Punjab

Moga

CC/16/115

Sanjeev Sharma - Complainant(s)

Versus

ICICI Home Finance Co. Ltd. - Opp.Party(s)

Sh. Rahul Gupta

02 Nov 2016

ORDER

THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM, MOGA.

 

 

                                                                                      CC No. 115 of 2016

                                                                                      Instituted on: 01.07.2016

                                                                                      Decided on: 02.11.2016

 

Sanjeev Sharma aged 43 years s/o Sh. Rajinder Kumar s/o Sh. Piare Lal r/o House No.655, G.T. Road, Moga.

                                                                          ……… Complainant

 

Versus

1.       ICICI Home Finance Company Limited, through its Branch Manager, Ground Floor, SCF-12 & 13, Improvement Trust Shopping Area, Moga - 142001.  

 

2.       ICICI Bank Limited, through its Branch Manager, Ground Floor, SCF- 12 & 13, Improvement Trust Shopping Area, Moga - 142001.

 

                                                                           ……….. Opposite Parties

 

 

Complaint U/s 12 of the Consumer Protection Act, 1986.

 

 

Quorum:    Sh. Ajit Aggarwal,  President,

                   Smt. Bhupinder Kaur, Member.

 

Present:       Sh. Rahul Gupta, Advocate Cl. for complainant.

                   Sh. Ajay Gulati, Advocate Cl. for opposite party nos.1 & 2.

 

 

ORDER :

(Per Ajit Aggarwal,  President)

 

1.                Complainant has filed the instant complaint under Section 12 of the Consumer Protection Act, 1986 (hereinafter referred to as the "Act") against ICICI Home Finance Company Limited, through its Branch Manager, Ground Floor, SCF-12 & 13, Improvement Trust Shopping Area, Moga and others (hereinafter referred to as the opposite parties) directing them to settle the loan account of the complainant with interest @ 9.75% per annum and to refund the excess amount, if any, deposited by the complainant. Further opposite parties may be directed to pay Rs.50,000/- on account of mental tension caused by him, to pay Rs.25,000/- on account of litigation expenses to the complainant and to issue 'No Due Certificate' in respect of the loan in question and to return to the complainant original title deed and any other relief which under the facts and circumstances of this case the complainant is found entitled to may be granted to him.

2.                Briefly stated the facts of the case are that the complainant took loan against property to the tune of Rs.5,50,000/- from opposite party no.1 vide loan agreement no.LBMGA00001094343 dated 30.06.2005, which was disbursed to the complainant on 16.08.2005, through opposite party no.2. The aforesaid loan amount was repayable by the complainant to opposite party no.1 alongwith interest thereon @ 9.75% per annum in 120 monthly instalments w.e.f. October, 2005 to September, 2015. The complainant got opened a Saving Bank Account no.023701504329 with opposite party no.2 in his name and the repayment of the aforesaid loan amount was to be enrouted through this saving bank account. The complainant paid to opposite party no.1 all the 120 monthly instalment regularly w.e.f. October, 2005 to September, 2015 through his aforesaid Saving Bank Account with opposite party no.2. In October, 2015, the complainant approached concerned officials of opposite party no.1 for obtaining 'No Due Certificate and original title deed. Instead of delivering these documents, the complainant was told by the concerned officials of opposite party no.1 that his aforesaid home loan is still subsisting and further the complainant was given Repayment Schedule. That from 7.4.2006 onwards, the opposite party no.1 had been charging higher rate of interest than agreed and in this regard, no prior intimation to the complainant was ever given and further no consent of complainant was ever sought/received by opposite party no.1; that the amount of interest was increased and the principal amount in EMI was decreased without increasing the EMI amount itself; that the aforesaid initial repayment schedule of 120 monthly instalment was changed/rescheduled by the opposite party no.1 into 222 monthly instalment upto March, 2024. The acts of the opposite party no.1 unilateral, arbitrary and detrimental to the economics interests of the complainant and as such, these acts are neither legal nor valid. As per the guidelines and regulations of Reserve Bank of India (RBI) and National Housing Companies (NHC) regarding observance of fair trade practices, it is essential for opposite parties to inform the complainant beforehand regarding any changes/modifications which are required to be made in the facility availed, if any. Time and again, number of circulars has been issued by Reserve Bank of India and National Housing Companies making necessary and incumbent for opposite parties to follow these guidelines and regulations. But opposite parties in present complaint has miserably failed in complying with any such instructions/guidelines and hence are guilty of unfair trade practices and deficiency in services. Hence this complaint.

