Date of Filing: 03-11-2018
Date of Order: 05-02-2020
BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM – I, HYDERABAD
P r e s e n t
HON’BLE Sri P.VIJENDER, B.Sc. L.L.B., PRESIDENT
HON’BLE Sri K.RAM MOHAN, B.Sc. M.A L.L.B MEMBER
HON’BLE Smt. CH. LAKSHMI PRASANNA, B.Sc. LLM. (PGD (ADR), MEMBER
ON THIS THE MONDAY THE 05th DAY OF FEBRUARY , 2020
C.C.No.40/2018
Between
Shri Alladi Papaiah
S/o.late Alladi Srinivas,, Aged 58 years,
Occ: Business,
R/o. 1-5-169, Kondoji Bazar,
Secunderabad ……..Complainant
And
The Assistant General Manager,
Indian Overseas Bank,
1-2-61 & 62, Parklane,
Secunderabad – 500 003. ……..Opposite party
Counsel for the complainants : Mr.A.V.S.S.Prasad
Counsel for the opposite Parties : Mr.A.Srinivas
O R D E R
(By. Smt. CH. Lakshmi Prasanna,B.Sc. LLM (PGD ( ADR)., Member on behalf of
Bench)
- The complaint is preferred under Sec.12 read with Sec.2(i)(r) unfair trade practice of The Consumer Protection Act, 1986 aggrieved by the unilateral change in the lending rates from existing Benchmark Prime Lending Rate (BPLR) + 5% to Base Rate System of the Term Loan availed by the complainant under the Trade Credit scheme vide Loan A/c No.020003270900014 dt.25/8/2009. Hence, the complainant is seeking appropriate direction to the Opposite Party to refund an amount of Rs.2,86,378/- collected in excess towards the interest over and above the agreed interest from 1/4/2017 till the date of realization with interest @18%, and to pay a compensation of Rs.50,000/- for causing inconvenience and mental agony and to award an amount of Rs.25,000/- towards the costs of litigation.
2) The brief averments of the complainant are that:
Having executed the necessary security documents, the complainant along with 7 others availed Term loan of Rs.20.00 Lakhs for business purposes under Trade Credit Scheme vide Sanction Letter dt.17/8/2009 from the Opposite Party. As per the terms and conditions of the said Sanction Letter, the loan is repayable in 84 monthly instalments of Rs.35,842/- including the interest rate of BPLR + 0.5%. Accordingly, the complaint paid the instalments regularly, when he received a letter from the Opposite Party on 24/3/2017 that the loan account is showing an overdue amount of Rs.2,82,509.29/- requiring him to pay the same to avoid being classified as an NPA (Non-performing Asset) with negative rating in the CIBIL Report depriving to get further loans from any financial institutions.. The complainant had no other choice but to pay the said amount of Rs2,82,509.29/- although he was shocked to find that the outstanding loan amount despite paying regularly was because of the exorbitant interest rate that was unilaterally increased as against the agreed terms and conditions of the Sanction Letter by the Opposite Party without providing an opportunity to hear him. Aggrieved by the unilateral enhancement of the interest on his term loan amounting to unfair trade practice as defined u/Sec.2 (1)(i)(r) of the Consumer Protection Act,1986, in pursuance of representations dt.18/1/2017 and 1/7/2017, the present petition is filed seeking appropriate relief.
3) The Opposite Party in the written version submitted that the Complaint and the claim are false, baseless and devoid of merits and hence liable to be dismissed for the following reasons:-
a) As per Clause 2. a of the of The Sanction Letter dt.17/8/2009, the Bank reserves its right to amend, alter the terms and conditions, or withdraw all or any of the credit limits sanctioned at any time at its discretion without assigning any reasons whatsoever and further that the complainant is bound by the terms and conditions of the sanction latter wherein it is categorically mentioned in Clause 2.h.1 that, " In the case of borrowal accounts where interest rate is linked to BPLR or where fixed interest rate is specified by the Bank, changes if any, in the Bank's BPLR and/or the Spread (viz. Plus or Minus percentage factor to BPLR) or fixed rate specified by the Bank, shall be conveyed through Press Report or Publicity through media or a suitable notice placed in the Banking Hall of the Branch and such mode of communication shall be construed as sufficient notice to you about the revisions effected in the interest rates" .
b) The Opposite Party introduced the Base Rate System from 25/6/2010 in compliance of the RBI Circular DBOD No.DIR.BC 88/13.03.00/2009-2010 dt.9/4/2010, all Banks should switch over to the Base Rate System from the existing BPLR system effectice from 1/7/2010, with the objective of making the lending rates more transparent with better assessment of transmission of monetary policy. However, the loan account of the complainant was not converted from BPLR system to Base Rate System as the complainant has not given consent for the same and the floating rate of interest, being applicable to BPLR, whenever, there is a change in the rate of interest, the Computer system automatically makes the effective changes to the Master Loan Account. A general public notice of change of interest rates is apparently conveyed from time to time by the Opposite Party and hence the allegation of the complainant borrower that he was not informed or obtained his consent is baseless and hence there is no deficiency of service on the Opposite Party.
