Haryana

Ambala

CC/176/2016

Ramesh Kumar - Complainant(s)

Versus

M/s Indiabulls Housing Finace Ltd. - Opp.Party(s)

Rajiv Walia

30 Mar 2018

ORDER

BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM, AMBALA.

 

                                                           Complaint No.:176 of 2016.

                                                           Date of Instt.: 06.04.2016.

                                                           Date of Decision: 30.03.2018.

 

Ramesh Kumar son of Shri Ram Lal resident of House No.17/261 Ward No.3 Baldev Nagar, Ambala City.

                                                                             …Complainant.

                             Versus

 

1.M/s Indiabulls Housing Finance Limited Shop No.2, near Punjab Sports, Rai Market, Ambala Cantt. through its Manager/Authorized signatory.

2.M/s Indiabulls Housing Finance Limited Indiabulls House 448-451, Udyog Vihar, Phase-V, Gurgaon-122001 (Haryana) through its Manager/Authorized signatory.

                                                                             …Opposite Parties.

 

             Complaint U/s 12 of the Consumer Protection Act, 1986

                                                                  

BEFORE:                    SH. D.N. ARORA, PRESIDENT.

                             MS. ANAMIKA GUPTA, MEMBER.

 

Present:                Sh.Rajiv Walia, counsel for the complainant.

                             Sh.Rajesh Kumar, counsel for the OPs.

 

ORDER:

 

                             In nutshell, the brief facts of the present complaint are that the complainant had applied for a loan of Rs.4 lac from OP No.2 vide loan agreement No.HHEAMB000098723 which was sanctioned by Op No.1 and the amount was credited in the account of the complainant on 16.03.2017.  The loan amount was to be paid in 120 monthly installments   and till today the complainant has already paid more than 105 installments regularly out of the total 120 monthly installments. After about four years the OPs increased the installment from Rs.7208/- to Rs.7428/- which was further increased to Rs.7639/- and then Rs.7784/-. Thereafter the installment was increased to Rs.7804/- and then Rs.7917/- and since last more than two years the complainant has been making the payment at this installment and till today he has already paid Rs.7,75,000/-. The complainant contacted the OPs to know the balance installments but it was intimated to him to pay 420 installments instead of 120 installments commencing from 01.05.2007 to 05.04.2042. The complainant has told that he has to pay 120 installments of Rs.7208/- as per loan agreement but they did not listen and failed to provide loan account statement. The complainant got served legal notice upon the OPs but to no avail. The act and conduct of the OPs clearly amounts to deficiency in service on their part. In evidence the complainant has tendered affidavit Annexure CX and documents Annexure C1 to Annexure C8.

2.                          On notice, OPs appeared and filed their joint reply wherein several preliminary objections such as cause of action, mis-joinder and non-joinder of necessary parties, cause of action and concealment of material facts from this Forum have been taken. It has been submitted that the complainant and his wife have availed loan facility of Rs.4 lacs at floating rate of interest which at the time of execution of loan agreement was 18 %. Since the rate of interest was floated in nature, it was liable to be changed with the change in Prime Lending Rate (PLR) of the OPs. The change in rate of interest leads to change in tenure of repayment or amount of installment according to terms and condition of the loan agreement.  The Prime Lending Rate (PLR) is the benchmark interest rate on the basis of which financial institutions decide the interest rates on the various loan products based upon costs of funds etc. This means if the PLR increases or decreases by a certain amount the interest rates charged on the floating rate loans offered by the bank/financial institutions also increase or decrease by the same amount. The company has a policy of reviewing the interest rates periodically taking into account all the factors such as Nature of the loan, Cost of funding, Security, Geographical locations, Expected delinquency, Costs servicing the loan and Prevailing interest rates in the market.  Therefore, the rate of interest is bound to change whenever there is a change in the tenure in which the loan has to be repaid.  The change in rate of interest further leads to change in number of installments or amount of installments as per terms and conditions of loan agreement. At the time of execution of loan agreement 120 monthly installments were to be paid  since there was change in rate of interest which resulted enhancement of number of installment therefore, on 25.05.2016 total 420 installments were to be paid by the borrowers. Other contentions have been controverted and prayer for dismissal of the complaint has been made. In evidence the OPs have tendered affidavit Annexure RA and documents Annexure R1 to Annexure R3.

3.                          We have heard learned counsel for the parties and have gone through the evidence and documents on the file carefully.

4.                          It is admitted fact that the complainant has obtained a loan of Rs.4 lac which was to be paid in 120 installments as mentioned in Annexure R1 and the IHFL-PLR  @ 14.75 % per annum  with adjustable rate of interest IHFL-PLR+/- 3.25 % p.a. = 18 % p.a.

5.                          The complainant has come with the plea that he has already paid more than 120 installments towards the loan amount as mentioned in Annexure C2/Annexure C9/Mark A i.e. account statements. It has been further argued that the rate of interest was floated but it cannot go beyond interest @ 18 % as per loan agreement but the Op has bent upon to charge interest @ 25 % p.a.by enhancing the EMI from 120 to 420 wrongly and illegally by violating the terms and conditions because initially the EMI was started from Rs.7208/- but it increased from time to time and lastly the complainant had paid the EMI of Rs.7917/- as the interest was floated.

