By Sri. MOHANDASAN.K, PRESIDENT
1.The complaint in short is as follows: -
The first complainant is a LI C agent at Tirur and he is hailing from a poor family,economically challenged, socially and educationally back ward. The second complainant is the wife of the first complainant, who is unemployed and they have got two children. Children are studying with the small income accruing from the job of the first complainant.
2. The complainant thought of constructing a house for the family, approached LICHF and the ROI was around 10% and knowing that the complainant needs a housing loan, the executives along with first opposite party Manager approached complainant and offered housing loan @ 8% per annum under a special scheme for SC/ST on a condition that spouses must be party to the loan. Thus, the complainant prepared all documents required for the opposite parties under the instigation, persuasion and promises of the first opposite party. The opposite party availed a loan of Rs. 3,00,000/- on 08/08/2005 on the stipulation of payment of 180 equated monthly instalments including 8% interest p.a. as such liable to pay Rs. 2,867/- per month commencing from 08/08/2005 as per the home loan document of opposite party’s loan file No.777-4540079. At the first instance, mandate for auto debit from his SB A/c 021901502249 was also provided and EM was created on the property. The opposite parties collected 180 signed blank cheques of complainant towards security amount.
3. The complainant is working as LIC agent for last 30 years and LIC offers housing funds/loan around 10% per annum and at that time ICICI Bank officers offered the loan @ 8% per annum and complainant took the loan from the opposite party’s bank only because of such great offer extended to the complainant being a person/ family from SC. The opposite party never discussed any other loan details with complainant except to the extent that the loan is liable to be repaid on prompt payment of 180 instalments with 8% interest. They never discussed about any variation in the payment of any EMI and the life of complainant was arranged in such a manner to pay Rs. 2,867/- up to July 2020.
4. The opposite parties were collecting EMI at the rate of Rs. 2,867/- from complainant account but to the surprise, they started collecting an amount of Rs.3,274/- from 07/08/2008 without notice to complainant. While the complainant came to know at later stage, it was told that if such payments are made, the instalments can be reduced, but which was without the prior sanction of complainant and was reduced to Rs. 3,163/-from 07/02/2009 and the same was also in excess of actually payable sum. In addition to that the opposite party collected higher amount thereafter also, against the agreed terms given in writing to the complainant. The act of the opposite parties amounts illegal and deficiency of service. The complainant alleges there is no legal sanctity for such an escalation under any circumstances whatsoever, moreover the instalments amount also increased from the admitted one. The complainant alleges deficiency of service coupled with apparent unfair trade practice from the conduct and practice of opposite parties and is liable to be vitiated under law. The opposite parties increased the EMI to 301 against admitted and agreed 180 instalments.
5. Due to the illegal acts of opposite parties, the complainant is unable to pay the amount and he already paid 155 EMI that too with excess payment and which are liable to be adjusted to future instalments. Complainant is not liable to pay any excess amount than Rs. 2,867/- per month that too by 180 instalments. The complainant alleges escalating the amount from Rs. 2,867/- and to 301 instalments are obviously illegal and malafide. Complainant caused much loss, injury, hardship, damage and mental agony due to the deficiency in service on the part of the opposite parties. The complainant forwarded several complaints that, the opposite parties have not taken any steps to rectify their mistakes and they did not extent help till the date to the complaint. The complainant pledged original title deeds and other documents before the opposite party bank and the opposite parties are doing mischiefs and the complainant is turned down the scope of taking over the liability to other banks due to such a high demand of liability. The complainant alleges that the opposite parties indulged in unfair trade practice of the worst kind and they are increasing EMI and interest rate even now. In spite of repeated request and reminders, the opposite parties have not taken any steps to redress the grievance of the complainant and so the complaint is filed.
6. Prayer of the complaint is the that to give direction to the opposite parties only to collect Rs. 2,867/- as EMI by way of total 180 instalments and to adjust the amounts paid in excess in future instalments. The complainant prays for the direction to the opposite parties that not to charge any amount on any dishonoured cheques, which are in excess of Rs. 2,867/-. The complainant prays compensation of Rs. 10,00,000/- on various ground and also cost of Rs. 1,00,000/-.
