AI Structured Summary
Not yet generated for this judgment
Judgment
FACTS as culled out from the materials placed on record and the submissions made by the respective Counsels across the bar, may in brevity, be related for understanding the crux of the issue arising for consideration in this action.
ONE Dr. D. Selvaraj, M.D. (2nd complainant) desired to construct an hospital going by the name S.R.R.A. Hospital at SRA Colony, Ettayapuram Road, Tuticorin-2. He availed of a loan for the construction of the said hospital from M/s. Tamilnadu Industrial Investment Corporation Ltd. [for short, "TIIC Ltd."]. He availed of a loan to the tune of Rs. 11,93,000/- on various dates between 27.8.1991 and 11.8.1992. He also availed of a loan to the tune of Rs. 1,25,000/- between 29.12.1992 and 30.3.1993. The total amount of the loans he had availed of was to the tune of Rs. 13,18,000/-. The sanction of the loan, it appears, was to the tune of Rs. 13,50,000/-. The loan amount of Rs. 11,93,000/- was availed of by the 2nd complainant Doctor for the construction of the hospital. The completion of construction of the hospital is required to be done within a period of 24 months from the date of sanction of the loan. This loan amount was disbursed to the 2nd complainant by way of instalments on various dates between 27.8.1991 and 11.8.1992 under account No. A. This loan amount, according to the terms and conditions of the loan, carries interest @ 15% p.a.
The other amount of the loan to the tune of Rs. 1,25,000/- which was disbursed between 29.12.1992 and 30.3.1993 was to carry interest @ 17% p.a. and the said amount had been disbursed under account No. B and this loan was stated to have been disbursed after the completion of the construction of the hospital.
INDUSTRIAL Development Bank of India [for short, "IDBI"] provided the necessary and requisite funds to TIIC Ltd., and TIIC Ltd., in turn refinanced the amount by way of sanctioning of loan to intended persons like the 2nd complainant. By a communication dated 3.1.1992 addressed to the 2nd complainant, TIIC Ltd., informed him that the rate of interest for the term loan will be 3% over and above IDBI rate for refinance with a minimum of 18% p.a. In addition to the above, interest tax at specified rate shall be levied and collected from the concern/company. What was further informed, was in case of default, an additional interest of 5% p.a. will be charged on the defaulted amount for the defaulted period.
BY communication dated 3.7.1992, the TIIC Ltd., informed the 2nd complainant that as per the salient provisions adumbrated under Section 26(c) of the Interest Tax Act that all clauses in the documents executed by the 2nd complainant for the term loan availed of from TIIC Ltd., dealing with interest rate shall stand amended and the revised minimum rate of interest with effect from 1.10.1991 will be 20.75% p.a. and this will substitute the minimum interest rate wherever stipulated in the documents. The TIIC Ltd., by letter dated 31.8.1994 addressed to the 2nd complainant informed him that as per condition No. 8 of the terms and conditions for the sanction of the term loan, any condition stipulated by the IDBI for refinance will also be applicable to his loan. Accordingly, as per condition No. 5(c) of the terms and conditions for the sanction of the term loan, the TIIC Ltd., reserves the right for any alteration of interest rate. The 2nd complainant, aggrieved by the enhancement of the interest rate, it appears, sent a communication dated 28.4.1997 to the President, The CNR Consumer Protection Cell, 73/10, Polpettai, Tuticorin - 628 002 requiring the Cell to take up his cause with the TIIC Ltd. The said Consumer Protection Cell also took up the cause of the complainant and the Cell, in turn, addressed a communication dated 30.4.1997 enclosing a copy of the representation received by them from the 2nd complainant to TIIC Ltd., TIIC Ltd., also by their letter dated 27.5.1997 informed the Cell their views governing the transaction. Aggrieved by the charging of enhanced rate of interest on the term loan, CNR Consumer Protection Cell, 73/10, Polpettai, Tuticorin-2 and Dr. D. Selvaraj, M.D., S.R.R.A. Hospital, SRR Colony, Ettayapuram Road, Tuticorin-2, figuring as complainants, instituted a complaint before the District Consumer Disputes Redressal Forum, Tuticorin, impleading the Chairman and the Manager respectively of M/s. TIIC Ltd., as opposite parties, alleging deficiency in service on their part and praying for the reliefs as below : (1) to refund or credit to the loan account of the complainant No. 2, Rs. 1,58,067/- being the excess interest charged by the opposite party; (2) to direct the opposite parties to remove the deficiency in service by discontinuing to demand the increased rate of interest and by restoring the original rate of interest; (3) to pay Rs. 10,000/- for mental agony; (4) to pay Rs. 1,000/- towards cost of the complaint.
