DISTRICT CONSUMER DISPUTES REDRESSAL FORUM: BHADRAK
Dated the 24th day of January, 2018
C.D Case No. 14 of 2015
Sri Gopabandhu Dalai
S/O Rabindra Dalai
Vill/Po- Guamal (Dolasahi)
Ps- Tihidi
District-Bhadrak
……………. Complainant
(Versus)
The Branch Manager
MUTHOOT FINANCE Ltd
At- salandi Bypass,
1st Floor, above PNB , Bhadrak.
…..Opp. Party.
For the Complainant: Adv. Sri Arun
Kumar Chand & Others
For the O.P: Adv Sri Sangram Keshari Naik
& Others
Date of hearing: 10.10.2017
Date of order: 24.01.2018
Sri Raghunath Kar, President.
This dispute arises out of the complaint filed by the complainant alleging deficiency in service against the Opp.Party.
The back ground facts disclosed in the complaint are to the effect that , the complainant requested the O.P for granting a loan on pledge of Gold ornament and accordingly O.P sanctioned a sum of Rs.1,00,000/- against pledge of 37.800gm.Gold ornaments and advanced a sum of Rs. 56,000/ at the 1st phase to the complainant. The complainant after receipt of the loan purchased a truck which was stolen away.
Due to theft of the truck the complainant could not repay the loan amount within the stipulated time. Instead of financing rest amount of loan sanctioned i.e Rs.1,00,000/- after one year and eight months the O.P charged Rs. 27.000/- as interest which is more than the 25% against the directives of the Reserve Bank. When the complainant received a notice of auction on 31.o1.2015 approached the O.P to receive part payment of loan outstanding but O.P refused to receive part payment and charged Rs. 82,687/- illegally. Complainant assured that he will pay the interest as per the S.B.I rate of interest within a period of six month but the O.P refused to accept. Hence complainant approached the Forum for a direction to reduce the interest and receive the principal amount of Rs.56,000/- plus interest 13% per annum for the period till liquidation and pay cost of Rs.3,000/- and compensation of Rs. 7.000/- for causing mental agony.
O.P resisted the complaint and contested the claim that ,complainant is not a consumer as defined in section 2(1) (d) of C.P Act . The petition U/s 12 and U/s 13 (3) of the consumer protection Act 1986 filed by the complainant is totally misconceived & against the settle principle of law. The branch office of the O.P governed by the guide lines of the Reserve Bank of India having RBI License Regd No. N16.00167. The complainant has availed 2 nos. of personal loans from the O.P on different dates by pledging gold ornaments with different loan accounts. (1) Gold loan A/c No. MSL-5207, dated 28.05.2013 – Rs. 28.000/- and (2) Gold loan A/c No. MSL-5228, dated 08.06.2013 – Rs. 28.000/-. The documents have been Prepared for each loan which has been duly signed by the borrower as a token of acceptance of the details terms and conditions as written therein. This is called as the undertaking cum sanction order. The claim of the complainant to pay the rate of interest of SBI is not applicable to O.P and prayer for extension of time for payment loan will put financial pressure on opposite party. More over the O.P never charges illegally beyond the guide line of the loan agreement .Hence he prays to order the complainant to repay the loan dues of O.P as soon as possible and dismiss the case with exemplary cost .
We heard the facts from both the sides and perused the documents filed by them . We are also well convinced that ,the op is a NBFC. Undisputedly the O.P has financed Rs.56,000/ in two dates I;e on 28.05.2013 & 08.06.2013 and complainant has received the same . Only core is - whether the complainant is entitled to pay interest as per the SBI guide line. On perusal of the Annexure B.1 & B.2 filed by O.P it is found that, at the back side of annexure 10 points of term & conditions have been written. Out of them the first three points are related to the terms and condition of interest.
Such as :-
The rate of interest chargeable for the loan is as shown on reverse. Interest will be charged at monthly rests, interest is chargeable for a minimum period of ____ days. Whenever the interest rates move to a higher slab, the hike will be applicable from the date of such slab change. Interest is required to be paid in full on cosure of the loan account.
The loan amount along with interest is repayable on demand made by the company. Even if not demanded, the loan has to be repaid with interest within 12 months. In case the value of gold ornaments given as collateral security comes down. The borrower has to repay immediately the amount demanded by the company.
In case the loan amount with interest is not repaid within the due date or earlier as demanded by the company, the company has the right to initiate legal proceedings and/or sell the gold ornaments in auction with prior notice and set off the amount so received towards the loan amount, interest and other charges. If the amount thus recovered is insufficient to cover the amount, the shortfall will be recovered from the borrower personally or from his other personal assets.
From above points there is no specific the rate of interest which is chargeable in this case. Prior to fix up interest it is here to look into the interest chargeable by Banks and financial institutions. In this connection we advise that as per the extant policy, the Reserve Bank of India is not regulating/fixing the interest rates to be levied by companies registered with RBI as Non Banking Finance Companies (NBFCs), other than NBFC-Micro Finance Institution, on the loans granted by them. The rate of interest to be charged by the company is governed by the terms and conditions of the loan agreement entered into between the borrower and the NBFCs. However, in order to ensure transparency in such matters, the NBFCs have been advised by RBI to adopt a Fair Practices Code, with the approval of their Boards. The NBFCs have also been advised to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges."
