DISTRICT CONSUMER DISPUTES REDRESSAL FORUM, BATHINDA
CC.No.340 of 21-08-2013
Decided on 13-01-2014
Dr.Boota Singh Sidhu S/o Raj Singh R/o # P-8, Giani Zail Singh College of Engg. & Technology, Dabwali Road, Bathinda now Dean (Academic) Punjab Technical University, Jalandhar (Punjab).
........Complainant
Versus
1.Indiabulls Financial Services Limited having its Regd. Office: F-60, Malhotra Building, 2nd floor, Cannaught Place, New Delhi-110 001, through its Managing Director.
2.The Branch Manager, Indiabulls Financial Services Limited, Guru Kashi Marg, Bathinda.
.......Opposite parties
Complaint under Section 12 of the Consumer Protection Act, 1986.
QUORUM
Smt.Vikramjit Kaur Soni, President.
Smt.Sukhwinder Kaur, Member.
Sh.Jarnail Singh, Member.
Present:-
For the Complainant: Sh.Gurbinder Singh, counsel for the complainant.
For Opposite parties: Sh.J.D Nayyar, counsel for the opposite parties.
ORDER
VIKRAMJIT KAUR SONI, PRESIDENT:-
1. The instant complaint has been filed under section 12 of the Consumer Protection Act, 1986 as amended upto date (Here-in-after referred to as an 'Act') by the complainant. Briefly stated the case of the complainant is that he is owner of a plot No.132 situated in Housefed Colony, Dabwali Road, near Milk Plant, Bathinda. The complainant was in need of the financial assistance and in the month of March/April, 2011, he approached the opposite party No.2 for granting him the loan against the said property. The opposite party No.2 and their officials, after perusing all the documents regarding the ownership of the complainant over the said property, agreed to grant him the loan of Rs.35 lacs on interest @ 12% p.a. The complainant has submitted all the documents with the opposite party No.2 at Bathinda for sanctioning and disbursing of the loan of Rs.35 lacs. At the time of sanctioning of the loan, the opposite parties increased the rate of interest @ 12.50% p.a. though they agreed to sanction the loan on interest @12% p.a. repayable in 120 installments of Rs.51,598/- each commencing from 1.5.2011 and the due date of the payment of the first EMI was fixed as 1.6.2011. The complainant raised objection regarding the increase of the rate of interest, but the concerned officials did not listen to him. As the complainant had submitted all the documents regarding his ownership with the opposite parties and also spent thousands of rupees for procuring certain documents, the matter was finalized. As the complainant was in dire need of money and the opposite parties had upper hand, he had no option but to agree to the increased rate of interest. The complainant further alleged that he has regularly been paying the installments to the opposite parties and there is no default in the repayment of the loan. Later on, the complainant came to know that the opposite parties have increased the rate of interest from 12.50% to 14.25% p.a. within 3 months of their own, though there is no such increase of rate of interest by the Reserve Bank of India in such loans during this period. The complainant also came to know that the opposite parties of their own have included the amount of Rs.25,000/- in the principal loan amount, thereby increasing the loan amount to the tune of Rs.35,25,000/-. The amount of Rs.25,000/- has been included in the loan amount by the opposite parties on the pretext of the insurance charges, though the complainant never agreed for seeking the alleged insurance policy. The complainant also came to know that the opposite parties have increased the number of installments from 120 to 141 at their own, thereby increasing the due amount against him by a sum of Rs.10,82,718/- against the rules and regulation and guidelines of the RBI. The complainant approached the opposite party No.2 for getting right the loan account through e-mail on dated 11.4.2013, they gave a vague reply to the same on dated 16.4.2013 stating that the rate of interest has been increased at their own level and they are not bound by the RBI guidelines. The complainant also sent another e-mail on dated 28.4.2013 to the opposite parties to reduce the rate of interest, loan amount and refix the installments, but they again gave him a vague reply through e-mail on dated 3.5.2013. The complainant is entitled to get the insurance policy cancelled and thereby reduce the loan amount to the tune of Rs.35 lacs only and further entitled to get the rate of interest reduce to 12% p.a. or any other rate as per the RBI guidelines on the abovesaid loan amount and to get the installments reduced from 141 to 120 of the amount of Rs.51,598/- per month alongwith cost and compensation.