3.                Upon notice, opposite party nos.1 & 2 appeared through counsel and filed their written reply taking certain preliminary objections that this Forum has got no jurisdiction to try and entertain the present complaint; that complicated questions of law and facts are involved in the present complaint and the complainant has raised a dispute qua numerous transactions which require voluminous evidence to be presented and so many debit/credit entries in the loan account of the complainant have to be examined and scrutinize which is not possible in this Forum of limited jurisdiction and as such, the present complaint is not maintainable in this Forum and thus the alleged dispute is liable to be referred to Civil Court; that the complaint is time barred; that the complainant is estopped to file the present complaint by his own act and conduct. The complainant never objected to the frequent changes in the rate of interest earlier; that no deficient services have been rendered by the answering opposite parties as alleged by the complainant. A loan against property of Rs.5,50,000/- was advanced to the complainant by the opposite party no.1 on 'Floating Rate of Interest' and in case of floating rate of interest, the rate of interest is not fixed and varies from time to time with the changes in the economic environment and resultant changes in the borrowing cost of the bank. As per guidelines of Reserve Bank of India from time to time and as per loan agreement executed by the complainant, the floating rate of interest applicable in the case of the complainant has been increased and decreased accordingly. The opposite party bank has intimated the complainant about the change of rate of interest and repayment schedule of the loan on each and every occasion as and when the same were changed/rescheduled vide written letters. On merits, it is submitted that the complainant has obtained loan against property for Rs.5,50,000/- vide loan agreement no.LBMGA00001094343 and he executed various loan documents in favour of opposite party and he undertook to repay the loan on floating rate of interest which is subject to change as per the guidelines of Reserve Bank of India from time to time and the complainant was bound to repay the loan on such changed rate of interest as per the agreed terms and conditions of the loan agreement. At the time of disbursement of the loan in the year 2005 the rate of interest was 8.75% (FRR) plus 1% (margin) totalling 9.75% per annum, which was repayable in 120 months in shape of monthly instalment. As per sanction letter and loan agreement duly signed and accepted by the complainant at the time of disbursement, the rate of interest type opted was "Floating Rate of Interest". For calculating such rate of interest, a bench mark rate is adopted, which in the present case is the Floating Reference Rate (FRR). The interest payable by the complainant/borrower is being determined by adding margin percentage with such a bench mark rate (FRR) as agreed by the complainant and the opposite party bank at the time of execution of loan agreement. In the present case, the margin i.e. 1% remains fixed throughout the pendency of loan whereas the bench mark FRR is subject to changes, which gets reviewed from time to time throughout the tenure of the loan. The bench mark i.e. Floating Reference Rate is linked to ICICI Bank's Cost of Funds and appropriate cost of operations for the relevant period, credit charge and margin. As cost of funds is one of the component of FRR, any change in cost of funds would therefore impact all customers whose loans are linked in FRR. The spread between the FRR and the actual rate of interest offered to the borrower is called as "margin". In the present case at the time of disbursement FRR was 8.75% and margin was 1%. Any changed in the rate of interest is on account of changes in the FRR only. The final rate of interest offered to the borrower is a function of the bench mark rate i.e. FRR and the margin associated with the loan. The margin remain constant throughout the loan and thus the appropriation of equal monthly instalments towards interest and principal amount solely depend upon the rate of interest applicable to the borrower that means "EMIs" are also subject to change with the change in rate of interest from time to time. However, the complainant is not a consumer of opposite party bank for the purposes of filing the present complaint under the provisions of the Consumer Protection Act, 1986 (as amended upto date). Further submitted that as per statement of loan account the complainant has to repay 220 monthly instalments, whereas he has so far paid only 129 monthly instalment and therefore, 91 EMIs are still pending against the complainant. The complainant was fully informed by the opposite party bank qua the repayment schedule of the loan in question by way of written letters delivered at the registered address of the complainant in bank record from time to time, when the rate of interest was increased or decreased as per the guidelines of RBI. It is submitted that no dues certificate can only be issued and original title deed can only be returned when the entire loan alongwith interest/cost etc. have been paid by the borrower to the bank and in the present case the complainant was not entitled for the no dues certificate and the return of the original title deed as the loan is still pending against him. It has been further submitted that the rate of interest is being enhance in accordance with the terms of agreement executed between the complainant and opposite party bank and also as per the internal instructions/rules of the opposite party bank under the guidelines of RBI.

