BEFORE THE DAKSHINA KANNADA DISTRICT CONSUMER DISPUTES REDRESSAL FORUM AT MANGALORE
Dated this the 16th August 2010
COMPLAINT NO.3/2010
(Admitted on 8.1.2010)
PRESENT: 1. Smt. Asha Shetty, President.
2. Smt. Lavanya M. Rai, Member.
BETWEEN:
U.B. Rehmath,
So U.B.Aliyabba,
Aged about 34 years,
Rat Rehmath Manzil,
Basthipattu, Ullal,
Mangalore Taluk. …….. COMPLAINANT
(Advocate for the Complainant: Mrs.Suma R.Nayak)
VERSUS
Manager,
Muthoot Finance Ltd.,
Thokkottu Branch,
Mangalore. ……. OPPOSITE PARTY
(Advocate for the Opposite Party: Sri K.Balaraj Rai)
ORDER DELIVERED BY PRESIDENT SMT. ASHA SHETTY:
1. The facts of the complaint in brief are as follows:
This complaint is filed under Section 12 of the Consumer Protection Act alleging deficiency in service against the Opposite Party claiming certain reliefs.
The Complainant submits that, on 9.7.2009 had obtained a Super Personal loan of Rs.56,700/- bearing Loan Account No.0004012 from the Opposite Party by pledging gold bangles weighing 52 grams which was valued at Rs.56,700/- as collateral security. On the very same day, the Complainant has availed another loan of Rs.23,500/- bearing Loan Account No.0004014 from the Opposite Party by pledging a Gold leg chain weighing 22.200 grams valued at Rs.23,500/- as collateral security.
It is stated that, the Complainant has produced declaration form for both the loans and submitted that, he had made to understand by the Opposite Party that, the interest charged by them on the said loan so availed by him is 17% per annum and also made understand by the Opposite Party that the Complainant had an option to avail higher amount of loan depending upon the value of gold ornaments offered as collateral security under various schemes of the company. The Opposite Party further made to understand that when a higher amount (amount higher than the market value of gold) is sanctioned to the borrower, interest above the basic interest of 17% is collected as risk interest.
It is stated that, in this case, the Complainant not availed any higher amount up and above the valuation of gold given and collateral security by him. It is stated that, since no risk interest was applicable to him, reduction of risk interest for three months or 6 months (closure period) is not applicable. The Opposite Party not called upon the Complainant to repay the amount as per clause 2 seen in the declaration form. On 7.12.2009 when the Complainant to pay the entire loan amount and release his gold articles, the Opposite Party called him to pay Rs.6.517/- as interest for the period of loan with regard to loan bearing No.0004012 and Rs.2,705/- as interest for the period of loan with regard to loan bearing NO.0004014. The interest calculated/charges from 9.7.2009 to 7.12.2009 works out to nearly 34% on the loan amount which is arbitrary and there is no legal justification on the part of the Opposite Party. It is contended that the Opposite Party indulged in unfair trade practice and also the service rendered by the Opposite Party amounts to deficiency. Hence the above Complaint is filed by the Complainant before this Forum under Section 12 of the Consumer Protection Act 1986 (herein after referred to as ‘the Act’) seeking direction from this Forum to the Opposite Party to release the gold by charging 17% interest per annum from the date of loan. And also prayed for compensation and cost of the proceedings.
2. Version notice served to the Opposite Party by R.P.A.D. Opposite Party appeared through their counsel filed version and admitted that, the Opposite Party is a non-banking financial company and running its business as per the guidelines of the Reserve Bank of India.
The plea taken by the Opposite Party is that, the Complainant is not a consumer and the transaction between the Complainant and the Opposite Party is a commercial transaction and relationship is that of debtor and creditor.
