CC Filed on 24.04.2010
Disposed on 08.06.2011
BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM, KOLAR.
Dated: 08th day of June 2011
PRESENT:
Sri. G.V.HEGDE, President.
Sri. T.NAGARAJA, Member.
Smt. K.G.SHANTALA, Member.
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Consumer Complaint No. 48/2010
Between:
Sri. B.R. Srinivasa Murthy, No. 1705, Maruthi Krupa, First Floor, Old Post Office Road, Brahmins Street, Kolar. | ….Complainant |
V/S The Manager, Manappuram General Finance and Leasing Limited, 1st Cross, Gowripet, Opp. S.B.M, M.G. Road, Kolar. (By advocate Sri. Mohammed Haneef) | ….Opposite Party |
ORDERS
This is a complaint filed under section 12 of the Consumer Protection Act, 1986 praying for a direction against the opposite party to return the pledged jewelries on receipt of the principal and the interest legally due and for payment of compensation for mental agony and harassment with costs, interest, etc.,
2. The material facts of complainant’s case may be stated as follows:
That the OP is a licensed pawn broker doing its business in the address stated in the cause title. That the complainant pledged 139 grams of gold ornaments with OP and obtained loan of Rs.84,500/-. The complainant was informed to pay interest at 14% p.a. The details of pledge are as follows:
Sl. Pawn Ticket No. Date Weight Loan Amount
No.
1. 700921 30.05.2007 14.80 gms. Rs.9,500/-
2. 700972 09.06.2007 30.80 gms. Rs.20,000/-
3. 700973 09.06.2007 24.90 gms. Rs.15,500/-
4. 700974 09.06.2007 26.80 gms. Rs.15,000/-
5. 700975 09.06.2007 16.70 gms. Rs.11,500/-
6. 700976 09.06.2007 25 gms Rs.13,000/-
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Total 139 gms. Rs.84,500/-
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It is alleged by complainant that he approached the OP on several times to pay the principal and interest, but the OP insisted to pay exorbitant interest and thereafter the complainant requested by his letter dated 23.01.2008 and 09.06.2008 to send the statement of account relating to his loans, but the OP did not reply to those letters. Further that the complainant got issued legal notice dated 20.08.2008 demanding to send the statement of account relating to his loans and in reply to it the OP sent the statement of account claiming interest at 27% p.a. on the first loan and 26% p.a. for the remaining loans apart from claiming penal interest at 3% per month subsequent to the pledge period in respect of all the loans and intimating that the pledge period was 6 months from the date of respective loans and further intimating the date of auction for sale of the pledged articles.
It is further alleged that after receipt of the above said reply the complainant got issued another legal notice dated 18.10.2008 informing that he was ready to pay interest at 14% p.a. which was legally recoverable in the case of pledge transactions and that the interest and penal interest claimed by OP was illegal and arbitrary. The complainant has further alleged that on enquiry he came to know that OP had obtained licence for running the business of pawn broking and that the interest that could be legally charged was 14% p.a. It is also alleged that the OP had not published the auction notice as required under law and that the pledged articles were not yet sold.
3. OP appeared and contested the claim of complainant. It is contended that the OP-The Mannapuram General Finance and Leasing Limited is granted Certificate of Registration issued under section 45 IA of Reserve Bank of India Act 1934 to carry on the business of non-banking financial institution vide Registration No. 16-00029, dated 25.05.1998 and in view of this fact the interest and the charge on a loan to be charged is as provided under the provisions of Reserve Bank of India Act but not as per the provisions of State Money Lending Act or Pawn Brokers Act.
Further it is contended that the OP has been exempted from the purview of Karnataka Money Lenders Act and that the charging of interest and incidental charge is a matter of contract between the complainant and the customer depending on the need of customer. Therefore it is contended that the provisions of the Karnataka Money Lenders Act have no bearing to the facts of the present case. Further that the OP has offered different schemes of loans and the customer can choose any scheme by accepting the terms and conditions of the concerned scheme.