                   It is crystal clear that whenever a change in FRR had occurred the rate of interest was accordingly increased and decreased and on the said basis the repayment of loan was rescheduled and EMIs were accordingly also changed and the complainant was fully informed about such changes through written letters delivered to the complainant, whenever there is an increase or decrease in the interest rate there is corresponding change in either the tenure of instalments or EMI itself. It is important to mention here that to avoid burdening the complainant/borrower with the higher Emi, the tenure of instalments was increased/revised subject to permissible limits with communication to the complainant towards intimation of said changes. It is submitted that all such changes are being made on the basis of terms of loan agreement duly signed by the complainant at the time of disbursement. The complainant was in the knowledge of abovesaid changes in the rate of interest/tenure/EMIs fully and he never raised any objection towards abovesaid changes and he has been repaying the changed EMIs as per the rescheduled repayment program of the loan in question. The first change was made on dated 01.04.2006 and it is still subject to change as applicable upon agreed "Floating Rate of Interest" loan case of the complainant. The complaint is hopelessly time barred and the conduct of the complainant shows that he is already aware about the resetting of rate of interest etc. In the present case, the opposite party bank has followed all the necessary guidelines issued by RBI/Regulatory Authorities in letter and spirit. All other allegations made in the complaint have been denied and a prayer for dismissal of the complaint has been made.

4.                In order to prove the case, complainant Sanjeev Sharma tendered in evidence his duly sworn affidavit Ex. C-1 and copies of documents Ex. C-2 to Ex.C-7 and closed the evidence. 

5.                On the other hand, opposite parties tendered in evidence duly sworn affidavit of Sh. Dapinder Singh Kaler, Legal Manager, ICICI Bank Ltd. Ex.OPs-1 and copies of documents Ex.OPs-2 to Ex.OPs-20 and closed the evidence.

6.                We have heard the learned counsel for the parties and have very carefully gone through record placed on file.

7.                Ld. Counsel for the complainant argued that complainant took loan to the tune of Rs.5,50,000/- from opposite parties and rate of interest was fixed @ 9.75% p.a. and this loan was to be repayable in 120 monthly instalments w.e.f. October, 2005 to September, 2015. The complainant paid all the instalments to opposite parties within time from October, 2005 to September, 2015. After repayment of all the instalments in October, 2015, the complainant approached to opposite parties for obtaining No Due Certificate and original title deed, but instead of delivering these documents, officials of opposite parties told that the loan account is still subsisting and gave repayment schedule vide which initially 120 monthly instalments are rescheduled by opposite parties into 222 monthly instalments payable upto March, 2024, copy of repayment schedule is Ex.C-2. From this repayment schedule, it reveals that opposite parties had been charging higher rate of interest than agreed and no information regarding it was ever given to complainant and no consent of complainant was taken by opposite parties. The amount of interest was increased and the principal amount in EMIs was decreased. This act of opposite parties unilateral and arbitrary and detrimental to the economic interests of the complainant. The opposite parties have no right to increase the rate of interest unilaterally without information and consent of complainant. It amounts to deficiency in service and mal trade practice on the part of opposite parties.