2. The opposite parties after appearing before this Forum have filed their joint written statement and pleaded that the complainant was explained regarding the increase or decrease in the amount of EMI's as per the changes in the PLR/LFRR, he himself signed & executed the loan agreement after admitting it to be correct. The complainant has opted for a floating rate of interest, in his loan agreement and also admitted in his complaint. The floating rate of interest is linked with the Prime Lending Rate/Lap Floating Reference Rate of the Company. Therefore, the rate of interest is bound to change whenever there would be change in the PLR/LFRR of the company which would, in turn, lead to changes in the tenure in which the loan has to be repaid or the amount of equated monthly installment (EMI). The upward or downward change in the PLR/LFRR is made by a Finance Company/Bank to manage its cost of funds and operations. All the customers are intimated from time to time regarding the change in the PLR/LFRR. As per the fair practice code adopted by the company, besides sending of the individual intimation, the PLR/LFRR changes are notified and displayed on the website of the opposite parties company for giving the information to the public at large and all their clients/stake holders. This method of the intimation is also specified in the loan agreement. The actual facts of the case are that the complainant obtained the loan facilities to the tune of Rs.35,25,000/- under loan account bearing No.HLAPBAT00085499 from the opposite parties towards the loan against the property at floating rate of interest. After completing the necessary formalities and agreeing to comply with all the terms and conditions of the loan agreement, the complainant executed the necessary documents in this regard. The loan was sanctioned and disbursed to the complainant as per the terms and conditions and rules and regulations so agreed to by them on dated 21.4.2011. The loan was disbursed to the complainant @ 15.75% LFRR/PLR (Variance -3.25%) total rate of interest as applicable was 12.50% and was payable in 120 installments to the tune of Rs.51,596/- against the loan account bearing No.HLAPBAT00085499. The complainant has opted the floating rate of interest at the time of taking the loan and it was made clear to him that in case of any change in the primary lending rate (PLR), the rate of interest may increase or decrease from time to time and also installment amount or tenure of the loan may be changed accordingly. At the time of disbursing of the loan to the complainant, the PLR/LFRR was 15.75% p.a. The PLR got increased 15.75% p.a. to 16.50% p.a and the rate of interest of the complainant was increased from 12.50% to 13.25% w.e.f. 1.6.2011 and payable from the month of July, 2011. Thereafter the FRR changed from 1.7.2011 from 16.50% to 17% and accordingly the rate of interest was increased from 13.25% to 13.75%. After that the FRR was increased from 1.8.2011 from 17% to 17.5% and accordingly, the rate of interest was increased from 13.75% to 14.25%. thereafter the LFRR was increased in the month of August, 2012 from 17.50% to 18% and the rate of interest was changed from 14.25% to 14.75% and then the last change has taken place from 1, September, 2012 from 18% to 18.50% and the rate of interest has increased from 14.75% to 15.25%.
