BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM

VAZHUTHACAUD : THIRUVANANTHAPURAM

PRESENT:

SHRI. G. SIVAPRASAD : PRESIDENT

SMT. BEENA KUMARI .A : MEMBER

SMT. S.K. SREELA : MEMBER

C.C.No: 263/2009 Filed on 05/10/2009

Dated: 31..01..2013

Complainant:

The Charitable & Educational Society of The Thiruvananthapuram Orthodox Diocese represented by its President & Treasurer Dr. Gabriel Mar Gregorios Metropolitan, Orthodox Church Centre, Ulloor, Medical College – P.O., Thiruvananthapuram – 695 011.

(By Adv. S.V. Rajan)

Opposite parties:

1. Union Bank of India, Attingal Branch, Sham Complex, Opposite KSRTC Bus Stand, Attingal, Attingal – P.O., Thiruvananthapuram – 695 101.

2. Union Bank of India, represented by its Chairman, Central Office : 239, Vidhan Bhavan Marg, Nariman Point, Mumbai – 400 021.

(By Adv. Kulathoor S.V. Premakumaran Nair)

This O.P having been heard on 15..01..2013, the Forum on 31..01..2013 delivered the following:

ORDER

SHRI. G. SIVAPRASAD, PRESIDENT:

The facts leading to the filing of the complaint are that, complainant, the Charitable & Educational Society of The Thiruvananthapuram Orthodox Diocese, had availed two loans from Union Bank of India, Attingal Branch, the 1^st opposite party herein, that 1^st term loan vide A/c No. 535706390000005 availed on 16/02/2004 for Rs. 100 lakhs and the second term loan – vide A/c No. 535706390000011 availed on 09/08/2005 for Rs. 50 lakhs, that both loan agreements were executed by the complainant, the Charitable & Educational Society of The Thiruvananthapuram Orthodox Diocese represented by its President and Treasurer in favour of the 2^nd opposite party, the Union Bank of India represented by its Chairman, Central Office, Mumbai, that the sanction letter dated 30/07/2005 issued by the opposite party confirmed the rate of interest of the term loan as 12%, that the said loan was availed by the complainant upon the specific stipulation and assurance as regards the rate of interest which was fixed at 12% per annum, that thereafter there was absolutely no communication from the opposite parties as regards the revised rate of interest if any, or the periodical charges to be levied from the complainant, that it was found during their internal audit that highly exhorbitant rate of interest and illegal charges have been levied from the complainant by the opposite parties for the said loan transactions, that therefore complainant had on 11/03/2008 sent a letter to the 1^st opposite party about the unfair trade practice of extracting exhorbitant rate of interest in an arbitrary manner, that in response to the said letter, opposite party had sent a reply letter dated 24/03/2008 stating that interest on the term loans are linked to banks prime lending rates and are subject to fluctuations, that as of now the rate of interest is 16.25%, that opposite party actually charged interest on both loans at the rate of 12% till 30/11/2007, that on 30/11/2007 the bank unilaterally increased the rate of interest up to 16.75% with retrospective effect without the consent or intimation to the complainant, that as per the code of bank's commitment to customers when it comes to changes in the terms and conditions of the agreements normally changes will be made with prospective effect giving notice of one month, that opposite party has made changes without notice, that on 16/08/2008, the 1^st opposite party had sent a letter stating that the revised rate of interest was 17.50%, that altogether opposite parties had collected excess amount as regards the aforesaid loan transaction to the tune of Rs. 17,51,659.98/-, that due to the aforesaid illegal excess from the part of the opposite parties, complainant was forced to close down those loans transaction by paying the entire amount as demanded by them and the loans were closed on 20/03/2009. Hence this complaint to direct opposite parties to refund the total amount collected which was in excess of 12% rate of interest fixed for the loan transactions with interest from the dates of collection of such amount, to refund an amount of Rs. 17,51,659.98/- with interest from 20/03/2009 and Rs. 90,121/- as additional charges collected from the complainant along with cost.

