2025 (1) TMI 3 - SC - Indian Laws

Locus of Respondent organization to approach the National Commission - jurisdiction of National Consumer Disputes Redressal Commission to interfere with banking operations, which is the exclusive statutory domain of the Reserve Bank of India - jurisdiction to fix a maximum ceiling rate of interest to be charged by banks from their credit card holders for their failure to make full payment on the due date - interference with the contract executed between the parties or not - 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, is unfair trade practice or not. Whether the Respondent organization has the locus to approach the National Commission? - HELD THAT - Section 12(1)(b) also permits a any recognised consumer association whether the consumer to whom the goods sold or delivered or agreed to be sold or delivered or service provided or agreed to be provided is a member of such association or not to file a complaint, in terms of the procedure prescribed under section 13 of the Act. The Respondent nos. 1 and 2 herein, have taken refuge under this provision claiming themselves to be a voluntary consumer association, to approach the National Commission. Since, this Court has held that the requirement of Order I Rule 8, prescribed in Section 13(6) is to be read into section 12(1) of the 1986 Act RAMESHWAR PRASAD SHRIVASTAVA ORS. AND AVINASH GAUR AND ORS. VERSUS DWARKADHIS PROJECTS PVT. LTD. AND ORS. 2018 (12) TMI 2007 - SUPREME COURT , the requirement of obtaining prior permission from the Commission, for any consumer to act in a representative capacity, can in no way be dispensed with. 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. A direction by the National Commission or any other Court, must be based on material or evidence and not on surmises, and bald averments made by complainants. Any such directions issued otherwise is unsustainable. It is unable to subscribe to the view adopted by the National Commission, that any complaint under the Consumer Protection Act, 1986 to curb unfair trade practice(s) adopted by the banks is maintainable . Whether the National Consumer Disputes Redressal Commission, has the jurisdiction to interfere with banking operations, which is the exclusive statutory domain of the Reserve Bank of India? - Whether the National Consumer Disputes Redressal Commission had the jurisdiction to fix a maximum ceiling rate of interest to be charged by banks from their credit card holders for their failure to make full payment on the due date, at the behest of the Reserve Bank of India unilaterally direct banks/non-banking financial institutions to charge rates of interest not beyond the 30% p.a., in absence of an instruction/directive of the Reserve Bank of India? - HELD THAT - 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 - The decision of the National Commission to unilaterally hold that any interest above 30% p.a. is usurious, is in contrary to the legislative intent of section 21A and is an encroachment upon the domain of the Reserve Bank of India. In the case of Central Bank of India Vs Ravindra Ors. 2001 (10) TMI 1065 - SUPREME COURT , this Hon ble Court had decided on the issue, when banks in India were not following a uniform practice, and other banks charged interest with monthly or quarterly rests while others charged with yearly or six-monthly rests. It was held by this Hon ble Court, that a distinction was drawn between the court s power to interfere on the promise that the interest charged is excessive under the general law, and the court s interference on the premise that the interest charged is in contravention of the circulars and directions issued by the Reserve Bank of India. In the former case, it would not be permissible in view of the bar enacted by Section 21A of the Banking Regulation Act, while in the latter case, it would be permissible because of the Reserve Bank of India s circulars and directions having statutory force under section 21/35A of the Act, having been violated. The RBI is the prime regulator and the decision-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 - There is also merit in the submission made by the Appellants, that a direction cannot be issued to the Reserve Bank of India, to enact a particular legislation. It is a settled cannon of law that when an executive authority, exercises a legislative power by way of subordinate legislation pursuant to the delegated authority of a legislature, such executive authority, cannot be asked to enact a law, which he has been empowered to do under the delegated legislative authority. Whether the Impugned Judgment interferes with the contract executed between the parties? - 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? - HELD THAT - 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. In the present context, the pre-conditions of deceptive practice and unfair method are manifestly absent. The Banks have in no manner made any misrepresentation, to deceive the credit card holders. Upon availing the facility of the credit cards, the customers, are made aware of the most important terms and conditions , including the rate of interest, that shall be charged by the Banks. Even on merits, the Reserve Bank of India, has made it clear that there exists no material on record, to establish that any bank has acted contrary to the policy directives issued by the RBI - The mere inflation in the rates of interest cannot be construed as a practice, intended to cause loss or injury. It is correct to say that the National Commission has been duly empowered under the statute to set aside unfair contracts, which may symbolise a single will or are unilaterally dominant or incorporate terms which are unfair and unconscionable. However, the rate of interest, charged by the banks, determined by the financial wisdom directives issued by the Reserve Bank of India, and is duly communicated to the credit card holders from time to time, cannot be in any manner unconscionable or unilateral. The credit card holders are duly educated and made aware of their privileges and obligations, including timely payment levying of penalty on delay - the question of directing the RBI to act against any bank does not arise, in the facts and circumstances of the present case and that there is no question of the RBI being directed to impose any cap on the rate of interest, either on the banking sector as a whole, or in respect of any one particular bank, contrary to the provisions contained in the Banking Regulation Act, and the circulars/directions issued thereunder. Conclusion - The Court emphasized that the RBI is the primary regulator of banking practices, and the National Commission overstepped its jurisdiction by interfering with banking operations and contractual terms. The decision reinforced the RBI's authority in regulating interest rates and banking policies - the National Commission's judgment was set aside - appeal allowed.

Summary

Issues Involved:

1. Whether the Respondent organization has the locus to approach the National Commission?
2. Whether the National Consumer Disputes Redressal Commission has the jurisdiction to interfere with banking operations, which is the exclusive statutory domain of the Reserve Bank of India?
3. Whether the National Consumer Disputes Redressal Commission had the jurisdiction to fix a maximum ceiling rate of interest to be charged by banks from their credit card holders?
4. Whether the Impugned Judgment interferes with the contract executed between the parties?
5. Whether charging rates of interest by banks in the manner advised by the Reserve Bank of India constitutes an unfair trade practice?

Issue-wise Detailed Analysis:

1. Locus of the Respondent Organization:

The Court examined whether the Respondent organization could approach the National Commission under the Consumer Protection Act, 1986. A complainant must be a "consumer" or fit within Section 12(1) of the Act. The Respondents claimed to be a voluntary consumer association. However, the complaint failed to meet the threshold of Section 12(1) and 13, as the Trust was not a "person" under Section 2(1)(m) of the Act. The Trust, not being a person, cannot invoke provisions or file a consumer dispute, as held in Pratibha Pratisthan Vs Canara Bank. The complaint was deemed a public interest litigation disguised as a consumer dispute, lacking the necessary jurisdiction.

2. Jurisdiction of the National Consumer Disputes Redressal Commission:

The Reserve Bank of India (RBI) is the statutory authority with supervisory roles over banking, empowered to issue binding directions. The National Commission does not have jurisdiction to interfere with banking operations, a domain exclusive to the RBI. The Commission's assumption of jurisdiction over RBI's domain was contrary to Section 21A of the Banking Regulation Act, which bars reopening transactions on the ground that the rate of interest is excessive.

3. Fixing a Maximum Ceiling Rate of Interest:

The National Commission's decision to cap interest rates at 30% per annum was deemed an overreach into the RBI's domain. The RBI alone is entrusted with formulating banking policies, including interest rates. The Commission's decision was contrary to the legislative intent of Section 21A, which prevents courts from reopening transactions based on excessive interest rates.

4. Interference with Contractual Terms:

The Court held that the terms of a contract are not open to judicial scrutiny unless they are arbitrary, discriminatory, or mala fide. The credit card holders were informed and agreed to the terms, including interest rates. The National Commission's interference with these terms was an impermissible attempt to constitute a new contract. The Court reiterated that contracts should be interpreted based on the actual terms agreed upon by the parties.

5. Unfair Trade Practice:

The Court found no evidence of unfair trade practices by the banks. The rates of interest were in line with RBI guidelines, and customers were informed of the terms. The absence of deceptive practices or misrepresentation meant that the banks' actions did not constitute unfair trade practices. The RBI confirmed that there was no violation of its directives by the banks.

Conclusion:

The appeals were allowed, and the National Commission's judgment was set aside. The Court emphasized that the RBI is the primary regulator of banking practices, and the National Commission overstepped its jurisdiction by interfering with banking operations and contractual terms. The decision reinforced the RBI's authority in regulating interest rates and banking policies. No order as to costs was made.