AI OCR 
TaxTMI 
TaxTMI 
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2025 (1) TMI 3
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....ise out of the common Judgment & Order dated 07.07.2008 passed by the National Consumer Disputes Redressal Commission, Delhi (hereinafter "National Commission/ NCDRC") in Complaint Case No. 51/2007 and Revision Petition No. 1913/2004. No appeal has been preferred from either of the parties, in the Revision Petition No. 1913/2004. 2. The National Commission proceeded with the prima-facie view that the charging of interest at rates ranging from 36% to 49% p.a. is exorbitant and amounts to the exploitation of the borrowers/debtors and is usurious, had framed the following issues: i. Whether the Reserve Bank of India (hereinafter referred to as RBI) is required to issue any circular or guidelines prohibiting the Banks/Non-Banking Financial Institutions/money lenders from charging interest above a specific rate? ii. (a) Whether banks can charge the credit card users interest at rates from 36% to 49% per annum if there is any delay or default in payment within the time specified? (b) Whether interest at the above-stated rates amounts to charging usurious rates of interest? 3. The Appellants, Hong Kong Shanghai Corporation, Citibank, American Express Banki....
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....uised as a consumer dispute which could not have been entertained by the National Commission, being beyond its inherent jurisdiction. 5. The Respondents nos. 1 to 3, the original Complainants [hereinafter "Complainants"] before the National Commission, have also preferred a cross-Appeal bearing CA. 6679/2008, against the Impugned Judgment dt. 07.07.2008 contending that the National Commission has only partly allowed their complaint, and ought to have adjudicated upon a benchmark restriction for the rates of interest charged by banks from credit card holders. It is contended that the rates of interest charged by the banks from its credit cardholders is usurious and exploitative in nature, and in contravention of the circulars issued by the Reserve Bank of India. The Complainants claim that they represent the public at large, as a voluntary consumer association voicing against the usurious rate of interest charged by the banks, which is a deficiency in service in banking and constitutes an unfair trade practice, in terms of the Consumer Protection Act, 1986. It is argued on behalf of the Complainants that there ought to have been a Notification passed by the Reserve Bank of India,....
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....hall discharge certain functions in the public interest and the RBI does not discharge such functions, it would amount to unfair trade practice, but, that question is not required to be dealt with finally in this matter." 9. It is argued that the exercise of jurisdiction by the National Commission is ostensible and non-est in law. The administrative policy decisions of the determination of interest on credit cards and the regulation of the banks across the country, are within the specific statutory domain of the Reserve Bank of India. The Parliament of India, under List I of the Seventh Schedule of the Constitution of India had conferred upon the Reserve Bank of India, the powers of subordinate legislation to formulate directives, circulars, and administrative policies, having statutory force and being binding on all Banks from time to time Keshav Lal Khemchang & Sons Pvt. Ltd & Ors. Vs Union of India [2015] 4 SCC 770 Our attention is also drawn to the Preamble of the Reserve Bank of India Act, 1934 which enlists the endeavour of the RBI to " secure monetary stability in India, having a modern monetary policy framework to meet the challenge of an increasingly complex economy, wh....
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.... with such directions. (1) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect." 12. The scope of the statutory bar under section 21-A of the Banking Regulation Act, 1949 has been comprehensively dealt with by this Hon'ble Court in the Central Bank of India Vs Ravindran Central Bank of India Vs Ravindran [2002] 1 SCC 367 wherein it has been observed that "With effect from 15.2.1984, Section 21A has been inserted in the Act, which takes away power of the court to reopen a transaction between a banking company and its debtor on the ground that the rate of interest charged is excessive. The provision has been given an overriding effect over the Usurious Loans Act, 1918 and any other provincial law in force relating to indebtedness." It was also observed by this Hon'ble Court, that for all transactions, which may not be squarely governed by such circulars, the RBI directives may be treated as standards for the purpose of deciding wheth....
