DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, PALAKKAD
Dated this the 17th day of April, 2023
Present : Sri.Vinay Menon V., President
: Smt.Vidya A., Member
: Sri.Krishnankutty N.K., Member Date of filing: 14/02/2020
CC/26/2020
Satish Ramachandran
S/o Ramachandran (Late)
Chaithram, Alankode
Olavakkode (P.O)
Palakkad – 678 002 - Complainant
(By Adv. Pramod.P.K)
V/s
The Branch Manager
UCO Bank, Palakkad Branch
31/776 (1), Market Road
Palakkad – 678 014 - Opposite party
(By Adv. C.Mohanram)
O R D E R
By Smt. Vidya.A, Member
1. Pleadings of the complainant in brief
The complainant had availed a housing loan of Rs. 10,33,525/- from the opposite party on 26/06/2006 with loan A/c No. 07600600010660. At the time of availing the loan, the opposite party told the complainant that the repayment has to be made in 180 instalments and the amount of instalment will be informed to the complainant. Though the instalment amount instructed by the opposite party was Rs. 10,400/- per month, the complainant regularly paid Rs. 10,500/- per month.
In May 2015, the complainant received a SMS from the opposite party stating that from next month onwards the complainant has to pay an EMI of Rs. 8,400/- and accordingly he was making regular payments of Rs. 9,000/- per month. On June 2018, when the complainant approached the opposite party to close the loan and to avail a fresh housing loan for reconstruction of his house, he was shocked to know that after making regular payments of EMI for 12 years he has to make a further payment of Rs. 8,77,718/- for closing the loan. When enquired about this, the opposite party informed that the interest rates on housing loans varied several times during the period and the considerable part of the amounts remitted by the complainant was adjusted towards the interest of the loan amount.
As per the rules and guidelines of RBI, the opposite party is bound to inform the complainant when there is a change in the interest rate. The wilful omission/negligence on the part of the opposite party amounts to deficiency in service and unfair trade practice. The complainant suffered mental agony and financial loss due to the acts of the opposite party. He had to postpone his daughter’s marriage and his daughter could not go for higher studies abroad for want of money. Complainant was forced to pay an amount of Rs. 7,90,000/- to close the loan and for availing a new loan.
So he filed this complaint to get an order directing the opposite party
- To refund Rs. 5 lakh, being the amount adjusted only towards interest by the opposite party,
- To pay Rs. 2 lakh as compensation for the damages, mental agony and financial loss caused to the complainant due to the deficiency in service and unfair trade practice on the part of the opposite party.
- To pay Rs. 25,000/- towards cost of the litigation and such other reliefs which the Forum finds fit and proper to grant.
2. Complaint was admitted and notice issued to the opposite party. The opposite party entered appearance and filed version.
The opposite party in their version contended that the complainant was not properly paying the EMIs as per the terms and conditions of the loan and was a defaulter. Whenever there was a variation in the interest rate, it was intimated to the complainant through SMS. Moreover, as per the banking norms, whatever payment is made, it will be first adjusted towards interest; the balance will be adjusted towards principal and the same was done in this case also.
The opposite party denied all other allegations in the complaint. The opposite party has no connection with the incidents alleged to have been happened and is not liable and answerable for the personal difficulties and problems faced by the complainant. The opposite party has not committed any negligence or unfair trade practices or deficiency in service and was only working as per the terms and conditions of the loan agreement and Banking norms, rules and regulations.
The housing loan was closed by the complainant on 26/10/2018 and he has taken another loan from the opposite party. At the time of closing the Housing loan, the complainant has not raised any dispute regarding the repayment and it was closed by him without any protest. After the lapse of one year, he filed this complaint with malafide intention of making unjust enrichment and it has to be dismissed with compensatory cost to the opposite party.
3. From the pleadings of both parties, the following points arise for consideration
- Whether the opposite party bank is bound to inform the change in interest rate and EMI to the complainant?
- Whether there is any deficiency in service on the part of opposite party?
- Whether the complainant is entitled to the reliefs claimed?
- Reliefs if any as cost & compensation.
4. Complainant filed proof affidavit and Ext. A1 to A7 were marked from his side. Ext. A2 is objected to on the ground that it is a photocopy and it is incomplete and has no seal. Since the opposite party has no case that it is forged or concocted, we find no merit in that objection. Ext. A4 & A4(a) objected to on the ground that they are not signed by the addressee of the letter. A4(a) is the e-mail communication between complainant’s daughter and LincoIn University, New Zealand and A4 is the accompanying S.65B certificate under Indian Evidence Act. A5 is a wedding invitation and is subject to proof. It is in no way connected with the issues in this case. Complainant was examined as PW1. Opposite party filed proof affidavit without any documents. Heard. Both parties filed notes of argument.
5. Point No: 1
The complaint averment is to the effect that the complainant had availed a housing loan from the opposite party for an amount of Rs.10,33,525/- on 26/06/2006. He was regularly paying the EMIs. On June 2018, when he approached the opposite party to close the loan and avail a fresh housing loan for reconstruction of his house, the opposite party demanded Rs. 8,77,718/- for closing the loan. On enquiry, he was informed that the EMI was varied several times due to change of interest rates. The variation in interest rate and EMI was not informed to the complainant.
