commission.

12.    I have given a thoughtful consideration to the arguments advanced by the learned counsel for the parties and have examined the record.

13.    It is admitted that the EMIs were increased by 120 to 141 without the consent of the complainant.  The District Forum has basically decided that the EMIs could not have been increased by the opposite party without the consent of the complainant and that is why it has asked to take the consent of the complainant for increased number of EMIs.  The capacity to pay the amount of EMI and span of repayment are interlinked and persons in different circumstances may choose different sets of EMI instalment and the span for repayment.  

14.    A perusal of the order of the State Commission reveals that the State Commission has extensively discussed various notifications and circulars of Reserve Bank of India (RBI) and has given a finding that these circulars were not followed by the petitioners.  The following observations of the State Commission are relevant:-

“As per the RBI guidelines to commercial banks and to Non-banking financial Companies (NBFCs), it is stated that these institutions will not be able to enhance the interest rate when the loan was sanctioned at floating rate of interest without giving a written intimation to the borrower and without obtaining written consent of the borrower.  If written consent is obtained, then only commercial banks are permitted to enhance the floating rate of interest.  As per equity, these instructions of RBI issued to commercial banks will also be applicable to all the financial institutions, who are financing the consumers being a company falling under the category of non-banking financial companies.  The RBI vide its direction No.RBI/2006-07/414 dated 24.05.2007 has issued instructions to all non-banking financial companies including residuary non-banking companies about the matter of complaints of charging excessive interest rate by NBFCs as back as 24.05.2007.  They were advised to regulate the interest rates and the rate of interest beyond the certain level may be seen to the excessive and can neither be sustainable nor be conforming to normal financial practice.  Thereafter, RBI has issued another circular addressed to all NBFCs vide its master Circular No.RBI/2011-12/470 dated 26.03.2012.  As per this, master circular guidelines on Fair Practices Code (FPC) for all NBFCs were laid down.  In this circular, there is a mention of the guidelines issued by the RBI, vide its master Circular dated 24.05.2007.  We have perused the master circular, which was downloaded from our computer to decide the present case at our end.  As per the guidelines, an intimation was issued by RBI vide notification No.DBBS/204/CGM(ASR)-2009 dated 22.01.2009.  As per this guideline, the rate of interest should be annualised so that the borrower is aware about the exact rate to be charged in his account by NBFCs.  As per the directions, disclosures are to be given in the loan agreements/loan card.  As per these directions on loan agreement, following instructions shall be disclosed:-

i) All the terms and conditions of the loan,

ii) that the pricing of the loan involves only three components viz; the interest charge, the processing charge and the insurance premium (which includes the administrative charges in respect thereof),

iii) That there will be no penalty charged on delayed payment,

iv) That no security deposit/margin is being collected from the borrower.

Further as per the loan card, the following directions have been enumerated, which are as under:-

c.  The loan card should reflect the following details as specified in the Non-Banking Financial Company-Micro Finance Institutions (Reserve Bank) Directions, 2011.

(i)   The effective rate of interest charged

(ii)  All other terms and conditions attached to the loan

(iii)  Information which adequately identifies the borrower and

(iv)  Acknowledgments by the NBFC-MFI of all repayments including instalments received and the final discharge.

(v)  The loan card should prominently mention the grievance redressal system set up by the MFI and also the name and contact number of the nodal officer.

(vi)  Non –credit products issued shall be with full consent of the borrowers and fee structure shall be communicated in the loan card itself.

(vii)   All entries in the Loan Card should be in the vernacular language.

12. From perusal of this circular, it is evident that the interest rate was to be charged in one year being annually and not on monthly basis as is agitated by the present appellant before the District Forum.  However, we have noted from the reply that the interest rate was increased once after 01.08.2011 on 01.08.2013 to the extent of rate from 17.50 to 18%, but then we fail to understand then how another rate of interest was raised from 18% to 18.50% from 01.09.2012 that too with a backdate change, the increased rate of interest applied to the loan account was raised from 14.50 to 15.25% p.a. We also observe that the terms and conditions are printed in a small font, which are not easily readable.”

15.    From the perusal of the above observations of the State Commission, it is construed that some of the provisions of the agreement are not inconsonance with the RBI guidelines and whatever provisions are there they have not been implemented.  Accordingly, the clause relating to Amortization in the Schedule ‘B’ of the agreement clearly states that:

“(a)  Save and except as provided under (b) below for administrative convenience the EMI amount is intended to be kept constant irrespective of variations in the Adjustable Interest Rate and therefore the number of EMIs is likely to vary on account of the variance in the Adjustable rate of interest No intimation shall be given by IFSL as to further or other or reduced number of EMIs required to be paid by the Borrower upon each any change in the Adjustable Interest Rate.  Provided however that the Borrower shall be intimated of the information as to the applicable/applied Adjustable Interest Rate during the preceding financial year on an annual basis, within such time at the end of the financial year as IFSL may determine”.

16.    RBI guidelines clearly provides that interest rate will be changed only annually.  Even if interest rate is changed many times during the year it only be informed on annual basis as per the clause mentioned above.  The State Commission has found that petitioners have changed interest rate many times within a year, whereas, the RBI circular provides only for change of such interest rate annually. RBI/2011-12/53, DBOD No.Dir. BC. 5/13.03/2011-12, dated July 1, 2011 addressed to commercial banks states the following:-

“2.4  Floating Rate of Interest on Loans

2.4.1. 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.  The methodology of computing the floating rates should be objective, transparent and mutually acceptable to counter parties.  The Base Rate could also serve as the reference benchmark rate for floating rate loan products, apart from external market benchmark rates.  The floating interest rate based on external benchmarks should, however, be equal to or above the Base Rate at the time of sanction or renewal.  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 loan accounts, after obtaining the consent of the concerned borrower/s.”

 17.  From the above it is clear that RBI has clearly issued directions to all commercial banks that in case of floating rate of interest the consent of the borrower should be obtained.  It is true that the petitioners are not a commercial bank but it is a NBFC. However, the principle laid down by the RBI so far as consumer is concerned cannot be diluted in case of NBF company.   Moreover, the District Forum has only ordered that consent of the borrower be obtained for either increased number of EMIs or same number of EMIs with increased installment amount.  Amortization clause of schedule B only provides for increase or decrease in number of EMIs, however, it does not provide for same number of EMIs with changed instalment amount.  Natural justice demands that the consumer must have right to either change the number of EMIs due to change in the interest rate or to change instalment amount to keep the same number of EMIs.  From this perspective the order of the District Forum seems perfectly in order.  Amortization clause of schedule B is only an unfair trade practice as borrower will come to know the change in the interest rate only at the end of the year and even at that time when the petitioners think it appropriate to inform.  Even in the instruction issued to the NBFC vide circular No.RBI/2006-07/138 DNBS (PD) CC No.80/03.10.042/2005-06, dated 28.09.2006, it has been instructed that the change in the interest rate and charges should be effected only prospectively, whereas in the present case amortization clause provides that the changes made during the financial year should be communicated to the borrower at the end of the financial year.  Thus, this clause clearly contravenes the RBI guidelines issued by this circular. 

18.    From the above examination it is 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 petitioners.  Also the agreement itself becomes voidable as certain provisions of the agreement are against the law of the land.

19.    In the light of the above discussion, I do not find any illegality, material irregularity or jurisdictional error in the order dated 02.03.2017 of the State Commission which calls for any interference from this Commission.  Accordingly, Revision Petition No.2884 of 2017 is dismissed at the admission stage.