TaxTMI 
TaxTMI 
2024 (2) TMI 245
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....ate. Clause 2.2 of the agreement defines the interest and Clause 2.3 defines the computation of interest. The relevant extract of the agreement is quoted below:- "2.2 Interest (a) The rate of interest applicable to the said Loan as on the date of execution of this agreement is as stated in the Schedule thereto, PROVIDED THAT in the event SCB desires to increase or decrease the rate of interest prior to the disbursement of the full loan, the weighted average of the different rate of interest shall become applicable to the Loan forth with, from the date of such change in the rate of interest. (b) The variable rate of interest shall be reviewed by SCB at the end of every three months from the month of disbursement and upon review SCB may decide to increase, decrease or remain the interest rate unchanged. 2.3 Computation of Interest (a) The Bank shall charge interest at the rate specified in the Schedule hereto on the daily outstanding debit balance in the Home Saver Account. The debit balance in the Home Saver Account shall be difference between the Borrowing Limit and the credit balance in the account pursuant to deposits by the Borrower and credit of excess interest pa....
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....his complaint, respondent-Bank provided a day-wise calculation towards the home loan. Being aggrieved by the action of the Bank, the petitioner filed a complaint before the Banking Ombudsman, Reserve Bank of India (respondent no.4) under Clause 8(1)(x) read with Clause 8(2)(a) of the Banking Ombudsman Scheme, 2006 (hereinafter referred as 'Scheme, 2006'). The complaint was based on three issues, which were as follows:- (a) Respondent no.5 had arbitrarily and unilaterally changed the interest rate during the period of loan against guidelines of the Reserve Bank of India. (b) After four years of sanction of loan, respondent-Bank illegally and arbitrarily started charging thousands of rupees as yearly charges, though all the installment were paid in time. (c) After four years from the date of completion of term loan, the respondent-Bank had charged 8717/- towards arrears including late Rs.12095/-. As per the agreement entered into between the charge in EMI, though all the EMIs were paid in time. 4. Thereafter, when the petitioner approached respondent no.4 to know the status of the complaint, he was informed that the respondent no.5-Bank has filed a reply. The petitioner rep....
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....etitioner an opportunity to file his objections and granting him reasonable opportunity of being heard." ARGUMENTS OF PETITIONER 7. Learned counsel for the petitioner argued that the impugned order was passed in blatant violation of Clause 11 of the Scheme, 2006. Clause 11(2) of the Scheme, 2006, envisages power to the Banking Ombudsman to follow the process as he may consider just and proper. Clause 11(2) has been misused and no opportunity was ever given to the petitioner to furnish or vent his grievances. Even as per Clause 11(3)(c), the complaint may be deemed as resolved when, the Banking Ombudsman has informed the complainant of his opinion that the Bank has adhered to the banking norms and practices in vogue, and the complainant's objections, if any, to the same are not received by the Banking Ombudsman. However, the petitioner had repeatedly asked for the copy of bank's reply, but the same was not served to him and hence, he didn't get any chance to file objection. Even in RTI sought by the petitioner, the Office of the Banking Ombudsman admitted that no opportunity of submitting objection was granted to the petitioner. Hence, it is clear that the procedure of Clause 11....
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.... have been advised by the RBI to lay proper internal mechanism and procedure, so that usurious interest charged, including processing and other charges are not levied by them on loans and advances. 10. Learned counsel for the petitioner submits that when the loan agreement was entered into between the parties, there was no such mention of charging annual maintenance charge, hence, it is not open for the bank to unilaterally charge any annual maintenance charges. 11. Learned counsel for the petitioner further submits that no opportunity of hearing was given by the Banking Ombudsman to the petitioner. The entire working of the Banking Ombudsman is completely opaque. The reply filed by the bank on the petitioner's complaint was not even shared by the bank and instead of asking for the same, respondent no.4 chose not to provide the same. Even the impugned order passed by the Banking Ombudsman does not give any reason for closure of the complaint of the petitioner. The impugned order passed by the Banking Ombudsman is a non speaking order and seems that it is just a formatted order. ARGUMENTS OF THE RESPONDENTS 12. Per contra, Ms. Himadri Batra, appearing on behalf of respondent no....