It is further contended that, the above said loan was availed by the Complainant as per the Super Personal Loan scheme (herein after called as “SPL”) of the Opposite Party Company. As per the scheme under which the Complainant has availed the loan, he has to pay interest at the rate of 15% per annum apart from the interest as stated above. It is further stated that, the Complainant is also liable to pay risk interest at the rate of 16% per annum as per the declaration made by the Complainant in pledge form. It is stated that, the company grants reduction in risk interest at the rate of 6% if the loan is closed within 3 months and the company grants reduction in the risk rate interest at 3%. It is denied that, the Opposite Party demanded 34% interest on 7.12.2009. It is further stated that, the Opposite Party charged the interest as per the Fare Practice Code of the company approved by the Reserve Bank of India and no point of time the Opposite Party misrepresented the Complainant. As on 7.12.2009, the Complainant is liable to pay Rs.3,495/- plus risk interest of Rs.3,022/- in respect of gold loan account No.4012 and also liable to pay interest of Rs.1,449/- plus risk interest of Rs.1,256/- in respect of Gold loan A/c No.4014 and contended that there is no deficiency and unfair trade practice and prayed for dismissal of the Complaint.
3. The points that arise for our consideration in this case are as follows:
- Whether the Complainant is a consumer?
- Whether the Complainant proves that the Opposite Party has committed deficiency in service?
- If so, whether the complainant is entitled for the reliefs claimed?
- What order?
4. In support of the complaint, U.B.Rehmath (CW1) filed affidavit reiterating what has been stated in the complaint and answered the interrogatories served on him. Ex.C1 to C4 were produced for the Complainant as listed in the annexure. One Mr.Praveen Kumar, Branch Manager of Opposite Party (RW-1) filed counter affidavit and answered the interrogatories served on him. Ex.R1 to Ex.R5 were produced for the Opposite Party as listed in the annexure. Both parties are produced notes of arguments with citations.
We have considered the notes/oral arguments submitted by the learned counsels and also considered the materials that was placed before the Forum and answered the points are as follows:
Point No.(i) : Affirmative.
Point No.(ii): Affirmative
Point No.(iii) & (iv): As per the final order.
REASONS
5. POINT NO. (i):
It is admitted by both the parties before this Forum is that, the Complainant had obtained a Super Personal Loan by pledging his gold ornaments with the Opposite Party Bank for consideration. The transaction between the financier and the customer herein the Complainant is a creditor and debtor and all the transaction between the banker and the customer falls within the ambit of ‘Service’ under the Consumer Protection Act, 1986. Hence, the Complainant is a consumer and the Complaint filed by the Complainant is maintainable before this Forum and Point No.(i) held in favour of the Complainant.
POINTS NO. (ii) to (iv):
As far as the 2nd point is concerned, the main allegation of the Complainant in this Complaint is that, he had availed two Gold Loans, in order to close the two Gold loans availed by him approached the Opposite Party, the Opposite Party called upon the Complainant to pay 34% interest instead of 17% interest as stated in original declaration executed by the Complainant in favour of Opposite Party. Hence this Complaint.
The Opposite Party on the contrary contended that, they have not charged any exorbitant interest as against original declaration Form. As per the scheme under which the Complainant availed the loan as to pay interest at the rate of 15% per annum apart from the interest, the Complainant is also liable to pay risk interest at the rate of 16% per annum as per the declaration made by the Complainant in pledge Form. And further contended that, the company grants reduction in risk interest on the rate of 6% if the loan is closed within the 3 months, if the loan is closed after 3 months and within 6 months the company grants reduction in the risk rate of interest at 3% per annum and denied that the Opposite Party has demanded 34% interest per annum and submitted that the Complainant was liable to pay interest at the rate of 28% per annum and the total amount was calculated and informed to the Complainant.
However, in order to substantiate their rival contentions both the parties filed oral evidence by way of affidavit and produced Ex.C1 to C4 on behalf of the Complainant and Ex.R1 to R5 on behalf of the Opposite Party.
On careful scrutiny of the above documents in proof, we find that, both the parties admitted before this Forum that one Mr.U.B.Rehmath has availed a loan of Rs.23,500/- as per Gold Loan A/c. No.SPL 4014 and Rs.56,700/- as per Gold Loan A/c No.SPL 4012 from the Opposite Party. It is also admitted that, the said loan was availed by the Complainant as per Super Personal Loan scheme of the Opposite Party Company. The Complainant has pledged two items of Gold ornaments with the Opposite Party as collateral security on 9.7.2009 (as per Ex C1).