Due to the increase of the PLR from time to time, the tenure and EMI of the loan were changed accordingly, this was done according to the amortization clause in the loan agreement which has been accepted and entered into by the complainant. The opposite parties issued the letters dated 1.6.2011; 1.7.2011; 1.8.2011; 29.7.2013 and 29.8.2013 to the complainant. The opposite parties informed the complainant from time to time regarding the increase of the tenure and rate of interest as per the rules and regulations and as per the loan agreement executed between the complainant and the opposite parties. The complainant has defaulted in the payments made in the month of December, 2012 and January, 2013, whereby the EMI cheques were bounced and EMI was received on a later date, thus he is liable to pay the overdue charges as well as the bouncing charges and interest thereon which amounts to Rs.2672/-. The opposite parties denied that they of their own have included the amount of Rs.25,000/- in the principal loan amount, thereby increasing the loan amount to the tune of Rs.35,25,000/- and also denied that the amount of Rs.25,000/- has been included in the loan account of the complainant on the pretext of the insurance charges, though he was not agreed for getting the alleged insurance. The opposite parties sanction the loan to the complainant to the tune of Rs.35,25,000/-. The opposite parties have no relation with the insurance policy and the agreement that the complainant has entered into with the same except the fact that the first premium has been disbursed by them to the insurance company on his request. The opposite parties denied that they have increased the number of the installments payable by the complainant from 120 to 141 at their own, thereby increasing the outstanding amount against him by a sum of Rs.10,82,718/- against the rules and regulations and guidelines of the RBI. The complainant had an option of getting the amount of EMI increased instead of the number of EMIs being increased when the total rate of interest was increased, it is the customer who has opted for the same and the burden of the increasing of the rate of interest cannot be transferred to the opposite parties. The opposite parties further pleaded that the complainant is a valued customer, therefore the company out of respect and need of the complainant has given him a margin of -3.25%. The complainant is not entitled for the cancellation of the insurance policy which has been taken by him from ICICI Lombard. The opposite parties further denied that after the cancellation of the insurance policy by the complainant he is entitled to get reduction in the loan amount or to get the rate of interest reduced to 12% or any other rate as per the RBI guidelines. The complainant cannot reduce his installments from 141 to 120 of the amount of Rs.51,598/- per month. The complainant was given a sanction letter prior to entering into a loan agreement and disbursal of the loan amount. In the said sanction letter it has been clearly stated that the sanctioned loan amount is Rs.35,25,000/- and the applicable rate of interest is @12.50% p.a. on the floating rate of interest. The complainant could have easily rejected the sanction letter, however he remained silent for 2 years and now raised all such issues.
3. The parties have led their evidence in support of their respective pleadings.
4. Arguments heard. The record alongwith written submissions submitted by the parties perused.
5. The main allegations levelled by the complainant in the present complaint are that the opposite parties have charged the increased rate of interest against the agreed rate of interest. Initially the agreed rate of interest was 12% but they have disbursed the loan @ 12.50%, which gradually grow upto 14.25% just within 3 months of sanctioning of the loan and also increased thereafter. The opposite parties have added the amount of Rs.25,000/- more in the loan amount of the complainant on account of the insurance policy whereas the complainant has applied for the loan of Rs.35 lacs only and the opposite parties suo-motively added the amount of Rs.25,000/-, making the loan amount as Rs.35,25,000/-. The opposite parties have increased the number of installments, initially the number of agreed installments were 120 each commencing from 1.5.2011 for Rs.51,598/-, but the opposite parties have increased the same upto 141 installments without any notice and intimation to the complainant. The opposite parties have charged the amount of Rs.2672/- on account of overdue and bouncing charges.
6. The complainant submitted that he has been paying the EMI regularly and this fact has been admitted by the opposite parties in their reply to the legal notice dated 27.7.2013. The opposite parties never brought the fact in the notice of the complainant that there are any overdue charges against him. The opposite parties increased the number of installments payable by the complainant from 120 to 141 and increased the rate of interest as per page No.5 of e-mail, Ex.C2, which is against the law and fact and without following the rules and regulations as well as instructions of the RBI. The complainant further submitted that the opposite parties cannot raise the rate of interest against the regulations issued by RBI and has referred the precedent laid down by the Hon'ble State Commission in case cited at 2012(IV) CPJ 515 (NC). The service provider without informing or telling the reason for increasing the rate of interest in the general terms, cannot impose the increasing rate of interest on the complainant. The insurance was got effected by the opposite parties at their own without the consent of the complainant as such he is not liable to pay any insurance charges to them. Vide Ex.C2, the opposite parties have duly admitted on page No.6 of e-mail that the insurance policy has been provided by them the amount has been included in their account. The complainant has applied for the loan of Rs.35 lacs that has duly been sanctioned to him, but the opposite parties without taking his consent increased the loan amount from Rs.35 lacs to Rs.35,25,000/- and rate of interest from 12% to 12.50% per annum though they agreed to sanction the loan @ 12% per annum repayable in 120 installments of Rs.51,598/-. The due date for the payment of the first EMI was fixed on 1.6.2011. The loan agreement was executed on 1.5.2011 i.e. on the date of sanctioning of the loan and the terms and conditions regarding the insurance have not been disclosed to the complainant. Regarding the bouncing of the cheque the complainant submitted that the said cheque was bounced due to the non matching of the signatures and when he came to know about the same, he paid the installment in cash to the opposite parties vide receipt dated 15.12.2012. The opposite parties not only increased the number of the installments from 120 to 141, they also increased the EMI of the said loan. The complainant sent an e-mail on dated 11.4.2013 to the opposite parties for setting right the loan account, but they gave a vague reply to his e-mail on dated 16.4.2013 stating that the rate of interest has been increased at their own level and they are not bound by the RBI guidelines. Even, when RBI reduced the rate of interest by 0.5% and in the month of March, 2013 again decreased the rate of interest by 0.5%, the opposite parties have failed to decrease the same, rather they are following the procedure which is in their favour. The complainant further submitted that he is entitled to get the insurance policy cancelled, to reduce the loan amount to the tune of Rs.35 lacs only and further entitled to get the rate of interest reduce to 12% p.a. or any other rate as per the RBI guidelines on the abovesaid loan amount and to get the installments reduced to the tune of Rs.51,598/- per month.
