PER MR SUBHASH CHANDRA

1.          These appeals have been filed under Section 19 of the Consumer Protection Act, 1986 (in short, ‘the Act’) against the order of the Punjab State Consumer Disputes Redressal Commission, Chandigarh (in short, ‘the State Commission’) in CC nos. 43, 44 and 45 of 2016 dated 07.12.2017. As these first appeals arise from the same order and pertain to a similar set of facts, they are disposed of by way of a common order. For the sake of convenience FA no.790 of 2018 is taken as the lead case.

2.     In brief, the relevant facts of the case are that the appellant who is a scheduled Bank had promoted an investment scheme named Kisan Vikas Patra (KVP) Margin Funding Scheme under which 10% of the amount was to be invested by the applicant for the purchase of KVPs and the balance 90% was undertaken to be provided by the appellant Bank as loan under the KVP Margin Funding Scheme. The investors were assured of getting return of 21.01% or tax free return of 13.65% after 103 months as per the flow chart prepared by the appellant. The interest rate chargeable by the appellant on the 90% margin fund was fixed at 7% and the KVP was to earn interest at 8%. The respondent invested Rs.3.5 lakh on 29.09.2005 as margin money and the appellant sanctioned loan of Rs.31.50 lakh on 29.09.2005 to him to purchase KVPs through the Bank for Rs.35 lakhs, which were then pledged as security with the appellant. The appellant informed the respondent subsequently that the rate of interest had been changed from 7 to 7.5 % with retrospective effect from 28.03.2006 and thereafter, on various dates, about the increase of interest rate to 8% with effect from 24.04.2006 and 12% with effect from 20.10.2008. The appellant has stated that the rate of interest was a floating rate of interest and was therefore changed as per the provisions of the scheme.

3.      The respondent approached the State Commission in CC no. 43 of 2016 on the grounds that despite their protest, the appellant had been arbitrarily charging a higher rate of interest and statement of accounts had been showing negative figures and prayed that the appellant be held deficient in service and for adopting unfair trade practice. Compensation of Rs.20 lakh for deficiency in service and mental harassment with directions to refund the excess amount of Rs.20,41,612/- taken by it along with interest from 20.05.2014 till payment, along with cost of litigation was prayed for.

4.     On contest, the State Commission upheld the complaint on the basis of this Commission’s orders in Rohit Bajaj and Others vs ICICI Bank Ltd., and Ors..  [II (2008) CPJ 271 (NC)]  decided on 17^th April 2008 and HDFC Bank Limited vs Surinder Kumar Goyal [11 (2011) CPJ 229 (NC)] decided on 11.03.2011 that the primary condition for grant of loan stated in the Customer Approval Sheet (CAS) had mentioned the rate of interest as 7% per annum which could not be altered arbitrarily by the Bank. It was also held that the contention of the appellant that the investment in the KVP Margin Fund Scheme was a commercial transaction since an overdraft facility had been provided was not justifiable. The State Commission accordingly, directed that “this complaint is accepted and OPs are directed to refund the amount charged by them in excess of interest @ 7% per annum to the complainant in this case and to credit the above referred amount to the account of the complainant and to charge interest only @ 7% per annum. The complainant is held entitled to compensation of Rs.1,00,000/- for mental harassment and deficient service on the part of OPs and Rs.30,000/- as costs of litigation from OPs in this complaint.”

5.     The appellants have impugned this order on the grounds that the State Commission had erroneously came to its conclusion on the basis of Rohit Bajaj (supra) and HDFC Bank Limited (supra) since those cases were distinguishable on the ground that the KVP had been purchased prior to the execution of the loan agreement, and hence the rate of interest mentioned in the CAS would be applicable and not the rate of interest mentioned in the agreement. It was contended that in the instant case, purchase of KVPs had followed the execution of the loan agreement, and the respondents were aware that the rate of interest mentioned in the CAS was only indicative and not final and hence the respondents were, bound to adhere to the agreed terms under the loan agreement which clearly stipulated that the rate of interest shall be subject to change and / or can be varied. It was argued that the State Commission erred in observing that CAS should be taken as the document to determine the rate of interest and to determine whether it would be fixed or varied. It was further argued that the Loan Agreement and the Promissory Note between the parties had mentioned that the rate of interest applicable would be subject to change and had held that the rate of interest applicable shall be @ 7% on fixed basis. The appellant has relied upon the agreed terms and conditions of the Loan-cum-Guarantee Agreement, dated 20.09.2005, Promissory Note and the Letter of Continuity to argue that the rate of interest would be subject to variation by the appellant from time to time. Reliance was placed on Clause 5 of the agreement in this regard. The appellant has also relied upon the judgment of the Hon’ble Supreme Court in Bharathi Knitting Company vs DHL Worldwide Express Courier Division of Airfreight Ltd., (1996) 4 SCC 704 and Tamil Nadu Electricity Board and Anr vs N Raju Reddiar and Another (1996) 4 SCC 551,  to argue that parties are bound by the terms and conditions of the contract signed and on Grasim Industries Limited and Anr vs Agarwal Steel (2010) 1 SCC 83 to argue that when a person signs a document there is a presumption, unless there is a proof of force or fraud, that he has read and understood the documents properly. Reliance has also been placed on Central Bank of India vs Ravindra (2002) 1 SCC 367 in which the Apex Court has affirmed Section 21 A of the Banking Regulation Act, 1949 that rates of interest charged by Banking Companies are not subject to scrutiny by courts.

