KERALA  STATE  CONSUMER  DISPUTES  REDRESSAL  COMMISSION

                    VAZHUTHACADU    THIRUVANANTHAPURAM

APPEAL  NO: 677/2009

                                 JUDGMENT DATED:18-10-2010

PRESENT

SRI. M.V. VISWANATHAN                                    : JUDICIAL MEMBER

1.         The General Manager,

Canara Bank, Trivandrum.

                                                                        : APPELLANTS

2.         The Manager,

Canara Bank, Kadappakkada,

Kollam.

(By Adv.Sri.P.Balakrishnan)

            Vs.

1.         V.G.Biju,

Ramani Nivas, Kottackakom,

Perinad.P.O, Kollam.

                                                                        : RESPONDENTS

2.         Siva Kumari,

Ramani Nias, Kottackakom,

Perinad.P.O, Kollam.

(By Adv.Sri.Wilson Mullasseril)

JUDGMENT

SRI. M.V. VISWANATHAN : JUDICIAL MEMBER

Appellants were the opposite parties and respondents were the complainants in CC.436/06.  The aforesaid complaint was filed alleging deficiency of service and unfair trade practice on the part of the opposite parties in enhancing the rate of interest from 7.5% per annum to 9% and thereafter at 9.25%.  The opposite parties entered appearance and filed written version denying the alleged deficiency of service.  They contended that the rate of interest was enhanced by virtue of the terms and conditions incorporated in the loan agreement dated:4/5/2006.  Thus, the opposite parties prayed for dismissal of the complaint.

2. Before the Forum below the 1^st complainant was examined as PW1 and Exts.P1 to P5 documents were marked on the side of the complainants.  Exts.D1 to D4 documents were marked on the side of the opposite parties.  On an appreciation of the evidence on record, the Forum below allowed the complaint finding the opposite parties deficient in rendering service to the complainant.  Thereby the opposite parties are directed to collect interest at the rate of 7.5% on the loan amount availed by the complainants.  The opposite parties are also directed to pay compensation of Rs.2000/- with cost of Rs.1,500/-.  Hence the present appeal by the opposite parties.

3. We heard both sides.  The learned counsel for the appellants/opposite parties submitted his arguments based on the grounds urged in the memorandum of the present appeal.  He relied on Ext.D1 loan agreement and D2 sanctioning memorandum and D3 sanction letter and argued for the position that the opposite party/bank was fully justified in enhancing the rate of interest from 7.5% to 9% and then to 9.25%.  On the other hand, the learned counsel for the respondents/complainants supported the impugned order passed by the Forum below and requested for dismissal of the present appeal.

4. There is no dispute that the appellants/opposite parties conducted a Loan Festival Mela by publishing P2 publication.  As per P2 publication, the opposite party/Canara Bank assured the customers that the customers can very well avail housing loan at the rate of 7.5% for a period of 20 years and at the rate of 7.25% for a period of 5 years.   It is based on the aforesaid P2 publication the complainants approached the opposite parties and availed the loan for Rs.2,75,000/-.  Admittedly, the loan amount of Rs.2,75,000/- was sanctioned by the opposite parties during the aforesaid loan festival mela based on P2 publication.  It was sanctioned on 28/4/2006 and the said amount was disbursed to the complainants/loanees by 2 instalments.  The 1^st instalment of Rs.1,50,000/- effected on 4/5/2006 and the 2^nd instalment of Rs.1,25,000/- on 24/5/2006.

5. The appellants/opposite parties enhanced the rate of interest from 7.5% to 9% with effect from 5/5/2006.  The fact regarding enhancement of the rate of interest was communicated only in October 2006.  It can be seen that the opposite party/ bank issued Ext.P3 notice informing the complainants their decision to enhance the rate of interest with effect from 5/5/2006.  The complainants issued a reply to P3 notice.  P4 is the reply dated:6/10/2006.  The opposite party/bank issued another clarification letter dated:30/10/2006 vide P5 letter.  Thus, it can be seen that the appellants/opposite parties enhanced the rate of interest with retrospective effect.  It is also to be noted that the loan was sanctioned on 28/4/2006 at the rate of 7.5% per annum.  The 1^st instalment of the housing loan was disbursed on 4/5/2006 at the rate of 7.5% interest.  It is to be noted that immediately on the very next day ie on 5/5/2006, the bank enhanced the rate of interest from 7.5% to 9%.  The aforesaid enhancement was communicated only in October 2006 with retrospective effect.  The aforesaid action on the part of the opposite parties in enhancing the rate of interest with retrospective effect is to be treated as unfair practice.  It can also be considered as a sort of deficiency of service on the part of the opposite party/bank.

