P;DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, KOZHIKODE

PRESENT: Sri. P.C. PAULACHEN, M.Com, LLB    : PRESIDENT

Smt. PRIYA.S, BAL, LLB, MBA (HRM) :  MEMBER

Sri.V. BALAKRISHNAN, M Tech, MBA, LL.B, FIE: MEMBER

Wednesday the 27^th   day of March 2024

C.C.166/2020

Complainant

1.        Dr. Lubna Shahul,

W/o Shahul Hameed,

Apartment No. 4D,

                 4^th Floor, Palm Beach,

Beach road, Head Post office (P.O),

Kozhikode – 673 001.

2.        Shahul Hameed,

S/o Dr. S.K. Abdul Hakeem,

Apartment No. 4D,

                  4^th Floor, Palm Beach,

Beach road, Head Post office (P.O),

Kozhikode – 673 001.

(By Adv. Sri. Radhakrishnan and Adv. Sri. A.G.Reghunathan for the complainants)

Opposite Parties

1.         The Manager,

Housing Development Finance,

Corporation Limited, Seiken Chambers,

Kannur road, Calicut, Pin – 673 001.

                   (By Adv . Sri. P.S. Murali and Adv. Smt. Anjana. P.K)

Suppl OP2.       Housing Development Finance Corporation Ltd,

                         Registered Office Ramon House,

HT Paraekh Marg, 169,

Backbay Reclamation, Churchgate,

Mumbai -400020, India,

Represented by

Zonal Manager /Office in charge,

Zonal office HDFC Bank,

Zonal office Palarivattom, Cochin,

Ernakulam -682 025.

(Suppl OP2 impleaded as per IA 310/2022 order dated 16/11/2022)

ORDER

By Sri. P.C. PAULACHEN  – PRESIDENT

            This is a complaint filed under Section 35 of the Consumer Protection Act, 2019 against Housing Development Finance Corporation Ltd (HDFC) alleging unfair trade practice and deficiency of service.

2.     HDFC has filed written version and additional written version contending, interalia, that the complaint is not maintainable and this Commission has no jurisdiction to entertain the complaint  as the jurisdiction has been specifically ousted by the Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act).
3. The opposite party has also filed a petition as IA No. 12/2023 to hear the maintainability of CC. 166/2020 as a preliminary point. The prayer was allowed and we heard both sides as to the maintainability of CC. 166/2020.
4. The complainants in CC. 166/2020 are husband and wife and they had availed 3 loans under floating rate from HDFC agreeing to repay the loan in equated monthly instalments. The repayment was by Electronic Clearance Services (ECS) under standing instruction by the complainants. When the equated monthly instalment of one among the loans was over, the opposite party demanded further mandate for equated monthly instalments. The complainant alleges that the opposite party has suo motu charged higher rate of interest whenever the interest rate had gone up whereas the opposite party has not bothered to lower the interest rate when the interest rate has come down. The complainants alleged that thus the HDFC has indulged in unfair trade practice and it also amounts to deficiency of service.
5. The availing of the 3 loans by the complainants under the Adjustable Rate Home Loans (AHRL) scheme is admitted by the opposite party. According to the opposite party, the interest calculation on AHRL is governed by the twin principles of Retail Prime Lending Rates (RPLR) and Spreads.  The rate of interest will be revised every three months from the date of first disbursement, if there is a change in RPLR. The complainants did not care to check the rate of interest charged in their account and did not approach the opposite party for exercising the conversion option to reprice their loans by opting for a conversion in the rate of interest after paying the prescribed conversion fee and by executing certain documentations. According to the opposite party, there was no unfair trade practice or deficiency of service on their part as alleged. One of the loan accounts is in default for the last 13 months and it had crossed the threshold of NPA classification on 31/12/2019 and hence proceedings were initiated against the complainants under the SARFAESI Act and demand notice under Section 13(2) of the said Act was issued. The opposite party alleges that it was at this juncture that the complainants have approached this Commission with the present complaint.  
6. The learned counsel for the opposite party has argued that Sec 35 of the SARFAESI Act has an overriding effect and this Commission has no jurisdiction to entertain the above complaint and the interlocutory application. Per contra, the learned counsel for the complainants pointed out that the dispute between the complainant and the opposite party is regarding the practices followed/service rendered in reference to the application of interest in a case where floating rate of interest is opted by the complainants. It was argued that the remedy sought for by the complainants before this Commission cannot be effectively addressed before any other Forum and the Jurisdiction of this Commission does not stand ousted by the SARFAESI Act.
7. The prayer in the complaint is to direct the HDFC to recalculate the interest components with respect to the 3 loans taking into account the periodical revision of interest announced by HDFC from time to time as per adjustable rate scheme and to restrain HDFC from taking any coercive steps against the complainant and also to direct them to compensate the complainants to the tune of Rs. 1,00,000/- for the mental agony and inconvenience suffered. Admittedly, the opposite party has initiated  action under provisions of the SARFAESI Act and has issued a demand notice under Sub Section (2) of Section 13 of the SARFAESI Act to the complainants on 9/06/2020. The notice is produced by the complainants along with the complaint. It is stated in paragraph 11 of the complaint that the cause of action has arisen on various dates the opposite party corresponded with the complainants threatening that they would take coercive action against the complainants for realisation of the amount due. The present complaint was filed on 20/08/2020. So it is crystal clear that in effect, the complainant is challenging the action initiated by the HDFC under the provision of the SARFAESI Act. It is also important to note that along with CC 166/2020 the complainants had filed IA NO. 17/2020 seeking a temporary injunction against the opposite party and our learned predecessors-in-office vide order dated  24/08/2020 had passed an order of interim injunction restraining the opposite party from taking any coercive steps against the complainants, until further orders. So it is evident that the real intention behind the present complaint is to stall the proceedings initiated by the opposite party under the SARFAESI Act.
8. The Consumer Protection Act is an enactment made to protect the interest of the consumers from defective goods and services. SARFAESI Act is meant to recover the dues of the bank and financial institutions by either taking possession and resorting to sale of the mortgaged or hypothecated assets, or to manage the business of the defaulter loanee. The issue whether the Consumer Forum has jurisdiction to entertain a matter which is under SARFAESI Act proceedings came up for consideration in Punjab National Bank Vs Consumer Disputes Redressal Forum reported in 2011(3) KLT 616. The Hon’ble High Court of Kerala has clarified the position that the Consumer Protection Act is a general statute whereas SARFAESI Act is a special enactment and the special enactment will prevail over the provisions of the general statute. It was held that no injunction shall be granted by any court or other authority in respect of any action to be taken in pursuance of any power conferred by or under the SARFAESI Act. It has been held in Paragraph 6 of the afore said decision as follows;