7. On the other hand the submission of the opposite parties is that the complainant was fully explained regarding the increase or decrease in the amount of EMI's as per the changes in the PLR/LFRR, he himself signed & executed the loan agreement after admitting it to be correct. The complainant opted for a floating rate of interest, which is duly mentioned in the loan agreement and this fact has been admitted by the complainant himself. The floating rate of interest is linked with the Prime Lending Rate/Lap Floating Reference Rate of the Company. All the customers are intimated from time to time regarding the change in the PLR/LFRR. Besides sending of the individual intimation, the PLR/LFRR changes are notified and displayed on the website of the opposite parties company for giving the information to the public at large and all their clients/stake holders. The complainant obtained the loan facility to the tune of Rs.35,25,000/- bearing loan account No.HLAPBAT00085499 from the opposite parties against the property at floating rate of interest. The loan was sanctioned and disbursed to the complainant as per the terms and conditions and rules and regulations so agreed to by them on dated 21.4.2011. The loan was disbursed to the complainant @ 15.75% LFRR/PLR (Variance -3.25%) total rate of interest as applicable was 12.50% and was payable in 120 installments to the tune of Rs.51,596/-. At the time of disbursing of the loan to the complainant, the PLR/LFRR was 15.75% p.a. The PLR got increased 15.75% p.a. to 16.50% p.a and the rate of interest of the complainant was increased from 12.50% to 13.25% w.e.f. 1.6.2011 and payable from the month of July, 2011. Thereafter the FRR changed from 1.7.2011 from 16.50% to 17% and accordingly the rate of interest was increased from 13.25% to 13.75%. After that the FRR was increased from 1.8.2011 from 17% to 17.5% and accordingly, the rate of interest was increased from 13.75% to 14.25%. thereafter the LFRR was increased in the month of August, 2012 from 17.50% to 18% and the rate of interest was changed from 14.25% to 14.75% and then the last change has taken place from 1, September, 2012 from 18% to 18.50% and the rate of interest has increased from 14.75% to 15.25%. Due to the increase of the PLR from time to time, the tenure and EMI of the loan were changed accordingly, this was done according to the amortization clause in the loan agreement which has been accepted and entered into by the complainant. The opposite parties issued the letters dated 1.6.2011; 1.7.2011; 1.8.2011; 29.7.2013 and 29.8.2013 to the complainant. The complainant has defaulted in the payments that are to be made in the month of December, 2012 and January, 2013, whereby the EMI cheques were bounced and EMI was received on a later date, thus he is liable to pay the overdue charges as well as the bouncing charges and interest thereon which amounts to Rs.2672/-. The complainant has opted for the insurance policy and the amount of Rs.25,000/- has been been paid to the insurance company towards the premium by the opposite parties hence they have increased the loan amount to the tune of Rs.35,25,000/- including Rs.25,000/- in the loan account of the complainant. The opposite parties have no relation with the insurance policy and the agreement that the complainant has entered into with the insurance company except the fact that the first premium has been disbursed by them to the insurance company on his request. The opposite parties have not increased the number of the installments payable by the complainant from 120 to 141 of their own. The complainant had an option of getting the amount of EMI increased instead of the number of EMIs being increased when the total rate of interest was increased, it is the customer who has opted for the same. The company has given a margin of -3.25% to the complainant being a valued customer.
