ICICI BANK vs NIKKA MAL BABU RAM JEWELLERS

THIS is an appeal against order of District Consumer Disputes Redressal Forum-I, U. T. , Chandigarh (for short hereinafter to be referred as District Forum) dated 7. 2. 2008 in Complaint Case No. 709 of 2006, Nikka Mal Babu Ram Jewellers v. ICICI Bank and Another.

BRIEFLY stated the averments made in the complaint are that the Complainant got financed a Mercedes Benz C180 car for a sum of Rs. 14,17,500 on 17. 11. 2005 from the OPs. This amount was to be repaid in 18 equal monthly instalments of Rs. 83,830 each commencing from 7. 12. 2005. As per the agreement, the Complainant paid 7 instalments to the OPs, which included the interest component of Rs. 59,740. The Complainant requested the representative of OPs to foreclose the loan, which was done on 28. 6. 2006. It is stated that at the time of closing the loan, OP No. 1 imposed a penalty of Rs. 49,721 against the Complainant for the foreclosure. The Complainant made repeated request for waiving of the penalty but the same was not done and hence a legal notice dated 1. 9. 2006 was served by the Complainant upon the OPs but the OPs did not bother to settle the matter and hence, this complaint seeking directions to the OPs to settle the matter and to waive of the penalty of Rs. 49,721 and they be also directed to pay a sum of Rs. 5 Lacs to the Complainant to harassment and mental agony suffered by it. Further a sum of Rs. 2,200 has also been sought from the OP as legal expenses. The version of the OPs is that the Complainant was liable to pay foreclosure charges, which had been agreed between the parties. Since he had paid only seven instalments inclusive of interest, an amount of Rs. 9,40,547 was payable by the Complainant to the Bank when its account was closed on 28. 6. 2006 on the receipt of the said amount. It has been clarified that charges of Rs. 49,721 were payable to the Bank as per terms and conditions of the agreement, which provides that in case of loan foreclosing, the loanee was liable to pay a sum equivalent to 5. 61%. The OPs reiterated that it had not violated any term and condition of the agreement and the payment sought was as per the agreement duly signed by the Complainant.

In its analysis of the complaint, the learned District Forum has observed that none of the parties have mentioned the rate of interest payable on the loan amount. However, it had been agreed that the total interest to be paid for the loan period of 18 months was to be Rs. 91,440 and as such, the rate of interest worked out by the learned District Forum came to 8. 6% per annum on the principal amount of Rs. 14,17,500. Accordingly, the total amount of loan amounting to Rs. 15,08,940 inclusive of interest was to be repaid in 18 monthly instalments of Rs. 83,830 each. It has also been recorded by the learned District Forum that as per the agreement, the Complainant was liable to pay foreclosure charges @ 5. 61% on the outstanding amount. The learned District Forum took note of the plea of the Complainant that it is being penalized by the Bank to pay interest @ 8. 6% + 5. 61% = 14. 21%. In view of the learned District Forum, the basic question is as to what is the amount on which prepayment charges are to be levied and how is that to be worked out? The learned District Forum has also observed that the Bank is not entitled to any interest on the loan amount after 28. 6. 2006 when the full payment of the loan was made to it as thereafter, it did not render any service of loan to the Complainant. It further held the view that prepayment charges can be worked out only on principal amount due on the date and the amount should not include interest component of the loan as OP is not entitled to recover interest over interest as there was no agreement between the parties that the OP would be entitled to interest as well as prepayment charges in case of foreclosure. Therefore, in view of the learned District Forum, the right course for the OP Bank on 28. 6. 2006 was to work out the total amount of interest due from the Complainant up to the date of foreclosure and after deducting it from the total amount paid by the Complainant, it should have worked out the outstanding amount due from it on that date and the OP Bank was, thereafter, entitled to only 5. 61% of interest on this outstanding amount. The learned District Forum held the view that it was an unfair trade practice to charge interest as well as prepayment charges on such amount. In view of the above analysis, the learned District Forum directed the OP Bank to redraw the account of the Complainant and work out the interest payable by the Complainant till the lump-sum payment of the remaining amount was made and after deducting the principal amount paid by the Complainant on the balance principal amount due from the Complainant, OP Bank was held entitled to prepayment charges @ 5. 61% on that date. The learned District Forum directed the OP Bank to refund the excess amount to the Complainant within 30 days from the receipt of copy of the order along with interest @ 8. 6% per annum since the date of payment till the amount is refunded. The learned District Forum further held that this practice of charging interest as well as prepayment charges on the amount of loan may have been adopted by the OP Bank in other cases also and since it is an unfair trade practice and is also contrary to the agreement, therefore, it cannot be permitted to continue. The learned District Forum, therefore, further directed the OP Bank to discontinue this practice forthwith and to redraw the account of all other consumers similarly placed and refund the amount due to them. The OP Bank was also directed to pay a sum of Rs. 50,000 as compensation out of which Rs. 10,000 were to be paid to the Complainant and the remaining Rs. 40,000 were to be deposited with the U. T. Legal Services Authority fund and in case this amount was not paid within a stipulated period of 30 days, OP Bank was liable to make the payment along with penal interest @ 12% per annum w. e. f. the date of order till realization. The learned District Forum also directed that the OP Bank should pay another Rs. 5,000 to the Complainant as cost of litigation.

