Chandigarh

DF-II

CC/664/2017

Bindu - Complainant(s)

Versus

Punjab National Bank - Opp.Party(s)

Sanjiv Gupta KKR Adv.

25 Oct 2018

ORDER

DISTRICT CONSUMER DISPUTES REDRESSAL FORUM-II, U.T. CHANDIGARH

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Consumer Complaint  No	:	664 of 2017
Date  of  Institution	:	31.08.2017
Date   of   Decision	:	25.10.2018

 

 

 

 

Bindu d/o Sh.O.P.Gulati, aged about 46 years, R/o H.No.5288-A, First Floor, MIG Category, Sector 38-West, Chandigarh.

 

             ……..Complainant

Versus

 

Punjab National Bank, Sector 16, Chandigarh through its Authorised Officer/Branch Head.

 

………. Opposite Party

 

BEFORE:  SH.RAJAN DEWAN            PRESIDENT

SMT.PRITI MALHOTRA        MEMBER

            SH.RAVINDER SINGH         MEMBER

 

Argued By: Sh.Sanjiv Gupta, Adv. for the complainant.

           Sh.Ajay Sepehia, Adv. for the Opposite Party

 

 

PER RAVINDER SINGH, MEMBER

 

         The case of the complainant, in brief is that, he availed housing loan of Rs.7 lacs at the interest rate of 12% p.a. from Opposite Party on 2.3.2002 to be repaid in 180 monthly installments of Rs.8120/- each. It is averred that the complainant has been regularly paying the monthly installments of loan. It is also averred that on 29.11.2013 the complainant was maintaining the debit balance of Rs.6,98,408/-.  It is submitted that the complainant made payment of Rs.2 lacs against the said loan account during the period from 2.12.2003 to 15.12.2003 for reducing the loan liability.  Accordingly, the loan account of complainant was restructured and he was required to make payment of Rs.5200/- per month instead of equated monthly installment of Rs.8120/- and the period of closure of loan account remained the same ending March, 2017.

         It is submitted that despite making regular payment of loan account, the complainant was surprised to know that as on 30.1.2017, a loan amount of Rs.96,219.25 has been shown as due for payment. The complainant demanded the account statement from the Opposite Party, but in vain. Ultimately, the complainant on 30.1.2017 made payment of Rs.27,500/- to the said housing loan account under protest as the loan account was to end in March, 2017.  It is also submitted that the incomplete account statement provided by the OP bank shows the imposing of penal interest, whereas the complainant made the payment of loan without any default.  The matter was taken up with the Opposite Party many times, but it did not pay any heed.  Hence, this complaint has been filed alleging deficiency in service and unfair trade practice on its part.

 

2]       The Opposite Party has filed reply and while admitting the disbursement of loan, stated that the loan amount of Rs.7 lacs with interest rate of 12% per annum was to be repaid in 180 EMI of Rs.8120/- each due on 8^th of every month.  It is submitted that as per Sanction letter, Penal Interest shall be leviable in case of default in repayment of loan.  It is submitted that as per bank record, the complainant has miserably failed to repay the loan as per scheduled in terms of conditions of the loan.  It is also submitted that no doubt that EMI was reduced from Rs.8120/- to Rs.5500/- per month, but the complainant still failed to pay the reduced EMI regularly.  It is stated that since the complainant did not pay the loan installments timely, therefore, the loan account could not be closed on due date i.e. 31.3.2017.  It is also stated that the loan account of the complainant was declared NPA thrice because the complainant never deposited EMI in time hence she is liable to pay the due amount along with interest, cost and other charges.  It is further stated that the complainant himself confirmed the debt balance on many occasions during the period from 2003 to 2015 by executing the Balance and Security Confirmation Letters. It is denied that the complainant made regular payment of loan account. It is submitted that the complainant has been provided the statement of account as and when demanded.  It is also submitted that the Opposite Party bank, which is a financial institution incurred financial loss and smooth function of the Opposite Party has also been disrupted by the complainant by filing false complaint despite the fact that she has not repaid the loan as per settled terms & conditions of the loan agreement. Denying the allegations of the complainant, the Opposite Party has prayed for dismissal of the complaint with heavy cost.

 

3]       Complainant also filed rejoinder thereby reiterating the assertions made in the complaint.

 

4]      Parties led evidence in support of their contentions.

 

5]       We have heard the ld.Counsel for the parties and have also perused the record.

 

6]       The complainant has filed the present complaint on following issues:-

a)  The interest has to be charged on quarterly rest, but instead the Opposite Party has charged the interest on monthly rest, resulting into excess payment;

b)  The penal interest has been capitalized violating the law as applicable thereto.

 

7]       The complainant took a loan of Rs.7 lacs from Punjab National Bank/Opposite Party for purchase of house and an agreement to that effect was executed at Chandigarh on 1^st March, 2002 (Ann.R-3). 