2. Opposite parties filed version contending inter alia that the complaint is not maintainable either in law or on facts, that though complainant is a Charitable Institution it is in fact, not a charitable one and it is profit generating institution and the transactions alleged is commercial in nature, that complainant availed loan from the opposite party, that being a scheduled bank, it runs its business in strict compliance to the RBI Rules, that the statement that bank has unilaterally increased rate of interest is without any basis, that as per the original agreement, the rate of interest was 14.75% per annum, that in the agreement itself it is specifically provided that the bank is entitled to enhance the rate of interest and penal interest, that it is clearly provided in the agreement that the borrower shall be deemed to have notice of revision of interest, whenever such revision in the rate is displayed on the notice board of the bank or by publication in any newspaper on the revision of interest rates of made known through an entry in the statement of account, that in this case apart from the contractual provision, the change of rate of interest was made known to the complainant in writing by the opposite party, that being an educational institution a temporary concessional rate of interest was allowed to the complainant, that the provision was that, every year after considering the performance of the complainant in repayment, the concessional rate of interest will be specifically allowed and the rate will be 12%, that if the controlling authority did not allow the concession, the rate of interest will be 14.75% as provided in the original agreement or subsequent enhancement as per the rules of Reserve Bank of India, that it is pertinent to note that Union Bank, Attingal Branch had clearly stated that the reduction of interest rate from 14.75% to 12% was subject to approval from Central Office, that any concession is applicable for one year after that sanction is required from higher authorities, that there is a rating procedure followed by the Bank and that Bank found that rating was declared from CR4 to CR6 shows that the complainant was not entitled for concession, that is on 29/07/2005, renewal for concession was sent, it was partly allowed as 12.25% stating that the complainant have low debt service coverage relation, that bank never agreed to fix the interest at 12% per annum, that there is no question of unfair trade practice on the part of the opposite party, since opposite party informed the change of the rate of interest complainant had sufficient knowledge of the same, that Bank is working in strict accordance with RBI Rules and there is no dishonest or fraudulent intention on the part of the bank, that no excess amount is collected by the Bank, that there is no default or deficiency in service or unfair trade practice on the part of the opposite parties, that complainant is not entitled to get back any amount from the Bank. Hence opposite party prayed for dismissal of the complaint.

3. The points that arise for consideration are:

1. Whether there is deficiency in service on the part of the opposite parties?

2. Whether the complainant is entitled to any reliefs?

    

In support of the complaint, the Power of Attorney Holder of the complainant has filed proof affidavit as PW1 and has marked Exts. P1 to P17. In rebuttal, 1^st opposite party has filed proof affidavit and has marked Exts. D1 to D8.

4. Points (i) & (ii): Admittedly, complainant had availed two loans from the opposite parties vide A/c No. 535706390000005 for Rs. 100 lakhs and A/c No. 535706390000011 for Rs. 50 lakhs. According to complainant both the loans were availed at the rate of interest at 12% and EMIs were fixed for both loans, on the basis of interest at the rate of 12%. It has been the case of the complainant that opposite party charged interest on both the loans @ 12% per annum till 30/11/2007 according to the terms and conditions of sanction as per letters dated 16/02/2004 and 30/07/2005. The very case of the complainant is that on 30/11/2007 the Bank unilaterally increased the rate of interest up to 16.75% with retrospective effect without the consent or intimation to the complainant, that too after a period of 3 years and 9 months from the date of release of the 1^st term loan and 2 years and 2 months after the release of the 2^nd term loan. Complainant's evidence consisted of oral testimony of the Power of Attorney Holder and Exts. P1 to P17. Ext. P1 is the copy of the Term Loan Agreement dated 16..02..2004. A perusal of Ext. P1 shows that opposite party has sanctioned a term loan of Rs. 100 lakhs (One Crore) to the complainant. As per clause 5(a) of Ext. P1 the borrower shall pay to the Bank interest on the loan at the rate of ....................percentage per annum with .......................rests or at such other rate as may be prescribed by the bank. Opposite party has not mentioned the rate of interest in the said agreement. Ext. P2 is the copy of General Term Loan Agreement dated 16/02/2004. In Ext. P2 also there is no mention regarding the proposed rate of interest. Ext. P3 is the copy of the letter dated 16/02/2004 from the 1^st opposite party to the complainant – The Charitable and Educational Society of the Trivandrum Orthodox Diocese. A perual of Ext. P3 letter dated 16/02/2004 reveals that the request for a reduction of interest from 14.75% to 12% has been taken up with opposite parties' higher office and reduced rate will be effected on receipt of the approval. Further it is mentioned that the monthly repayment will be Rs. 2,18,960/- for 72 months taking into effect the principal as well as the interest @ 12% with a moratorium of 12 months. Ext. P4 is the copy of the letter dated 30/07/2005 issued by the 1^st opposite party to the complainant with regard to sanction / renewal of credit facility. It is mentioned in Ext. P4 that as per the application of the complainant the following credit facility is sanctioned / renewed:

Nature of facility Amount Interest Margin Repayment Schedule

Term Loan I Rs.10000000/- 12% 25% 66 EMI's starting From September 2005

Term Loan II Rs. 5000000/- 12% * 25% 66 EMI's starting

From September 2006

( * subject to approval from C0)

Thus it appears from Ext. P4 that opposite party has confirmed the rate of interest of the first term loan as 12% whereas the request for reduction of interest for Term Loan II has not been confirmed. Ext. P5 is the copy of the letter dated 11/03/2008 issued by complainant to the 1^st opposite party about the unfair trade practice of extracting exhorbitant rate of interest in an arbitrary manner. In Ext. P5 it is seen stated by the complainant that as per letter dated 30/07/2005 the interest to be charged on the term loan accounts is stated as 12% whereas the actual interest charged is much in excess of the agreed rate. Through Ext. P5 complainant had requested the opposite party to immediately look into the anomalies pointed out in the enclosures and reverse the excess interest / charges debited to their accounts. Ext. P6 is the copy of the reply letter dated 24/03/2008 issued by the Union Bank of India in response to Ext. P5 letter. Ext. P6 shows various interest rates charged by opposite party from 07/09/2005 to 24/03/2008. As per Ext. P6, interest rates varied from 12% on 7/09/2005 to 16.25% on 21/02/2008. Ext.P7 is the copy of the letter from the complainant dated 18/04/2008 to the Deputy General Manager, Union Bank of India, Thiruvanantapuram. As per Ext. P7 it is seen alleged by the complainant that interest rates of 12% for the loan advised in the sanction letter dated 30/07/2005 have been revised a number of times unilaterally, that the assurance given by the Regional Manager at the time of sanction of credit facilities to reduce the interest rate in due course has not been kept up. Ext. P8 is the copy of the letter dated 11/03/2009 from complainant to 1^st opposite party requesting the latter to restore the lower interest charges as at the time of sanction of credit facility. Ext. P9 is the copy of the letter dated 19..03..2009 to the Senior Manager, Union Bnk of India, Attingal branch requesting to close the term loan accounts immeditely and after closure of the loan accounts to arrange to return the documents to the complainant. Ext. P10 is the copy of the statement of account for the second term loan for the period from 31/08/2005 to 20/03/2009 issued by the 1^st opposite party. Ext. P11 is the copy of the statement of account for the 1^st term loan issued by opposite party for the period from 15/02/2004 to 20/03/2009. Ext. P12 to Ext. P14 are: Copy of Grievance Redressal Policy, Copy of code of Banks commitment to customers, and copy of Approval letter issued by BC.S B1 which were marked subject to objection. Ext. P15 is the code of Bank's commitment to customers and grievance redressal policy format. Ext. P16 is the original audited statement of account with regard to the loan transaction prepared by Mr. Thomaskutty. P.C., Chartered Accountant. Ext. P17 is a document showing details of accounts number. Power of Attorney Holder has been cross examined by the opposite party. During cross examination Power of Attorney Holder (PW1) has deposed that he has direct knowledge regarding the transaction. PW1 has accepted his signature in Ext. P1. PW1 has denied the suggestion putforth by the opposite party that the loan was sanctioned at 14.75% rate of interest. According to PW1 as per the renewal of the loan, loan was sanctioned at 12% interest. PW1 has admitted that complainant had taken loan after detailed discussion with the opposite party. PW1 has deposed that the initial offer of interest at 14.75% was not accepted by the complainant. As per Ext. P4 dated 30/07/2005, opposite party has informed the complainant that for term loan I for Rs. 100 lakhs opposite party has fixed at the rate of 12% while for term loan II for Rs. 50 lakhs 12% interest will be subject to the approval from C0 thereby it appears that opposite party had already decided to charge 12% interest for the first term loan of Rs. 100 lakhs. But opposite party has not taken any decision as per Ext. P4 regarding the request for reduction of interest for the second term loan of Rs. 50 lakhs. Further as per Ext. P1 term loan agreement opposite party has not mentioned the rate of interest in the space provided for the same under clause 5(a), thereby we find force in the argument of the complainant that the rate of interest for the term loan No. I was 12% which is confirmed by opposite party by Ext. P4. As regards the terms loan II for Rs. 50 lakhs as per Ext. D1 term loan agreement, opposite party has not mentioned the rate of interest in the space provided for the same as under clause 5(a) of the agreement. But it is pertinent to point out