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TMI Blog2024 (11) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... st, frequent increase of rate of interest and not allowing pre-payment of Loans (imposition of pre-payment penalty) resulted in the creation of barriers for new entrants in the market, as consumers would be disinclined to switch to a new entrant due to the apprehension of incurring losses. It is also alleged that the competition gets adversely affected as consumers face hindrance in the form of penalties when they switch to another bank. Therefore, the conduct of OP-1 allegedly amounts to be in violation of Sections 3(1) and 3(2) of the Act. It is also alleged that imposing unjust and excessively high rates of interest contravene provisions of Section 4 of the Act. For the purpose of analysis of conduct of OP-1 under the ambit of Section 4 of the Act, the Commission deems appropriate in the present matter to delineate relevant market as provision of loan against property in India . The Commission notes that the Informant has suggested that OP-1 has the biggest share in the area of Delhi and NCR and therefore is dominant. The Commission also notes from the information available in public domain that OP-1 is a housing finance company which is India s third largest non-bank mortgage l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) of the Act by Indiabulls Housing Finance Limited ( OP-1 ) and its officers (OP-2 to OP-20), all collectively referred to as other OPs . OP-1 and other OPs are collectively referred to as OPs . 2. OP-1 is stated to be a company that claims expertise in providing loans against property. Other OPs are the ex-Chairman, Chairman, Vice Chairman, Managing Director, Executive Director, Financial Officer, and other officers of OP-1 and are/were responsible for the day-to-day business operations of OP-1. These individuals are alleged to have been directly involved in the promotion, sales and marketing activities of OP-1. Facts and Allegations as stated in the Information 3. The Informant has alleged that it was induced to believe by the OPs through misleading and deceptive advertisements that they are a prominent entity offering loans against property at the most favourable interest rates. 4. Based on the representations and advertisements made by OP-1, the Informant entered into an agreement to avail a Loan against Property (LAP) at a floating rate of interest from OP-1. It availed two LAP facilities. The first loan was sanctioned on 01.03.2013 at an annual interest rate of 13.25% per a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On 27.03.2023, OP-1 provided repayment schedule for the Loans indicating increase in EMIs by several additional months as against the repayment schedule shared alongwith the letter dated 16.03.2013 and 20.06.2013 shared with the Informant. The Informant lodged another criminal complaint for financial fraud on 27.03.2023. 10. The Informant has averred that according to the RBI Circular dated 24.05.2007 and the master circular dated 02.07.2012, the interest rate cannot be modified, reviewed, or altered without prior notice and consent from the borrower. Moreover, in line with the RBI Guidelines dated 22.01.2009, the interest rate should be expressed on an annualized basis to ensure the borrower's awareness of the exact interest rate applicable to them. The interest rate must not be excessive, as stated in the RBI circular dated 24.05.2007. 11. The Informant has alleged that the loan agreement conspicuously lacks any provision for the revision of interest on a monthly basis or any duration shorter than a month and that OP-1 had an obligation to disclose that the LFRR would increase progressively and in an exorbitant manner. However, contrary to this obligation, OP-1, through its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd new financial companies are unable to get customers which is stifling competition in home loan market. The Informant has stated this to be an unfair trade practice. The imposition of frequently high rate of interest and lack of pre- payment support (imposition of pre-payment penalty) results in creation of barrier for new entrants in the market, thus causing Appreciable Adverse Effect on Competition (AAEC) in the market as per Section 19(3) of the Act. Therefore, under Section 3(1) and 3(2) of the Act, these agreements entered into by the banks are anti-competitive and therefore, void. 14. The Informant has alleged that OP-1 has the biggest share in the area of Delhi and NCR and thus, has a dominance in terms of Section 19(4) of the Act. OP-1 has complete market power to attract customers as they are providing home loan at the lowest rate of interest as compared to prominent service providers to reduce competition or eliminate competitors and has capacity and ability to affect the competition in the market in its favour. 15. The Informant alleged that OP-1's unilateral increase in the rate of interest, without its consent or authorization to raise the monthly instalment is u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the records forming the basis of continuous increase of the lending rate and not to increase the rate of interest till the disposal of the present case without any prior information; 19.2. Direct the Opposite Party to stop deducting additional EMIs; 19.3. Direct the Opposite Party not to misuse the ECS given by the Informant to the Opposite Party; and 19.4. Pass such other or further order/s as this Hon ble Commission may deem fit. 20. The Informant has prayed to the Commission as under- 20.1. Direct the Opposite Party to cease and desist from further engaging in the manipulations of the said agreement especially the Floating Reference Rate (LFRR) or any abusive exercise of dominant position; 20.2. Direct that the agreement in question to undergo necessary modifications as may be specified in the Commission's order, in accordance with the facts presented in the Information; 20.3. An investigation be conducted concerning the manner and the mode of charging rate of interest from borrowers by OP-1; 20.4. Pass directions restraining the Opposite Party from deducting additional EMIs and misusing the ECS given by the Informant; 20.5. Direct the Opposite Party to issue a no-dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also notes from the information available in public domain that OP-1 is a housing finance company which is India s third largest non-bank mortgage lender in the country and is regulated by the Reserve Bank of India (RBI). 1 As per Annual Report 2022-23 of OP-1, besides providing home loans for Resident Indians and Non-Resident Indians, it also offer loans to small businesses and Micro, Small and Medium Enterprises (MSMEs), against their properties and home loan balance transfers. Further, it is observed from the information in public domain that the relevant market appears to be competitive with the presence of large number of banks and Non-Bank Financial Companies (NBFCs) and housing finance companies and thus, dominance of OP-1 is not established in the aforesaid relevant market. Further, the allegation of aftermarket abuse is misplaced since the loan services of the nature impugned herein do not involve any aftermarket as alleged by the Informant and is, thus, rejected. 26. In view of the above, the Commission is of the view that there is no prima facie case made out under the provisions of Section 4 of the Act. As far as the provisions of Section 3 of the Act is concerned, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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