BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM AT BANGALORE URBAN

 06^th DAY OF OCTOBER 2016

O R D E R

SRI. P.V SINGRI, PRESIDENT

The complainant has filed this complaint U/s.12 of the Consumer Protection Act, 1986 against the Opposite Parties (herein after referred as OPs) with a prayer to direct the OPs to pay him a sum of Rs.30,000/- as compensation for the deficiency of service and negligence and also to reverse the excess interest debited to his loan account over and above the agreed terms and conditions.

2. The brief averments made in the complaint are as under:

That in the month of November 2006 the complainant had approached OP-1 seeking a House Term Loan for the purpose of construction of a residential house at No.245, 8^th Main, Judicial Layout, Thalaghattapura, Bangalore and in consideration of the same, OP-1 had sanctioned a term loan of Rs.8,00,000/- and said sanction was communicated to the complainant vide letter dated 27.11.2006.  That as per the terms and conditions stipulated under the sanction letter, the term loan was to be repaid in 102 equated monthly instalments @ Rs.11,355/- per month with an initial repayment holiday of 18 months, along with interest @ 9.25% p.a with monthly rests.  That as per the option given, the complainant choose fixed rate of interest and as per the then prevailing norms the rate of interest was fixed @ 9.25% p.a with monthly rests and accordingly the complainant was paying instalments as and when the same were due.  That to the shock and surprise of the complainant, he came to know that OP-1 was charging interest at an abnormal rate of 12.25% p.a as against the agreed rate of 9.25% p.a and immediately thereupon the said discrepancy was brought to the notice of OP-1 vide letter dated 24.07.2014 with a request to rectify the error.  That on receipt of the said representation, OP-1 modified the rate of interest from 12.25% to 10.25% which is still 1% higher than the agreed rate, under fixed interest mode and once again this discrepancy was brought to the notice of OP-1 on 19.08.2014 with a request to rectify the error and settle the rate of interest at the contractual rate i.e., 9.25% p.a under fixed rate of interest.  That despite receipt of the notice dated 19.08.2014 OP-1 failed and neglected to comply with the demand made, except endorsing a copy of letter dated 22.09.2014 received from OP-2.

In the letter dated 22.09.2014 the rate of interest mentioned in the sanction letter dated 27.11.2006 has been wrongly shown as 9.75% p.a instead of 9.25% p.a.  It is further stated that the said rate of interest was changed to 11.25% p.a subject to reset at the end of every three years.  This variation made in charging the interest without the consent and any notice to the complainant amounts to deficiency of service.  The complainant had opted for fixed rate of interest and accordingly the rate of interest was fixed at 9.25% p.a which signifies its static nature and under no circumstances the rate of interest can be modified once it was opted under fixed rate and the same has to be continued for the entire tenure of the loan.  That the manner of performance of OPs is in violation of the conditions of loan and this resulted in deficiency of service in relations to charging of interest.  That the complainant got issued a legal notice dated 04.12.2014 through his advocate calling upon the OPs to reverse the excess interest charged on and above the contractual rate of interest agreed at 9.25% p.a and despite the receipt of the said notice, OPs once again failed to comply the demand made therein.  That the OPs sent an untenable reply dated 05.01.2015 through their advocate justifying their action in charging interest over and above the agreed rate.  That since the OPs failed to comply the demand made by the complainant in his legal notice he had no option other than to approach this Forum.  Therefore, the complainant prays for allowing the complaint as prayed for.

3. In response to the notice issued, OP entered their appearance through their advocate and filed their version.  The sum and substance averments made in the version are as under.

That it is true that the complainant during November 2006 had approached OP-1 for a term loan of Rs.8,00,000/- for construction of residential house and was sanctioned a term loan of Rs.8,00,000/- and issued with a sanction letter dated 27.11.2006 and in terms of the said sanction letter loan amount has to be repaid in 102 equated monthly instalments at Rs.11,355/- per month with an initial holiday of 18 months along with interest @ 9.25% p.a with monthly rest.  That in terms of the said sanction letter the rate of interest is fixed subject to reset at the end of every three years, which the complainant has not purposefully mentioned in his complaint.  That the OP has never charged interest at an abnormal rate against the agreed rate of interest as alleged in the complaint.  That the legal notice issued by the complainant has been suitably replied through their counsel. 

That the complainant failed to avail the loan facility immediately after sanction of the same vide letter dated 27.11.2006.  That after lapse of one year the complainant approached OPs for loan facility.  OP considering the request of the complainant has issued revised sanction along with annexure dated 03.12.2007.  That the complainant has accepted the terms and conditions of the revised loan sanction letter and annexure by affixing his signature and availed loan facility by executing loan documents.  That in terms of the revised loan sanction and fixed rate basis 11.25% with a stipulation that the interest on the loan will be charged at 11.25% p.a on daily reducing balance at monthly rest.  That the Bank may at its discretion stipulate the periodicity of computation of interest and further Bank may its sole discretion reset the interest rates at the end of every three years on the basis of Bank’s fixed rates prevailing at that time and prospectively.  That the complainant having the knowledge of the entire transactions and having executed all the documents and availed loan and after lapse of 7 years he has come up with this false complaint to harass the OP.  Therefore, OPs pray for rejection of the complaint with costs.