It is significant to note that, the Opposite Party Company vehemently contended that, they have charged interest as per the Fair Practice Code of the company approved by the Reserve Bank of India. The interest has been charged by the Opposite Party as per the conditions agreed by the Complainant and as on 7.12.2009 the Complainant is liable to pay Rs.3,495/- plus risk interest of Rs.3,022/- in respect of Gold loan A/c. No.4012. So also he is liable to pay interest of Rs.1,449/- plus risk interest of Rs.1,256/- in respect of Gold Loan A/c. bearing No.4014. When that being the case, the entire burden lies upon the Opposite Party to satisfy that they have not charged the interest at the rate of 34% as against to the Ex.C1 and C2 or the rate of interest charged by them are as according to the agreement entered between the Complainant and the Opposite Party and there is no unfair trade practice or deficiency.
However, we find that, the Opposite Party has miserably failed to substantiate that the rate of interest demanded by them from the Complainant is correct. On the contrary the Ex.C1 and C2 are the declaration issued by the Opposite Party and the same contains terms and conditions has been printed on the back portion of the declaration form clearly states that the basic rate of interest on the loan is 17% per annum. Further the rate of risk interest is left ‘blank’. When this being the position, the later portion of the terms and conditions with regard to the granting reduction in risk interest does not arise in this case. And further we have observed that, in point (2) of the declaration issued by the Opposite Party in favour of the Complainant at the time of availing loan finds that, in case, the value of gold ornaments given as collateral security comes down, the borrower has to repay immediately the amount demanded by the company. But in the given case, the Opposite Party not produced any credible evidence to show that the value of the gold ornaments has pledged by the Complainant as collateral security come down. As we know, the value of the gold has always being on boom in the market and hence the Opposite Party had never been at risk. The Opposite Party also produced the alleged declaration form, wherein, the rate of penal interest column is seen to be filled with 16% interest. But the declaration issued by the Opposite Party at the time of availing the loan i.e. Ex.C1 and C2 do not disclose the same. That itself shows that, the above insertion has been made by the Opposite Party for the purpose of this case which amounts to unfair trade practice by the Opposite Party. The Opposite Party always shall bind on the documents executed between the Complainant and the Opposite Party at the time of availing loan and not otherwise.
However, the Opposite Party produced Ex.C4 i.e. the Fair Practice Code of Muthoot Finance Limited i.e. the Opposite Party which talks about risk interest. On careful scrutiny of the above document, it could be seen that, the risk interest of the subject disputed loan is once again left ‘blank’. Further the last line of point No.(3) of the above document, it could be seen that, “The acceptance of these terms and conditions are to be recorded by obtaining the signature of the borrower”. But the Opposite Party while issuing Ex.C1 and C2 not adhered to the terms and conditions of their own Fair Practice Code introduced to the public. The Ex.C1 and C2 base the signature of the Complainant wherein the risk interest column is ‘blank’. Thus, the acceptance of terms and conditions clearly goes to show that, the Complainant has been subjected to 17% interest per annum and not explained the risk interest and there has not been any acceptance/covenant of 16% risk interest. The above documents made us very clear that, the Opposite Party indulged in unfair trade practice by charging excessive rate of interest according to their whims and fancies. However, in the given case, the Complainant while filing the Complaint expressed his grievances to close the loans at the rate of 17% per annum as agreed by him as per Ex.C1. But Opposite Party demanded excessive rate of interest as against the Ex.C1 and C2 issued by them is proved.