It is admitted that the complainant pledged the gold articles and obtained loans as alleged in the complaint. It is contended that the pledge in respect of first loan should have been redeemed within 12 months and the pledge in respect of other loans should have been redeemed within 06 months from the respective dates of loans. Further it is contended that the complainant had agreed to pay interest at 27% p.a. on first loan and 26% p.a. in respect of other loans and also had agreed to pay overdue interest at 3% p.a. Further it is contended that the complainant had failed to repay the principal and interest within the due dates inspite of several reminders. Further it is contended that the complainant did not approach the OP along with principal and interest as alleged by him. It is contended that the OP is not bound to levy interest at 14% p.a. as the provisions of Money Lenders Act are not applicable to the business carried by it. Therefore the OP requested to dismiss the complaint.
4. The parties filed affidavits and the documents in support of their respective contentions. We heard the complainant who prosecuted the complaint in person and the Learned Counsel for the OP.
5. The following points arise for our consideration:
Point No.1: Whether the money lending business of OP is
governed by the provisions of The Karnataka
Money Lenders Act 1961 and The Karnataka
Pawn Brokers Act 1961 and the Rules framed
there under?
Point No.2: If so, whether the interest claimed by OP is tenable?
Point No.3: Whether the rate of interest chargeable on the loans
was agreed upon in writing between parties?
Point No.4: What shall be the rate of interest in the absence of
any such agreement?
Point No.5: To what order?
6. After considering the records and the submissions of parties our findings on the above points are as follows:
Point No.1: The OP has contended that it is not governed by the Karnataka Money Lenders Act 1961 and the Karnataka Pawn Brokers Act 1961. For this purpose the OP has relied upon the Gazatee Notification dated 25.04.2007 which publishes the Government Order dated 23.05.2007 exempting Mannapuram Finance (Tamilnadu) Pvt. Ltd., Coimboture from the definition of “money lender” under the Karnataka Money Lenders Act 1961. The relevant portion of the said Government Order is as follows:
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The above said exemption certificate is issued in favour of Mannapuram Finance (Tamilnadu) Pvt. Ltd., Coimboture. There is no material to hold that Mannapuram Finance (Tamilnadu) Pvt. Ltd., Coimboture and the OP Company- Mannapuram General Finance and Leasing Limited are one and the same. It appears that the two entities are different entities. It can be seen that Mannapuram General Finance and Leasing Limited is granted Certificate of Registration on 25.05.1998 under sec- 45 IA of the R.B.I Act 1934 to carry on the business of non-banking financial institution. Whereas the preamble to the above referred Government Order dated 23.05.2007 discloses that Mannapuram Finance (Tamilnadu) Pvt. Ltd., Coimboture was granted certificate on 13.09.2003 under sec-45 IA of the R.B.I. Act 1934. Hence it is clear that the two entities are quite different entities. It is not contended on behalf of OP that the said entities are one and the same legal person. Therefore we hold that the Government Order dated 23.05.2007 does not exempt the OP from the definition of Money Lender defined in Sec- 2 (10) of the Karnataka Money Lenders Act 1961. Therefore it appears the contention that the OP is exempted from the provisions of the said Act is not tenable.
The complainant has alleged in his complaint that the OP has obtained Pawn Brokers licence and has produced the letter dated 28.04.2010 issued by the competent authority. The said letter shows that the OP had obtained Money Lenders licence as well as Pawn Brokers Licence bearing No. DRK/Yogane/MLPB/56-69/2006-07 dated 09.10.2006. Sec-10 of the Karantaka Money Lenders Act 1961 provides that the licence granted for doing business of money lending shall be valid for a term of five years. The complainant has alleged that the OP had exhibited the licence in the business premises. The OP has not denied the said allegation made by the complainant. Even otherwise, as the OP is carrying on the business of taking goods and chattels in pawn as security for a loan, he is pawnbroker within the meaning of the Karnataka Pawn Brokers Act 1961. In that event he should obtain the licence to carry out the said business of pawn broking and the provisions of Karnataka Pawn Brokers Act 1961 apply to it.