8.                On the other hand, ld. Counsel for the opposite parties argued that complainant obtained loan against property of Rs.5,50,000/- and executed loan agreement and other documents in favour of opposite parties. He undertook to repay the loan on floating rate of interest, which was subject to change as per guidelines of RBI from time to time and he was bound to repay the loan on such change of rate of interest as per terms and conditions of loan agreement. At the time of disbursement in the year, 2005 the rate of interest was 8.75% plus 1% margin totalling 9.75% per annum, which was repayable in 120 monthly instalments and at the time of loan, the complainant opted for Floating Rate of Interest. For calculating such rate of interest, a bench mark rate is adopted by the bankers. The interest payable by the borrower is being determined by adding margin percentage with such a bench mark rate. In the present case, the margin rate was 1 % remains fixed and bench mark rate is subject to change, which gets reviewed from time to time, through the tenure of loan. The bench mark rate is linked to ICICI Bank's Cost of Funds and appropriate cost of operations for the relevant period, credit charge and margin. As cost of funds is one of the component of FRR, any change in cost of funds would therefore impact all customers whose loans are linked to FRR. The appropriation of EMIs towards interest and principal amount solely depend upon the rate of interest application to the borrower that means 'EMIs' are also subject to change with the change of rate of interest from time to time. The complainant has not paid the entire loan amount to opposite parties. As per loan statement the complainant has to repay the loan in 220 monthly installments. He had paid only 129 monthly installments and 91 installments are still pending, copy of statement of account is Ex.OPs-20. The complainant was duly informed by the opposite parties regarding the repayment schedule of loan by written letters from time to time when the rate of interest was increased or decreased. It is wrong that opposite parties unilaterally and arbitrarily increased the rate of interest at their own. No excess rate of interest has been levied to the loan account of the complainant at any point of time. Each and every time when rate of interest increased or decreased by the opposite parties, prior intimation was given to complainant. The rate of interest was being enhanced as per terms of agreement executed between the parties and also as per internal instructions/rules of opposite party bank under the guidelines of RBI. The rate of interest was accordingly increased and decreased and on the said basis the repayment of loan was rescheduled and EMIs were accordingly changed and complainant was fully informed about such changes vide written letters. To avoid burdening, the borrower with the higher EMI, the tenure of installments was increased/revised subject to permissible limits with communication to the complainant regarding changes. The complainant was fully aware regarding the change of rate of interest and EMIs. He never raised any objection to the abovesaid changes. Copies of letters vide which the complainant was informed regarding the change of interest and reschedule of the EMIs from time to time are Ex.OPs-3 to OPs-18. Moreover, the present complaint is hopelessly time barred as the first change in the rate of interest made on 01.04.2006 and the complaint was in the knowledge regarding the resetting of rate of interest, but he never challenge the same. So, the present complaint is hopelessly time barred. The opposite party' bank has followed all the necessary guidelines of RBI and other Regulatory Authorities. There is no deficiency in service and mal trade practice on the part of opposite parties and the present complaint may be dismissed with costs.

9.                The case of the complainant is that opposite parties never informed him regarding any change of rate of interest or EMIs at any time. Opposite parties have not acted upon as per guidelines of RBI and National Housing Bank issued by them time to time to Housing finance companies. The alleged letters Ex.OPs-3 to Ex.OPs-18 never received by complainant. Moreover, the opposite parties failed to show any record vide which these letters were sent to complainant. As per guidelines of RBI and National Housing Bank, the opposite parties should inform the complainant and other borrowers regarding any change of rate of interest and  floating rate of interest prior to any change, but they failed to inform it on time. He put reliance on the guidelines of Fair Practices Code for HFCs dated 05.09.2006 issued by National Housing Bank, copy of which is Ex.C-3. As per these guidelines at Serial no.3.4 under the Heading Interest rates it is mentioned that HFCs shall given information to the customer on: (a) the interest rates which apply to his/her accounts, both deposit and loan, (b) when interest is paid on his/her deposits, or changed on his/ her loan accounts, (c) how interest is applied to his/her account and method of calculation of interest. At Serial No.3.5 under the Heading Changes in interest rates it is mentioned that "HFCs shall inform their customers when they change interest rates on their products.

                   Further put reliance on the guidelines of dated 02.06.2009 issued by National Housing Bank to HFCs, vide which it is mentioned that NHB has been receiving complaints from the borrowers of HFCs about the excess interest and charges being levied by them. This also partly could be due to lack of disclosure and transparency or information on interest rate, common fees and charges levied by the HFCs. Hence, HFCs are advised to revisit their policies on interest rate determination, fee and other charges etc., including margin and risk premium charged to different categories of borrowers and get the same duly approved by their Boards. Further the HFCs are also advised to put in place an internal mechanism to monitor the process and the operations so as to ensure adequate transparency in communications with the borrowers.

                   Ld. Counsel for the complainant further produced copy of guidelines on Fair Practices Code for HFCs dated 11.10.2010 Ex.C-5, which is as follows:-

'Loans' point 4.1 (iv) (b) The HFCs should give notice to the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges, other applicable fee/ charges etc. HFCs should also ensure that changes in interest rates and charges are effected only prospectively. A suitable condition in this regard should be incorporated in the loan agreement.

 

4.1 (iv) (c) If such change is to be disadvantage of the customer, he/she may within 60 days and without notice close his/ her account or switch it without having to pay any extra charges or interest.