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.... of interest rates, the RBI vide Circulars dated 21.10.2003 and 02.07.2007 provided that: "Credit card dues are in the nature of non-priority sector personal loans, and as such, banks are free to determine the rate of interest on credit card dues without reference to their BPLR and regardless of the size" The same circulars also gave comprehensive directions on charging interest rates on advances and the Benchmark Prime Lending Rate (BPLR) as under: "Benchmark Prime Lending Rate (BPLR) and Spreads: 2.2.1 With effect from October 18, 1994, RBI has deregulated the interest rates on advances above Rs. 2 lakhs and the rates of interest on such advances are determined by the banks themselves subject to BPLR and Spread guidelines. For credit limits up to Rs. 2 lakh banks should charge interest not exceeding their BPLR. Keeping in view the international practice, and to provide operational flexibility to commercial banks in deciding their lending rates, banks can offer loans at below BPLR to exporters or other creditworthy borrowers, including public enterprises, on the basis of a transparent and objective policy approved by their respective Boards. Banks wil....
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....ging of rates of interest or charges applicable thereto, have been duly informed to all customers by way of the Most Important Terms and Conditions issued by the Banks, which are the standard set of conditions for the issuance and usage of credit cards, thereby defining the responsibilities of the card issuer and the cardholder, and contain information with regard to fee, charges applicable on credit cards, finance charges and withdrawal limits, and are also provided at the time of the generation of each monthly bank/billing statement. The customer from day one is aware that in the event of there being a delayed payment, he would be liable to pay the interest. 20. A preliminary objection has also been raised by the Banks, that the Respondent nos. 1 & 2, do not qualify as a 'consumer' under the Consumer Protection Act, 1986 and have no locus standi to approach the National Commission. The Respondent nos. 1 & 2, are registered trusts, that claim to fight for consumer rights, are not purchasers of any goods, nor have they availed any services. The Complainant trust does not meet the requirements under section 2(b) & 2(d)) read with Section 12(c) and 13(6) of the Consumer Protection....
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...., and it has been brough to our notice that: (a) No application seeking such permission to file a Complaint in a representative capacity was filed up till the point of conclusion of arguments and reservation of judgment 22.05.2008. (b) Even otherwise, the application (undated) filed by the Complainant was done so subsequently, upon the reservation of the Judgement. (c) The application was never adjudicated upon by the Commission, and no attempt had been made by the Complainants to file review against the final order in this regard. 23. It is stated that the Complaint could not have been filed in a representative capacity on behalf of all credit card holders across the spectrum, as only a handful of banks were impleaded as a party to the Complaint. Even otherwise, no notice of any kind whatsoever was issued to any other bank by the Hon'ble Commission for adequate representation, so as to further treat the complaint in a representative capacity. The scheduled banks notified by the Reserve Bank of India are engaged in the business of credit card, hence any representation at the behest of other banks, or directions to other banks, could not be done in a pi....
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....terest free period of 20-50 days. (b) in case of default, interest, which may have to be paid from credit free period till the date of payment, would be payable over the 2.5 % transaction fee (c) late payment of fees of 30 % of the minimum due up-to Rs. 500 per month. (d) Interest which is to be compounded on a monthly basis (d) the penalty charged to be capitalized every month. 27. Our attention is drawn to the same 2003 Circular issued by the Reserve Bank of India, whereby the RBI has given guidelines as caution to banks, with respect to excessive interest charged by banks, and the same reads as under: "2.12. Excessive interest charged by banks 2.12.1 Though interest rates have been deregulated, charging of interest beyond a certain 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 internal principles and procedures so that usurious interest including processing and other charges, are not levied by them on loans and advances, in laying down such principles and procedures in respect of small value loans, particularly personal loans and such oth....
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....on is drawn to the 103rd Report submitted by the Law Commission on "Unfair Terms in Contract", wherein it had recommended an amendment in the Indian Contract Act, 1872 against such unconscionable terms under any contract. It is the grievance of the Complainants that banks under the veil of providing credit card facilities, is executing unilateral contracts, for their own profit and gain, and such practice, cannot be fair by any means. It is submitted that such one-sided contracts, offering no choice to the consumer, have been struck down as "unfair trade practices" Pioneer Urban Land and Infrastructure Vs Geetu Gidwani Verma & Anr. [2019] 5 SCC 725; Ireo Grace v Abhishek Khanna, (2021) 3 SCC 241; Exeprion Developers Pvt Ltd v Sushma Ashok Shiroor, (2022) 12 SCC 286. 32. It is submitted that the definition clause of the Act itself, gives adequate ammunition to the court to declare any form of unfair trade practice as illegal and grant the resultant relief to the consumer Texco Marketing Pvt. Ltd. Vs TATA AIG GIC [2023] 1 SCC 428. It is urged that the Consumer Forum has the necessary jurisdiction, to entertain the plea of a consumer, and further adjudicate on the terms of a contra....
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.... that the interest rates on advances are determined by individual banks as per their internal policies approved by their Board of Directors, subject to the regulatory guidelines contained in the Master Direction- Reserve Bank of India (Interest Rate on Advances) Directions, 2016 issued vide DBR. Dir. No. 85/13/03/00/2015-16 dated March 3, 2016 (as updated till September 12, 20230. In regard to fixed rate loans, it has been specified that the fixed rate of tenor below 3 years shall not be less than the benchmark rate for similar tenor. 37. It has been submitted that in terms of the regulatory guidelines issued vide Master Direction-Credit Card & Debit Card-Issuance and Conduct dated April 21, 2022 as on March 07, interest charged on credit cards shall be justifiable having regard to the cost incurred and the extent of return that could be reasonably expected by the card user. 38. Most pertinently, it is the assertion of the Reserve Bank of India, that it is only the Hon'ble Supreme Court under Article 32 and the High Courts under Article 226, that have the power of judicial review of statutory instruments. It is not within the executive domain of the National Commission to jud....
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....ny user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or (ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person; but does not include a person who avails of such services for any commercial purpose; Explanation.-For the purposes of this clause, "commercial purpose" does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment;" 41. Section 12(1)(b) also permits a "any reco....
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....ssue whether a Trust would come within the purview of consumer has been referred to a larger bench in Administrator Smt. Tata Bai Desai Charitable Opthalmic Trust Hospital, Jodhpur Vs Managing Director, Supreme Elevators India Pvt. Ltd. & Ors. Administrator Smt. Tata Bai Desai Charitable Opthalmic Trust Hospital, Jodhpur Vs Managing Director, Supreme Elevators India Pvt. Ltd. & Ors SLP(Civil) No. 18636/2019 vide judgment dated 04.10.2019; however, the ratio in Pratibha Pratisthan Vs Canara Bank (supra), is the position of law in force. 45. We are further of the considered view that the consumer Complainant fails to disclose any deficiency in service or violation and is in fact a public interest litigation in guise of a purported consumer dispute. We also agree with the contention of the Appellants, that the Respondents had approached the National Commission at the behest of the Respondent no. 3, a credit card holder with Citibank, purportedly claiming an amount of Rs. 90,000/- against excess interest charged by the bank, which is barred by the pecuniary jurisdiction of the Commission. 46. Even otherwise, the administrative policy decisions of banks, do not constitute provisio....
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....ts the mandate for the banks. In this sphere, the only function of the Courts is to examine that the lawful authority is not abused, and not to appropriate itself the task entrusted to that authority. However, the National Commission has done just that. 50. The National Commission has assumed jurisdiction and expertise over the Reserve Bank of India, whilst observing that a ceiling on the rates of interest, is the purported solution to the alleged exploitation of credit card holders. It has made observations, that are contrary to the legislative intent of Section 21A of the Banking Regulation Act, 1949 that provides for a statutory bar on any court/tribunal to re-open transactions, that the rate of interest charged by the banking company in respect of such transaction is excessive. 51. Although, the National Commission has recorded that by virtue of its decision, it is not re-opening any transaction between the banking company and its debtor on the ground that the rate of interest is excessive, as barred under section 21A; and has only decided the limited question on "whether a bank has adopted any unfair trade practice, as defined under section 2(1)(r)(I)"; we do not subscri....