7. On admission of the complaint notice was issued to the opposite parties and on receipt of notice, the opposite parties entered appearance and filed version denying the entire averments and allegation in the complaint.
8. The opposite parties contented that the complainants had approached the opposite parties for a home loan and the application was sanctioned vide loan account No. LBMPM00001112770 for an amount of Rs. 3,00,000/-with floating rate of interest as required by the complainants. The complainant entered in to a home loan agreement with the opposite party bank and as per the sanction letter and loan agreement signed by the complainant at the time of disbursement of loan, had chosen floating interest rate (Adjustable rate of interest) as is evident from statement of account and the loan agreement. The complainant where very well aware of the fact that the present interest rate structure would result in fluctuations and loan tenure from time to time. Whenever there is an increase in interest rate, the bank increases the tenure of the loan to the customer subject to permissible limits, in order to avoid burdening the customer with higher Emi’s. If the EMI is not abdicated to cover the interest payment, the bank is entitled to increase the EMI’s amount suitably. The same was mentioned in the home loan agreement signed and accepted by the complainants. The perusal of repayment schedule of the concerned loan account would clearly show that the tenure has been increased as result of the increase in interest rate.
9. The opposite parties submitted that as per the loan agreement the complainant has chosen the floating interest rate, subject to the monitory policy of RBI so based on that complainant himself admitted the facts stating that from monthly EMI Rs. 2,867/-per month from 08/08/2005 and Rs. 3,274/-per month from 07/08/2008 and also Rs. 3,163/-per month from 07/02/2009. The complainant had entered into home loan agreement with the opposite party bank as per sanction letter and loan agreement signed by the complainant at the disbursement of loan, had chosen a floating interest rate as is evident from the statement of account and the home loan agreement. The complainants are very well aware of the fact that the present interest rate structure would result in fluctuations in the interest rate and loan tenure from time to time. Whenever there is an increase the interest rate, the bank increases the tenure of the loan to the customer subject to permissible limits, in order to avoid burdening the customer with higher Emi’s. The opposite parties submitted that they communicated the revision of the interest of the loan account as per the guidelines of Reserve Bank of India. The complainants herein are conveniently twisting the facts to suite their cooked-up story and to get undue advantage from this Commission. The opposite parties submitted that, the perusal of repayment schedule of the loan account would clearly reveal that the tenure has been increased and can be decreased as a result of the changes in interest rate.
10. The opposite parties submitted that, they are functioning as per the existing rules and regulations of Reserve Bank of India. They do not cheat the complainants, and there is no necessity to do any mischiefs things, Bank is functioning as per the existing rules and regulations of Reserve Bank of India, instead giving financial service and facilities to the needy and does not charging any exorbitant interest by violating Reserve Bank of India Rules. The complainants are bound to repay the loan with interest as agreed and home loan agreement.
11. The opposite parties alleges the complaint is devoid of any merits and to be considered as speculative litigation to evade payments due to the opposite parties by abusing proceeds of law. The opposite parties are banking company and the Bank’s money is public funds and the bank is answerable to its customers for each and every penny. Hence the monthly payment of dues within due date is very important in loan transactions. The opposite parties demanded only the amount legally due to them. It is submitted that the Hon’ble Supreme Court has held that bank is trusty public fund and that cannot compromise public interest for benefiting private individual. The person taking loan from bank is bound to repay and the bank is bound to recover, if by adopting of legally permissible methods. There is no negligence, deficiency in service or unfair trade practice on the side of opposite parties as alleged in the complaint. The complainants are not entitled to any relief as prayed and they have not suffered any financial loss or mental agony at the instance of the opposite parties and no cause of action arisen against the opposite parties.