6.  It is also to be noted that the opposite party/bank made enhancement of the rate of interest without any justification.  It is true that the respondents/complainants being the loanees executed D1 loan agreement giving liberty to the bank to enhance the rate of interest.  The aforesaid permission or authority given to the bank cannot be misused.  There must be some reasonableness and justification for enhancing the rate of interest on the strength of the terms and conditions incorporated in the loan agreement.  But in the present case the appellants/opposite parties enhanced the rate of interest with retrospective effect without any justification or reasonableness.

7. There is nothing on record to show that the appellant/bank was directed by the Reserve Bank of India to enhance the rate of interest.  The appellant/bank could not produce any circular or guidelines issued by the Reserve Bank of India authorizing the opposite party bank to enhance the rate of interest, as far as the housing loans are concerned.  In all respects, it can be concluded that the enhancement of the rate of interest on the part of the appellant/opposite party, Canara Bank would amount to deficiency of service and unfair trade practice.

8. The respondents/complainants much relied on P2 publication issued by the appellant/Canara Bank.  It is true that in P2 publication the bank had given the assurance that the rate of interest for house loans will be 7.5% for a period of 20 years and that the rate of interest will be 7.25% for 5 years.  On a perusal of P2 publication would make it abundantly clear that the aforesaid concession is given for the house loans granted or sanctioned in the said house loan mela (Bhavana Vaipa Mela).  Ext.P2 publication would also make it clear that the appellant/Canara Bank decided to conduct house loan mela on 23^rd, 24^th and 25^th February at Town Hall, Kollam, Anandavalleeswaran Branch of Canara Bank and Chamber of Commerce Hall.

9.  A reading of Ext.P2 publication would make it clear that the aforesaid concessions and benefits are available to the customers who avail house loans in the said house loan mela conducted on 23^rd, 24^th and 25^th  of February 2006.

10.  The documentary evidence available on record would show that the respondents/complainants availed the loan during April 2006.  Ext.D3 sanction letter would make it abundantly clear that the house loan was sanctioned in the name of the complainants only on 28/4/2006.  So, the case of the respondents/complainants that they were sanctioned house loan during the loan festival mela conducted by opposite party/bank cannot be believed or accepted.  But unfortunately, the Forum omitted to note that aspect.  Anyhow, this commission has already held that there occurred unfair trade practice and deficiency of service on the part of the opposite parties in enhancing the rate of interest from 7.5% to 9% and thereafter at 9.25%.  The Forum below can be justified in directing the opposite parties to collect interest at the rate of 7.5% for the loan availed by the complainants.  It is pertinent to note that the entire loan transaction was closed by the respondents/complainants on 17/9/2009 and no amount is due to the bank from the complainants.  Admittedly, the appellants/opposite parties have collected interest at the enhanced rate ie at the rate of 9% from 5/5/2006 and at the rate of 9.25% from 1/9/2006.  So, the enhanced rate of interest collected by the opposite parties (bank) from the complainants/loanees is to be refunded.

11. The Forum below has also awarded a further compensation of Rs.2000/- to the complainants.  This Commission is of the view that the further compensation of Rs.2000/- ordered by the Forum below was unwarranted and the same is deleted.  Cost of Rs.1500/- ordered by the Forum below can be treated as reasonable.  Hence the same is upheld.

12. The loan agreement marked as D1 and D3 loan sanction letter, would make it clear that the rate of interest will be compounded monthly.  So, the appellant/opposite party (Bank) is justified in calculating the rate of interest accordingly.

In the result the appeal is allowed partly.  The impugned order dated 29^th September 2009 passed by CDRF, Kollam in CC.436/06 is modified.  Thereby, the compensation of Rs.2000/- ordered by the Forum below is cancelled.  In all other respects, the impugned order passed by the Forum below is upheld.  It is made clear that the rate of interest at 7.5% will be compounded monthly.  The appellants/opposite parties are directed to refund the excess interest collected from the complainants within one month from the date of this judgment failing which the appellants will be liable to pay penal interest on the said amount at the rate of 12% per annum.  As far as the present appeal is concerned, there will be no order as to costs.

                   M.V. VISWANATHAN : JUDICIAL MEMBER

VL.