The OP has contended that as it has obtained Certificate of Registration under Sec-45 IA of R.B.I Act 1934 to carry on the business of non-banking financial institution, it need not obtain the licence under the Money Lenders Act or Pawn Brokers Act. We think in the absence of a valid Notification exempting a person from the applicability of these Acts, obtaining the licence under the respective Acts is necessary for carrying on the business of money lending or business by a Pawn Broker. The OP has not pointed out any provision either under R.B.I Act or under Money Lenders Acts and Pawn Brokers Act which exempts a person from obtaining the licence under Money Lenders Act or Pawn Brokers Act, if a Certificate is issued under Sec-15 IA of the R.B.I Act. For the above reasons we hold point No.1 in affirmative.
Point No.2: Sec-28 of the Karnataka Money Lenders Act 1961 and Sec-6 of the Karnataka Pawn Brokers Act 1961 impose restrictions on charging interest and charges on the loans lent. These provisions are applicable notwithstanding any agreement between parties. Therefore any agreement between parties contrary to the said provisions, cannot be a defence to claim higher rate of interest than the rate prescribed under these Acts. Therefore we hold that the claim of OP for interest at the rate of 27% or 26% along with penal interest at 3% p.a., is not sustainable in the eye of law. Accordingly point No.2 is held in negative.
Point No.3: The complainant has alleged that the OP had informed him to pay interest at the rate of 14% p.a. for the loans borrowed by him. On the other hand the OP has contended that the complainant had agreed to pay interest at 27% p.a. for the first loan of Rs.9,500/- dated 30.05.2007 and he had also agreed to pay interest at 27% p.a. in respect of other loans borrowed on 09.06.2007 and that the first loan was repayable within 12 months and the other loans were repayable within 6 months from the date of respective loans and that if the repayments were not made the loanee was liable for penal interest at 3% p.a. over and above the applicable interest rate.
The OPs have produced the documents relating to all these loans. Regarding payment of interest, the loan document states that the loan will carry interest at the rates specified in the demand promissory note executed by the borrower in this regard and appearing overleaf and incidental charges as fixed by the company from time to time. However the promissory note appearing on the overleaf of loan document is not signed by the complainant. The complainant submitted that the portion of promissory note printed on the overleaf of loan document was left blank and he was asked to write his name and address and the description of jewelery in the appropriate column and was asked to sign on it. Therefore according to him at the time of preparing the loan document the on demand promissory note was not filled up and his signature was not taken on it and he contended that subsequently it must have been fraudulently filled up without his knowledge. As complainant has not executed any of the pro-notes appearing on the overleaf of loan papers, it is to be held that there was no agreement in writing for payment of interest in respect of any loans. The loan papers state that if the payment is not made within the period prescribed for repayment of the loan, penal interest at 2% p.a. is to be charged. However in the version the OP has claimed penal interest at 3% p.a. and in the reply notice it had claimed penal interest at 3% per month. It appears such demand for penal interest is against the terms and conditions of the loan stated in the loan papers. It appears that at the time of preparing the loan papers the promissory note was kept blank and the loanee was not asked to sign on the promissory note and it must have been filled up at a later stage.
The complainant has produced a pamphlet and an advertisement issued by Mannapuram Finance Kolar offering gold loan at 1% interest per month. From the notifications issued by Reserve Bank of India the copy of which are produced by OP, it can be said that non-banking financial companies shall adopt an uniform interest rate in respect of different kind of loans and such rates shall be disclosed to the borrower in the loan application form and shall be communicated explicitly in the sanction letter and that such rate of interests shall also be made available on the website of the companies or published in the relevant newspapers. In the present case, all the loans were obtained on the security of pledge of gold articles. Usually the interest chargeable on such gold loans is minimum. The pamphlet issued by OP shows that the interest chargeable for the gold loan is 1% per month. In the present case, the loan papers or the sanction order does not specifically disclose to the borrower the rate of interest. The OP has also not produced any guidelines prescribed by it fixing the rate of interest for gold loan and other loans. It must have prescribed the rate of interest chargeable on gold loans and that must have been intimated to the concerned authority of R.B.I, as per the notification issued by R.B.I. Therefore we think there is much force in the submission of complainant that at the time of preparing loan papers he was informed regarding the rate of interest as 14% p.a. but there was no written term in the loan papers regarding the payment of interest. In the facts and circumstances of the case we hold that the blanks in the promissory note must have been written at a subsequent stage after execution of the loan papers by complainant. It appears for that reason the OP did not intimate the complainant regarding the quantum of interest due inspite of he writing letters dated 23.01.2008 and 09.06.2008. Only after issuing legal notice the OP disclosed the rate of interest charged on the loans. For the above reasons we hold that there was no agreement in writing between parties regarding payment of interest on the loans. Hence Point No.3 is held in negative.
