HDFC Bank Ltd. & Anr vs Satish Gupta & Anr

Subhash Chandra, Member

This revision petition filed under section 21 of the Consumer Protection Act, 1986 (in short, the ‘Act’) assails the order of the State Consumer Dispute Redressal Commission, Punjab, Chandigarh (in short, ‘State Commission’) in Appeal No. 202 of 2012 dated 09.05.2014 arising out of order dated 26.12.2008 in complaint no. 8/829 of 2008 of the District Consumer Disputes Redressal Commission, Patiala (in short, ‘District Forum’).

The facts of the case as per documents on record are that the  petitioner/bank started a scheme known as “KVP Margin Funding” under which the applicant was required to deposit an amount of margin money with the bank. The bank in turn would advance nine times the amount of the margin money as loan to the applicant and procure Kisan Vikas Patras (KVPs) on behalf of the applicant and retain the same till maturity after 8 years and 7 months. During this period the value of the KVPs was expected to double and thereby offer interest higher than the interest that would be charged by the bank on the loan amount. Through a Customer Approval Sheet (CAS) provided by the bank it was specifically stated that the rate of interest would be 7% without any processing fee. The respondent accordingly opened an account with a cheque of Rs 10 lakhs on 29.09.2005. An agreement was signed between the petitioner bank and the respondent and a loan of Rs.90 lakhs was credited to the account of the respondent. This amount was encashed on 18.10.2005 and the KVPs purchased from the Post Office. However, the amount of commission received from the Post Office was not credited to the said account. The Overdraft (O/D) limit of Rs 200 lakhs as agreed to in the Customer Approval Sheet dated 20.10.2005 was also not provided. The rate of interest charged was @ 9.75% w.e.f. 03.04.2006 which was refunded on 31.08.2006 when protested. However, interest @ 8% continued to be charged on monthly compounding basis against the 7% on monthly compounding basis that was agreed upon. The interest was enhanced to 12% on 22.08.2007 w.e.f. 10.09.2007 which was refunded on 08.12.2007. However, interest @ 8% continued to be charged. The petitioner expressed inability to provide O/D facilities. The petitioner conveyed that the KVPs would be encashed and that the interest amount was contingent upon the holding period of the KVP based upon bonus, which placed the respondents under mental stress. On the grounds of unfair trade practice and deficiency in service, the respondent approached the District Forum which ordered as below on 26.12.2008 after opportunity to both parties:

As an upshot of our aforesaid discussion, it would appear that not only that the complaint is found barred by limitation, the Forum lacks the jurisdiction to entertain and try the complaint and even there are no merits in the complaint and the same is hereby dismissed.

As per records, the respondent herein preferred an appeal against the order of the District Forum which was allowed by the State Commission. The order of the State Commission reads as below:

In view of the position discussed above, the order passed by the learning district forum is liable to be set aside. Consequently, we accept the appeal. The complaint filed by the complainant is accepted with the direction to:

(i)  OP No 1/respondent no 1 to charge interest @ not more than 7% and accordingly recast loan account of the complainant in which the interest has not been charged more than 7% on the loan taken by the complainant for the purchase of KVPs and to calculate the interest accordingly and to refund the excess amount so charged to the LAS O/D A/c No. 01162070000105 of the complainant.

(ii) credit in the account of the complainant the amount of commission i.e. Rs 1 Lac received from the Post Office on the investment of the complainant as per his share of contribution.

(iii)

pay Rs 50,000/- on account of compensation for mental and physical harassment

(iv)

pay Rs 11,000/- for the cost of litigation.

This order is impugned before us by way of the present Revision Petition.

We have heard the learned counsel for both the parties and carefully considered the material on record. Both parties filed their short synopsis of arguments and the relevant case laws relied upon.

On behalf of the petitioner, it was argued that the State Commission erred in holding that principles of natural justice were violated on the ground that the respondents were not put on notice before the rate of interest was enhanced when the parties were bound by the terms of the contract. It is contended that the purchase of the KVPs was done after the execution of the loan agreement whereas in the case of HDFC Vs. Surinder Kumar Goyal in RP no.963 of 2010 dated 11.03.2011 and Rohit Bajaj & Ors. Vs. ICICI Bank Ltd. & Ors., II (2008) CPJ 271 the purchase of KVPs was prior to the signing of the loan agreement. It is also contended that the Agreement was executed on 20.09.2005 prior to the encashment of the cheque of Rs 1o lakhs and the rate of interest was as per the terms of the Agreement. Therefore, it is contended that the cases are different. It is also contended that the Customer Approval Sheet (CAS) is only a reference document and the rate of interest was to be as per the terms of the loan agreement. The purchase of the KVPs was as per a letter from the respondents. It is averred that the bank was within its rights to vary the rate of interest under the floating rate of interest provided under the loan agreement without consent as held by this Commission in ICICI Bank Ltd. Vs. Vishnu Bansal in FA No. 454 of 2021 dated 23.11.2022.