“Further Section 34 of the SARFAESI Act provides thus:“ CivilCourt notto have jurisdiction. – No civil court shall have jurisdiction to entertainany suit or proceedings in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)”.

Although the first part of the Section ousts the jurisdiction of only the Civil Court, which will not apply to a CDRF which is not a Civil Court, the latter part of the Section expressly bars the jurisdiction of not only civil courts but also other authorities, which would include CDRF also from granting injunction in respect of any action taken or to be taken in pursuance of any power conferred by or under the SARFAESI Act. The CDRF cannot, without granting an injunction, restrain financial institutions like banks from proceeding with an action taken under the SARFAESI Act, which the CDRF has no powers under Section 14(1) of W.P.(C)No. 5957 of 2011 the Consumer Protection Act and as such power is expressly barred by Section 34 of the SARFEASI Act. As such it is clear that the CDRF cannot grant any relief against measures taken by a Bank or Financial Institution under the SARFAESI Act. Therefore, going by the above said provisions of the two Acts themselves, the jurisdiction of the CDRF to deal with matters provided for in the SARFAESI Act is expressly excluded”.

Further in paragraph 8 it has been held as follows ;

“Section 35 of the SARFAESI Act is another reason for excluding jurisdiction of the CDRF in respect of matters covered by the SARFAESI Act. The said Section reads thus:

“35 The provisions of this Act to override other laws. The provisions of this Act shall have effect, notwithstanding W.P.(C) No.5957 of 2011 anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of anysuch law.”

The SARFAESI Act is a later Act than the Consumer Protection Act. The SARFAESI Act is a special enactment and the Consumer Protection Act is a general enactment. It is settled law that the provisions of a special enactment would override the provisions of a general enactment. The SARFAESI Act provides for specific remedies to aggrieved persons for challenging proceedings under the said Act. Therefore if it is to be held that CDRF has also jurisdiction to entertain challenge against proceedings under the SARFAESI Act, that would be hit by Section 34 in so far as that would be inconsistent with the provisions of the SARFAESI Act”.

9. The above position has been reiterated in the decision reported in 2015(3) KLT 645 (Reghu and another Vs State Bank of Travancore)  wherein relying on the decision in 2011(3) KLT 616 it has been held that the State Consumer Redressal Commission  has no jurisdiction to stay the recovery proceedings under SARFAESI Act.
10. In 2010(2) KLT 905 (Muhammad Rafeeq Vs The Bank of Baroda), the Hon’ble High Court of Kerala has held that by virtue of Section 35, the SARFAESI Act would override all other provisions in any other law including Section 56 of the Transfer of  Property Act.
11. From the above dictum, it is clear that this Commission has no jurisdiction to entertain the present compliant as a jurisdiction has been specifically ousted by the SARFAESI Act. Hence the complaint is not maintainable before this Commission.  
12. The argument of the complainants is that they are alleging unfair trade practice and deficiency of service against the opposite party regarding the service rendered in reference to the application of interest and the remedy sought for in the present complaint cannot be effectively addressed before any other Forum. The allegation is that HDFC suo motu increased the rate of interest whenever the interest rate went upwards whereas, the benefit was not given to them whenever the interest rate was low, stating the reason that they did not approach the bank for doing so by executing necessary documents and paying the prescribed fee. Admittedly, loan agreements were executed by the complainants, copies of which, are produced by the opposite party. Article 2.13 of the loan agreement reads as follows;