that as per Ext. P4 opposite party has not reduced the rate of interest from 14.75% to 12%. It is informed by the opposite party by Ext. P4 that the reduced rate will be effected on receipt of the approval. The burden is on the part of the opposite party to show that there was specific agreement between parties regarding the rate of interest and that the initial rate of interest agreed by the parties was to be 14.75%. Though opposite parties have produced loan agreements the rate of interest at the time of borrowal is not seen entered therein. Further the case of the complainant is that Bank unilaterally increased the rate of interest upto 16.75% with retrospective effect without consent or intimation to the complainant. According to complainant bank has not complied the provisions of bank commitment to customers. It is argued by the counsel for the complainant that normally in case of any changes, such changes shall be made only with prospective effect after giving notice of one month. According to complainant, opposite party failed to intimate the complainant regarding the changes in the terms and conditions of the agreement. Though opposite party has mentioned in the version and in the affidavit that increase in the rate of interest was communicated by the opposite party to the complainant, to substantaite the same, opposite party has not produced any documents. According to complainant unilateral increase in the rate of interest with retrospective effect by the opposite party amounts to unfair trade practice especially in contravention to opposite parties own commitment to customers as per the banking practice formulated by the RBI. Complainant has relied on the decision of the State Consumer Disputes Redressal Commission, Chandigarh 2009(1) CPR 29 in the case of ICICI Bank Ltd Vs. Gurmandeep Singh & Anr. wherein it has been held that Bank is duty bound first to inform the consumer regarding increase in rate of interest or in number of EMIs. Without such intimation the increase in interest or number of EMIs cannot be enforced. Complainant has also relied on the decision of Tamil Nadu State Consumer Disputes Redressal Commission 2009 (1) CPR 492 in ICICI Bank Ltd. Vs. R.S. Murugesan wherein it has been held that where the complainant was not informed about the revision of rate of interest at any time from the date of release of the loan till the date of repayment with entire interest and when excess interest was never mutually agreed upon between parties, it was unfair on the part of the opposite party in that to claim excess interest. Herein also the basic dispute is in regard to the unilateral increase in the rate of interest and as a result of which, complainant was forced to close the loan transaction by paying entire amount as demanded by the opposite parties. Though opposite party has produced Exts. D1 to D8, there is no material on record to show that opposite party had issued notice regarding the periodical revision rate of interest to the complainant. The onus is on the part of the opposite party to substantiate that opposite party had sanctioned the loan initially at the rate of 14.75%. Nowhere in the agreement is it seen entered the said rate of interest. It should be noted that Loan Agreement has been executed by both the parties. The Agreement should disclose at what rate of interest opposite party has sanctioned, the aforesaid loan. Complainant has argued that opposite party has assured interest at 12%. The counsel for opposite party has argued that loan was given initially at interest at 14.75%. Though opposite party has produced loan agreements as Exts. D1 & D2. Opposite party had not mentioned the proposed rate of interest in the space provided for the same. The burden or onus is on the part of opposite party to show that the loan was sanctioned at 14.75%. Moreover it is contended by the complainant that complainant is a Charitable and Educational Society. Complainant has argued that a term loan was granted with interest at 12% by the opposite party, but opposite party started charging increased rate of interest invoking clause 5 of the agreement that it was entitled to unilaterally and retrospectively enhance on the basis of RBI directions. According to complainant RBI directions were applicable to non priority loan. Complainant relied on the decision State Commission, Haryana 1993 CPR 226. Complainant herein is a Charitable and Educational Society, as such Bank cannot be allowed to increase the rate of interest unilaterally without notice to parties. We cannot afford to overlook the submission made by the counsel for the complainant that requirement of notice was necessary to the upward revision of interest. Opposite party has not produced any material to show that they have sent notice of revision of interest to complainant in time.