 

8]       As per loan agreement, the interest has to be assessed & charged with quarterly rest (three month rest), but from the perusal of Statement of Account, it is explicitly obvious that the interest was charged on monthly basis.  The Opposite Party has relied upon the Consolidated instructions regarding Charging of interest at monthly rests as circulated vide Circular No.DBOD.No.Dir.BC.8/13.03.00/2002-03, dated 26^th July, 2002, addressed to all Scheduled Commercial Banks, which stipulate as under:-

“2.     In supersession of the instructions contained in the above circulars on the subject, banks are now advised to follow the undernoted consolidated instructions in regard to switchover to the system of charging monthly interest on loans and advances:

i.        Banks have option to compound interest at monthly rests effective either from April 1, 2002, or July 1, 2002 or April 1, 2003.

ii.       With effect from quarter beginning July 1, 2002, banks should ensure that the effective rate does not go up merely on account of the switchover to the system of charging / compounding interest at monthly rests and increase the burden on the borrowers.

Illustratively:

If a bank is charging in a borrower’s account an interest rate of 12 percent with quarterly rests, the effective rate is 12.55 percent. If the bank charges in the same account an interest rate of 12 percent at monthly rests, the effective rate comes to 12.68 percent. Banks should, therefore, adjust the 12 percent interest rate charged to the borrower in such a way that the effective interest rate to the borrower does not exceed 12.55 percent as hitherto. Thus, in the above example, banks should charge interest at 11.88 percent (and not 12 percent). If this is done, the effective rate, even after compounding at monthly rests will be 12.55 percent.

3. Application of interest on monthly rests shall be restricted to all running accounts, e.g. Cash Credit, Overdraft, Export Packing Credit Accounts, etc. At the time of changing over to monthly rests, banks may obtain consent letter / supplemental agreement from the borrowers for the purpose of documentation.
4. Interest at monthly rests shall be applied in case of all new and existing term loans and other loans of longer / fixed tenor.
5. In the case of existing loans of longer / fixed tenor, banks shall move over to application of interest at monthly rests at the time of review of terms and conditions or renewal of such loan accounts or after obtaining consent from the borrower.”

 

9]       The Opposite Party has assessed and charged the interest on the basis of monthly basis, but without any intimation and prior consent of the borrower/complainant as envisaged under the above consolidated instructions and as such, committed gross violation, resulting into deficiency in service. 

10]      The Opposite Party has imposed penal interest/charges on the outstanding loan amount of the complainant from time to time with effect from 2.2.2003 to 1.5.2018, and merged/consolidated the penal interest/charges in the outstanding loan amount of the complainant, as is clear from the Statement of Loan Account of complainant, furnished by the OP Bank, marked as Mark-A, which is not permissible.    

 

11]      The Hon’ble Supreme Court of India (Constitution Bench) vide its judgment dated 18^th Oct., 2001 in SLP (Civil) No.2421 of 1993 titled Central Bank of India vs. Ravindra & Others, has ruled as under:-

Penal interest is an extraordinary liability incurred by a debtor on account of his being a wrong-doer by having committed the wrong of not making the payment when it should have been made, in favour of the person wronged and it is neither related with nor limited to the damages suffered. Thus, while liability to pay interest is founded on the doctrine of compensation, penal interest is a penalty founded on the doctrine of penal action. Penal interest can be charged only once for one period of default and, therefore, cannot be permitted to be capitalised.

12]      Interest, i.e. interest on interest, whether simple, compound or penal, cannot be claimed on the amount of penal interest. The Opposite Party herein by clubbing/consolidating penal interest/charges in the outstanding balance loan amount of the complainant, has violated the law laid down by the Hon’ble Apex Court, which warrant severe reprimand.

13]      The Opposite Party during hearing of this complaint before this forum was offered ample opportunities to rectify their mistakes pertaining to the clubbing of penal interest/charges in the outstanding loan amount as well as imposing/calculating of interest on the loan amount on monthly basis instead of quarterly rest, but the Opposite Party expressed its inability at this stage to mend the calculations.

14]      After analytical examination of complete evidence on record produced by the parties as well as pleadings, it is established that the OP/Panjab National Bank has not processed the loan account of the complainant in right perspective and by capitalizing the penal interest/charges in the outstanding loan amount of the complainant, has caused huge financial loss to the complainant by overcharging and as such, the same amounts to unfair trade practice.  The Opposite Party has also suffers from gross deficiency in service on its part by ignoring the dictate of the Hon’ble Supreme Court of India in judgment Central Bank of India vs. Ravindra & Others (supra).

15]      Keeping into consideration the facts & circumstances of the case, as discussed in the preceding paragraphs, the complaint is hereby allowed against the OP with direction to refund to the complainant an amount of Rs.16,500/- charged in excess and also to pay, compensatory cost of Rs.20,000/- for causing harassment & mental agony to her, along with litigation cost of Rs.10,000/-.

         The Opposite Party shall comply with this order within a period of 30 days from the date of its receipt, failing which it shall also be liable to pay additional compensatory cost of Rs.10,000/- apart from the above relief.  

 

        Certified copy of this order be sent to the parties, free of cost. File be consigned to record room.

Announced

25^th October, 2018                                                                  Sd/-

 (RAJAN DEWAN)

PRESIDENT

                                                                                               

Sd/-

                                                                    (PRITI MALHOTRA)

MEMBER

 

Sd/-

(RAVINDER SINGH)

MEMBER