8. The complainant has sent an e-mail, Ex.C2 to the opposite parties, in this e-mail, in Para No.2, he has specifically mentioned that however the loan was sanctioned at 12.50% interest rate instead of 12%, which he surprised to note. As well as Rs.25,000/- was directly paid to the insurance company on my behalf and this amount has also made a part of my loan, that has unnecessarily increased my loan amount to Rs.35.25 lacs instead of Rs.35 lacs'. The complainant has further mentioned in this e-mail that the rate of interest was increased 3 times continuously in 3 months from the sanctioning of the loan and he has received only one letter. Only first installment was on the sanctioned rate and within three months the opposite parties have increased the rate of interest from 12.50% to 14.25%. This increase in interest rate has increased the number of installment from 120 to 141 installments. The monthly installment payable by the complainant is to the tune of Rs.51,598/- and the increase of 21 installments has put extra burden upon him of Rs.10,82,718/-'. The opposite parties have given the reply to the said e-mail, in which they have mentioned that the rate of interest has been increased as per the actual variation of the RBI. The complainant has sent the legal notice to the opposite parties, in reply to the said legal notice, the opposite parties pleaded that 'We like to mention that in floating rate of interest the rise or decline in LFRR (Loan Against Property Floating Reference Rate) is transferred to the customer and consequently the ROI and/or EMI increases or decreases with the rise and fall in the LFRR. This fact is also mentioned in the terms and conditions of the loan agreement signed by you. We would like to mention that the individual financial institutions set their own LFRR based upon various factors like their fund value, market conditions, asset/liability of the company, etc. Further, apart from the statutory guidelines, the transaction between your client and the company is governed by the specific terms and conditions contained in the agreement entered by the parties and the agreement executed by your client specifically mentioned the rate of interest to be floating'.
A perusal of Loan Agreement, Ex.OP1/1, reveals that the rate of interest be calculated as per Clause 2.2. In the case of the complainant he has opted for the adjustable interest rate. The relevant portion of Clause 2.2 is reproduced:-
“2.2(c) In the event the Borrower/s opts for the adjustable interest rate offered by IFSL, the rate of interest applicable to the loan as on the date of execution of this agreement and the terms applicable to such adjustable interest rate are as stated in Schedule-B.”
In the Schedule No.1, in the column of 'Charges':-(a) PEMII Interest 12.50% per annum. The complainant has opted for the adjustable rate of interest, as per Schedule-B, Terms and Conditions applicable to the loan with adjustable interest rate:-
“Interest:-(a) IFSL-LFRR 15.75% per annum (as on the date of execution of this agreement).
(b) Adjustable rate of interest: IFSL-LFRR +/- 3.25% p.a.=12.50% p.a.
Terms of adjustable interest rate (to be filled & applicable if offered with fixed rate of interest):
from....... (DD/MM/YYY) till full and final settlement of account.
Computation of rate of interest:-(i) All future/further adjustable interest rates applicable for the amount of loan lent by IFSL to the Borrower/s shall be applied by IFSL on the first day of the month following the month in which IFSL-LFRR is changed.
(ii) In an event IFSL changes adjustable interest rate prior to the disbursement of the full loan, the weighted average of the different adjustable interest rate shall be applicable to the loan forthwith from the date of such increase or decrease till the first day of the month following the month in which IFSL-LFRR is changed.
(iii) Adjustable interest rate will be reset on the first day of the month following the month in which IFSL-LFRR is changed.
(iv) In case of PEMI, all future/further adjustable interest rates applicable to the Borrower/s shall be applied by IFSL on the first day of the month following the month in which IFSL-LFRR is changed.
(v) The adjustable interest rate applicable to the loan shall be on the basis of IFSL-LFRR prevailing on the date of final disbursement.
(vi) The adjustable interest rate prevailing on the date of this Agreement or as changed from time to time shall be applied as follows:-
a) In the event of the Borrower/s having already commenced payment of EMI before the beginning of the month in which IFSL-LFRR has been revised on the outstanding principal amount of the loan at the beginning of next month, or
b) In the event of the Borrower/s not having commenced payment of EMI on the total amount of the loan drawn prior to revision of IFSL-LFRR.