THE Forum below rejected the complaint in limini by its order dated 21.8.1997 in SR No. 20/97 holding the the complainants have to work out their remedy in a competent Civil Court inasmuch as the action in question involves voluminous evidence to be taken relatable to taking of accounts covering a longer duration.
THE aggrieved complainants resorted to the present action by engaging a Counsel of this choice namely learned Counsel Mr. T. Mohan. On service of process, the respondents/opposite parties entered appearance by engaging a Counsel of their choice namely learned Counsel Mr. G. Sivashanmugam.
We heard the arguments of learned Counsel Mrs. S. Devika, representing learned Counsel Mr. T. Mohan, appearing for the appellants/complainants and learned Counsel Mr. G. Sivashanmugam, representing the respondents/opposite parties.
ACROSS the bar, learned Counsel appearing for the respondents/opposite parties stated that the IDBI had revised the rate of interest by their Circular No. FI-5/91-92 dated 3.9.1991 and pursuant to the statement so made, he also produced the relevant circular before us for considerartion. He had also stated that the 2nd complainant Doctor had settled the loan amount on 22.3.1999 and the documents were released to him on 23.3.1999. On this aspect of the matter, when we put question to learned Counsel M/s. S. Devika, representing learned Counsel Mr. T. Mohan, represented that she was not having any knowledge about the same. From the pith and submission of learned Counsel appearing for the respective parties, the question that crops up for consideration is as to whether the order of the Forum below in dismissing the complaint in limini, on the facts and in the circumstances of the case, is sustainable in law.
ACCORDING to learned Counsel appearing for the complainant, the enhanced revised rate of interest on the term loan, as sanctioned to the 2nd complainant Doctor is not legally permissible, on the facts and in the circumstances of the case, when especially even the circular issued by the IDBI is not at all applicable to the loan in question sanctioned to the Doctor 2nd complainant. Learned Counsel appearing for the opposite parties would however strike a discordant note to such a submission. The tenability or otherwise of the submissions of either Counsel many fall in the arena of discussion in the light of the Circular No. FI-5/91-92 dated 3.9.1991. The second paragraph of the said circular reads as under : "2. The revised rates of interest will come into force with immediate effect and be applicable to, (i) all cases of refinance sanctioned on or after September 3, 1991; (ii) cases where the relative loan agreement between the primary lender and its borrower has been executed on or after September 3, 1991 even if loan/refinance was sanctioned prior to September 3, 1991; and (iii) all cases where no refinance has been disbursed as on September 3, 1991."
