ORDER

PARAMJIT SINGH, PRESIDENT

1. Brief facts of the present complaint are that complainants were allotted plot No. 960 measuring 300 sq. yards in residential Urban Estate, Kapurthala upon which the complainants intended in raising the construction of the house after purchase of plot from PUDA for which they required housing loan, as such the complainants approached the respondent for a loan of Rs.11,60,000/- but actually availed only such of Rs.4,36,050/- for

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purchase of the aforesaid plot. The complainants were offered two options for repayment of the loan amount. One was to carry floating rate of interest, which was in vary from time to time as per the the instructions of the Government and RBI and the other option given to the complainants was to opt for fixed rate of interest, which was 1% more than the prevalent rate of interest on the house loan at the prevalent time, which was bound to carry fixed rate of interest throughout the period of repayment. The repayment period by fixing fixed monthly installment for the repayment thereof.

2. That the complainants opted for the second option i.e. fixed rate of interest @ 9.25% p.a. an highest monthly reducing balance at quarterly rest which was repayable in monthly, installments of Rs.5440/- each as available at the relevant time in 180 monthly installments. The complainants had been regularly paying the installments. The complainants had moved an application dated 16.4.2009 and 20.4.2009 to the respondent bank for seeking copies of various documents including sanction letter of the loan account, statement of loan account and amount of interest paid therein as it was found that instead of fixed rate of interest, the respondent bank has been wrongly charging higher rate of interest to the tune of 8.75%, 8.50%, 12.75% and 13.75% p.m. as on 7.11.2008 without any intimation, knowledge or and consent of the complainants but these letters were not responded by the bank. Even the complainants had moved an application for issuing of the copies under the Right to Information Act but inspite of issuing copies, the bank has been delaying the matter on one pretext or the other and a

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letter dated 30.5.2009 was received from the bank and that the matter is being taken up with the competent authority and will revert back after hearing from them in the meanwhile bank had issued letter dated 15.2.2009 asking the complainants to enter into modify arrangement letter of housing loan agreement by sending the said revised agreement proforma with it, which was replied by the complainants vide letter dated 28.5.2009 making it clear that they are not ready to enter into any modify agreement.

3. That the respondent bank has got absolutely no right to change the fixed rate of interest as agreed in the original housing loan agreement referred to above. The respondent bank is wrongly charging excessive rate of interest than agreed under the original agreement referred to above. The complainants had been requesting the respondent bank to redress their grievances, but the bank has failed to so. This act of opposite party bank in charging the excessive interest from the complainants is deficiency in service. Hence the present complaint.

4. Notice of the complaint was issued to the opposite party who appeared and filed written statement raising as many as five preliminary objections. It is admitted that the complainants had purchased a plot and obtained a loan to the tune of Rs.11,60,000/- on 29.6.2005 on execution of the loan documents and it was agreed that fixed rate of interest @ 9.25% on the highest monthly reducing balance shall be charged. The clause was agreed but the complainants further agreed by executing a Memorandum of Term Loan of Agreement and by virtue of this Memorandum, the

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complainants agreed. The bank through its letter dated 15.2.2009 had informed the complainants wherein they were informed that due to volatility in the interest rate the bank shall reset fixed rate of interest in the end of every two years on the basis of fixed rate of interest. It is admitted that agreement dated 26.6.2005 was entered upon and the bank agreed to charge 9.25% interest from the borrower which rate of interest was prevalent at that time. The complainants further agreed to pay the higher rate of interest which in the option of the bank warrants charging of such enhanced rate of interest for which period as the bank may deem fit so the bank is at liberty and have charged the enhanced rate of interest from time to time on the outstanding amount of the loan account of the complainant. The rate of interest is decided at the bank level keeping in view the directions of the Central Govt. and Reserve Bank of India and borrowing conditions of the market. Thus, there is no deficiency in service on the part of opposite party in charging the excess interest.

5. The counsel for the complainant has tendered into evidence affidavit of complainants Ex.C1 along with documents Ex.C2 to Ex.C6 and closed the evidence.

6. On the other hand the opposite parties tendered into evidence affidavit Ex.RA along with documents Ex.R1 to Ex.R18 and Ex.D19 to Ex.D24 and closed the evidence.