6.     It is also contended that the complaint before the State Commission was not maintainable on the grounds of limitation, pecuniary jurisdiction and the fact that the respondent did not fall within the definition of ‘Consumer’ under section 2 (1) (d) of the Act. It was contended that the agreement was executed and overdraft facility was availed by the respondent on 29.09.2005 and that he had filed the complaint before the District Forum, Amritsar on 07.08.2008 which was barred by limitation. He was not a ‘consumer’ since OD facilities against the pledge of KVPs was for business purpose which fact had not been denied by the respondent. The appellant before this Commission with the following prayer:

1. That pending the hearing and final disposal of the above number First Appeal this Commission be pleased to Stay the operation of order pronounced on 07.12.2017 by State Consumer Disputes Redressal Commission, Punjab, in Consumer Complaint no. 43 of 2016; and in that behalf
2. For such other reliefs as this Hon’ble Commission may deem fit and proper looking to the facts and circumstances in the present case.

7.     We have heard the rival contentions of the learned counsel for both the parties and have given our careful consideration to the material on record.

8.     The appellant has essentially argued on the basis of his appeal and stated that the respondent is dealing in the business of manufacturing of steel wires under the name and style of  ‘India Wires’’ for over 9 years and employs 17 persons. He therefore, does not fall within the definition of ‘consumer’ under the Act.  OD facilities under the Loan-cum-Guarantee Agreement dated 29.02.2005 were availed by him essentially for business purposes. It was contended that the CAS was only a reference document and the rate of interest mentioned therein was the rate of interest applicable as on that date. The rates revised by the appellant were in accordance with the Benchmark Prime Lending Rate in accordance with the directions of the Reserve Bank of India (RBI) vide its circular dated 01.07.2009. It is contended that no confirmation or commitment was given at any point of time that the rate of interest will be maintained at 7% per annum for the entire duration of the loan. It was argued that the State Commission erred in holding that the loan was set up as an OD facility and that the interest payable by the respondent was only on the amount utilized by him. The respondent also had complete freedom to utilize the limit as per his requirement and to keep depositing surplus funds in the account to save on interest costs. The appellant also did not prescribe any minimum utilization requirement or commitment charge for low utilization. Reliance was placed on the following judgments:

1. Shrikant G Mantri vs Punjab National Bank – 2002 (5) SCC 42;
2. M/s Harsolia Motors vs M/s National Insurance Co. Ltd., (1) 2005 CPJ (NC);
3. India Bank vs M/s Blue Jaggers Estate Ltd., and Ors AIR 2010 SC 2980;
4.  Geo Miller and Co. (P) Ltd., vs Rajasthan Vidyut Uptadan Nigam Ltd., (2020) 14 SCC 643;
5. Inder Singh Rekhi vs DDA (1998) 2 SCC 338
6. Duggirala Prasad Babu vs Skoda Auto India Private Limited and Ors., 11 (2014) CPJ 82 NC
7. Jasobanta Narayan Ram vs L & T Finance Limited II (2014) CPJ 87 (NC)
8. Tamil Nadu Electricity Board and Anr vs N Raju Reddiar and Anr (1996) 4 SCC 551
9. Bharathi Knitting Company vs DHL Worldwide Express Courier Division of Airfreight Ltd., (1996) 45 SCC 704.