6.                          On the other hand the OPs have argued that a joint loan was taken by the complainant and his wife but the present complaint has been filed by complainant only, therefore, present complaint is not maintainable. It has been further argued that the rate of interest was floated and this fact is also admitted by the complainant and he also kept on depositing the EMIs as per the revised schedule from time to time and being a IHFL-PLR (India Housing Finance Limited-Preliminary Land Rate) can be revised as per the floating rate of interest.  It has been further argued that there is arbitration clause and as per the agreement the Forum/court situated at Delhi has jurisdiction to entertain and decide the present complaint, therefore, this Forum has no jurisdiction to try and decide the present complaint.

7.                          After going through the material available on the case file it is well established that this Forum has jurisdiction to decide and entertain the present complaint because the agreement between the complainant and the OPs was executed at Ambala as mentioned in Agreement Annexure R1 within the jurisdiction to this Forum, therefore, this plea is not sustainable.

                             The plea of arbitration clause in the agreement is also no force in the eyes of law as per Section 3 of the Consumer Protection Act, which is reproduced as under:-

“3. Act not in derogation of any other law.—The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.”

8.                Upon reading of the Section 3 of the Consumer Act, it is clear that it provides additional remedy and existence of arbitration clause, in the agreement, to settle disputes between the parties, is not a bar to entertain a complaint filed by the consumer, alleging deficiency in service in providing services etc.  It is a remedy in addition to and not in derogation to any other remedy available to an individual. Hon’ble Supreme Court inSkypak Couriers Ltd. v. Tata Chemicals Ltd., (2000) 5 SCC 294 held as under:-

 “Even if there exists an arbitration clause in an agreement and a complaint is made by the consumer, in relation to a certain deficiency of service, then the existence of an arbitration clause will not be a bar to the entertainment of the complaint by the Redressal Agency, constituted under the Consumer Protection Act, since the remedy provided under the Act is in addition to the provisions of any other law for the time being in force”.

                            

9.                          The loan in question was obtained by the complainant and his wife jointly and the present complaint has been filed by the complainant Ramesh Kumar who has been shown as one of the applicant in the loan agreement. Being co-owner and applicant in the loan agreement the complainant has every right to file the present complaint and the OP has failed to show on the case file as to what prejudice has been caused to it, therefore, the Ops are ceased to take this plea.

10.                        Now, we are coming on the core point of the dispute in question whether the OPs can changed the period of installments of loan being taken by the complainant floating rate of interest or not?

11.                         Learned counsel for the OPs has  argued that a per loan agreement executed between them the amount of EMI was retained at Rs.7208/- with IHFL-PLR  @ 14.75 % per annum  with adjustable rate of interest IHFL-PLR+/- 3.25 % p.a. = 18 % p.a. but period of installments were changed due to change in Prime Lending Rate (PLR).

12.                        As per the RBI guidelines to commercial banks and to Non-banking Financial companies (NBFCs), it is stated that these institutions will not be able to enhance the interest rate when the loan was sanctioned at floating rate of interest without giving a written intimation to the borrower and without obtaining written consent of the borrower. If written consent is obtained, then only commercial banks are permitted to enhance the floating rate of interest. As per equity, these instructions of RBI issued to commercial banks will also be applicable to all the financial  institutions, who are financing the consumers being a company falling under the category of non-banking financial companies. The RBI vide its direction No.RBI/2006-07/414 dated 24.05.2007 has issued instructions to all non-banking financial companies including residuary non-banking companies about the matter of complaints of charging excessive interest rate by NBFCs as back as 24.05.2007. They were advised to regulate the interest rates and the rate of interest beyond the certain level may be seen to the excessive and can neither be sustainable nor be conforming to normal financial practice. Thereafter, RBI has issued another circular addressed to all NBFCs vide its master Circular No.RBI/2011-12/470 dated 26.03.2012. We have also perused the loan agreement on page 38 of loan agreement pertaining to default/future interest rate as under:-

3. Amortisation (refer schedule in case of combination of

Fixed and Adjustable Rate of interest)

(i) Terms of repayment 120 months.

(ii) EMI Rs.7208/-

(iii) Total number of EMIs: - 120

(iv) Date of Commencement of EMI 01.04.2007                      (v) Due date of payment of first EMI 01.05.2007

 

However, in the event of advance, the date of commencement of EMI shall be the corresponding day  (to the date specified above) of the month following the month in which disbursement will have been completed. In such a case, the Due Date of Payment of first EMI shall be the corresponding day of the following month to the due date specified above.

 

(vi) Subsequent EMIs shall be payable at the end of each respective month. The Borrower/s may, if he so chooses, issue standing instructions to the bank in which the Borrower/s has an account, to debit the account of the Borrower/s every month and credit such account as directed by IFSL, for the value of the EMI due.

In case of Structured Repayment Facility

EMI Rs.______/- from ________month to ____month

EMI Rs.______/- from ________month to ____month      EMI Rs.______/- for the balance term of repayment.