Admittedly, the agreement entered into between the 2nd complainant, Doctor, and the TIIC Ltd., is not placed on record by the complainant. The date of the agreement entered into between the parties is a crucial factor to decide the applicability or otherwise of Clause 2 referred to in paragraph 2 of the circular as extracted above. If the agreement happened to be executed on or after September 3, 1991 even though the refinance was sanctioned prior to September 3, 1991, the revised rate of interest as per the circular would be made applicable to such refinance. ACCORDING to Clause 3 of paragraph 2 of the circular, all cases where no refinance had been disbursed as on September 3, 1991 the revised rate of interest charged by the circular will be applicable. ACCORDING to Clause 1 of paragraph 2 of the circular, the revised rate of interest would be applicable to all cases of refinance sanctioned on or after September 3, 1991. Excepting an amount of Rs. 4,59,000/- which has been disbursed to the 2nd complainant on 27.8.1991, the rest of the loans had been disbursed to the 2nd complainant Doctor on or after September 3, 1991. Such being the case, it goes without saying that as per the said circular, the rest of the loan amount excepting the loan amount of Rs. 4,59,000/- which had been disbursed to the 2nd complainant Doctor on 27.8.1991 will carry revised rate of interest as per the circular. The opposite party TIIC Ltd., is not only banking upon the circular issued by the IDBI for the revised rate of interest but also banking upon Section 26C of the Interest Tax Act, 1974. The said section reads as under : "26C. Power of credit institutions to vary certain agreements.-Notwithstanding anything contained in any agreement under which any term loan has been sanctioned by the credit institution before the 1st day of October, 1991, it shall be lawful for the credit institution to vary the agreement, so as to increase the rate of interest stipulated therein to the extent to which such institution is liable to pay the interest tax under this Act in relation to the amount of interest on the term loan which is due to the credit institution."
"Credit Institution" had been defined in Section 5A. The said section reads as under : "2. Definitions.-In this Act, unless the context otherwise requires,- 5A. "credit institution" means,- (i) a banking company to which the Banking Regulation Act, 1949, applies (including any Bank or banking institution referred to in Section 51 of that Act); (ii) a public financial institution as defined in Section 4A of the Companies Act, 1956; (iii) a State Financial Corporation established under Section 3 or Section 3A or an institution notified under Section 46 of the State Financial Corporations Act, 1951; and (iv) any other financial Company."
On the face of Section 26C of the Interest Tax Act, 1974 [for short, "the Act, 1974"], it goes without saying the the TIIC Ltd., being a credit institution, is entitled to vary the agreement and increase the rate of interest stipulated therein to the extent to which such institution is liable to pay the interest tax under the Act in relation to the amount of interest of the term loan which is due to the credit institution. In such circumstances, we are of the view that the demand of enhanced rate of interest by the TIIC Ltd., does not appear to be contrary to the provision of law or the terms and conditions of the loan agreement.
NO doubt true it is that the Forum below die not at all embark upon a discussion as we have done above. The Forum below dismissed the complaint in limini mainly holding that voluminuous evidence is to be taken regarding the calculation of interest at different rates for a longer period and such sort of a dispute is capable of being disposed of by a competent Civil Forum rather than by a fora constituted under the Act. Such sort of a finding as had been given by the Forum below sounds reasonable and justifiable, on the facts and in the circumstances of the case.
AT this juncture, we may profitably pen down the weighty observations of the National Commission. In the case of M/s. Special Machines v. Punjab National Bank & Ors., 1991 (1) CPR 52, reflected in paragraph 28 at page 62 which reads as under : "28. The procedure for disposal of complaints under the Act has been laid down in Section 13 of the Act, the provisions of which are made applicable to proceedings before the National Commission by Rule 14(2) of the Consumer Protection Rules, 1987. Sub-sections (2) and (3) of Section 13 of the Act show beyond doubt that the Statute does not contemplate the determination of complicated issues of fact involving taking of elaborate oral evidence and adducing of voluminuous documentary evidence and a detailed scrutiny and assessment of such evidence. It is no doubt true that the Forums constituted under the Act are vested with the power to examine witnesses on oath and to order discovery and productin of documents. But such power is to be exercised in cases where the issues involved are simple such as the defective quality of any goods purchased or any shortcoming or inadequacy in the quality, nature and matter of performance of the service which the respondent has contracted to perform for consideration. Even in such cases, if it appears to the concerned Forum under the Act that the issues raised canot be determined without taking elaborate oral and documentary evidence it is open to it to decline to exercise jurisdiction and refer the party to his ordinary remedy by way of a suit."