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....s given by the bank. Respondent no.5 on 16.4.2019 issued a loan closure report. After paying the entire claimed amount, no dues certificate along with all the property documents were handed over to the petitioner. 17. She further argued that, when the petitioner approached respondent no.5-bank in August, 2019, raising concern regarding rate of interest charged, the bank duly provided the breakup of interest charged on the loan and intimated that no excess amount was charged. 18. Thereafter, when the petitioner had raised dispute before the Banking Ombudsman, the Banking Ombudsman asked for reply of the bank, which was duly submitted and thereafter the Banking Ombudsman had passed order on 17.6.2020. The bank further submitted that the variable category loans are linked to a reference rate called as MVRR. The change in MVRR will have an impact on the interest rate charged on the loans, which are sanctioned under "variable" interest rate category. 19. It was further submitted that, since the petitioner has not objected to annual charges, hence, the bank was justified to charge the same as it is also not contrary to the terms and conditions. 20. Mr. Sumit Kakkar, learned counsel a....
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.... of this guideline lays Internal Benchmark as to what would be the Base Rate, Marginal Cost of Funds based Lending Rate (MCLR). Clause 7 lays down the External Benchmark. Clause 8 (Chapter IV) lays down Spread under Base rate system for customer. Clause 9 states of Reset of Interest rate under MCLR system Clause 10 lays down Transition to Base Rate from BPLR etc. 23. In the rejoinder affidavit filed by the petitioner it is submitted that letter of intimation annexed to the counter affidavit clearly showed that the intimation was sent to a wrong address, it was sent somewhere in Maharashtra and the same has never been received by the petitioner. 24. On being asked to supply the proof of the receipt, the counsel for the respondent-bank stated that it is a very old intimation, so they do not have proof of delivery. 25. Learned counsel for the petitioner further submitted that they filed chart showing that emails have been sent and they have not annexed single email whereby they have informed the petitioner that they will be charging such a heavy rate of interest. 26. He further submitted that in February 2011 monthly maintenance charge on the Home Saver Account ....
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....tance, we have perused the pleadings, grounds taken in the petition, affidavits and annexures thereto and the reply filed by concerned parties. 29. The objection has been raised by the private bank i.e. respondent no.5 regarding the jurisdiction, as no writ can be issued against a private Bank. The said objection of Ms. Batra is misconceived as the relief prayed by the petitioner is for quashing the order passed by the Ombudsman in accordance with the Banking Regulation of RBI Circulars, which provides that the complaint has to be adverted/adjudicated by the Ombudsman. The said decision/order comes under Article 12 of the Constitution, hence, the writ is maintainable. 30. Apparently, in this case the petitioner has sought a loan of 9 lacs from Rs.12095/-. As per the agreement entered into between the respondent no.5-bank and the bank while sanctioning the loan had agreed to charge 12.5% variable rate of interest and the entire amount was to be paid in 144 months. However, the petitioner, who has been paying the EMIs in time, chose to close the loan account. After closure of the loan account, when the petitioner checked the statement of loan account of 9 lacs @ 12.5% interest Rs.1....
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....y had been sending email to the petitioner informing him about the change of interest rate but has not placed any email on record. Though, respondent no.2 in its counter affidavit has annexed one of the emails but even therein, there is no mention of change of MVR from12.5% to 16% or 18%. 37. The bank is also not justified to charge excessive interest rate as per the RBI Master Circular dated 2.7.2007. Clause 2.5.1 of the Circular clearly stated that the methodology of computing floating rates should be objective, transparent and mutually acceptable to counter parties. In this case, the bank has failed to place any document on record to show that the petitioner has mutually accepted for the increase in rate which they had been charging. 38. Further, Clause 2.12 of RBI Master Circular lays down excessive interest rate charged by the bank. The same is being quoted below:- "2.12. Excessive interest charged by banks 2.12.1 Though interest rates have been deregulated, charging of interest beyond a certain level is seen to be usurious and can neither be sustainable nor be conforming to normal banking practice. Boards of banks have, therefore, been advised to lay out appropriate in....
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..... It was not mutually acceptable to him and the consent was not taken as per the guidelines of the RBI referred above. 42. It has been further observed that the borrower bind themselves into long running documents intentionally formulated by the bank. They fill in the blanks without even caring to read what has been provided in the terms and conditions and later the borrowers unwittingly fall into this trap and are made obligated and liable to pay the same. In this view, it would amount to unfair trade practices. 43. The Hon'ble Supreme Court in the matter of Central Bank of India vs. Ravindra (2012) 1 SCC 367 has held as under : "During the course of hearing it was brought to our notice that in view of several Usury Laws and Debt Relief Laws in force in several States private money lending has almost come to an end and needy borrowers by and large depend on banking institutions for financial facilities. Several unhealthy prac-tices having slowly penetrated into prevalence were pointed out. Banking is an organised institution and most of the banks press into service long running documents wherein the borrowers fill in the blanks, at times without caring to read what has been pr....