12. The opposite parties submitted that the complainants committed serious defaults in repayment of the loan and on 19/11/2018 the opposite parties sent a legal notice through Adv. P. Sunil Nair demanding the outstanding balance amount due and also intimating that failing to pay the said amount within seven days appropriate legal action will be taken. The complainant despite receipt of notice did not comply the directions. On 11/06/2019 the opposite parties sent a loan recall notice to the complainants by recalling the loan and demanding the outstanding balance together with interest within seven days and informing them that otherwise legal action would be initiated. Though the complainants received the notice, did not respond. The loan account became NPA on 31/05/2019 and on 21/08/2019.The opposite parties sent a notice to the complainants under section 13(2) of SARFAESI Act. Both the complainants received the notice and they are bound by the terms of the agreement. The opposite parties are legally entitled to recover the amounts due from the complainants. The complaint is not maintainable before the Commission since SARFAESI proceedings are already initiated. Hence the prayer of the opposite parties is to dismiss the complaint with the compensatory cost.
13. The complainant and opposite parties filed affidavit and documents. The documents on the side of complainant marked as Ext. A1 to A3. The documents on the side of opposite parties marked as Ext. B1 to B6 series. Ext.A1 is copy of home loan document page 1, 18, 19 and 20. Ext. A2 is copy of letter issued by the opposite party nil dated. Ext. A3 is letter issued by opposite parties related to the application No.7774540079. Ext. B1 is copy of Loan agreement, Ext. B2 is copy of loan account statement in respect of complainants. Ext. B3 is demand legal notice issued by Adv. Sunil Nair dated 19/11/2018 to the complainants. Ext. B4 is the copy of loan recall notice issued by the opposite parties to the complainants. Ext. B5 is notice issued by the opposite parties to the complainant dated 21/08/2019. Ext.B6 series are the copy of Statements for claiming deductions Under Sections 24 (b) & 80C (2) (xviii) of theIncome Tax Act 1961 for the periods 2016, 2017, 2018 from March to March.
14. Perused affidavit and documents and heard both sides. Both parties filed brief notes of arguments. The following points arise for consideration: -
- Whether there is defective service on the part of the opposite parties?
- Whether there is unfair trade practice on the opposite parties?
- Relief and cost?
15. Point No.1 &2: -
The admitted case is that the complainant availed loan of Rs. 3,00,000/- from
the opposite party as per loan agreement Ext. A1. As per Ext. A1, it can be seen that the loan amount is Rs. 3,00,000/- and the EMI fixed as Rs. 2,867/- per month and for the term of repayment was 180 months. The opposite parties also admitted that the loan amount has to be paid by the complainant through EMI of Rs. 2,867/- as 180 instalments. The opposite parties allowed loan on 08/08/2005. The first complainant submitted that, he is being an LIC agent, LIC housing loan was available at the rate of 10% interest but the opposite parties offered housing loan at the rate of 8% per annum. Considering the better offer of the opposite parties the complainant availed loan from the opposite party as per Ext. A1. As per the loan agreement, the complainant has to pay the last EMI on July 2020. But to the surprise of the complainant the opposite parties collected EMI as Rs. 3,274/- from 07/08/2008 onwards and thereafter the opposite parties collected Rs. 3,163/- from 07/02/2009 on every month. It is also alleged that though the agreement was to repay the loan amount through 180 instalments, the opposite parties fixed the tenure as 301 instalments unilaterally. The complainant alleges that the opposite party has not informed the variation of instalments amounts and also variation of number of instalments. The allegation of the complainant regarding the extension of instalment period from 180 EMI to 301 means instead of closing loan amount in the year 2020 he has to close the loan in the year 2030. Otherwise, the complainant is liable to pay interest for the loan amount up to further ten years. It is also notable that the opposite parties enhanced EMI amount forms Rs.2867/- to Rs. 3,274/- and thereafter to Rs. 3163/-. The opposite parties have not denied the averment of the complainant regarding the enhancement of instalments as well as extension of loan tenure. It is also not denied the issuance of cheque leaf to the opposite party.
16. The contention of the opposite parties is that as per the loan agreement and in accordance with the directions of Reserve Bank of India, the opposite party is entitled to do what is done in this complaint. The submission of the opposite party is that the loan issued to the complainant was with floating rate of interest. It is admitted that at the time of execution of loan agreement in favour of the complainant, the rate of interest was 8 % p.a. But subsequently there was hike in the rate of interest and accordingly for the convenience of the complainant for avoiding burdening, the EMI amount was enhanced. It is also submitted that the Bank is permitted to increase the tenure of the loan subject to permissible limits in order to avoid burdening the customer with higher EMI’s. The opposite parties submitted that the revision of the interest of the loan was communicated to the complainants as per the guidelines of the RBI.