It is argued that the KVP was pledged as security with the petitioner and the O/D Account of the respondent was shown with a debit balance of Rs 90 lakhs. To avail the O/D facility, respondents were required to pay monthly interest till maturity of the KVPs. However, the CAS was only indicative and the rate of interest was subject to change. No dispute was raised by the respondents for 3 years; hence, there was implied acceptance of the terms and conditions.

It is contended that the Commission lacks jurisdiction to alter the rate of interest. Reliance is placed on judgments of the Hon’ble Supreme Court in Indian Bank Vs. Blue Jaggers Estates Ltd. & Ors., AIR 2010 SC 2980 that the doctrine of unconscionable contract cannot be invoked for frustrating the recovery of its dues by the appellant; in Syndicate Bank Vs. R. Veeranna & Ors., in AIR 2003 SC 2122 that the rate of interest was enhanced as per the agreement between the parties and there was no question of taking separate consent again and Central Bank of India Vs. Ravindra & Ors., in AIR 2001 SC 3095 that the RBI circulars need to be relied upon in case of interest rates to be applied. The complainants are stated to not be ‘consumers’ under the Act since the loan was obtained in the name of a company, Cosmo Metal (P) Ltd., and it was not mentioned whether the loan was obtained for earning of livelihood. The petitioner relies upon the Hon’ble Supreme Court’s judgment in Shrikant G. Mantri Vs. Punjab National Bank in (2022) 5 SCC 42 where “commercial purpose” was held to be the dominant purpose behind purchasing goods or services and a business-to-business transaction could not be interpreted to be a consumer dispute. Reliance is also placed on Laxmi Engineering Works Vs. P.S.G. Industrial Institute, (1995) 3 SCC 583 which held that a person buying a service for large scale profit will not be a ‘consumer’.

On limitation it is urged that section 24A of the Act  was rightly concluded by the District Forum in its order dated 22.12.2011 as the Agreement was signed and O/D availed on 20.09.2005 and the complaint was filed beyond the prescribed period of 2 years on 26.12.2008. The petitioner contends that this Commission lacks jurisdiction in view of the fact that parties are bound by the terms of the contract as also held by the Hon’ble Supreme Court in Rajasthan State Industrial Development & Investment Corporation & Ors. Vs. Diamond and Gem Development Corporation Ltd. & Ors., (2013) 5 SCC 470 and in  Bharathi Knitting Co. Vs. DHL Worldwide Express Courier Division of Airfreight Ltd., (1996) 4 SCC 704. Pecuniary jurisdiction of the District Forum was also lacking according to the petitioner as the amount involved was Rs 2 crores.

The order of the State Commission is stated to be matter of fact without any finding of any shortcoming. It is argued that the State Commission has acted beyond its jurisdiction in modifying the terms of the agreement. It has also failed to appreciate that the respondents had accorded implied consent to the rate and method of interest on a monthly basis along with other terms such as fees and charges, down payment of Rs 10 lakhs, execution of demand promissory note, etc. It is therefore prayed that the revision petition be allowed and the order of the State Commission set aside.

Per contra, the learned counsel for the respondent argued that the present case was squarely covered by the order of this Commission dated 17.04.2008 in exactly similar cases of Rohit Bajaj & Ors. Vs ICICI Bank Ltd., original petition no. 7 of 2007 dated 17.04.2008 and order dated 11.03.2011 in HDFC Bank Ltd. Vs. Surinder Goyal, RP 963 of 2010. It is argued that the contention of the petitioner that these judgments are not applicable to the present case since the KVPs were purchased on 29.09.2005 after the execution of loan agreement on 20.09.2005 is false and mischievous. The case of the respondent is that the petitioner had deliberately kept the date of loan agreement blank as placed before the District Forum.

11.It is contended that the respondents are ‘consumers’ under the Act. It is submitted that the respondents are all self-employed and that the loan was not obtained in the name of Cosmos Metal (P) Ltd. as is evident from the petitioner/bank’s own loan documents which are in individual names. As regards the issue of limitation, it is submitted that the State Commission has rightly held that the District Forum erred in holding that the complaint was barred by limitation since the bank had been increasing the rate of interest and then reversing the same and therefore the cause of action should not be reckoned from the date of advancing the loan but from the date the excess rate was charged or refused to be decreased and when they continued to charge the excessive rate, then every such date on which the excessive rate of interest was charged constituted a date of cause of action. It is therefore averred that the cause of action occurred on several dates and the State Commission rightly considered the same and set aside the order of the District Forum.

