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ICICI BANK (HOME LOAN) & ANR. v. GANGA SINGH SHEKHAWAT
Factual and Procedural Background
The complainant, Ganga Singh Shekhawat, along with his wife, obtained a loan of Rs. 8 lakhs from ICICI Bank (Home Loan) on 29-04-2004 at an interest rate of 7.5% per annum, repayable in installments of Rs. 11,425. The bank increased the interest rate without prior intimation, citing the floating rate nature of the loan and RBI instructions. The complainant alleged that despite depositing Rs. 4,500, the bank charged interest exceeding the agreed rate. He filed a complaint before the District Forum alleging deficiency in service by the bank.
The bank resisted the complaint on grounds including non-joinder of the complainant's wife as a party, lack of jurisdiction of the District Forum, and justification for the floating interest rate increases after notice. The District Forum allowed the complaint, ordering the bank to refund excess interest charged above 7.5% with 10% interest, awarding Rs. 1 lakh as compensation and Rs. 3,000 as litigation costs.
The bank appealed to the State Consumer Disputes Redressal Commission, which partly allowed the appeal by reducing the compensation to Rs. 50,000 but upheld the rest of the District Forum’s order. The bank filed this revision petition challenging the State Commission's order.
Legal Issues Presented
- Whether the complaint filed by the complainant without impleading his wife, who was also a borrower and signatory to the loan agreement, was maintainable.
- Whether the District Forum and State Commission erred in holding the bank liable for charging excess interest despite the loan being on floating rate and increases being as per RBI instructions and notices.
- Whether the District Forum had jurisdiction to re-open the transaction and order refund of interest beyond the agreed rate under the applicable law.
Arguments of the Parties
Petitioner's Arguments (ICICI Bank)
- The loan was granted on a floating interest rate basis, and increases were made after due notice to the complainant.
- The complaint was not maintainable as the complainant’s wife, also a borrower, was not impleaded as a party.
- The cause of action did not arise within the jurisdiction of the District Forum; it was maintainable only in Mumbai.
- The bank had reduced the interest rate from 13.75% to 9.75% after the complainant deposited Rs. 4,500, and no excess interest was charged thereafter.
- Relied on Supreme Court precedents to assert that the bank was entitled to increase interest rates based on RBI instructions and that courts lack jurisdiction to re-open such transactions on the ground of excessive interest.
Respondent's Arguments (Complainant)
- The order passed by the State Commission was in accordance with law and should be upheld.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Syndicate Bank Vs. R. Veeranna & Ors, AIR 2003 SC 2122 | Parties bound by contract terms; no violation of natural justice in increasing interest rate on loan taken on floating rate basis without separate notice for each increase. | The court held that the bank was entitled to increase the interest rate based on RBI instructions even without separate notice for each increase, as the loan was on floating rate. |
| Central Bank of India Vs. Ravindra & Ors, AIR 2001 SC 3095 | Section 21A of the Banking Regulation Act bars courts from re-opening banking transactions on grounds of excessive interest charged. | The court concluded that the District Forum lacked jurisdiction to re-open the loan transaction on the ground of excess interest and thus erred in allowing the complaint and awarding compensation. |
Court's Reasoning and Analysis
The court observed that the complaint was filed solely by the complainant without impleading his wife, who was also a borrower and signatory to the loan agreement. Neither the District Forum nor the State Commission considered this fundamental procedural defect, rendering the complaint apparently not maintainable.
The court acknowledged that the loan was on a floating interest rate, subject to increase or decrease in line with RBI directives. Although the bank did not produce all notices of interest rate increases, the court held that lack of specific notice for each increase does not preclude the bank from charging increased interest rates under a floating rate agreement, relying on the Syndicate Bank precedent.
Further, the court noted that after the complainant deposited Rs. 4,500, the interest rate was reduced from 13.75% to 9.75%, and no evidence was presented that excess interest was charged thereafter.
Relying on the Central Bank of India precedent, the court held that the District Forum had no jurisdiction to re-open the transaction on the ground of excessive interest, as Section 21A of the Banking Regulation Act precludes such interference.
Consequently, the court found that both the District Forum and State Commission erred in their respective orders and that the complaint should be dismissed.
Holding and Implications
The revision petition is allowed. The orders dated 20-05-2013 of the State Commission and 12-12-2012 of the District Forum are set aside, and the complaint is dismissed.
This decision directly affects the parties by nullifying the earlier awards of refund and compensation to the complainant. The court did not establish any new precedent but reaffirmed the binding effect of existing Supreme Court rulings regarding jurisdiction and the nature of floating interest rate loans.
PER JUSTICE K.S. CHAUDHARI, PRESIDING MEMBER This revision petition has been filed by the petitioner against order dated 20-05-2013 passed by the learned State Consumer Disputes Redressal Commission, Rajasthan (in short, the State Commission) in Appeal No. 72/2013 ICICI Bank (Home Loan) Vs. Ganga Singh Shekhawat, by which while allowing appeal partly, order of District Forum allowing complaint was upheld but compensation was reduced.