AGGRIEVED by the said order of learned District Forum, the OP has filed this appeal. The appeal having been taken on board, notice was sent to the Respondent/complainant and record of complaint case was summoned from the District Forum. Mr. Sandeep Suri, Advocate appeared on behalf of the Appellants whereas Mr. Arun Kumar, Advocate represented the Respondent/complainant. An affidavit of Sh. Manpreet Singh, Manager, ICICI Bank had been placed on record by the learned Counsel for the Appellants, which gave the calculations as to how the amount demanded by the Bank was liable to be paid by the Complainant.

REFERRING to the above affidavit of Sh. Manpreet Singh, the learned Counsel for the Appellants Mr. Sandeep Suri, Advocate submitted that the learned District Forum had misconstrued that the Bank had charged from the Complainant both interest @ 8. 6% and foreclosure charges @ 5. 61%. He pointed out that as per the affidavit of Sh. Manpreet Singh on record, it is clear that by payment of 7 due instalments up to 7. 6. 06, the Complainant had paid a total amount of Rs. 5,86,810 out of which the interest component amounted to Rs. 55,605. 29 ps whereas the principal amount paid amounted to Rs. 5,31,204. 70. He clarified that after deducting this amount from the original principal amount of Rs. 14,17,500, the balance principal amount outstanding on 7. 6. 2006 amounted to Rs. 8,86,295 and only on this balance principal amount, foreclosure charges were charged @ 5. 61%, which amounted to Rs. 49,721 and further adding to it interest for the period from the date of payment of 7th instalment i. e. 7. 6. 06 till the date of foreclosure i. e. 28. 6. 06, another amount of Rs. 4,135 accrued as interest and therefore, the total foreclosure amount payable on 28. 6. 06 amounted to Rs. 9,40,151 [8,86,295. 30 + 49,721 + 4,135]. The learned Counsel reiterated that all these calculations had been made as per the agreement and no amount of interest has been taken on the future interest, which was payable after 28. 6. 06. The learned Counsel, therefore, submitted that the Bank had exactly done what the learned District Forum has directed vide the impugned order and, therefore, there is neither any deficiency in service on the part of the Bank nor the Bank has adopted any unfair trade practice. The learned Counsel for the Appellants also submitted that the award of Rs. 50,000 as compensation is on the higher side. The learned Counsel prayed that the appeal be allowed and the impugned order be set aside. In response, Mr. Arun Kumar, Advocate for the Respondent/ Complainant submitted that the learned District Forum in the impugned order had made correct observations and reiterated that the amount of Rs. 49,721 demanded by the Bank amounts to deficiency in service as well as unfair trade practice and therefore, prayed that the appeal be dismissed as it lacks substance. We have gone through the evidence on record including the affidavit of Sh. Manpreet Singh as well as the impugned order and have heard the learned Counsel for the parties.