It is averred by the respondent that the State Commission had held that the complainant had deposited Rs 10 lakhs only and the balance amount was financed by the Bank to purchase the KVPs which were lying with the Bank as pledged. No other overdraft was given as it was restricted to the value of the pledge. It was rightly appreciated, according to the petitioner, that the issue was not with regard to the release of the O/D of Rs 2 crores but was instead the rate of interest from 7% to 8%, withholding of the commission amount, compensation and costs, which was within the pecuniary jurisdiction of the District Forum. It is further argued that the District Forum erred in holding that it lacked pecuniary jurisdiction and thereafter proceeding to adjudicating the complaint on merits.

13.On merits, it is submitted that no funds were released to the respondents under the alleged Loan Agreement and only a book entry was made. Therefore, there was no right to increase or vary the rate of interest. Therefore, the District Forum erred in relying upon the loan agreement to justify the increase in the rate of interest by the bank. The variation in the rate of interest which should have been 7% as per the agreement, to 7.5% w.e.f. 07.02.2006, 9.75% w.e.f. 03.04.2006 and 12% w.e.f. 20.10.2008  is contended to be in contravention of the concluded contract. The debiting of the balance in the ’loan account’ resulted in an anomalous situation that the balance in the loan account exceeded the maturity value of Rs 2 crores of the KVPs. It is argued that the petitioner/bank’s stand on the variation of the interest rate is not sustainable in view of there being a concluded contract which mentioned 7% in the CAS. Therefore, any variation of the rate of interest is unconscionable as held by this Commission in Rohit Bajaj (supra) and Surinder Goyal (supra).

As far as the date on the loan agreement is concerned, the respondent argues that the date was kept blank by the petitioner himself and therefore needs to be disregarded. The argument of the petitioner that the rate of interest mentioned in the CAS was only ‘indicative’ and not binding is contested by the respondent as the CAS provided a flow chart for the entire duration of the agreement, mentioning the profit to the respondents if a loan was taken and KVPs purchased and pledged to the Bank. The stand of the Bank is submitted to be an unfair trade practice under the Act, as it was aware that the respondent would be unable to exit from the scheme once the loan was taken and the KVPs purchased.

The device of the petitioner/Bank to get respondents to purchase KVPs is stated by the respondent to be one that enables the petitioner/Bank to invest in KVPs which it is not otherwise able to invest in as the scheme is open only for individuals. The ‘earnings’ for the respondent has been worked out at Rs 55,52,216/- only @ 7% interest. Interest on O/D was not calculated. The State Commission has, according to the respondent, rightly noted that the Reserve Bank of India issued directions on 09.05.2014 that no loans be sanctioned for purchase of KVPs.

In view of the foregoing reasons, the respondent states that the case is squarely covered by an order of this Commission in Surinder Kumar Goyal (supra) and it is therefore prayed that Rs. 42.61 lakhs with interest till realization be paid to him by the petitioner.

From the order of State Commission it is apparent that the contentions of both parties were heard and considered. The petitioner has contended as per submissions before the State Commission. It is evident that the cause of action relates to the charging of a variable rate of interest by the petitioner and not the loan agreement. The contention of the petitioner that the matter was barred under section 24A of the Act on grounds of limitation does not sustain since admittedly the rate of interest has varied from time to time for reasons stated by the petitioner. The respondent had a continuing cause of action and the State Commission cannot be faulted for setting aside the District Forum’s finding on limitation on this ground. The State Commission rightly considered the appeal and proceeded to adjudicate on it. As regards the preliminary objection of the pecuniary jurisdiction of the District Forum, the State Commission has held that the relief claimed by the respondent (complainant before the District Forum) was Rs 6,23,872/- which was well within the pecuniary jurisdiction of Rs 20 lakhs of the District Forum. The issue of the respondents not being ‘consumers’ was also validly considered and upheld by the State Commission.

From the foregoing, it is evident that the scheme devised by the petitioner/Bank required the respondent to deposit only Rs 10 lakhs and he was to earn a return on it through the purchase of KVPs by the Bank on his behalf, for which purpose an overdraft account was opened in his name. The State Commission has rightly held that the issue of interest charged is the key issue and has adjudicated on it. The instant case is squarely covered by this Commission’s order dated 17.04.2008 in Rohit Bajaj (supra) and order dated 11.03.2011 n RP no.963 of 2010 in Surinder Goyal (supra) were also the issue was similar and involved the purchase of KVPs by the Bank in the name of the person in whose name they were purchased. It was clearly held that the rate of interest mentioned would be the rate applicable for the duration of the ‘scheme’ and not any other rate. For these reasons the revision petition is liable to fail.

The revision petition is found to be without merit and is accordingly dismissed. The order of the State Commission is affirmed.