The complainant to substantiate the allegations made in the complaint submitted his evidence by way of affidavit reiterating the allegations made in the complaint.  OPs also got filed the affidavit evidence of their authorized officer Ramachandra K. Bhat in support of the averments made in the version.  Both the parties have produced certain documents in support of the respective contentions.  Both the parties have also submitted written arguments.    

4. The points that arise for our determination in this case are as under:

        5. Perused the allegations made in the complaint, averments made in the version, sworn testimony of both the sides, various documents relied upon by them and written arguments as well.

6. Our answer to the above points are as under:

REASONS

7. Admittedly on the application filed by the complainant in the month of November 2006 he was sanctioned a home loan of Rs.8,00,000/- and a sanction letter was communicated to the complainant vide sanction letter dated 27.11.2006.  It is also not in dispute that as per the terms and conditions mentioned in the sanction letter, the said term loan was to be repaid in 102 equated monthly instalments @ Rs.11,355/- per month and the rate of interest applicable was at 9.25% p.a with monthly rests.  That the complainant was also given initial repayment holiday of 18 months.  However it appears from the material placed on record the complainant did not avail the loan facility immediately after receipt of the sanction letter and he availed the said loan only in the month of December 2007 i.e., almost a year after receipt of the above mentioned sanction letter.  While availing the said loan as per revised sanction letter dated 03.12.2007, the complainant has affixed his signature on the loan documents by accepting the terms and conditions mentioned in the said revised loan sanction letter.

8. Admittedly both in the earlier sanction letter and the revised sanction letter, it has been mentioned, by affixing a stamped writing that fixed rate of interest is subject to reset at the end of every three years.  The said condition mentioned in the first sanction letter as well as the second sanction letter is not denied by the complainant.  Thus from terms and conditions mentioned in both the sanction letters the fixed rate of interest agreed between the parties is subject to reset at the end of three years and complainant is liable to pay the revised rate of interest, prevailing at that point of time. 

9. OPs claim that the complainant agreed to pay fixed rate of interest @ 10.25% p.a with monthly rest while accepting the revised sanction letter dated 03.12.2007.  Admittedly the revised sanction letter bears the signature of complainant.  It is pertinent to note that in the revised sanction letter dated 03.12.2007, initially the rate of interest has been mentioned as 9.25% p.a.  However the said rate of interest has been rounded off and substituted with rate of interest at 11.25% p.a.  The complainant seriously disputed this claim of OPs that he agreed to pay the fixed rate of interest @ 11.25% p.a while accepting the revised sanction letter dated 03.12.2007.

10. We don’t understand the conduct of OPs in substituting interest @ 11.25% p.a by rounding of the rate of interest mentioned as 9.25% p.a in the revised sanction letter.  The said correction in the ‘interest rate’ has not been initialed either by the complainant or the Branch Chief Manager.  The learned advocate for the complainant pointed out that at the time when the complainant signed the revised sanction letter dated 03.12.2007, the rate of interest mentioned was 9.25% p.a with monthly rest and subsequently the rate of interest has been tampered and substituted as 11.25% p.a. If at all the rate of interest then prevailing was 11.25% p.a, we don’t understand as to why the rate of interest was mentioned as 9.25% p.a in the revised sanction letter.  Therefore, we find considerable force in the argument of the learned advocate for complainant that the rate of interest was changed to 11.25% subsequent to obtaining signatures of complainant.  Nothing prevented the OPs to type the rate of interest @ 11.25% p.a in the said revised sanction letter at the first instance instead of substituting subsequently.  From the discussions made above, we are of the clear opinion that even at the time of issuing revised sanction letter the rate of interest agreed was 9.25% p.a only and not 11.25% p.a.  The complainant being a senior judicial officer would not go to an extent of denying the agreed rate of interest, if at all he had agreed to pay fixed rate of interest at 11.25% p.a with monthly rest.  We have no reason to suspect the bonafides of the complainant in claiming that the agreed rate of interest was 9.25% p.a even on the date of issuing the revised sanction letter dated 03.12.2007.  It appears to us that OPs deliberately with an intention to make wrongful gain for themselves have substituted the rate of interest as 11.25% p.a subsequently.