In view of the foregoing discussion and evidence available on record, and decisions relied by the complainant, we are of the considered opinion that as per Ext. P4 issued by the opposite party, complainant availed the 1^st Term Loan of Rs. 100 lakhs at 12% interest while the said rate of interest was never approved by the opposite party for the second term loan of Rs. 50 lakhs. Upward revision of rate of interest by the opposite party for 1^st term loan was without the knowledge and consent of the complainant. Further complainant herein is a Charitable and Educational Society. As such enhancement of rate of interest on the basis of RBI directions applicable to non-priority sector cannot be applicable to priority sector (educational) loan. Complainant has not furnished any materials to support other grievances than the rate of interest issue. The action of the opposite party to collect amount of interest in excess of 12% for 1^st term of loan contrary to what has been mentioned in Ext. P4 would amount to deficiency in service. Complainant is entitled for refund of amount of interest charged in excess of 12% in connection with the 1^st term loan dated 16/02/2004.

In the result, complaint is partly allowed. Opposite parties are directed to refund the amount of interest charged in excess of 12% per annum in connection with 1^st term loan of Rs. 100 lakhs, along with compensation of Rs. 5,000/- to the complainant within two months from the date of receipt of this order, failing which the amount to be refunded to the complainant will carry interest at the rate 8% from the date of this order. Parties shall bear and suffer their respective costs.

A copy of this order as per the statutory requirements be forwarded to the parties free of charge and thereafter the file be consigned to the record room.

Dictated to the Confidential Assistant, transcribed by her, corrected by me and pronounced in the open Forum, this the 31^st day of January, 2013.

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G. SIVAPRASAD,

PRESIDENT.

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BEENA KUMARI .A,

MEMBER.

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S.K. SREELA,

ad. MEMBER .

C.C. No: 263/2009

APPENDIX

I. Complainant's documents:

P1 : Copy of Term loan agreement dated 16/2/2004 executed by the complainant in favour of 1^st opposite party.

P2 : Copy of General Term loan agreement dated 16/2/2004 executede by the complainant in favour of 1^st opposite party.

P3 : " sanction of credit facility dated 16/2/2004 executed by 1^st opposite party to the complainant.

P4 : " sanction / renewal of credit facility dated 30/7/2005 sent by the 1^st opposite party to the complainant.

P5 : " letter dated 11/3/2008 sent by the complainant to the 1^st opposite party.

P6 : " reply letter dated 24/3/2008 sent by 1^st opposite party to the complainant

P7 : " letter dated 18/4/2008 sent by the complainant to the 1^st opposite party.

P8 : " letter dated 11/3/2009 sent by the complainant to the 1^st opposite party

P9 : " letter dated 19/3/2009 sent by the complainant to the 1^st opposite party.

P10 : " statement of account issued by Union Bank of India, Attingal Branch dated 20/3/2009.

P11 : " statement of account issued by Union Bnk of India, Attingal dated 20/3/2009.

P12 : " Grievance Redressal Policy

P13 : " Code of Banks commitment to customers.

P14 : " approval letter issued by BCS BI

P15 : " Code of Bank's commitment to customers issued by the Central Public Information Officer, Union Bank of India, Regional Office, Tvpm.

P16 : Original Audited Statement of Account with regard to the loan transaction mentioned in the compaint prepared by Mr. Thomaskutty P.C., Chartered Accountant, Thiruvananthapuram.

P17 : " Credit Report dated 18/03/2009 issued by Branch Manager, Union Bank of India, Attingal Branch.

II. Complainant's Witness:

PW1 : Baby John

III. Opposite parties' documents:

D1series : Copy of Term Loan Agreement

D2 : Copy of letter of Guarantee

D3 : Letter dated 11 March, 2009 issued by the complainant to the Senior Manager, Union Bank of India, Attingal.

D4 : Letter dated 24/3/2008 REF 639/5, 11 issued by Union Bank of India to the complainant.

D5 series : Copy of letter dated 3/10/2008 issued by Union Bank of India to the complainant.

D5(a) : Copy of letter dated 24/9/2008 issued by MSME Department Central Office Union Bank, Mumbai to Asstt. Gen. Manager, FGMO Union Bank, Chennai.

D6 series : Letter dated 12/3/2008 issued by Manager, MAR DIOSCORUS COLLEGE OF PHARMACY to the Branch Manager, Union Bank of India, Attingal Branch.

D6(a) : Copy of supplementary documents to be provided

D6(b) : " certificate dated 13/3/2008 REF 639/5, 11 issued by Union Bank of India

D7 : Letter issued to the Branch Manager, Union Bank of India, Attingal Branch.

D7(a) : Letter dated 29/3/2005 issued to the Asstt. General Manager, Union Bank of India, Regional Office, Thiruvananthapuram by the complainant.

D7(b) : Letter dated 4/3/2005 issued to the complainant by the Branch Manager, Attingal Branch, Union Bank

D8 : Copy of Instruction Circular No. 7043 dated November 8, 2004 issued by Union Bank of India.

IV. Opposite parties' witness:

DW1 : Venugopalan Nair

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ad. PRESIDENT