AI Structured Summary
Not yet generated for this judgment
Judgment
This review application has been filed by M/s. Indiabulls Housing Finance Limited against the impugned order dated 17.11.2017 passed by this Commission in RP No.2884 of 2017. Earlier the review applicant preferred an SLP against the order of this Commission dated 17.11.2017, however, the same was withdrawn with the permission to file the review application before this Commission. Accordingly, the Hon'ble Supreme Court vide order dated 23.4.2018 allowed the review to be filed. Accordingly, the review has been filed on 01.05.2018.
Heard the learned counsel on the review applicant.
Learned counsel for the review applicant stated that this Commission has relied on the RBI Circular dated July 1, 2011, which was issued to the Commercial banks and was not applicable to the NBFCs. It was stated that on 01.07.2011 a Master Circular- Interest rate on advances bearing No.RBI/2011-12/53 was issued by Reserve Bank of India (RBI) to All Scheduled Commercial Banks, wherein the RBI have laid down consolidated instructions/guidelines to banks on matters relating to interest rates on Advances which provides that in the case of Scheduled Commercial Banks the consent of the borrower is required while resetting the floating rate of interest at the time of review or renewal of the loan account. However, on the same date i.e. 01.07.20011 another Master Circular- Fair Practice Code was addressed to All Non-Banking Financial Companies (NBFC's ) and Residuary Non-Banking Companies (RNBC's) wherein necessary guidelines and instructions were given for Fair Practice Code for NBFCs wherein the NBFCs are free to fix the interest rates but were required to follow the guidelines as mentioned below-
"... Boards of NBFCs are, therefore, advised to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges."
It was further argued by learned counsel that similarly, the RBI has issued another circular i.e. RBI/2011-12/470 dated 26.03.2012 wherein the RBI has relied on the above mentioned circular and have laid down the guidelines that need to be followed by NBFCs in relation to interest rate charges by NBFCs. The relevant paragraph is reproduced below:-
"b) 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 rate of interest..........."
Learned counsel further stated that an application under Right to Information Act was filed in the month of June, 2018 seeking information from RBI in relation to the applicability of the above-mentioned circular i.e. RBI/2011-12/53 DBOD. No..Dir..BC.5/13.03.00/2011-12 dated 01.07.2011 to NBFCs. The RBI vide its reply dated 26.06.2018 have stated that the said circular is applicable to all Schedule Commercial banks (excluding RRBs.)
Learned counsel for the review applicant further pointed out that this Commission has held that amortization clause violates the guidelines issued by the RBI and reflects unfair trade practice adopted by the review applicant in this regard. Learned counsel mentioned that the amortization clause of Schedule B does not contravenes the RBI guidelines issued by the circular No.RBI/2006-07/138 DNBS (PD) CC No.80/03.10.042/2005-06 dated 28.09.2006. Petitioner has complied with all the guidelines/circular laid down by the RBI as mentioned above. Petitioner has complied with all the guidelines and have duly intimated the Borrower/Respondent regarding the change in the interest rate and Schedule B of the loan agreement clearly states that "I) All future/further adjustable interest rates applicable for the amount of Loan lent by IFSL to the Borrower(s) shall be applied by IFSL on the first day of the month following the month in which IFSL-LFRR is changed." Therefore, the changes in the interest rates are effected prospectively and in consonance of the circular/guidelines issued by RBI. Adding to it, Petitioner has also sent intimations to its customer/borrower pursuant to change in PLR/LFRR and displayed the same on the websites of the Company for information to the public at large and all other clients/stake holders.
On the basis of the above arguments, learned counsel requested that the order dated 17.11.2017 may be reviewed and set aside.
I have given thoughtful consideration to the arguments advanced by the learned counsel for the petitioner and have examined the record as well as the impugned order. The review filed under Section 22 (2) of the Consumer Protection Act, 1986 reads as follows:
" Without prejudice to the provisions contained in sub-section (1), the National Commission shall have the power to review any order made by it, when there is an error apparent on the face of record."
From the contents of Section 22(2), it is clear that review is limited only to the error apparent on the face of record.
It is seen that the learned counsel for the review applicant has argued in his application mainly on the ground that RBI circular No.2011-12/53 dated 01.07.2011 was addressed only to all the Scheduled Commercial Banks and was not applicable in the case of NBFCs. In that circular commercial banks have been asked to inform the borrower and to have his consent for change in the rate of interest in the case of loans sanctioned on floating rate of interest. In the absence of any circular specific to NBFCs in this regard, as the petitioner had not filed the RBI Circular No.2011-12/26 dated 01.07.2011 applicable only to NBFCs which has now been mentioned in the review application, this Commission took a view agreeing with the principle laid down in the Circular of RBI addressed to the Commercial Banks. Now, the circular referred to by the counsel for the review applicant applicable to the NBFCs clearly states that whenever NBFC will change the rate of interest, it will inform the borrowers by publishing this information in the newspapers as well as in the website of the NBFC. Though the learned counsel for the review applicant has stated that all these guidelines were duly observed by the applicant, however, information in respect of these things was not produced when the main revision petition was heard and decided. The fact is that clause relating to amortization in the agreement reads as under:-
"(a) Save and except as provided under (b) below for administrative convenience the EMI amount is intended to be kept constant irrespective of variations in the Adjustable Interest Rate and therefore the number of EMIs is likely to vary on account of the variance in the Adjustable rate of interest No intimation shall be given by IFSL as to further or other or reduced number of EMIs required to be paid by the Borrower upon each any change in the Adjustable Interest Rate. Provided however that the Borrower shall be intimated of the information as to the applicable/applied Adjustable Interest Rate during the preceding financial year on an annual basis, within such time at the end of the financial year as IFSL may determine".
From the above, it is clear that the above clause does not mention anything like requirement to publish the change of interest rate in the newspapers or in the website of the NBFC as per the guidelines of the Reserve Bank of India for informing all the borrowers. In fact, the above clause says that borrower will be only informed at the end of the financial year and that too at a time to be decided by the NBFC.
Thus, even if the RBI Circular No.2011-12/53 dated 01.07.2011 addressed to All Scheduled Commercial Banks was not applicable to the NBFCs, however, the guidelines of the RBI issued vide other Circular mentioned by the learned counsel for the review applicant addressed to the NBFCs cannot be observed by the petitioner because the provision in the agreement particularly relating to amortization clause is not in consonance with these guidelines. The review applicant has not stated anything in the review application in respect of the fact that the State Commission has observed that the petitioner was entitled to change the rate of interest only ones in a year as per the guidelines of the RBI, however, the petitioner has changed the rate of interest many times in a year. This was clearly a violation of the guidelines of the Reserve Bank of India.
Accordingly, I do not find any merit in the review application as the following finding of this Commission given in para 18 of the impugned order is not required to be changed in the light of aforesaid discussion:-
From the above examination it is clear that there are certain clauses in the loan agreement which are apparently not in conformity with the RBI guidelines, however, these clauses constitute unfair trade practice on the part of the petitioners. Also the agreement itself becomes voidable as certain provisions of the agreement are against the law of the land.
Consequently, the review application No.134 of 2018 is dismissed.