In order to control the usurious rate of interest the HON’BLE NATIONAL COMMISSION (NC) in a case AWAZ & OTHERS versus RESERVE BANK OF INDIA & OTHERS reported in I (2008) CPJ 319 (NC) observed as under:
“Consumer Protection Act, 1986 – Section 2(1)(r) –Banking and Financial Services – Excessive rate of interest/service charges – Unfair trade practice – Restrictions – As per RBI guidelines/circulars, usurious rate of interest cannot be charged by banks – Consumers who are in need, having no bargaining capacity, forced to pay unjustifiable, unreasonable, coercice interest – Banks/Non-banking Financial Institutions exploiting situation – RBI officers appear to be unaware of same – Charging of such rate of interest amounts to unfair trade practice under Consumer Protection Act – Summons issued to responsible officers of RBI.
[Pg. 321, 322 (Paras 9,10,11,12)]”
Similarly, in the present case, we hold that, the Opposite Party charged interest against to the covenant made with the Complainant which amounts to exploitation of the borrowers herein the Complainant.
In view of the above discussion, we hold that, the Opposite Party in this case committed Unfair Trade Practice as well as deficiency of service.
As far as compensation is concerned, while assessing the compensation, the facts and circumstances of the each case plays an important role to determine the compensation. But in the given case, we observed that among thousands of customers, the customer like Complainant only approached this Forum to wriggle out the unfair trade practice. At the same time, thousands of customers because of their needy in finance and having no bargaining capacity forced to pay unjustifiable, unresponsible and coercive interest as demanded by the Opposite Party. The Complainant one who brought to the knowledge of the public that non-banking financial institution are charging exorbitant interest and indulged in unfair trade practice. By keeping in view of the above, we charge direct the Opposite Party to pay Rs.25,000/- (Rupees Twenty five thousand only) as compensation and stop indulging in unfair trade practice hence forth. And further we direct the Opposite Party to release the gold ornaments to the Complainant by charging 17% interest per annum from the date of loan till the date of payment i.e. 9.12.2009 the day Complainant approached the Opposite Party and is willing to pay the gold loan amount and release the gold in favour of the Complainant. Further Rs.1,000/- awarded as cost of the litigation expenses. The compliance and payment shall be made within 30 days from the date of this order.
6. In the result, we pass the following:
ORDER
The complaint is allowed. The Opposite Party i.e. Muthoot Finance Ltd., represented by its Manager is hereby directed to release the gold in favour of Complainant by collecting the rate of interest at 17% per annum from the date of loan till the date of first approach by the Complainant i.e. 9.12.2009. Further Rs.25,000/- (Rupees Twenty five thousand only) awarded as compensation and Rs.1,000/- awarded as cost of the litigation expenses. The compliance and payment shall be made within 30 days from the date of this order.
The copy of this order as per the statutory requirements be forwarded to the parties free of charge and therefore the file be consigned to record.
(Page No.1 to 13 dictated to the Stenographer typed by him, revised and pronounced in the open court on this the 16th day of August 2010.)
PRESIDENT MEMBER
ANNEXURE
WITNESSES EXAMINED ON BEHALF OF THE COMPLAINANT:
CW1 – U.B.Rehmath – Complainant.
DOCUMENTS PRODUCED ON BEHALF OF THE COMPLAINANT:
Ex C1 – 9.7.2009: Original Declaration by borrower issued by the Opposite Party (2 in number)
Ex C2 – 9.12.2009: Copy of the letter sent to the Opposite Party by the Complainant.
Ex C3 – : RPAD Acknowledgment, with postal receipt.
Ex C4 – 21.1.2010: Notice sent by the Opposite Party to the Complainant.
WITNESSES EXAMINED ON BEHALF OF THE OPPOSITE PARTY:
RW-1: Mr.Praveen Kumar, Branch Manager of Opposite Party.
DOCUMENTS PRODUCED ON BEHALF OF THE OPPOSITE PARTY:
Ex R1: 9.7.2009: Loan application form submitted by the Complainant.
Ex R2: 9.7.2010: Declaration signed by the Complainant.
Ex R3: 9.7.2009: Declaration signed by the Complainant.
Ex R4: : Fair Practice Code of Muthoot Finance Limited.
Ex R5:13.11.2001: Copy of Certificate of Registration issued by Reserve Bank of India.
Dated:16/08/2010 PRESIDENT
Dated:
