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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 ..... 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion 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. - BELA M. TRIVEDI And SATISH CHANDRA SHARMA , JJ. For the Parties : Mr. Shankar Divate, AOR Mr. Kishan Rawat, Adv. Mr. Rajan Narain, AOR Mr. Abhishek Manu Singhvi, Sr. Adv. Mr. Chanchal Kumar Ganguli, AOR Mr. Gagan Gupta, AOR Mr. Ananta Prasad Mishra, AOR Mr. Ateev Mathur, Adv. Mr. Dhruv Mehta, Sr. Adv. Ms. Bindi Girish Dave, AOR Mr. Hitesh Kumar Sharma, Adv. Mrs. Shiel Sethi, AOR Mr. Shankar Divate, AOR Mr. Manish K. Bishnoi, AOR Mr. Abhishek Manu Singhvi, Sr. Adv. Mr. Chanchal Kumar Ganguli, AOR Mr. H. S. Parihar, AOR Mr. Kuldeep S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actice. (ii) Penal interest can be charged only once for one period of default and shall not be capitalized. (iii) Charging of interest with monthly rests is also an unfair trade practice 4. The Appellants have contended that determining the reasonability and fixing of the maximum or the minimum rates of interest , is the exclusive function of the Respondent no.6, the Reserve Bank of India, a statutory authority responsible for the regulation of the Indian Banking system. The Appellants have assailed the observations of the National Commission, in light of the statutory bar under section 21A 35A of the Banking Regulation Act, which expressly bars courts/tribunals to re-open transactions between banks, on the question that the rates of interest are excessive and empowers the Reserve Bank of India, to formulate directions, as befitting the public interest, proper management and banking policies of the country. The Appellants have urged that the encroachment of this statutory domain of the Reserve Bank of India, by the National Commission, is against the mandate of the Constitution and the legislative intent of the Reserve Bank of India Act, 1934. The Appellants have further contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, charged by banks from its credit card holders, constitutes an unfair trade practice, is erroneous. It is stated that the modus of adopting any unfair methods, or deceptive means to promote the sale, use or supply of any goods or for providing any service, is manifestly absent. The Banks assert that they have neither indulged in any unfair trade practice nor have done anything which would bring them within the mischief of Section 2(r)(l)(i) to 2(r)(l)(x). 8. Further, there are also no specific allegations raised by the Complainants or any materials on record, to elicit any unfair trade practices adopted by the Banks. The Counsel for the Appellant submits that the National Commission has barely acted on the assumption that banks are indulging in unfair trade practices. It is stated that there are no facts to suggest that any of the scheduled banks under the purview of the Reserve Bank of India, are indulging in unfair trade practices, including charging exorbitant rates of interest. The National Commission has made the observation that rates of interest charged by banks is an unfair trade practice, without even discussing the scope of the definition under section 2(1)(r) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round that the rate of interest is excessive. The said provisions are reproduced as under: 21A: Rates of interest charged by banking companies not to be subject to scrutiny by courts: Notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 2018), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive. 35A: Power of the Reserve Bank to give directions: (1) Where the Reserve Bank is satisfied that: (a) In the public interest; or (aa) in the interest of banking policy; or [inserted by Act 58 in the [public interest]; or (b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or (c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic policy Keshav Lal Khemchang Sons Pvt. Ltd Ors. Vs Union of India [supra] Ld. Counsel for the Banks, also submits that in absence of a statutory direction by the Reserve Bank of India, with respect to a maximum ceiling rate, the Banks could not be held liable for any unfair trade practices. More-so, they are bound by the circulars of the Reserve Bank of India and have formulated policies accordingly. 15. It has been further argued that once an executive authority exercises a legislative power by way of subordinate legislation, pursuant to a 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 Union of India Vs Prakash P. Hinduja [2003] 6 SCC 195 . A direction by the National Commission to the Reserve Bank of India to issue directions on Benchmark Rates of Interest, is an attempt to usurp the jurisdiction, and can in no manner be considered lawful and tenable. 16. On merits, it is the assertion of the Appellants that the rates of interest formulated by them, are in conformity with the directions of the Reserve Bank of India. As a matter of policy pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest on credit card dues are neither usurious nor do they constitute a practice that is unfair, arbitrary or unreasonable. The practice of charging any interest on creditcards dues is such that credit card generally carry an interest rate on an annualised basis (Annual Interest Rate-APR). The interest due is calculated only on unpaid balances. Any customer who pays in the entire amount being the value of the said transaction, within the due date of payment, is not charged any interest. The penalty or cost of such interest is incurred once, there is default, which takes into account costs to the bank of non-performing loans (bad debt), acquisition costs, and are not unreasonable. 19. It is submitted that the charging of interest by the Bank is in accordance with the circulars issued by the RBI and cannot an unfair trade practice as the interest is paid only by those who default in making payments of their credit-card bills, after having enjoyed free credit for periods ranging between 17-55 days, or those who do not make payment of the entirety of their dues on each bill, and then on the balance dues. Most pertinently, the terms and conditions for charging of rates of interest or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsufficient to constitute an unfair trade practice. Further, the pleading raised by the said Complainant, is improper and devoid of any material particulars to sustain a complaint. It not only fails to indicate how the concerned Respondent has suffered a deficiency of service; it does not disclose the date of purported default or alleged damage, or any particular date/rate of interest charged from him due to such default. 22. It has been further submitted that the consumer complaint was purportedly filed in a representative capacity by the Respondents, ought to have complied with the provisions of Order 1 Rule VIII of the Code of Civil Procedure, 1908 as mandated under Section 13(6) of the Consumer Protection Act, 1986 Godfrey Phillips India Ltd. v. Ajay Kumar, (2008) 4 SCC 504 : 2008 SCC OnLine SC 603 . In terms of Section 13(6) of the Consumer Protection Act, 1986, it was necessary for the Complainants to take necessary permission of the National Commission to sustain a complaint in a representative capacity. Our attention is drawn to an application filed by the Complainant, under section 13(6) of the Consumer Protection Act, 1986, and it has been brough to our notice that: (a) N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not consider the violation of the Benchmark Restrictions to be fixed by the banks in accordance with the circulars issued by the Reserve Bank of India. It is stated the banks have been allegedly charging rates of interest on credit cards in excess of their Benchmark Prime Lending rate (BPLR) on credit limits of less than Rs. 2 lakhs, in contravention to the annual policy 2003- 2004. By way of the original Complaint, it had been sought that the banks may be permanently restrained from charging excess rates of interest subsequently refund the excess amount of interest and service charges collected by the banks. 26. It is argued that the Bank Statement issued by the Banks, for availing the credit card facility, have several heads of hidden miscellaneous expenses for the issue of credit card facility, and entailed exorbitant penalty even during the interest free period. A Bank Statement from American Express Bank has been produced and it is averred that banks are charging: (a) Transaction Fees of 2.5 % on cash advance or on purchase on the credit card required to be borne even during the interest free period of 20-50 days. (b) in case of default, interest, which may have to be paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Consumer Forums are the necessary medium for grievance redressal. 30. It is also the case of the Complainants that the terms and conditions laid down by the Banks, at the time of issuance of the credit cards, constitute a unilateral, and one-sided contract. The counsel for the Complainants has drawn a parallel with the contracts of adhesion from the French term (contracts d adhesion) as they symbolise a single will so unilaterally dominant that it dictates its terms not to an individual, but to an indeterminate collectively. The characteristics associated with a contract, such as freedom of contract and consensus are absent from such contracts, which makes such terms unfair and unconscionable. The term unfair contracts has been defined under section 2(46) of the Consumer Protection Act, 1986 and include all such contracts that have terms which cause significant change in the rights of such consumer. It is submitted that the unilateral terms of the banks, in charging such excessive rates of interest, is such an unfair contract. 31. Our attention is drawn to the 103rd Report submitted by the Law Commission on Unfair Terms in Contract , wherein it had recommended an amendment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is of the considered opinion that there exist no extraneous circumstances of violation that warrant an action by the RBI against any bank or the banking sector. 35. The bone of contention raised by the original Complainants that the RBI ought to have taken action against the Banks, has been clarified by the Reserve Bank of India, stating that there is no material before it or the Complainants or the National Commission, to establish that any of the banks have acted contrary to the policy directives issued by the Reserve Bank of India. Hence, the question of directing the RBI to act against any bank does not arise in the facts and circumstances of the present case. The RBI has also submitted that there is no question of the RBI being directed to impose any a 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. 36. Even on merits, it has been submitted 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India? (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? ANALYSIS i. Whether the Respondent organization has the locus to approach the National Commission? 