                   As per these guidelines, HFCs should give notice to the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges, other applicable fee/ charges etc. and if such change is to be disadvantage of the customer, he/she is at liberty to close his account without any notice or switch it without paying any extra charges or interest. But the opposite parties never issued any letter regarding it to the complainant that he may within 60 days and without notice close his/ her account or switch it without having to pay any extra charges or interest. The complainant has the option to close his account or switch it without giving any extra charges or interest.

                   He further produced Circular dated 19.10.2011 issued by National Housing Bank to HFCs regarding Uniformity in charging interest (floating rate basis) for old and new Customers, copy of which is Ex.C-6 vide which HFCs are directed to maintain uniformity in rates between their old and new customers. The relevant part of this Circular is reproduced as under:-

"It has been observed that some of the housing finance companies are offering different floating rates of interest to their old and new customers. Several representations/complaints have been received by the National Housing Bank against such practice. We have carefully examined the issue in all its aspects. It is accordingly advised that the HFCs should ensure uniformity in rate, on floating rate basis, charged to their old and new customers, with the same risk profile, irrespective of the time of entry of the borrowers in the market. Charging of higher interest rate to the old customers against the new customers puts them to a great disadvantage, besides the practice being discrimination. The practice also generally lacks in transparency and fairness.

In view of the foregoing, HFCs are advised to apply uniform rates of interest to the old and new borrowers, who have the same credit/risk profile. This may be implemented with immediate effect."

 

10.              Ld. Counsel for complainant argued that opposite parties are of tendency to cheat the customers by alluring them in their mischievous deals and offering them low rate of interest then the market rate. When the customers fallen in their trap, then they increased the rate of interest at very high rate without informing them and looted the innocent customers. He produced the copy of circular dated 05.04.2013 issued by National Housing Bank  vide which they are instructed to facilitate quick and good understanding of the major terms and conditions of housing loan agreed upon between a HFC and the individual borrower. The HFCs shall obtain a document containing most important terms and conditions of such loan in all cases and copy of these terms and conditions should be handed over to the borrower under acknowledgement. In these terms and conditions at serial no.6 under the heading Repayment of loan and interest, the HFCs are instructed to mention the amount of EMIs and total number of installments, where in the loan is payable in equated monthly installments or other details for payment of principal amount of loan and interest including due date and also mention procedure for advance intimation of the changes in the rate of interest or EMI. In the present case, the opposite parties have failed to supply any detail, procedure or information in the change of rate of interest. In the loan document and loan agreement, copy of which is produced by opposite parties themselves is Ex.OPs-2, the rate of interest is mentioned as 8.75% per annum + 1% margin i.e. 9.75% per annum. The term of repayment is 120 months, total number of EMIs 120, date of commencement of EMI 07.08.2005. The agreed rate of interest between the parties is 9.75% per annum, whereas the opposite parties charged rate of interest upto 16.75% per annum and repayment of loan in 220 EMIs instead of 120 EMIs agreed at the time of sanction of loan, which is about double than the agreed, which is not permissible under law, even natural justice.

11.              From the above discussion, we are of the considered opinion that at the time of sanctioning the loan, rate of interest between the parties were settled @ 9.75% per annum and loan was repayable in 120 equated monthly instalments. The rate of interest in case of floating rate of interest is to be increased or decreased from time to time. But in the present case, the opposite parties charged very much higher rate of interest than agreed even at the rate of 16.75% and rescheduled the EMIs from 120 to 220, which is about double than the agreed between the parties, which is not justified and against the natural justice. Hence the present complaint in hand is hereby allowed and opposite parties are directed to overhaul the loan account of the complainant and to charge interest as charged by Nationalised Bank of such type of house loans as per guidelines of RBI issued time to time and to settle the loan account of the complainant accordingly. Further opposite parties are directed to pay Rs.3000/-(Three thousand only) as litigation expenses to the complainant. Compliance of this order be made within one month of date of receipt of the copy of this order, failing which, the complainant shall be entitled to initiate proceedings against opposite parties under Section 25 and 27 of the Consumer Protection Act. Copy of order be supplied to the parties free of costs. File be consigned to record room.

Announced in Open Forum.

Dated: 02.11.2016.

 

                                                  (Bhupinder Kaur)                    (Ajit Aggarwal)

                                                            Member                                      President