 

13.              From the above, it is clear that in case of structure repayment facility no amount has been mentioned on which date it will be increased on the columns under these parameters are kept blank. Even under Schedule A, terms and conditions applicable to the loans given on fixed rate of interest are kept blank. We have also perused Schedule B. Under schedule B the adjustable rate of interest was mentioned as 18 %. We find majority of the columns in the loan agreement appended on the record are left blank, which remain unfilled and would be filled up at a later date to disadvantage of the borrower. This type of practice of keeping blank documents can be used by the finance company to the determent of the consumers who were given financial assistance. So, keeping blank documents of loan is also against the principle of natural justice and is a unfair trade practice. Thus, we hold that the financial institutions had increased the repayment schedule from 120 to 176 months and further from 188 months, 203 months 242 months and lastly to 420 months as per their letters attached with Annexure R3. It is strange that on one hand the Ops kept on charging the installments by calculating the floating interest which increased from Rs.7208 (initial installment) to Rs.7423. It was further increased from Rs.7639 to Rs.7784 and further to Rs.7804 and lastly it was increased upto Rs.7917/-. It is not the case of the Ops that the complainant is/has been a defaulter rather it is not understandable as to how and under which formula the OPs have shown the tenure of EMIs from 120 months to 420 months.  The complainant has not objected to the floating rate of interest and as per agreement Annexure R1 the adjustable rate has been shown upto 18 %, therefore, the Ops cannot charge the rate of interest beyond interest @ 18 %.  It is worthwhile to mention here that the Amortization clause of schedule B of the loan agreement only provides for increase or decrease in number of EMIs, however, it does not provide for same number of EMIs with changed installment amount but when most of the columns of this clause have been left blank, therefore, the Ops have no right to increase the tenure of installments from 120 months to 420 months because natural justice demands that the consumer must have right to either change the number of EMIs due to change in the interest rate or to change installment amount to keep the same number of EMIs.  Amortization clause of schedule B is only an unfair trade practice as borrower will come to know the change in the interest rate only at the end of the year and even at that time when the petitioners think it appropriate to inform.  Even in the instruction issued to the NBFC vide circular No.RBI/2006-07/138 DNBS (PD) CC No.80/03.10.042/2005-06, dated 28.09.2006, it has been instructed that the change in the interest rate and charges should be effected only prospectively, whereas in the present case amortization clause provides that the changes made during the financial year should be communicated to the borrower at the end of the financial year.  Thus, this clause clearly contravenes the RBI guidelines issued by this circular.  It is clear that there are certain clauses in the loan agreement which are apparently not in conformity with the RBI guidelines, however, these clauses constitute unfair trade practice on the part of the petitioners.  Also the agreement itself becomes voidable as certain provisions of the agreement are against the law of the land. On this point reliance can be taken from case law titled as India Bulls housing Finance Ltd. and another Vs.  Boota Singh Sidhu decided by Hon’ble National Commission on 17.11.2017 in Revision Petition No.2884 of 2017.

14.              Moreover, admittedly loan was advance in the year 2007 and during the period of last ten years there is continuous tendency of reduction of PLR (Primarily rendering rate of interest) by Reserve Bank of India as per the sanctioned letter itself OP has claimed apparently excessive rate of interest after applying the said rate of interest. The total repayment of loan and interest was to be payable by the complainant into 120 monthly instalment @ Rs. 7208/-. It is also clear from the record that OP may increase the amount of instalment if PLR rate is increased by the RBI and that to under notice to the complainant but it is not a case, number of instalments can be increased. The OP has failed to place any documents on the file which may conclude that PLR has been increased by the RBI after advancement of the loan and if so to what extent. In the absence of clear cut evidence in this regard, OP cannot allowed to increase the amount of the instalment from 120 EMI to 420 EMI if they are allowed to recover the instalment then total repayment of the amount comes to Rs. 30 lakhs. So, the act of the OP is increasing the instalment 120 to 420 is totally a unilateral Act against the fundamental principal of lending is an Act of unfair trade practice which is highly depreciated by this Forum

15.                        Keeping in view the above facts and circumstances we hold that the OPs have wrongly and illegally enhanced the tenure of installments from 120 months to 420 months. Accordingly we allow the present complaint with cost which is assessed at Rs.20,000/- on account of mental agony, harassment and litigation expenses with a direction to the OP to settle the dispute 120 monthly installments and if the complainant has paid more than 120 installments then the OPs will refund the payment of installments paid beyond 120 installments to the complainant alongwith rate of interest which they had charged from the complainant. It is made clear that if the complainant commits delay in making the payment of any installments as per the schedule then the Ops are at liberty to charge the interest for delayed period only, if any, as per the agreement. The OPs are directed to release the paper/document received at the time of loan besides issuing the NOC as per above directions. Order be complied within a period of 45 days. A copy of this order be supplied to both the parties free of cost.  File be consigned after due compliance.

Announced in open Forum.                                                                 Dated:30.03.2018

 

                                                                    (D.N.Arora)                                                                                                           President                                 (Anamika Gupta)                                       Distt.Consumer Disputes                  Member                                   Redressal Forum, Ambala.