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TMI Blog2025 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 Banking Corporation, Standard Chartered Bank, vide C.A. no. 5273 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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, fixing a maximum ceiling rate of interest for all banks, and in pursuance theret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch 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, while maintaining price stability is the endeavour of the Reserve Bank of India. 10. The ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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 whether the interest charged is excessive, usurious or opposed to public policy. Thus, in view of this statutory bar, the Complaint of the Respondent nos.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 will continue to declare the maximum spread of interest rates over BPLR. 2.2.3. Banks are free to determine the rates of interest without reference to BPLR and regardless of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions 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 Act, 1986 and cannot be considered a voluntary consumer association. Be that as it may, a trust, whether registered under the Indian Trust Act, or the State Trust Registration Act, is not a person 'perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 piecemeal manner. Most pertinently, all banks come under the regulation and supervision of the Reserve Bank of India, which is the statutory authority empowered to regularize, notify and further direct guidelines for the functioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 other loans of similar nature, banks should take into account, inter-alia the following broad guidelines: ......" 28. The Counsel for the Complainant has referred to various other circulars issued by the Reserve Bank of India, wherein the RBI has acknowl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 contract, in the present case being the rates of interest, being charged by the banks. It is also argued that the question of this excessive rate of interest amounts to penalty falls well-within the meaning of Section 74 of the Indian Contract Act upon which any Civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, 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 judicially review the circulars/directives and hold that the policy contained therein is invalid. The National Commission is bound to accept the policy contained in the circulars as valid and cannot question the policy decision of the Reserve Bank not to impose a ceiling on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 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 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 refug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme 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 provisions/facilities of banking, which may come under the umbrella of 'service', defined under section 2(1)(o) of the Consumer Protection Act, 1986. A policy decision pertaining to the rate of interest, and trade practices carried out by the banks across the country, is a regulatory function within the specific statutory domain of the Reserve Bank of India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subscribe to this rationale. 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. 52. In the case of Central Bank of India Vs Ravindra & Ors. [ 2002 ] 1 SCC 367, this Hon'ble Court had decided on the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecifically 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 changes in the interest rates by the Reserve Bank from time to time." 56. We are thus, of the considered opinion that the challenge by the complainants that the guidelines issued by the RBI are arbitrary and not in public interest, is wholly without basis. It is no more res integra that any direction or guideline, issued by a statutory authority, is an extension of the statute itself. Rules ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint 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 "public interest", in context of Section 35-A of the Banking Regulation Act, 1949 : (SCC p. 370, para 176) "176. ... As we have indicated elsewhere, the power under Section 35-A to issue directions is to be exercised under four contingencies, namely, (i) public interest, (ii) interest of banking policy, (iii) interest of the depositors, and (iv) interest of the banking company. The expression "banking policy" is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 operations were known to the complainants and disclosed by the banking institutions before the issuance of the credit cards, the National Commission could not have scrutinized the terms or conditions, including the rate of interest. More-so, the Respondent has not approached the statutory authority, the Reserve Bank of India, for any objection against the rate of interest, or the high Benchmark Prime Lending Rate. 64. The National Commission, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 promoting the sale, use, or supply of any goods, or for the provision of any service, by adopting any unfair method or unfair or deceptive practice, has to be treated as 'unfair trade practice'. Hence, whether an act can be condemned as an unfair trade practice, or not, the key is to examine the 'modus operandi' i.e. whether there is any false statement/ misrepresentation, or deception. 69. In the present context, the pre-conditions of 'deceptive practice' and unfair method' a ..... 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