17. The perusal of affidavit of the opposite parties shows that they had communicated the revision of the rate of interest of the loan as per guidelines of Reserve Bank of India. But the opposite parties have not produced any documents to prove that, they had communicated the hike of interest as well as extension of EMI tenure. It is to be noted that the complainant has to repay the loan amount within 180 EMI and in the light of enhancement of interest rate the opposite parties increased EMI amount to meet closing of the accounts during the agreed instalments period of 180/-. It is right to hold that the opposite party is entitled to realise the enhanced rate of interest on loan amount since the agreement is to repay the loan amount on floating rate of interest. But the question remains whether the borrower is entitled to be informed regarding the hike of interest duly prior to enforcing the same. It is also a question whether the complainant is entitled to know the extension of loan tenure for a further period of 10 years. The Commission have no doubt regarding the issue that the borrower is entitled to know the hike of interest rate and also extension of tenure of the loan repayment, in the light of directions given by the Reserve Bank of India wide circular RBI/2013-2014/76, DBOB.NO.Dir.BC.14/13.03.00/2013-2014 Dated 01/07/2013. The abovementioned circular page 54 and 55 contains certain stipulations regarding the right of the borrower while entering into an agreement with Banks/Financial institutions. It has stated that Lenders should ensure timely disbursement of loans sanctioned inconformity with the terms and conditions governing such sanction. It has stated that Lenders should give notice of any change in the terms and conditions including interest rates, service charges etc. It has stated that Lenders should also ensure the changes in interest rates and changes are affected only prospectively. That being the definite direction of the Reserve Bank of India, any act contravening the directions amounts unfair trade practice and also clear deficiency in service. In this complaint none of the documents produced by the opposite parties reveals the compliance of directions of Reserve Bank of India regarding the terms and conditions including interest rates, service charges etc.
18. It can be seen that the opposite parties made variation from the terms agreed by Ext. A1 document. The opposite parties enhanced the EMI amount to see that the complainant remitted the loan amount within the stipulated tenure of 180 months. Then the issue arises while the opposite parties extended the tenure for further 10 years, it can be seen that the act of the opposite parties is apparent unfair trade practice which warrant action under Consumer Protection Act. The fact and documents established the case of the complainant that there is deficiency in service and unfair trade practice on the part of the opposite parties and so we find that the case of the complainant stands proved through the documents and affidavit before the Commission.
19. It can be seen that the first complainant is a LIC agent and the Life Insurance corporation itself providing housing finance for which they are collecting interest higher than the interest rate offered by the opposite parties and thus the complainant instead of preferring loan from Life Insurance Corporation, approached the opposite party. But later it was turned in to a burden through the enhancement of rate of interest and also collecting the same amount without proper communication to the complaint. It is also evident from the documents that the opposite parties have issued a notice to the complainant as part of initiating proceedings under SARFAESI Act. But the opposite parties have not produced any document to show that they have initiated effective legal steps against complainant. The perusal of facts and circumstances make it appear that the poor complainant, who is hailing from a poor family is facing threat from a financial institution which is expected to act in accordance with the law and Rule of the country. The opposite party has contended that bank is a trusty of public fund and cannot be compromised public interest for benefiting private individual. The contention is that the loan taken from the bank is to be repaid and the bank is bound to recover it by adopting all legally permissible methods. But in this complaint the opposite party bank trying to extort money from poor complainant through the unfair trade practice. The act of the opposite parties has caused much mental agony and financial difficulties to the complainant. Hence the complainant is entitled to appropriate redressal of his grievance.