Point No.4: It is found that the OP is not exempted by any Notification by the State Government from obtaining the licence for doing business of money lending or pawn broking. If the business of money lending also falls within the definition of “pledge” as defined in the Karnataka Pawn Brokers Act 1961, such pawn broker shall obtain licence under the said Act. The interest and charges allowed to pawn brokers are governed by Sec-6 of the Karnataka Pawn Brokers Act 1961. The said Section is as follows:
Interest and charges allowed to pawn-brokers: (1) No pawn-broker shall charge interest in respect of a loan on a pledge at a rate exceeding nine percent per annum simple interest or at such other rate as the State Government may by notification fix from time to time.
(2) A pawnbroker may demand and take from the pawner such charges and in such cases as may be prescribed.
(3) A pawnbroker shall not demand or take from the pawner any profit, interest, charge or sum whatsoever, other than the interest due to him and the charges, if any, referred to in sub-section (2).
The OP has not produced any Notification issued by the State Government fixing the rate of interest exceeding 9% p.a. as provided under Sec-6 of the Pawn Brokers Act. Therefore we think the maximum interest payable should be 9% p.a. The OP has not shown the charges prescribed for pledge that could be claimed by him. Hence the loan should carry interest at 9% p.a. without any other charges. The complainant has alleged that the legally payable interest was 14% p.a. It appears such contention was taken on the basis of a Certificate dated 19.02.2010 issued by Asst. Registrar of Co-operative Societies. The said letter states that under Money Lenders Act the interest that could be charged is at 14% p.a. in respect of secured loans and 16% p.a. in respect of unsecured loans. As already noted if the loan transaction amounts to pledge, the correct provision applicable for deciding the rate of interest is Sec-6 of the Karnataka Pawn Brokers Act 1961. Therefore we think in the present case, the maximum rate of interest that can be claimed should be as per Sec-6 of the said Act.
The complainant claims that he approached OP for payment of the principal and interest, but the OP claimed exorbitant interest and refused to receive the principal and interest at reasonable rate. In view of the above facts, we think the interest may be awarded to OP till the date of filing the complaint. Hence Point No.4 is held accordingly.
Point No.5: The Learned Counsel for OP relied upon the decision of our Hon’ble State Commission passed in Appeal No. 3955/2009 dated 22.12.2009 between H.N. Nagendra V/s. The Manager Mannapuram Finance and Leasing Limited. We have gone through the said decision. In the said decision the effect of relevant provisions under Money Lenders Act and Pawn Brokers Act, governing the rate of interest is not considered. We think if it is found that the said provisions are applicable to a particular loan transaction, there is no escape but to award interest only as per those provisions. Apart from it we held that in the present case the rate of interest was not agreed in writing between parties. Therefore the decision of our Hon’ble State Commission is not applicable to the facts of the present case. Considering the facts and circumstances of the case we think compensation of Rs.20,000/- may be awarded to complainant. Hence we pass the following:
O R D E R
The complaint is allowed with costs of Rs.1,000/-. The OP shall return the gold articles pledged, to complainant immediately on receiving the principal amount of loans with simple interest at 9% p.a. from the date of respective loans till the date of filing the complaint. The OP shall also pay Rs.20,000/- as compensation to complainant.
The complainant shall tender the principal loan amounts with interest as ordered above within 45 days from the date of this order. If the complainant fails to tender the said amount within that period, the OP is at liberty to realize his debts with interest stated above as per Law by sale of the pledged articles.
If the OP fails to return the gold articles on tendering the principal amounts and interest by complainant, the OP shall pay the present market value of the gold to complainant after deducting the amount due to him.
Dictated to the Stenographer, corrected and pronounced in open Forum this the 08th day of June 2011.
MEMBER MEMBER PRESIDENT