Explanation: In the events (a) and (b) above, any pre-payments made by the Borrower/s during the financial year shall be taken into account.
Amortization:-Subject to provisions of interest and computation of interest and the provision for variation of interest rates etc. contained in the 'Loan Agreement', the Borrower/s will amortise the loan as stipulated in Para (a) and (b) of Schedule-B.”
The opposite parties have increased the number of installments from 120 to 141 instead of increasing the amount of EMI without taking any prior consent from the complainant, which amounts to deficiency in service. The complainant has agreed to adjustable rate of interest, which is required to be increased/decreased by the opposite parties as per RBI guidelines not of their own. The opposite parties have increased the rate of interest but when RBI decreased the rate of interest, this benefit has not been given to the complainant.
In this regard the Hon'ble National Consumer Disputes Redressal Commission, New Delhi has laid down the precedent in the case titled as IDBI Bank Ltd. & Anr. Vs. Subhash Chand Jain & Anr., IV (2012) CPJ 415 (NC), wherein it has been held:-
“Consumer Protection Act, 1986-Section 2(1)(g), 21(b)-Banking and Financial institutions Services-Home loan-Higher rate of interest charged-Mental agony and harassment-Deficiency in service-District Forum allowed complaint-Hence revision-Page 29 of paper book under the heading 'Schedule to Home Loan Agreement' against the column 'Interest', the interest rate is indicated as 7.25% p.a. with default interest rate at 24% p.a.-There is no mention or reference to interest rate being floating or fluctuating-State Commission rightly held that concept of floating rate of interest flows from the regulation of rate of interest by RBI guidelines and not arbitrarily by the service provider without informing or telling the reasons for increasing rate of interest in general terms and not that there is inflationary market-Impugned order upheld.”
The rate of interest can be increased or decreased as per the guidelines of RBI, but in the legal notice the opposite parties have admitted that they have increased the rate of interest of their own.
9. Regarding the number of installments that has been increased from 120 to 141, to this the opposite parties have pleaded that the complainant has given the option to increase the installments, whereas there is no such option given by the complainant is placed on file by the opposite parties, hence they cannot of their own without intimating or issuing any notice to the complainant or without seeking the consent of the complainant can increase the number of the installments, thus they have arbitrarily increased the installments from 120 to 141, which amounts to deficiency in service on their part.
Regarding the increase of the loan amount from Rs.35 lacs to 35,25,000/-, the complainant has submitted that he has not opted for the insurance policy, the opposite parties of their own sent the premium towards his insurance policy and added the amount of Rs.25,000/- in their loan account by increasing the loan amount from Rs.35 lacs to Rs.35,25,000/-, whereas on the other hand the opposite parties have submitted that the complainant has himself opted for the insurance policy, they have only sent the premium of Rs.25,000/- to the insurance company except this they have no agreement regarding the insurance policy either with the complainant or with the insurance company. A perusal of the loan agreement placed on file shows that there is no such clause in this agreement to show that at the time of seeking of the loan, the complainant is required to get the insurance policy or it is mandatory in any way. The loan agreement has been executed on 1.5.2011 and the first payment was given on 1.6.2011 and the insurance premium has been paid by the opposite parties on 1.6.2011 to the insurance company, meaning thereby the complainant remained insured till filing of this complaint. The loan amount of Rs.35,25,000/- has been shown disbursed to the complainant. If the complainant is not satisfied with the insurance policy, he is at liberty to get it cancelled of his own as the insurance company is neither party to the present complaint nor it has any contract with the opposite parties. As the opposite parties have paid Rs.25,000/- to the insurance company hence the amount of the loan cannot be reduced.
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 installments 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/decrease rate of interest since the date of disbursement of the loan till this order.
11. The compliance of this order be done within 45 days from the date of receipt of the copy of this order.
12. A copy of this order be sent to the parties concerned free of cost and file be consigned to the record room.
Pronounced in open Forum:-
13-01-2014
(Vikramjit Kaur Soni)
President
(Sukhwinder Kaur)
Member
(Jarnail Singh)
Member
