Shishir Tiwari vs Dewan Housing Finance Corporation Ltd

BRIEF facts of this case which led to filing of this revision petition are that the petitioner who is the original complainant in this case took a home loan of Rs.25,50,000/ - from the respondent/opposite party on 1.12.2007 and the rate of interest agreed between the parties was 10.5% floating interest. Six months later, the respondent increased the rate of interest by 1.5% and charged at 12%. Thereafter, again in the month of March, 2009 the interest was reduced to 11%. It is alleged that even though the interest rate was reduced by the RBI at 4%, the respondent did not reduce interest proportionately. It was the grievance of the complainant/petitioner that rate of interest fixed for the new loans was 8.5% to 9% but the respondent/opposite party was charging 11% from the complainant who was an old customer. According to the petitioner, the same rate of interest as was applicable to the new customers should have been charged from the old customer also. It is stated that the complainant/petitioner pre -closed the account as he got the loan from another bank which charged lesser rate of interest. His grievance was that at the time of pre -closure, the respondent/opposite party collected an amount of Rs.54,670/ - as penalty which was not proper. This led to the petitioner filing a consumer complaint before the District Forum, Bangalore for directing the respondent/opposite party to refund Rs.54,670/ - and to direct the opposite party to adjust the EMI paid by him since January 2009 as per interest rates offered by the bank to the new customers and refund the excess amount collected with interest along with compensation of Rs.2 lakhs.

THE respondent/opposite party resisted the complaint on several counts. It took the plea that the complaint was not maintainable and was liable to be dismissed. It further submitted that the opposite party is a non -banking financial company governed by the National Housing Bank formed under the guidance of the RBI and as such the rate of interest referred by the complainant would be applicable to the banking companies and not the opposite party which was governed by the guidelines of the National Housing Bank. It was also contended by the opposite party that at the time of sanctioning the loan, the complainant had specifically agreed for payment of penalty for pre -closure of the account and in terms thereof, he was liable to pay the penalty at the time of pre -closure of the loan account. The complainant was quite aware of the terms and as such, he was bound by them. The opposite party finally submitted that the complainant is not entitled for refund of Rs.54,670/ - and the complaint was liable for dismissal. On consideration of the evidence and the submissions made by the parties, the District Forum allowed the complaint vide its order dated 30.8.2010 in terms of the following directions: - "The complaint is allowed in part. It is held that there is deficiency in service by the Opposite party. The Opposite Party shall refund Rs.54.670/ - (Rupees fifty four thousand six hundred and seventy) to the complainant with interest at 9% p.a. from 8.12.2009 until actual payment. The prayer of the Complainant for reducing the rate of interest and to award compensation is rejected. The Opposite Party shall be liable to pay cost of Rs.5,000/ - (Rupees five thousand) to the Complainant."

AGGRIEVED of the aforesaid order of the District Forum, the respondent/opposite party filed an Appeal No.4614 of 2010 before the Karnataka State Consumer Disputes Redressal Commission, Bangalore against this order. The State Commission vide its impugned order date 11.11.2011 accepted the appeal of the respondent/opposite party and set aside the order of the District Forum. The State Commission vide its impugned order also dismissed the complaint filed by the complainant/petitioner. It is against this order of the State Commission that the present revision petition has been filed by the petitioner.

