(Pinaki Chandra Ghose and R.K. Agrawal, JJ.)
ICICI Bank Ltd. _________________ Appellant
v.
Maharaj Krishan Datta and Ors. ______ Respondent(s)
Civil Appeal No. 5928 of 2015, decided on August 3, 2015
[Arising out of SLP (C) No. 1501/2015]
The Order of the court was delivered by
Order
1. Leave granted.
2. This appeal is directed against an order passed by the National Consumer Disputes Redressal Commission (in short “the National Commission”) dated 29.09.2014 dismissing the Revision Petition filed by the appellant bank. The Commission held that the Revision Petition is disposed of with an order that upto 30.11.2006, the bank was entitled to charge interest at Floating Reference Rate (FRR) per annum minus 1.5% per annum, whereas w.e.f. 01.12.2006, the bank would charge interest @ 8.75% per annum, irrespective of any increase or decrease in the FRR. The said order was passed by the National Commission on the following facts:-
(a) The complainants/respondents herein availed home loan to the extent of Rs. 13,35,100/- from the appellant bank for purchase of a flat in Zirakpur. The loan was sanctioned vide letter dated 14.11.2005 and it carried an interest @ 7.25% per annum. Later, it was confirmed by the bank that w.e.f. April, 2006 the loan would carry an interest @ 7.75% per annum.
(b) It was further case of the complainants/respondents that an additional loan of Rs. 3,00,000/- was sanctioned on 30.10.2006 with an obligation to pay interest @ 8.75% per annum. The grievance expressed by the respondents was that instead of charging interest at the agreed rate, the bank had charged the same @ 11.25% per annum for the period from 01.04.2007 to 31.03.2008, besides charging interest during pre-EMI period @ 9.5% per annum. Hence, the complainants/respondents filed a complaint before the District Forum, alleging deficiency in the service provided by the appellant bank to them.
(c) Such complaint was resisted by the appellant bank on the ground that loan was sanctioned on the floating rate of interest, which at the time of sanction was 8.75% per annum and could be enhanced as per the guidelines issued by the Reserve Bank of India and in accordance with the agreement between the parties.
(d) The District Forum passed an order in the matter directing the appellant bank to charge interest @ 7.25% per annum till 31.03.2006 and thereafter @ 7.75% per annum from 01.04.2006 to 30.10.2006 and thereafter @ 8.75% per annum. It further directed that the enhanced rate of interest shall not be more than the rate at which loan is advanced to the new borrowers. It further directed to pay a compensation, as a result whereof, the bank preferred an appeal before the State Commission. The State Commission, by its order dated 19.03.2010, permitted the appellant bank to vary the rate of interest only as per the variation allowed by the Reserve Bank of India from time to time, granting the complainants benefit of minus 1.5% of the FRR.
(e) The State Commission held that in view of the agreement between the parties, payment of interest @ minus 1.5% of the prevalent FRR, which could be reset by the bank based on the guidelines issued by the Reserve Bank of India. It was further held that the intimation of such resetting should be given to the complainants/constituents. The State Commission also affirmed the payment of compensation as well as the cost of litigation as assessed by it. In these circumstances, the appellant bank filed a Revision Petition before the National Commission and the National Commission dismissed the said petition.
3. Being aggrieved, the appellant bank had to knock the doors of this Court by filing this appeal by way of special leave.
4. Mr. P. Chidambaram, learned senior counsel appearing in this matter on behalf of the appellant bank submitted that a housing loan can be advanced either on a fixed rate of interest or on a floating rate of interest. In cases of floating rate of interest, the rate of interest is not fixed and varies from time to time with the changes in the economic environment and resultant changes in the borrowing cost of the Bank. For calculating such rates of interest, a bench mark rate is adopted, which in the present case is the Floating Reference Rate(FRR). The interest payable by the Borrower is determined by adding or subtracting the margin percentage from such a bench mark rate as agreed between the parties.
5. In the present case, the respondents took a Home Loan from the appellant bank on a floating rate interest basis. The adjustable margin was minus 1.5%. Thus, the loan was taken at 7.25% per annum [{8.75% being the FRR on the date of such advance i.e. 14.11.2005) (minus) (1.5% being the agreed margin)]. Therefore, if the interest is reduced then the customer would be benefitted and in case, it went up, then he would have to pay more. This is a risk that the customer willingly undertook. Normally, the rate of interest charged is higher in case of a fixed rate loan.
6. He further submitted that in the instant case, loan was sanctioned on a floating rate basis. He further made it clear that respondents did not challenge the order of the State Commission. Therefore, he accepted that the loan was on a floating rate basis. Therefore, it cannot be stated that the loan was on a fixed rate and not on floating rate.
7. He further pointed out the grievance of the complainants was that the rate of interest as increased and wanted to continue to pay a fixed rate of interest, since the rates of interest have gone up. According to him, the National Commission has wrongly fixed the rate of interest irrespective of an increase or decrease in the FRR, which is clearly erroneous in law. If that is accepted, then the sanction letter and the entire agreement would be rendered nugatory and otiose. The National Commission could not have changed or altered the terms of contract between the parties when the contract is in accordance with RBI guidelines.
8. He also pointed out that the National Commission has only discussed about one Clause of the Loan Agreement while deciding the matter and has interpreted it in isolation and without taking into account other terms of the contract. It is settled law that a contract has to be read as a whole and the terms of the contract cannot be read or construed in isolation. He also submitted that the Bank has to follow the RBI guidelines especially Schedules A and B thereto, and the Bank must be given liberty to act in the matter in accordance with the guidelines so issued by the RBI from time to time. Fixed rate, floating rate and other rates which have been mentioned in the guidelines and the right which has been given to the Banks in respect of Floating Reference Rate(FRR) has also to be followed in all cases by the Bank.
9. Mr. P. Chidambaram, learned senior counsel submitted on these grounds that the order passed by the National Commission should be set aside and the order so passed by the State Commission should be upheld by this Court. However, he has made it clear that he is considering the rights, which has been given by the National Commission in favour of the respondents before us and agreed to give effect to the order so passed by the National Commission in their favour only but he made it clear that such concession would not be made applicable to other cases.
10. After hearing Mr. P. Chidambaram, learned senior counsel in the matter and also after hearing the respondent No. 1 appearing in person, we find that the grounds advanced before us by Mr. P. Chidambaram, learned senior counsel, in our opinion, have to be accepted and accordingly we allow the appeal, set aside the order so passed by the National Commission and confirm the order so passed by the State Commission. The concession, which has been given by Mr. P. Chidambaram on behalf of his client in favour of the respondents are not curtailed by us. The benefit of the order of the National Commission will go in their favour as conceded by Mr. P. Chidambaram, learned senior counsel on instructions from his client.
11. Since we are allowing this appeal on the above terms, the amount which has already been deposited by order dated 22.01.2015 should be refunded by the Registry to the appellant bank within a period of two weeks. Ordered accordingly.
———