20. It is right to hold that the loan was availed on a floating rate of interest and the opposite parties are entitled interest for the money advanced to the complainant as per the directions of the Reserve Bank of India. But the hike of rate of interest has to be properly communicated to the complainant/ borrower in right time. Any act contravening the direction of the RBI disentitles the opposite parties from recovering the money from the complainant/ borrower. The complainant has got prayer for direction to the opposite parties that not to charge any amount on any dishonoured cheques which are in excess of Rs.2,867/-. We find it is genuine. Hence the Commission finds that in this complaint the opposite party is not entitled interest against what is agreed as per Ext. A1 agreement, 8% p.a. The Commission hereby restrained the opposite parties from realising interest more than 8% from the complainant from the date of issue of loan till completion of tenure of 180instalments. The complainant is liable to pay the loan amount with interest as agreed through Ext. A1 up to 180th instalments of the payment. It is further clarified that the complainant is liable to pay the arrear loan amount as on the date of complaint up to 180th instalment at the rate of 8% per annum. The complainant is entitled for a reasonable period for repayment of the balance amount. But considering the pendency of the complaint, it will be sufficient to allow one month time to pay the loan amount. The complaint is permitted to repay the entire arrear amount at a single stretch and if he is not able to repay the amount, the complainant is liable to pay interest at the rate of 9% p.a. from one month after the date of receipt of copy of this order to till the date of payment. It can be seen that the complainant suffered a lot of inconvenience, hardship and mental agony due to the unfair and deficient service on part of opposite parties. It will be proper to order a reasonable amount as compensation to the complainant on account of the same. The opposite parties are directed to pay Rs. 1,00,000/- to the complainant on account of deficiency in service and unfair trade practice and thereby caused inconvenience and hardships to the complainant. The opposite parties are also directed to pay Rs. 10,000/- as cost of the proceedings.
21. Point No.3:-
Hence, we allow the complaint as follows: -
- The opposite parties are restrained from collecting interest more than 8% per annum from the complainant up to the loan tenure agreed as per ExtA1 document.
- The opposite parties are directed to issue calculation statement of loan arrears excluding charges on dishonoured cheques if any which are in excess of Rs 2, 867/-, as on the date of this complaint and also the total arrears to be paid on the last instalment as per Ext. A1.
- The complainants are directed to pay the entire balance arrears at the rate of 8% interest per annum as per Ext.A1, within one month from the date of receipt of copy of this order on duly serving calculation statement by the opposite parties.
- The opposite parties are directed to pay Rs 1,00,000/-(Rupees One lakh only)as compensation to the complainant on account of deficiency in service and unfair trade practice and thereby caused inconvenience and hardships to the complainant.
- The opposite parties are directed to pay Rs 10000/-(Rupees ten thousand only) as cost of the proceedings to the complainant.
The opposite parties are directed to comply this order simultaneously within one month from the date of receipt of copy of this order, failing which the oppose parties are liable to pay interest on the above said amount of Rs 1,10,000/-at the rate of 12% per annum from the date of this order till compliance of the order.
Dated this 11thday of November, 2022.
MOHANDASAN K., PRESIDENT
PREETHI SIVARAMAN C., MEMBER
MOHAMED ISMAYIL C.V., MEMBER
APPENDIX
Witness examined on the side of the complainant : Nil
Documents marked on the side of the complainant : Ext.A1 to A3
Ext.A1: Copy of Home loan document page 1, 18, 19 and 20.
Ext. A2: Copy of letter issued by the opposite party nil dated.
Ext. A3: Letter issued by opposite parties related to the application No.7774540079.
Witness examined on the side of the opposite party : Nil
Documents marked on the side of the opposite party : Ext. B1 to B6
Ext. B1: Copy of Loan agreement.
Ext. B2: Copy of loan account statement in respect of complainants.
Ext. B3: Demand legal notice issued by Adv. Sunil Nair dated 19/11/2018 to the
complainant.
Ext.B4: Copy of loan recall notice issued by the opposite parties to the complainants.
Ext.B5: Notice issued by the opposite parties to the complainant dated 21/08/2019.
Ext.B6: Series are the copy of Statements for claiming deductions Under Sections 24
(b) & 80C (2) (xviii) of the Income Tax Act 1961 for the periods 2016, 2017,
2018 from March to March.
MOHANDASAN K., PRESIDENT
PREETHI SIVARAMAN C., MEMBER
MOHAMED ISMAYIL C.V., MEMBER