9.     On behalf of the respondent it was contended that the appellant Bank had lured the respondent into investing in their scheme by contributing 10% of the amount on the assurance that the KVPs carried an interest of 8% per annum and that the same would be refunded to the respondent after deducting the Bank’s contribution along with interest @ 7% per annum. It was submitted that the appellant Bank had misrepresented the entire transaction as a loan facility to be availed by the respondent whereas it was only an investment made by the respondent with a view to earn returns on the same. It was stated from the record that it was clear that the respondent never took any loan or availed any overdraft facility from the appellant bank during the entire period from the date of pledge of the KVP till the date of maturity. Customer Approval Sheet executed by the Bank had clearly mentioned that the rate of interest would be 7% and the Bank could not have altered or increased the rate of interest subsequently. It is alleged that the appellant misused the transaction unfairly by getting the respondent to invest a sum of Rs.3.50 lakhs in the scheme and to pledge the KVPs, and upon maturity has not only not returned the interest accrued but has also demanded more money on account of the arbitrary increase in the interest charged by the appellant. It was accordingly prayed that the appeal be dismissed.

10.   From the foregoing, it is evident that the appellant promoted a scheme involving purchase of KVPs which are investment instruments against funding to be provided by the appellant. The scheme was designed as an overdraft scheme although the objective was to provide margin money for the purchase of KVPs. The contention of the respondent before the State Commission was that the scheme was promoted as one for investment and that the respondent participated in it as such. No overdraft was availed as was evident from the accounts nor was any further deposit made. The CAS indicated the rate of interest to be a fixed rate of 7%. On the basis of this assurance, the respondent deposited Rs.3.50 lakhs with the appellant on 29.09.2005 against which Rs.31.50 lakhs was provided by the appellant as margin money for the purchase of KVPs by the Bank/ appellant. Appellant’s contention that the respondent was not a ‘consumer’ under the Act, as the scheme was one of overdraft or loan for business purposes and that the loan provided for a floating rate of interest as per clause 5 of the Agreement, has not been accepted by the State Commission in the impugned order on the basis of Rohit Bajaj (supra) and Surinder Kumar Goyal (supra) on the ground that the scheme was clearly designed as an investment scheme although presented as a loan. The Appellant’s contention that these orders are distinguishable as the KVP in Rohit Bajaj (supra) was purchased prior to the agreement is not material as the objective of both schemes was clearly the same, i.e., to promote investment through purchase of KVPs.

11.   The State Commission vide the impugned order has held as under:

13.   From critical appraisal of entire evidence on the record of all the cases and hearing the respective submissions of counsel for the parties, we proceed to decide all the cases. The matter is not res integra, as the Hon'ble National Commission has already decided this type of matter in case titled as "Rohit Bajaj & others Vs. ICICI Bank Ltd. & others" II(2008)CPJ-271(NC). The National Commission has held in this authority that "bank allured complainants to take loan at fixed rate by pledging Kissan Vikas Patras- Complainants when trapped in, increased rate of interest demanded and processing fee deducted unjustifiably- Tactics adopted by bank amount to unfair trade practice- Subsequent agreement, after trapping complainants cannot be relied upon Standardized contracts are pretended contracts- Signatures obtained on dotted lines not really represent substantial agreement with terms in it- Consumer Fora empowered of curing mischief adopted by one of contracting parties- Terms of contract in specified Consumer Complaint No.43 of 2016 13 form if unjustified/unilateral, it cannot be termed as intentional contract- Complainant's signatures taken on printed Form, without explaining terms and conditions - Relying upon flow chart given by Bank, if loan is taken, KVPs pledged, Bank cannot change its stand Breach of promise amounts to unfair trade practice- Bank directed to discontinue with unfair trade practice." The National Commission discussed the matter in detail in the cited authority and held that standardized contract are pretended contracts and signatures obtained on dotted lines not really represent the substantial agreement with terms in it. The terms of contract in specified form if unjustified/unilateral, it cannot be termed as intentional contract. Relying upon flow chart given by bank, it was held by the National Commission that if loan is taken, KVPs pledged, bank cannot change its stand. Breach of promise amounts to unfair trade practice. The matter has again been settled by the National Commission in case titled as "HDFC Bank Limited Vs. Surinder Kumar Goyal" II(2011)CPJ-229(NC), wherein the National Commission has held that bank charging interest at 8% rather 7% interest p.a. on amount of loan availed by complainant in Kisan Vikas Patra Margin Funding Scheme. The National Commission has held that contention of HDFC Bank that promissory note states that bank may revise the rate of interest, which was not acceptable to the National Commission. The National Commission has held in the cited authority that primary condition of grant of loan contained in customer approval sheet, mentioned rate of interest as 7%. No Consumer Complaint No.43 of 2016 14 condition of rate of interest being of floating nature or could be varied with passage of time, as mentioned in customer approval sheet. It was held that interest could not be varied without prior consent of complainant. The National Commission has emphasized on this point in the cited authority that it does not stand to common sense that a person would obtain a loan for investment in KVP at rate of interest which ultimately will result in a loss to him rather than getting any benefit after maturity. The above cited authority has arisen on the basis of Kisan Vikas Patra Margin Funding Scheme by the Bank with regard to loan. This authority has come into force after amendment introduced in the Act in the year 2002, which amendment came into force w.e.f. 2003. Consequently, the contention of OPs is that this is commercial transaction stands overturned on the basis of law laid by the National Commission in the above said authority. As the facts in the cited authority are identical to the facts of the case in hand, the controversy in the cited authority arose in the year 2005 after amendment in the Act in the year 2002 and hence the contention of OP is not accepted by us that complainant is not consumer on account of overdraft facility. The National Commission placed reliance upon customer approval sheet in the cited authority taking it as basic document to determine rate of interest. The customer approval sheet in the case in hand has mentioned rate of interest as 7% and it is not recorded in it that it is floating rate of interest and could be varied with the passage of time. The facts of the cited authority are, thus, directly applicable along with ratio of law laid down therein to the controversy of above cases.