4) In the enquiry, the complainant filed his evidence affidavit reiterating the averments in the complaint supporting his claim with 4 documents including the sanction letter, representation letter to the Opposite Party objecting to the enhanced interest rate on the loan and the relevant Circular.
For the Opposite party, Evidence Affidavit of the Chief Manager of the Opposite Party Bank was filed along with 5 exhibits including three RBI circulars relating to the Interest and the Letter to the complainant to regularize the loan account.
5) Based on the facts and material brought on record, and written arguments submitted by both the parties, the following points have emerged or consideration:
- Whether the complainant could make out the case of deficiency and of service on the part of the Opposite party?
- Whether the enhanced/revised interest rate on the Term loan account of the Complainant amounts to unfair trade practice u/Sec.2(i)(r) of The Consumer Protection Act?
- Whether the complainant is entitled for the claim/compensation made in the complaint and to what relief?
6) Point No.1:- Apparently, the Loan Account of the complainant continued under the BPLR System without being converted to Base Rate System, as there was no express consent for the same, however whenever there is a revision/change in the floating interest rates, the effective changes were automatically applicable to the loan account of the complainant and general public notice of the revised interest rates is given by the opposite party. Even if for a moment it is construed that the payment of the outstanding amount of Rs.2,86,378/- on 31/3/2017 by the complainant was made under protest to avoid adverse consequences of being classified as NPA, a perusal of the Exhibit No. A-1 clearly goes to show that there is informed consent of the complainant when he executed the Credit Sanction Letter dt.17/8/2009, regarding the discretion of the Opposite Party to amend and alter the terms and conditions therein without assigning any reasons whatsoever, and that the communication through general public notice shall be construed as sufficient notice about the changes/revisions effected in the interest rates. Hence, the complainant’s allegation that the Opposite party unilaterally enhanced the interest rate on the loan account is baseless and held against him. Point No.2:- Further on the point whether such upward revision of interest rates by the Opposite Party Bank amounts to unfair trade practice is answered in negative in view of the legal position as held in K. C. Venkateswarlu v. Syndicate Bank,(AIR 1986 AP 290) and reiterated in a catena of judgments of other High Courts and the Supreme Court, that banks were bound to follow the directives or circulars issued by the Reserve Bank/Parent Bank prescribing the structure of interest to be charged on loans and while upholding the constitutionality of section 21(A) of the Banking Regulation Act opined that the rate of interest charged by the banking companies shall not be subjected to scrutiny by courts. Section 21-A introduced in the Banking Regulation Act, 1949 reads as follows : Rates of interest charged by Banking Companies not to be subject to scrutiny by Court.- Notwithstanding anything contained in the Usurious Loans Act, 1918, or any other law related to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive." And on the question of applicability of Section 21-A of the Banking Regulation Act it was said that unless it is proved that the interest charged by the banks is not in conformity with the rates prescribed by the Reserve Bank/Parent Bank, the court would be precluded from reopening the transaction. Thus this point is answered in favour of the Opposite Party and against the Complainant.
7) Point No.2:- In view of the above findings of this Forum, the complainant is not entitled for any of the claims and hence the complaint is dismissed with no costs.
8) In the result, the complaint is dismissed. No order as to costs.
Dictated to steno transcribed and typed by her and pronounced by us on this the 5th day of February, 2020.
MEMBER MEMBER PRESIDENT
APPENDIX OF EVIDENCE
WITNESS EXAMINED
NIL
Exhibits filed on behalf of the Complainant:
Ex.A1 - Credit sanction Advice, dated 17.8.2009
Ex.A2 - Letter to the Indian Overseas Bank by the complainant
Ex.A3 – Payment of dues in the term loan dues, dt. 1.7.2017
Ex.A4 - Interest rate on advances introduction of base rate
Exhibits filed on behalf of the Opposite parties:
Ex.B1 – Payment of overdue in loan account.
Ex.B2 to 5 – Interest rates on advances
MEMBER MEMBER RESIDENT
