THE CONSUMER DISPUTES REDRESSAL FORUM, KOTTAYAM
Present:
Sri. Santhosh Kesavanath P., President
Smt. Bidhu M. Thomas, Member
Sri. K.N. Radhakrishnan, Member
CC No. 140 /2010
Monday, the 20th day of December, 2010.
Petitioner : Prasad J.,
C.S Sadanam,
T.B Road, Kodimatha P.O
Kottayam.
(By Adv. T.N. Prakash)
Vs.
Opposite party : The Branch Manager,
Muthoot Finance Ltd.,
Chalukunnu,
Kottayam P.O
(By Adv. Joseph Thampan)
O R D E R
Sri. Santhosh Kesavanath P., President
Case of the petitioner filed on 8..6..2010 is as follows:
Opposite party is a finance company availing gold loan for the consumers. On 18..8..2009 petitioner pledged 31gms. of gold sovereigns in the finance company of the opposite party for an amount of Rs. 35,000/-. As per the terms and conditions printed on the loan receipt petitioner is liable to pay 17% interest for the availed loan amount. Further more as per the terms printed in the overleaf of the receipt if the loan is closed within 3 months. Petitioner is liable to pay risk interest. On 29..5..2010 petitioner approached opposite party for taking the sovereign by remitting the loan amount. But the opposite party demanded interest for the loan amount more than the agreed interest rate for the loan amount. According to the petitioner act of the opposite party amounts to unfair trade practice. So, petitioner prays for a direction directing the opposite party to levy interest to the loan amount at the rate of 17% or rate prescribed by the RBI to the similar loan transactions. Petitioner also prays
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for a direction to the opposite party to pay an amount of Rs. 25,000/- as compensation and cost of the proceedings.
Opposite party entered appearance and filed version contenting that petition is not maintainable. According to the opposite party they are non banking finance company incorporated under the companies act 1956 and registered under section 45 (i) (A) of the R.B.I Act 1956. According to the opposite party petitioner is not a consumer. Relationship of the petitioner to the opposite party is that of debtor & creditor and no service is being given by the opposite party to the petitioner and there is no deficiency in service or unfair trade practice on their part. Opposite party admitted the loan transaction. According to the opposite party petitioner availed the loan agreeing to repay the amount with interest at 15% per annum and risk interest at the rate of 15% per annum. Opposite party has several schemes for the gold loan approved by the Reserve Bank of India. In each type of loans the loan amount advanced per sovereign and interest rate varies. Since there is heavy risk for advancing more amount, per sovereign, risk interest is charged above the risk rate of 15% per annum. Risk interest will be low if the loan is closed within the stipulated period and it will increase of more time is taken to close the loan. Conditions has been legibly stated in the pawn receipts. If the loan account is closed within 3 months a reduction of 6% risk interest is allowed and if the loan account is closed within 6 months a reduction of 3% on the risk interest is allowed. It is also agreed that if the loan account is not closed within one year opposite party is entitled to get compound interest for the said amount. As per the loan agreement the complainant agreed to repay the amount at the rate of 15% per annum and risk interest at the rate of 15% per annum. On 29..5..2010 total loan amount was Rs. 43,212/-. Interest for
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the above said loan as on 29..5..2010 is Rs.8,212/-. According to the opposite party they demanded only the principal amount and the agreed interest. Opposite party prays for dismissal of the petition with their costs.
Points for determinations are :
i) Whether there is deficiency in service and unfair trade practice on the part of the opposite party?
ii) Relief and costs.
Evidence in this case consists of affidavit filed by both parties and Ext. A1 document on the side of the petitioner and Ext. B1 document on the side of the opposite party.
Point No. 1
The crux of the case of the petitioner is that opposite party demanded interest rate for a gold loan above the agreed amount. According to the petitioner he is only liable to pay the interest either specified by Reserve Bank of India or the agreed amount. Opposite party raised contention stating that they are non banking finance company incorporated under the companies act 1956 and registered under provisions of the Reserve Bank of India Act 1956. Opposite party availed the gold loan as per the approved scheme of Reserve Bank of India. Moreover the interest is claimed as per the agreed amount. Petitioner produced a copy of the pawn receipt said document is marked as Ext. A1. In the reverse side of Ext. A1 it is stated that interest rate for one year is 17%. Moreover it is stated that risk interest for the loan amount is --%. Opposite party produced a copy of the pawn receipt the said document is marked as Ext. B1. Reverse side of Ext. B1 opposite party scored the 17% interest rate as 15%. Further more it is stated that risk interest is 15%. However rate of interest
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agreed between the parties is in dispute. Opposite party has not produce any agreement executed between the petitioner and opposite party with regard to the rate of interest other than the Ext. A1 & B1 document. Even though the opposite party has a definite case that they are conducting gold loan as per the schemes approved by the Reserve Bank of India they have not produced anything to prove the same. Hon’ble High Court of Kerala as per its decision in Sundaram Finance Ltd. Vs. State of Kerala and others (reported in 2009 (4) KHC page 871) stated that non banking finance companies are “Money lenders” coming within the purview of money lenders Act, 1956. Further more the Hon’ble Division bench of the High Court further stated that provisions of chapter III B of Reserve Bank of India Act are intended to protect the depositors, where as provisions of money lenders act are essentially to protect the borrowers. Provisions of both acts are not in conflicts and simultaneously apply to non banking financial companies. In the said case Hon’ble High Court stated that interest chargeable should not exceed 2 % above the maximum rate of interest charged by the commercial banks. In our view act of the opposite party in charging excess amount than what stated in money lenders Act 1958 is an unfair trade practice. So, point No. 1 is found accordingly.
Point No. 2
In view of the finding point No. 1, petition is allowed. In the result, opposite party is ordered to levy interest rate to the petitioners loan amount at the rate of 2% above the maximum rate of interest charged by the commercial banks in loan granted by them. (The maximum rate of interest is the rate applicable and allowed by the Reserve Bank for the commercial banks for the loans / granted by them) Without saying what had happened caused much inconvenience, loss and sufferings to the
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petitioner. So, we ordered the opposite party to pay an amount of Rs. 1,000/- as compensation to the petitioner. Opposite party is also ordered to pay an amount of Rs. 750/- as cost of the proceedings. Opposite party has the liberty to adjust the cost and compensation in the loan account of the petitioner. Opposite party is further ordered under section 14 (f) of the Consumer Protection Act 1986 to discontinue the unfair trade practice and not repeat the same . Order shall be complied with within one month of the receipt of the copy of this order.
Sri. Santhosh Kesavanath P., President Sd/-
Smt. Bindhu M. Thomas, Member Sd/-
Sri. K.N. Radhakrishnan, Member Sd/-
APPENDIX
Document for the petitioner
Ext. A1: Copy of the pawn receipt Dtd: 18..8..2009
Documents for the opposite party:
Ext. B1: Copy of the pawn receipt dtd: 18..8..2009
By Order,
Senior Superintendent
Received on / Despatched on
amp/ 4 cs.