14. As per law laid down by the National Commission in "HDFC Bank Limited Vs. Surinder Kumar Goyal" (Supra) and "Rohit Bajaj & others Vs. ICICI Bank Ltd. & others" (Supra), we hold that OP bank is not entitled to increase the rate of interest from 7% as agreed in the customers approval sheet between the parties. It does not stand to common sense that complainant would obtain loan for investment in KVP at rate of interest, so as to suffer loss rather than getting any benefit after its maturity.

15. Consequently, we accept all the above complaints and passed the below noted orders therein:

(1) Complaint no.43 of 2016: This complaint is accepted and OPs are directed to refund the amount charged by them in excess of interest @7% per annum to the complainant in this case and to credit the above referred amount to the account of the complainant and to charge interest only @7% per annum. The complainant is held entitled to compensation of Rs.1,00,000/- for mental harassment and deficient service on the part of OPs and Rs.30,000/- as costs of litigation from OPs in this complaint.

(2) Complaint no.44 of 2016: This complaint is accepted and OPs are directed to refund the amount charged by them in excess of interest @7% per annum to the complainant in this case and to credit the above referred amount to the account of the complainant and to charge interest only @7% per annum. The complainant is held entitled to compensation of Rs.1,00,000/- for mental harassment and deficient service on the part of OPs and Rs.30,000/- as costs of litigation from OPs in this complaint.

(3) Complaint no.45 of 2016: This complaint is accepted and OPs are directed to refund the amount charged by them in excess of interest @7% per annum to the complainant in this case and to credit the above referred amount to the account of the complainant and to charge interest only @7% per annum. The complainant is held entitled to compensation of Rs.1,00,000/- for mental harassment and deficient service on the part of OPs and Rs.30,000/- as costs of litigation from OPs in this complaint.

12.   The order of the State Commission is detailed and reasoned. It has clearly held that the scheme promoted by the appellant was for investment purposes. We find no reasons to disagree with this finding. The logic of a Bank providing overdraft against purchase of KVPs for commercial purpose as advanced by the appellant cannot be accepted. In any case, the KVPs were purchased by it. It is not material whether they were done before or after the agreement. The rate of interest in the CAS was specified as 7% (fixed). It does not stand to reason that a prudent investor will enter into a scheme that will yield negative results which the application of a floating rate of interest by the appellant effectively results in. The CAS is the primary document that laid out the scheme. The Promissory Note and Agreement have rightly not been considered by the State Commission. The findings of the State Commission are, therefore, found to be in order and in our considered opinion do not warrant any interference.

13.   The appellant has relied upon pretended contracts which have been held by the Law Commission of India in its 103rd Report, May 1983  to be standardized contracts drafted unilaterally, which impose conditions that are not negotiable and do not represent substantial agreement. Such an agreement has, on this basis, been held in Rohit Bajaj (supra) to amount to be an unfair trade practice warranting remedial action under Section 14 of the Act.

14.    In view of the discussion above and the facts and circumstances of this case, we do not find any merit in the appeal. Accordingly, the same is dismissed. Order of the State Commission is affirmed.

15.   FA nos.791 and 792 of 2018 are also disposed of accordingly.

16.   Pending IAs, if any, stand disposed with this order.