7. We have heard counsel for the counsel for the parties and have gone through the file. The counsel for the opposite party has relied upon Clause 2 (b) and 2(o) of the Memorandum of Agreement

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which reads as follows-

"Without prejudice to the bank, other rights and remedy, the bank shall be entitled to charge at its own discretion enhanced rate of interest on the outstanding in the loan account or a portion there of or for any default or irregularity on my/our part which in the opinion of the bank warrants charging of such enhanced rate of interest for such period as the bank may deem fit. The equated monthly installments will have to be paid till the entire loan and interest is fully repaid. Further the amount of equated monthly installments may change/increase as may be decided by the bank."

The counsel for the opposite party has further relied upon Clause 2 (o) which reads as under-

"I/we shall abide by all the terms and conditions of the sanction of loan to me/us as mentioned in the arrangement letter/sanction letter which forms part of this agreement and also to the rules for such loan which are now enforced and also which may be altered/revised/amended/added from time to time by the bank/Reserve Bank of India/Central Government/State Government".

8. On the other hand the counsel for the opposite party has argued that the bank is at its discretion to enhance the rates of interest on the outstanding amount in the loan account. He has relied upon the following para of the agreement executed between the complainant and opposite party-

"Without prejudice to the bank’s other rights and remedies, the bank shall be entitled to charge at its own discretion enhanced

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rates of interest on the outstanding in the loan account (s) of a portion thereof for any default or irregularity on my/our part which in the option of the bank warrants charges of such enhanced rates of interest for such period as the bank may deem fit. The equated monthly installments will have to be paid till the entire loan and interest is fully repaid. Further the amount of equated monthly installment may change/increase as may be decided by the bank."

9. The counsel for the opposite party pleads Clause 2 (b) of the Memorandum of Loan Agreement. The counsel for the complainant has argued that it is clearly mentioned in Clause 2 (b) that if any default or irregularity which in the opinion of the bank warrants charging of such enhanced rate of interest for such period as the bank may deem fit. The arguments of the counsel for the complainant is that unless there is any default or any irregularity committed on the part of the complainant, the enhanced rate of interest for such period as the bank may deem fit cannot be charged. The counsel for the complainant further argued that opposite parties have no where mentioned in their written statement that the complainant had committed any default or irregularity in payment of equated monthly installments and the installment may change/increase by the bank in case any default or irregularity is committed by the complainant. The counsel for the opposite parties relied upon Force Majeura Clause and following this Force Majeura Clause the bank had issued a letter dated 15.5.2009 and informed the complainant that due to volatility in the interest rate, the opposite party bank shall reset fixed rate of interest at the end of

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every two years and on the basis of fixed rate of interest prevailing then and the bank have also enclosed the certified copies of modify loan agreement to be executed by the bank and the complainant and the bank requested the complainant to deliver this modify copy of the loan agreement to be executed between the bank and the complainant and requested the complainant to deliver this modified copy of the agreement back to the bank within 15 days from the receipt of this letter, failing which shall be presumed that there is no objection for the amendment of the contract. This letter of the bank dated 15.5.2009 shows that the bank cannot change the rate of interest unless and until a modified agreement is signed between the complainant and the bank because the rate of interest can only be enhanced in the events of any default or irregularity committed by the complainant. The counsel for the complainant has also relied upon the Memorandum of Agreement dated 26.6.2005 and the letter of agreement whereby the borrower and the bank agreed to the terms and conditions of the loan advanced and the rate of interest to be charged from the complainant.

From the discussion above, we accept the complaint and direct the opposite party bank to charge fixed rate of interest as mutually agreed to between the parties because it cannot be changed especially when the complainant has not committed any default in repayment of equated monthly installment of the loan amount to the opposite parties. We direct the opposite party bank to adjust the amount of excess interest already charged by it while charging the floating rate of interest in the future Equated Monthly Installments

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payable by the complainant. Compliance of this order be made by the opposite party within one month from the receipt of copy of this order. Copy of the order be sent to the parties through registered post free of costs. File be consigned to the record room.

Dated: Gulshan Prashar Paramjit Singh

06-04-2010 Member President

Deepak Rattan another Vs. State Bank of India

Present: Shri J.K. Behl counsel for the complainant

Shri Vinay Garg counsel for the opposite party

Arguments heard. Complaint allowed vide our separate

detailed order of today. Copy of the order be sent to the parties through registered post free of costs. File be consigned to the record room.

Dated: Gulshan Prashar Paramjit Singh

06-04-2010 Member President