“In the event of HDFC offering revised spread in future, the borrower shall have the option to opt for the revised spread in respect of the loan, provided if such option is made available by HDFC, with prospective effect upon payment of such fee and execution of documents as HDFC may prescribe in that behalf. It shall be the borrower’s responsibility to keep himself informed about the revision in spread from time to time”.

The execution of the loan agreement is not disputed by the complainants. The complainants are not illiterate persons. Going by the complaint, the first complainant is a dental doctor by profession and the second complainant is an agriculturist. It cannot be thought that they were unaware of the contents of the loan agreements at the time of execution. The validity of the loan agreements cannot be disputed.The complainants have no case that they have paid any fee or executed any documents as stated in the agreements. The complaints also cannot be heard to say that the HDFC did not inform them about the increase/decrease in the rate of interest and in the number of monthly instalments in view of the specific clause in the agreement that it shall be the responsibility of the complainants to keep themselves informed about the revision in spread from time to time. The complainants have no case that the opposite party has acted in violation of the terms and conditions of the loan agreement. On the other hand, the action of the opposite party is justified by the terms and conditions contained in the loan agreement. The interest rate and the number of equated monthly instalments were increased only in terms of the loan agreement executed between the HDFC and the complainants herein. On a careful perusal of the averments in the complaint and the materials produced by the complainants, it can be seen that the allegation of deficiency of service and unfair trade practice will not stand against the opposite party.

13. The learned counsel for the complainants invited the attention of this Commission to some decisions in support of his argument that such a complaint is maintainable before this Commission. The first one is the order dated 15/03/2019 of the Hon’ble High Court of Madras in Application No. 253/2019 in CS No. 673/2018 (State Bank of India Vs G. Moorthi).  The question that arose for consideration in the above case was as to whether a suit filed for the relief of specific performance can be said to be barred by the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the provisions of the SARFEASI Act. It was held that the relief of specific performance cannot be granted by the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal and therefore the suit cannot be said to be barred.   The second one is the order dated 25/09/2013 in Application No. 3549/2022 in CS No. 97/2022 (Punjab National Bank Vs R. Lalitha and others) of the Hon’ble High Court of Madras wherein the question that arose for consideration was as to whether civil court jurisdiction is ousted in terms of Section 34 of the SARFEASI Act and Section 18 of Recovery of Debts and Insolvency Act.   It was held that the remedy which has been sought in the suit cannot be effectively addressed before the Debt Recovery Tribunal and so the bar under Section 34 of the SARFEASI Act cannot be extended to the nature of the claim raised in the suit. The third one is the judgment dated 02/04/2019 of the Hon’ble Supreme Court of India in Civil Appeal No. 12238/2018 (Pioneer Urban Land And Infrastructure Ltd Vs Govindan Raghavan), wherein it has been held that if contractual terms of the agreement are ex-facie one sided, unfair and unreasonable, the incorporation of such one sided clauses in the agreement amounts to unfair trade practice. The fourth one is the judgment dated 08/08/2022 in Civil Appeal No. 5216/2022 (Sau Rajani Vs Sau Smitha) of the Hon’ble Supreme Court of India which deals with the jurisdiction of the Civil Court under Section 9 CPC. Going by the said orders/judgments, we are of the view that they will not help the complainant. Consumer Commission is not a Civil Court. Moreover, the facts situation in the case in hand and the above cases are different. The above judgments/orders are not applicable to the facts situation in the present case.    
14. Another judgment pointed out by the complainants is the judgment dated 11/05/2021 of the Delhi State Consumer Disputes Redressal Commission in Complaint No. 163/2019 (Vishnu Bansal Vs ICICI Bank). The said judgement was set aside by the Hon’ble National Consumer Disputes Redressal Commission as per judgement dated 23/11/2022 in First  Appeal No. 454/2021   (2022 Law Suit (CO) 1095 ).  
15. From the forgoing discussion, what emerges is that this Commission has no jurisdiction to entertain the complaint in view of Sections 34 and 35 of the SARFAESI Act. Hence the complaint is only to be dismissed as not maintainable.

In the result, CC 166/2020 is dismissed as not maintainable. However, no order as to costs.

Pronounced in open Commission on this, the 27^th   day of March, 2024.

                             Sd/-                                                        Sd/-                                                           Sd/-

                     PRESIDENT                                           MEMBER                                                MEMBER

APPENDIX

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                     PRESIDENT                                           MEMBER                                                MEMBER

True Copy,      

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