11. It is also pertinent to note here that subsequent to availing loan facility the complainant has noticed that the OPs are charging interest @ 12.25% p.a as against the agreed rate of interest.  Therefore immediately he brought the same to the notice of OP-1 and requested him to rectify the said discrepancy by his letter dated 24.07.2014.  On receipt of the said letter from the complainant, OP-1 has modified the rate of interest to 10.25% p.a from 12.25% p.a.  This averment made of the complainant in para-5 of his complaint has not been denied by the OPs either in their version or in their affidavit evidence.  Thus, it is apparent from the conduct of OP-1 that even without intimating the complainant they resorted to charge interest @ 12.25% p.a which is much higher than the agreed rate of interest and also much higher than the rate of interest mentioned in the revised sanction letter dated 03.12.2007.  If at all the complainant had agreed to pay interest @ 11.25% p.a as claimed by the OP-1, as per their revised sanction letter, OP-1 certainly would not have reverted back to rate of interest @ 10.25% p.a.  This conduct of OP-1 itself goes to establish that the complainant never agreed to pay interest @ 11.25% p.a as asserted by OPs. 

12. A useful reference can also be made to a circular bearing No.008/2006-07 dated 19.05.2006 issued by Head Office of State Bank of Mysore regarding revision of rate of interest on housing loans (The copy of circular is produced).  According to the said circular the fixed rate of interest for a housing loan above 5 years upto 15 years was 9.25% p.a.  The said rate of interest was prevalent on the date of the loan transaction in question.  OPs did not dispute the said circular dated 19.05.2006 issued by their Head Office.  The OPs also did not produce any other documents/circular to show that there was further revision of rate of interest.

13. Thus from the said circular, it is quite clear that, the fixed rate of interest applicable to the loan transaction on hand was 9.25% p.a.  In the said circular it is further provided as under:

“1. Fixed rate loan will be sanctioned only for repayment period upto 15 years only.

2. In order to have a proper system of review of interest rate scenario, it has been decided that the interest rate on fixed rate loans would be reset at the end of every three years, on the basis of our fixed rates prevailing at that time.

3. Branches are advised to incorporate a clause in this regard as per annexure “A” to this circular in the Terms and Conditions letter as also in the relevant agreement form in respect of fixed loan to be sanctioned with effect from 22.05.2006 until such time the revised T & C letter and Agreement form is supplied by the stationery department”.

14. As provided in the said circular and also as provided in the loan sanction letter issued by OP-1, interest rate on fixed rate loans have to be reset at the end of every three years, on the basis then prevailing rates.  Accordingly the interest rate in the instant case on hand needs to be reset at the end of three years from 03.12.2007.  That means the reset falls due on 03.12.2010.  Thus, even according to their own circular the OPs are not justified in charging fixed rate of interest more than 9.25% p.a.  Furthermore the OP-1 has failed to incorporate necessary clause in this regard either in their loan application form or the loan sanction letter.  Even though the OPs have failed to incorporate Annexure-A attached to the said circular, either in their loan application or the loan sanction letter.

15. Thus, it is evident that the OPs in grave violation of their own circular dated 19.05.2006 have resorted to charge excess interest than permissible and also against the terms of agreement between themselves and the complainant.  Certainly this conduct of OPs is unbecoming of a Banking Institution and certainly amounts to serious breach of trust the customer has in the Bank.  The OPs have no justification at all to insist that the complainant agreed to pay fixed rate of interest @ 11.25% p.a in view of the circular dated 19.05.2006, referred supra issued by their own Head Office.  This conduct of the OPs must have put the complainant to great hardship, inconvenience and mental agony.  Therefore, apart from directing the OPs to revert back to the rate of interest at 9.25% p.a, they shall also to be directed to compensate the complainant for deficiency of service resulting in great hardship and mental agony to the complainant.  Accordingly, we answer point No.1.

16. The order could not be passed within the stipulated time due to heavy pendency. 

17. (Point No.2.)  In the result, we proceed to pass the following:                 

  O R D E R

The complaint filed by the complainant U/s.12 of the Consumer Protection Act, 1986 is allowed in part.  OPs are directed to reverse the excess interest debited to the loan account over and above the agreed rate of interest for the first three years and to pay compensation of Rs.25,000/- towards deficiency of service together with litigation cost of Rs.10,000/-.

OPs shall comply the said order within four weeks from the date of communication of this order.

Furnish free copy of this order to both the parties.

(Dictated to the Stenographer, got it transcribed and corrected, pronounced in the Forum on this 06^th day of October 2016)

MEMBER                            MEMBER                    PRESIDENT

Vln* 

Witnesses examined on behalf of the complainant dated 24.06.2015.

1. Sri.H.S Ramakrishna

Documents produced by the complainant:

Witnesses examined on behalf of the Opposite party/s dated 07.09.2015.

1. Sri.Ramachandra K Bhat.  

Documents produced by the Opposite Party:

  MEMBER                           MEMBER                     PRESIDENT

   Vln*