- Though interest rates are not regulated by the Bank, rates of interest beyond a certain level may be seen to be excessive and can neither be sustainable nor be conforming to normal financial practice.
- Boards of NBFCs are, therefore, advised to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges.
- In this regard the guidelines indicated in the Fair Practices Code about transparency in respect of terms and conditions of the loans may be kept in view.
- NBFCs may confirm having put in place appropriate systems in the regard within a period of one month from the date of this circular to the Regional Office of this Department in whose jurisdiction they are registered."
"Notification No.DNBS.204/CGM)ASR)-2009 dated January 2, 2009. The Reserve Bank of India, on being satisfied that for the purpose of enabling to regulate the credit system of the country to its advantage, it is necessary so to do, in exercise of powers conferred under Section 45 L of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby issues the following Directions to NBFCs:
- The Board of each NBFC shall adopt an interest rate model taking into account relevant factors such as, cost of funds, margin and risk premium, etc and determine the rate of interest to be charged for loans and advances. The rate of interest and the approach for gradations of risk and rationale for charging different rate of interest to different categories of borrowers shall be disclosed to the borrower or customer in the application form and communicated explicitly in the sanction letter.
- The rates of interest and the approach for gradation of risks shall also be made available on the web-site of the companies or published in the relevant newspapers. The information published in the website or otherwise published should be updated whenever there is a change in the rates of interest.
- The rate of interest should be annualised rates so that the borrower is aware of the exact rates that would be charged to the account." institutions . Both Bank and financial institutions are guided by RBI.
After all various courts held that :-
“ Banks are engaged in the business of banking contemplated under Section 6 of the Banking Regulation Act which takes in the sale of pledged articles and securities held by it. As such the Banks are not justified in contending that their business is only banking and that the transaction of sale of pledged articles is not either their main business or incidental or ancillary to the main business. Even assuming that the transaction of sale of pledged articles is not a part of their main business activities, still the said transaction will come within the meaning of incidental or ancillary to the business as held by the Supreme Court in District Controller of Stores, Northern Railway, Jodhpur v. Assistant Commercial Taxation Officer ((1976) 37 STC 423), Member, Board of Revenue, West Bengal v. Controller of Stores, Eastern Railway ((1989) 74 STC 5) and Karnataka Pawn Brokers' Association and Ors. v. State of Karnataka and Ors. ((1998) 111 STC 752).
18. For completion sake, we will also refer to the decision of the Supreme Court in Food Corporation of India v. State of Kerala ((1997) 5 KTR 74) relied on by the Special Government Pleader where the Supreme Court held that the Food Corporation of India effecting levy procurement of food grains and distribution of fertilisers under the provisions of the Essential Commodities Act is a dealer liable to tax under the Sales Tax Act and that the provisions are not ultra vires. The contentions taken by the Food Corporation of India in that case were that the sale/purchase of food grains and distribution of fertilisers pursuant to the orders issued under Section 3 of the Essential Commodities Act have acquired a character of compulsory transaction and that the element of consensus, which makes the transaction contractual, was to a great extent absent. The Supreme Court following the ratio of the decision of the Supreme Court in Vishnu Agencies (P) Ltd. v. Commercial Tax Officer and Ors. ((1978) 42 STC 31) rendered by a Bench of seven Judges, which did not approve the ratio of the decision in Chittermal Narain Das v. Commissioner of Sales Tax ((1970) 26 STC 344) which took the view that the levy procurement is a compulsory acquisition and not a sale, held that some area of consensual arrangement and some field for volition is left untouched by the legislation in all disputed transactions and that therefore, the transactions are exigible to tax under the Act. The Supreme Court in Sai Publication Fund's case ((2002) 126 STC 288) which we have already considered earlier was also considering the question as to whether the supply of books, pamphlets, etc. containing message of Saibaba which were made available to devotees on nominal charges to meet the cost makes the trust which is established for spreading message of Saibaba of Shiridi carrying on business. The Supreme Court observed that the main activity of the trust is not carrying on any business and their activity of supply of books, pamphlets, etc. to devotees on nominal charges to meet the cost cannot be treated as incidental to the business, exigible to tax under the Act. In other words, the Supreme Court held that unless the main activity is carrying on some business the incidental activity can not be subjected to tax. This is not the position in the present case where the activity of the bank is carrying on banking business which includes sale of pledged securities.
In this dispute only the question is the interest. Taking into consideration of the above facts and miserable condition of the complainant , as rate of interest should be annualized., we think it proper to direct the O.P to charge interest at a reasonable rate not exceeding 18% and to be calculated on annual rests.
Accordingly ordered.
ORDER
The complaint be and same is allowed on contest against the O.P in the circumstances without cost. Accordingly the O.P is hereby directed to receive the loan amount on the principal amount i.e Rs. 56,000/- along with interest @ 18% per annum with annual rests from the date of release of loan and release the pledged ornaments within 30days of receipt of the order .In case of non compliance of the order by the complainant within 30 days ,O.P may be suggested to initiate action as deem proper for recovery of loan as per law.
This order is pronounced in the open Forum on this day of 24th day of January, 2018 under my hand and seal of the Forum.