6. The opposite party contended that the change in interest rate was duly informed to the complainant through SMS. The complainant was not properly paying the EMIs and was a defaulter. The payment first made will be adjusted towards interest and the balance will be adjusted towards the principal as per the Banking norms. The complainant closed the loan on 26/10/2018 without raising any objections. He also availed another housing loan after closing the first loan.
7. Here the main issue is whether the Bank is bound to inform the complainant about the change in the rate of interest. The counsel for the complainant vehemently argued with supporting decisions made by the National Commission. In India Bulls Housing Finance Ltd. And Another Vs Boota Singh Sidhu (2019) I CPJ 126 the Hon’ble National Consumer Dispute Redressal Commission observed that – Reserve Bank of India has clearly issued directions to all commercial banks that in the case of floating rate of interest consent of borrower should be obtained – Natural Justice demands that consumer must have right to either change number of EMIs due to change in interest rate or to change instalment amount to keep the same number of EMIs. But the decisions cited by the complainant is overruled by the subsequent decision rendered by the Hon’ble National Commission. The National Commission in a recent decision in ICICI Bank Vs Vishnu Bansal First Appeal No: 454/2021 held that “Banks are not required to inform each borrower individually about any automatic change in interest rates, under the floating rate plan, as borrowers have already agreed to any such increase or decrease while executing loan agreements. Such intimation on a bank’s website will be considered as a deemed notice”.
The Hon’ble Commission further observed that any additional or further consent from the borrower (complainant) is not required, the same having already been agreed to in the loan agreement itself.
8. In this case, eventhough the loan agreement was not produced before the Commission, during cross examination the complainant deposed that the interest agreed was at floating rate. So as per the latest decision, the bank is not bound to inform individual borrowers and such intimation in the Bank’s website would suffice.
Here the Bank had only taken the defence that the complainant was not paying EMIs regularly and he was a defaulter. But from Ext. A1, Loan account statement, it is seen that complainant was regularly paying the EMIs and also the Bank has not produced any evidence to the contrary. Further they stated that they had informed about the change of interest to the complainant through SMS. But they did not adduce any evidence to show that they have sent the information to the complainant. They did not take the defence that it was published in their website to intimate their customers about the change of interest.
9. In the above dictum NCDRC further observed that “the Bank in this case has meticulously researched and pointed out the date of placing the relevant notifications on its website and also pointed out dates of sending the reset letters to the complainant”.
Here the Bank had not taken any defence that they have issued notification in their website showing change in interest rate or sent reset letters to the complainant to prove that the bank had not fixed the interest rate in an erroneous way contrary to the principles and the guideline applicable or had not differentiated between similar situate borrowers in this respect.
So even though as per the latest ruling, the Banks are not bound to inform their customers individually about the change of interest rate and to get their consent as they have already agreed in the loan agreement, they have to prove that the relevant notifications had been published in their website from time to time showing the change. Point No: 1 is decided accordingly.
10. Points 2 to 4
In this case the Bank failed to adduce any evidence to show that they have published in their website or made individual written notification to the complainant regarding the changes in interest rate and EMI. They have only vaguely stated that the complainant was a defaulter. The Bank did not produce any evidence to show that the complainant was a defaulter and any action taken by the Bank in the case of default in repayment of loan. From account statement it is clear that he was regularly paying the EMIs throughout the loan period.
The complainant further stated that if the Bank had intimated him about the change in the amount of EMI, he would have definitely paid according to that. So there is deficiency in service on the part of the Bank. The conduct of the opposite party had caused financial loss and mental agony to the complainant.
From Ext. A1, it is clear that considerable part of the amount paid by him was accounted towards interest as per the normal procedure of the Bank and only a small portion has been accounted towards the principal amount. So we are not inclined to allow the 1st prayer in the complaint to refund Rs. 5,00,000/- being the amount adjusted towards interest as alleged by the complainant.
In the result the complaint is allowed in part.
We direct the opposite party to pay
- Rs. 50,000/- as compensation for their deficiency in service,
- Rs. 30,000/- for the mental agony suffered by the complainant and
- Rs. 20,000/- as cost of this litigation.
The opposite party shall comply with the directions in this order within 45 days of receipt of this order, failing which opposite party shall pay to the complainant Rs. 500/- per month or part thereof until the date of payment in full and final settlement of this order.
Pronounced in open court on this the 17th day of April, 2023.
Sd/-
Vinay Menon V
President
Sd/-
Vidya.A
Member
Sd/-
Krishnankutty N.K.
Member
APPENDIX
Documents marked from the side of the complainant:
Ext. A1: Loan Closure Letter dated 03/12/2019.
Ext. A2: Letter mentioning the variation in interest rates.
Ext. A3: E-mail from Lincoln University
Ext. A4: Certificate under Indian Evidence Act.
Ext. A4(a): E-mail communication between complainant’s daughter and
LincoIn University, New Zealand
Ext. A5: Wedding Invitation letter.
Ext. A6: Copy of RTI application dated 30/03/2019.
Ext. A7: Reply letter by Sr. Vice President, Banking Codes and Standards
Board of India dated 04/04/2019.
Documents marked from the side of opposite parties: Nil
Witness examined from the complainant’s side: Nil
Witness examined from the opposite parties side: Nil
Cost- Rs. 20,000/-
NB: Parties are directed to take back all extra set of documents submitted in the proceedings in accordance with Regulation 20(5) of the Consumer Protection (Consumer Commission Procedure) Regulations, 2020 failing which they will be weeded out.