WE have heard learned Shri Shekhar G. Devasa, Advocate for the petitioner and learned Ms. Shweta Kapoor, Advocate for the respondent. Learned counsel for the petitioner submitted that the grievance of the petitioner was that the respondent did not decrease the rates for him when RBI reduced the rates of interest and he was being discriminated most as compared to the new customers who were being charged 8.75% interest by the respondent company as against 11% charged from him. The respondent had also failed to explain as to why lower rate of interest was being charged from the new customers. He further submitted that respondent Co. indulged in restrictive trade practice by binding the petitioner who is a consumer to go on availing loan even if the rate of interest charged by the respondent co. was much higher than that of the other banks. Learned counsel has relied on circular dated 19.10.2011 issued by the National Housing Bank regarding non -charging of penalty on pre -closure of housing loans and charging interest (floating rate basis) for old and new customers which are applicable to the Housing Banking Companies. Keeping in view these aspects, learned counsel contended that the State Commission committed grave mistake in accepting the appeal of the respondent and reversing the well -reasoned order of the District Forum and dismissing the complaint. He, therefore, submitted that the revision petition be allowed and the impugned order be set aside. Learned counsel for the respondent Co., on the other hand, argued in support of the impugned order and submitted that it has been passed after considering all the related issues and hence deserves to be confirmed. We have considered the submissions made by the parties and perused the record. The State Commission while reversing the order of the District Forum and dismissing the complaint has made the following observations: - "13. It seems that the DF has not considered the contention of the appellant. Both parties are bound by the agreement. If a party intends to close the account in advance is bound to pay pre closure charges. When a party agreed to pay floating rate of interest it is bound to pay variable rate of interest if raised by the financer basing on the circular or instructions by the Finance Ministry and the RBI. Therefore the appellant has rightly collected the pre closure charges of Rs.54,670/ - but not as a penalty. No prior notice is required to issue to the borrower in case of increasing the rate of interest on the strength of the order of the Finance Ministry and the RBI. Hence the appeal filed by the Appellant/OP is liable to be allowed as the impugned order under challenges is totally perverse and incorrect and the same is not sustainable."

WE may note that the respondent is a non -banking financial company and as such would be governed by the regulations of National Housing Bank formed under the control and guidance of the RBI. The circular dated 19.10.2011 of the National Housing Bank, a copy of which is placed on file, which is relied on by the learned counsel contains instructions of the National Housing Bank to the housing finance companies regarding not charging of the prepayment levy or penalty on pre -closure of housing loans under certain situations w.e.f. the date of issue of the circular, i.e., 19.10.2011 whereas the housing loan as well as the pre -closure thereof in question are of prior period. In view of this, the petitioner cannot get any benefit from this circular. It may not be out of context to mention here that even though the RBI guidelines as such do not directly apply to the non -banking finance companies, the RBI has also issued instructions regarding removal of pre -closure penalty / charges by the banks vide its circular dated 5.6.2012. This circular of the RBI, a copy of which has been placed by the petitioner on record, also came into effect from the date of its issue, i.e., 5.6.2012.

LEARNED counsel has also referred to the order dated 22.3.2011 passed by the Competition Commission of India under section 27 of the Competition Act in which it has directed the concerned non -banking finance company, namely, India Bulls Financial Services Ltd., New Delhi under section 27 of the Competition Act to stop the practice of levying pre -payment penalty on the foreclosure of the loans against purchase of properties. We have gone through this order of the Competition Commission of India passed under the Competition Act but it does not provide the desired relief to the petitioner as such. In any case, keeping in view the need for such regulation, both the RBI and the National Housing Bank have already issued instructions for removal of pre -payment penalty on the foreclosure of housing loans to the respective institutions under their control but these instructions are applicable for foreclosures of housing loans prospectively, i.e., during the period from the date of issue of those circulars. Besides the above, this Commission vide its orders dated 21.5.2013 in the Revision Petition No.2163 of 2011 Nitin Vashishth and Gagan Vashisth Vs. Central Bank of India. and another order passed on 11.3.2014 in Revision Petition No.1629 of 2008 S. Seshadri and Another Vs. The Housing Development Finance Corporation Ltd.], has held that the parties are bound by the terms and conditions of the loan agreement and as such charging of pre -closure penalty by the concerned bank/finance companies cannot be termed as illegal. Situation of course would be different if levying of such pre -closure is removed or declared as irregular/illegal by the concerned regulatory authority. The issue in question, therefore, is no longer res integra

IN view of the above, no fault could be found with the impugned order and as such no interference is called for from this Commission under section 21(b) of the Consumer Protection Act, 1986. Revision petition, therefore, is dismissed with the parties bearing their own costs.