WE have also gone through the loan agreement on file in detail. It indicates under Para "details of facilities and other charges" at Serial No. 2 that interest will be charged in accordance with the terms specified in the Annexure. A perusal of Annexure indicates that under Para "interest" at Serial No. 3, no figure has been inserted. However, under Para "repayment" at Serial No. 4, it is indicated that the loan will be repaid in eighteen equal instalments of Rs. 83,830 on 7th day of each month w. e. f. 7. 12. 2005. At internal Page No. 4 of the Credit Facility Application Form at Serial No. 11, it has been indicated that prepayment charges are 5. 5%. From this agreement, it has been correctly adduced that the Complainant was required to pay a total amount of Rs. 15,08,940 inclusive of interest in a time span of 18 months. Therefore, the learned District Forum has correctly concluded that the total amount of interest component to be paid for a period of 18 months amounted to Rs. 91,440. Further, we can safely conclude that the interest per month amounted to Rs. 91,440 18 = Rs. 5,080. Therefore, for the period for which the loan amount was retained by the Complainant i. e. a period of 7 months and 20 days, the interest component amounted to Rs. 35,560 for seven months plus interest for the period of 20 days from 7. 6. 06 to 28. 6. 06 i. e. Rs. 3,400, which comes 38,960. It is an admitted fact that the Complainant had paid a total amount of Rs. 5,86,810 till 7. 6. 06. Therefore, deducting the amount of interest due for this period i. e. Rs. 35,560 from Rs. 5,86,810, the principal amount paid till 7. 6. 06 amounts to Rs. 5,51,250. Therefore, the balance principal amount on this date amounted to Rs. 8,66,250 and the OP as per the agreement was entitled to charge foreclosure and interest only on this amount. However, from the affidavit of Sh. Manpreet Singh, it is clear that the Bank has charged interest component of Rs. 55,605. 29ps. This interest component, even though charged till 7. 6. 06, does not correctly represent the actual interest amount accrued till that date. No basis has been given by the OP Bank for this calculation. The Bank in fact was entitled to charge interest amount of only Rs. 35,560 as interest till 7. 6. 06 whereas it has actually charged Rs. 55,605. 29ps as interest from the Complainant, which clearly is not only a deficiency in service but is also an unfair trade practice. Consequent to this over charging of interest, the balance principal component worked out by the Bank as Rs. 8,86,295. 30ps is also incorrect because the actual balance principal amount on that date amounts to Rs. 8,66,250 and it is on this amount that the OP Bank was entitled to charge interest @. 5. 61% as foreclosure charges for the balance period of 10 months and 10 days, which comes to Rs. 41,773. Therefore, the Bank was legally entitled to charge interest amounting to Rs. 38,960 plus foreclosure charges amounting to Rs. 41,773 totalling Rs. 80,733 whereas as per the affidavit of Sh. Manpreet Singh, the amount recovered by the Bank is Rs. 55,605. 29ps + Rs. 49,721 + Rs. 4,135 i. e. a total of Rs. 1,09,461. 29ps. This amount is Rs. 18,021. 29ps more than the total agreed amount of interest on the loan amount of Rs. 14,17,500 for the total period of 18 months and is Rs. 28,728 (Rs. 1,09,461 Rs. 80,733 = Rs. 28,728) more than the entitled amount of interest that the Bank could charge. Thus, it is apparent that by the foreclosure, the Complainant has been made to pay much more than the total amount of interest of 18 months and also more than the entitled interest whereas the amount had been retained by the Complainant only for a period of 7 months and 20 days. The Bank further had the amount available to it for giving it on loan to any other customer. The spirit of the agreement is that in the case of foreclosure, the loanee should be paying less than the total amount of interest to be paid over the full term of the loan. The foreclosure charges are legally charged by the Bank as per the agreement to avoid any loss to the Bank due to foreclosure. However, in doing so, the Bank cannot be permitted to unduly enrich itself at the cost of the loanee. Even if there is a term or condition in the agreement, which puts a loanee in an adverse situation wherein he is to pay more than the total interest amount in case of foreclosure, then the implications of such a clause in the agreement needs to be explained to the loanee and if the same is not done, it would amount to unwarranted exploitation of the consumers and the Consumer Protection Act, 1986 has been enacted primarily to protect the interest of the consumers against such exploitation.

IN the instant case, admittedly, the Complainant was to pay a total interest amount of Rs. 91,440 for the full loan period of 18 months. It is also on record and admitted by the OP that they have made a total demand of interest plus foreclosure charges amounting to Rs. 1,09,461. 29ps. which is Rs. 18,021. 29ps. more than the total interest for the loan period on the whole amount and is Rs. 28,728 more than the entitled interest due to foreclosure. It is also on record that the Bank is claiming Rs. 55,605. 29ps. as interest for a total period of 7 months whereas in actuality, the interest amount for this period, based on the total interest to be paid by the Complainant for the total loan period of 18 months, comes to only Rs. 35,560 and thus, the Bank has again erred in coming to the principal amount due on 7. 6. 2006. The Bank is claiming that the principal amount outstanding on 7. 6. 06 was Rs. 8,86,295. 35ps. whereas actually, it should have been Rs. 8,66,250. Thus, the demand by the OP of amount more than a total amount of interest to be paid by the Complainant as well as wrong calculation of the outstanding loan amount as on 7. 6. 2006, which again resulted in seeking excess amount of foreclosure money, amounts to deficiency in service as well as unfair trade practice. Even though, we do not agree with the observation of the learned District Forum that the Bank has charged interest @ 8. 6% plus 5. 61% i. e. 14. 21% as the same is not borne out by any calculations, yet we are in total agreement with the view of the learned District Forum that there has been deficiency in service as well as unfair trade practice on the part of the OP Bank as is proved by calculations made in earlier part of this order by us. As calculated in the earlier part of the order, the Bank is only entitled to take an amount of Rs. 80,733 [rs. 38,960 as interest for 7 months and 20 days plus Rs. 41,733 as foreclosure charges on the outstanding amount of Rs. 8,66,250 @ 5. 61%] for a period of 10 months and 10 days only from the Complainant. Any excess amount recovered on this amount from the Complainant needs to be refunded to the Complainant.

In view of the foregoing discussion, we do not find any merit in the appeal and the same is dismissed with cost, which we quantify as Rs. 5,000. In view of the calculations given above, the impugned order is modified to the extent that OP Bank is directed to refund the excess amount of Rs. 28,728 charged from the Complainant. The OP Bank is further directed to redraw the account of other consumers similarly placed by calculating in similar manner and refund the amount to them if any. Subject to the above modification, the directions regarding payment of compensation, cost of litigation and compliance of order are upheld.

COPIES of this order be sent to the parties free of charge. Appeal disposed of.