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....tions in the annexures also includes "educating customers on the implication of paying only the minimum amount due" on credit cards. It has been carefully opined under the RBI instructions, for issue and action to be taken by banks, that "Banks should step up their efforts on educating the cardholders on the implications of paying only the 'minimum amount due'. The MITC should specifically explain that the 'free credit period' is lost, if any balance of the previous month's billing is outstanding. For this purpose, they could work out illustrative examples and include the same in the Welcome Kit sent to cardholders as also place it on their websites. 55. One such endeavour is also apparent from the fact that the same 2003 Circular, also enunciates the enabling clauses in a loan agreement, which reads herein as under: "2.7.1 Banks should invariably incorporate the following proviso in the loan agreements in the case of all advances, including the term loans, thereby enabling banks to charge the applicable interest rate in conformity with the directives issued by RBI from time to time. "Provided that the interest payable by the borrower shall be subject to the ch....
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....ision-making authority for the economic/financial decisions of the Indian economy, any endeavor by the National Commission or any other Court/Tribunal to decide at the behest of the RBI cannot be termed to be just, fair and equitable. Reliance is placed on: Small Industries Development Bank of India v. SIBCO Investment (P) Ltd. (2022) 3 SCC 56, this Hon'ble Court has been pleased to observe: "19. A conjoint reading of the statutory provisions mentioned above, makes it abundantly clear that for "public interest" RBI is empowered to issue any directive to any banking institution, and to prohibit alienation of an NBFC's property. The term "public interest" has no rigid definition. It has to be understood and interpreted in reference to the context in which it is used. The concept derives its meaning from the statute where it occurs, the transaction involved, the state of society and its needs. [Bihar Public Service Commission v. Hussain Abbas Rizwi, (2012) 13 SCC 61 : (2014) 2 SCC (Civ) 131] V. Ramasubramanian, J., speaking for a three-Judge Bench in Internet & Mobile Assn. of India [Internet & Mobile Assn. of India v. RBI, (2020) 10 SCC 274] , gave a wide meaning to "pub....
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....a fide. iv. Whether the Impugned Judgment interferes with the contract executed between the parties? v. Whether charging rate of interests by banks in the manner as advised by Reserve Bank of India vide its master circulars & notifications being independent of a standard ceiling rate prescribed by the Reserve Bank of India, constitute an unfair trade practice? 62. It is a well-settled principle that the terms of a contract executed between two parties, are not open to judicial scrutiny unless the same is arbitrary, discriminatory, mala fide or actuated by bias. The courts cannot strike down the terms of a contract, because it feels that some other terms would have been fair, wiser or logical. 63. The credit card holders in the present case are well - informed and educated & had agreed to be bound by the express stipulation by the terms issued by the respective banks. The banks in the most important terms and conditions, as provided by the Banks have provided all necessary information with regard to fees, and charges applicable to credit cards, credit and cash withdrawal limits. We are of the considered opinion that once the terms of the credit card operation....
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....airly, unjustly and unreasonably, in its contractual, constitutional or statutory obligations Directorate of Education vs Educomp Datamatics Ltd. [2004] 4 SCC 19. 67. In addition, thereto, the Hon'ble Court in the case of Colgate Palmolive (India) Ltd. Vs MRTP Commission [2003] 1 SCC 129, had laid down five ingredients before a trade practice could be an "unfair trade practice", as under : (1) There must be a trade practice [within the meaning of Section 2(u) of the Monopolies and Restrictive Trade Practices Act]. (2) The trade practice must be employed for the purpose of promoting the sale, use or supply of any goods or the provision of any services. (3) The trade practice should fall within the ambit of one or more of the categories enumerated in clauses (1) to (5) of Section 36A (4) The trade practice should cause loss or injury to the consumers of goods or services. (5) The trade practice under clause (1) should involve making a statement whether orally or in writing or by visible interpretation. Colgate Palmolive (India) Ltd. Vs MRTP Commission [2003] 1 SCC 129 68. Thus, any trade practice which is adopted for the purpose of p....