40. To maintain a complaint under the provisions of the Consumer Protection Act, 1986, a complainant must be either a consumer within the meaning of Section 2(1)(d) of the Act or it must fit into Section 12(1) of the Act. The definition of the term consumer is defined herein as under: 2.(1)(d) consumer means any person who (i) buys any goods 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, 3 (2019) 2 SCC 417 , 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. 44. The Respondent nos.1 and 2 have also handed over the Trust Deed dt 06.06.1994 only during the course of arguments, to demonstrate that the Complainants are a registered association representing consumer rights, does not help the cause insofar as a trust, whether registered under the Indian Trust Act, or the State Trust Registration Act, is not a person as defined under Section 2(1)(m) of the Consumer Protection Act, 1986. The decision in Pratibha Pratisthan Vs Canara Bank Pratibha Pratisthan Vs Canara Bank (2017) 3 SCC 712 by this Hon ble Court that a trust is not a person therefore not a consumer and consequently cannot invoke provisions or file a consumer dispute under the provisions of this Act. The issue 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 H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India? 48. The Reserve Bank of India is the prime banking institution of the country, and a statutory authority entrusted with the supervisory role over banking and conferred with the authority of issuing binding directions, having statutory force [ 2002 ] 1 SCC 367 . No other entity or banking institution has been conferred by the legislature, the power of subordinate legislation to formulate and enact new directives/guidelines in public interest and for the growth of the Indian economy. 49. The Reserve Bank of India has time time again acted on its salient duty and issued master directions/circulars which are clear, unambiguous and specific instructions to banking institutions to carry out their operations in a transparent and fair manner, and the banks across the country are bound to follow. It is the Reserve Bank of India alone which enacts 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stating that unfortunately, in our country, the regulator who is empowered under section 35A of the Banking Regulation has left it to absolute discretion of the banks . We do not subscribe to the observation made by the Commission or the manner in which it has been made. 54. We have also considered all the circulars/notifications on credit card operations, up till 2022, issued by the RBI, which provide a comprehensive compendium of guidelines for Banks to carry out operations with respect to credit cards. This Court is certainly not going into the actuarial principles adopted by the Reserve Bank of India, as the basis to formulate its directives, but we are of the considered opinion that the RBI must have acted with prudence while giving the apparent discretion to the banks to decide the rates of interest. One of the directions 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 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 223 and was pleased to observe as under: Judicial review is not concerned with matters of economic policy. The Court does not substitute its judgement for that of the legislature or its agents as to matters within its province of either. The Court does not supplant the feel of expert by its own views. When the legislature acts, within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In all such cases, judicial inquiry is confined to the question whether the findings of fact, are reasonably based on evidence and whether such findings are consistent with the laws of the land. 58. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of any economic legislation or notification having a public objective sought to be attained, it is imperative to test it on the touchstone of reasonableness, and in the absence of any patent arbitrariness, the directions cannot be condemned as being violative of Part III of the Constitution of India Peerless General Finance Investment Co. Ltd. Anr. Vs Reserve Bank of India [1992] 2 SC 343 . In the present context, it is not the case of the Complainants, or pleaded otherwise, that the directions or decisions taken by the statutory authority entrusted to manage the economy, do not pass the test of Wednesbury principle of reasonableness, or are not free from arbitrariness nor affected by bias or actuated by mala 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 jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for him to prove the terms, in the contract, or circumstances in which he came to sign the documents, need to be established Bharathi Knittting Company Vs Worldwide Express Courier Division of Airfrieght Ltd.[1996] 4 SCC 704 . Hence, the National Commission had no jurisdiction to re-write the said terms of the contract entered between the banks and the credit cardholders, which the parties have mutually agreed to be bound by. 66. Even otherwise, it is not the case of the Complainants or as adjudicated by the National Commission, that the decision by the Reserve Bank of India, being a statutory authority whilst imposing interest acts contrary to public good, public interest, unfairly, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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