The observations of the National Commission as extracted above are squarely applicable to the facts of the instant case.
Certain precedents emerging from various State Commissions had been relied upon by learned Counsel appeariong for the complainants and if we on our part do not refer to those precedents, we will be failing in our duty and, therefore, it is we refer to them and consider their applicability to the factual matrix of the case on hand.
IN Union Bank of INdia v. Dr. Amar Singh, II (1997) CPJ 53, the question that came up for consideration before the State Commission, Haryana, was as to whether it is permissible for the Bank to unilaterally increase the rate of interest at a later point of time when specifically a specified rate of interest had been fixed in the agreement. The Haryana State Commission, considering the question, said as below : "We do not agree with the contention of the learned Counsel and are of the considered view, that once the loan was advanced to the complainant under an agreement with a specific rate of interest i.e., @ 15.5% expressly stipulated therein, the same could not be enhanced by the Banik unilaterally thereafter. Obviously, if there was a subsequently change in the rate of interest either by the Bank''s own decision or under directions received by them from the Reserve Bank of INdia or any other higher quarter, the revised rate of interest would apply only to the subsequent transactions and not to the agreements already entered into by the parties."
This decision, on the face of it, is not applicable in all fours to the factual matrix of the instant case. In State Bank of India v. Dr. Samuel S. Chaudhury, I (1998) CPJ 456, the question that arose from the State Commission, Orissa, was as to whether it is permissible for the Bank to increase the rate of interest at a subsequent point of time unilaterally without issuance of any notice to the borrower and the State Commission answered the question with an emphatic "No" and the rationale for such a decision is reflected as under : "It requires the Bank to send notice to the complainant of its decision to collect higher charge and thereafter charge interest at such higher rate than agreed to by the opposite party. It may be mentioned here that the rate of interest payable @ 23.25% per annum is a matter of contract. The borrower at the time of taking loan agreed to pay interest at a higher rate with a further stipulation that he would be bound to pay higher rate of interest provided, he gets notice of such enhancement of rate of interest. Such a clause as Clause 8 has been introduced in the loan agreement which according to us is prospective for the reason that the borrower on the receipt of notice of enhancement of rate of interest would be in a position to exercise option either to liquidate the loan or to continue the transaction on payment of higher rate of interest. Thus, in our considered view the liability to pay the rate of interest at the stipulated rate would be dependent and subject to issuance of communication to the borrower as per the Clause 8 of the loan agreement."
The rationale provided is not applicable to the facts of the instant case. This apart, the State Commission further held that "if a particular rate of interest is not chargeable by the Bank against the loan and the Bank has charged the same, then in our opinion, it would come within the purview of definition of "Service" and amounts to deficiency in service on the part of the Bank". This sort of a rationale also is not applicable to the factual matrix of the instant case inasmuch as the revised rate of interest charged by TIIC Ltd., is pursuant to the circular issued by the IDBI in accordance with the salient provisions adumbrated under Section 26C of the Act, 1974 and under the terms and conditions of the sanction of the loan.
ACCORDING to the representations made by learned Counsel appearing for the opposite party TIIC Ltd., there is no lis or dispute now in existence between the 2nd complainant and the TIIC Ltd., in the sense of the entirety of the loan sanctioned to him had been paid and the documents had been released to him. As such, the revival of the case by way of a remand will not serve any purpose even assuming for arguments sake that there are merits for making such remand. Looked at from any angle, the disposal of the complaint in limine by the Forum below cannot at all be stated to be not sustainable in law, on the facts and in the circumstances of the case. The point is answered accordingly. The appeal, as such, deserves to be dismissed. In fine, the appeal fails and the same is dismissed. We however make no order as to costs on the facts and in the circumstances of the case. Appeal dismissed.