2. Brief facts of the case are that complainant/respondent obtained loan of Rs. 8 lakhs from opposite party/petitioner no. 1 on 29-04-2004 @ 7.5% p.a., which was to be repaid in installments of Rs.11,425/-. Opposite party without intimation to the complainant increased rate of interest and on enquiry it was revealed that as loan was given on floating rate, interest rate was increased as per instructions of RBI. It was further alleged that complainant deposited Rs.4,500/- with opposite party even then opposite party collected more interest than agreed interest. Alleging deficiency on the part of opposite party, complainant filed complaint before District Forum. Opposite party resisted complaint and submitted that loan was obtained by complainant and his wife but his wife has not been impleaded as a party, hence complaint was not maintainable. It was further submitted that cause of action did not occurr in jurisdiction of District Forum and complaint was maintainable only in Mumbai. It was further submitted that interest rate was changed only after notice to the complainant and as loan was taken on floating rate, interest was changed from time to time. It was further submitted that after depositing Rs.4,500/- interest rate was reduced from 13.75% to 9.75% and no deficiency has been caused by opposite party and prayed for dismissal of complaint. Learned District Forum after hearing both the parties allowed complaint and directed opposite party to refund excess interest charged from the complainant above 7.5% p.a. and return that interest with 10% p.a. interest and further awarded Rs. One lakh as compensation and Rs.3,000/- as litigation cost. Appeal filed by the opposite party was partly allowed and learned State Commission vide impugned order partly allowed appeal and compensation of Rs. One Lakh was reduced to Rs.50,000/- and rest of the appeal was dismissed, against which this revision petition has been filed.
2. Heard learned counsel for the parties and perused record.
3. Learned counsel for the petitioner submitted that as loan was sanctioned on floating rate of interest, rate was increased after due notice to the complainant even then learned District Forum committed error in allowing complaint and learned State Commission further committed error in allowing appeal only partly, hence revision petition be allowed and impugned order be set aside. On the other hand, learned counsel for the respondent submitted that order passed by learned State Commission is in accordance with law, hence revision petition be dismissed.
4. Perusal of record reveals that loan was taken by complainant and his wife and loan agreement was signed by both of them even then complaint has been filed only by the complainant without impleading his wife as party. Neither District Forum nor State Commission has considered this aspect, which ought to have been considered and apparently complaint was not maintainable without impleading complainants wife as party.
5. Record further reveals that loan was taken on floating rate of interest and floating rate was liable to be increased or decreased as and when rates were increased and decreased by RBI. Learned counsel for the petitioner has also placed on record notice dated 07-09-2008 and 01-05-2009 by which intimation was given to the complainant regarding increase in rate of interest. Learned counsel for the respondent submitted that rate of interest was increased number of times and learned counsel for the petitioner has not placed on record all the intimations for increase of rate of interest and directions of RBI. It is true that intimation for increasing rate of interest at every time has not been placed on record and directions of RBI have also not been placed on record but merely by not intimating to the complainant about increase of rate of interest, it cannot be inferred that rate of interest could not have been increased when loan had been taken on floating rate of interest. Learned counsel for the petitioner has placed reliance on judgment of Honble Apex Court in , in which AIR 2003 SC 2122 Syndicate Bank Vs. R. Veeranna & Ors. it was observed as under:-- The High Court while holding that the party is bound to pay the interest at the agreed rate took the view that the Bank could not automatically charge the increased rate of interest merely on the basis of rise of interest on account of RBI circulars. It is not a case of automatically charging the increased rate of interest; charge of higher rate is based on agreement between the parties. The High Court was clearly in error in holding that the principles of natural justice were violated on the ground that the defendants were not put on notice before enhancing the rate of interest when the parties are bound by the terms of the contract. Thus, it becomes clear that even without notice petitioner was entitled to enhanced rate of interest on the basis of rise of interest by RBI.
7. Perusal of record further reveals that by Amendatory Agreement for Switch from present interest rate scheme to adjustable ROI, rate was reduced from 13.75% to 9.75% on depositing Rs.4,500/- by the complainant. Learned counsel for the respondent could not place on record any document showing that after Amendatory Agreement excess rate above 9.75% was charged by opposite party from the complainant. In such circumstances, it cannot be presumed that inspite of depositing Rs.4,500/- by the complainant, opposite party charged excess interest rate from the complainant.
8. Learned counsel for the petitioner has also placed reliance on judgment of Honble Apex Court in in which it was AIR 2001 SC 3095 Central Bank of India Vs. Ravindra & Ors., observed as under:-- With effect from 15-02-1984 section 21a has been inserted in the Act which takes away power of the Court to re-open a transaction between a banking company and its debtor on the ground that the rate of interest charged is excessive. The provision has been given an overriding effect over the Usury Loans Act, 1918 and any other provincial law in force relating to indebtedness. In the light of aforesaid judgment it becomes clear that District Forum had no jurisdiction to re-open transaction between complainant and opposite party on the ground that rate of interest charged was excessive. Thus, District Forum committed error in allowing complaint directing opposite party to refund interest charged beyond 7.5% and further committed error in granting compensation and learned State Commission also committed error in allowing appeal only partly and complaint is liable to be dismissed.
8. Consequently, revision petition filed by the petitioner is allowed and order dated 20-05-2013 passed by learned State Commission in Appeal No. 72/2013 ICICI Bank (Home Loan) Vs. Ganga Singh Shekhawat and order of District Forum dated 12-12-2012 passed in Complaint No. 968/2009 Ganga Shekhawat Vs. ICICI Bank (Home Loan) & Anr. is set aside and complaint stands dismissed with no order as to costs. ......................J K.S. CHAUDHARI PRESIDING MEMBER
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