Legal
2024 INSC 1044 (Civil Appeal No. 5273 of 2008) Hongkong and Shanghai Banking Corp. Ltd. vs. Awaz and Ors. (Supreme Court dated 20 Dec 2024)
22
Dec
Dec
WITH
CIVIL APPEAL NO. 5294 OF 2008
CIVIL APPEAL NO. 5627 OF 2008
CIVIL APPEAL NO. 5278 OF 2008
CIVIL APPEAL NO. 6679 OF 2008
Civil Appeal No. 5273 of 2008 Page 2 of 44
J U D G M E N T
SATISH CHANDRA SHARMA, J.
- The captioned set of appeals arise out of the common
Judgment & Order 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. - 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?
Civil Appeal No. 5273 of 2008 Page 3 of 44
(b) Whether interest at the above-stated rates amounts
to charging usurious rates of interest? - The Appellants, Hong Kong Shanghai Corporation, Citibank,
American Express Banking Corporation, Standard Chartered
Bank, vide C.A. no. 5273/2008, C.A. No. 5294/2008, C.A. No.
5627/2008 and C.A. 5278/2008 respectively along with the
Intervenor, Housing Development Finance Corporation (I.A. No.
6/2017) [hereinafter “Banks”] have challenged the correctness
of the Impugned Order dated 07.07.2008, whereby the National
Commission has held that the charging of interest at rates beyond
30% by the banks/non-banking financial institutions, from credit
card holders, upon delay or default in payment, constitutes an
unfair trade practice and that penal interest could be charged only
once for one period of default and the same shall not be
capitalized. The conclusive observation under challenge, passed
by the National Commission is as under:
(i) Charging of interest rates in excess of 30% p.a.
from the credit card holders by banks for the former’s
failure to make full payment on the due date or paying
the minimum amount due, is an unfair trade practice.
(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 - 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
Civil Appeal No. 5273 of 2008 Page 4 of 44
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 that the original complaint by the Respondent nos. 1-
3 not only fails to meet the criterion of a Complaint u/s 12 r/w 13
of the Consumer Protection Act, 1986, but is a public interest
litigation, guised as a consumer dispute which could not have
been entertained by the National Commission, being beyond its
inherent jurisdiction. - 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
Civil Appeal No. 5273 of 2008 Page 5 of 44
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, - 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 thereto had approached the National Commission by
filing the Consumer Complaint no. 51 of 2007. It was prayed that
the Appellant along with Respondent nos. 5, 6 & 7 be
permanently restrained from charging excessive interest and
service charges, de-hors the Prime Lending Rate, and the
directions issued by the Reserve Bank of India. It was further
prayed that all banks who have issued credit cards to Respondent
no. 3 and members of the Respondent no.1 be directed to refund
the amount of interest, claiming the same to be more than Rs. 5
crores.
Civil Appeal No. 5273 of 2008 Page 6 of 44
SUBMISSIONS ON BEHALF OF BANKS - The Appellant, along with the Respondent nos. 5, 6 and 7
are foreign banks carrying on the business of banking in India
under the provisions of the Banking Regulation Act, 1949 and are
scheduled commercial Banks as notified by the Reserve Bank of
India. - The Appellants submit that the allegations raised by the
Complainant that the rate of interest, 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). - 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
Civil Appeal No. 5273 of 2008 Page 7 of 44
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 Act. The only reason given with
respect to the practice of charging excessive interest being unfair
trade practice is that “if the Banking Regulation Act, 1949
requires that the RBI shall discharge certain functions in the
public interest and the RBI does not discharge such functions, it
would amount to unfair trade practice, but, that question is not
required to be dealt with finally in this matter.” - 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 time1 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
1 Keshav Lal Khemchang & Sons Pvt. Ltd & Ors. Vs Union of India [2015] 4 SCC 770
Civil Appeal No. 5273 of 2008 Page 8 of 44
economy, while maintaining price stability is the endeavour of
the Reserve Bank of India. - The observations by the National Commission that the rate
of interest, in excess of 30% per annum is an unfair trade practice,
is per se illegal and is an interference with the clear, unambiguous
delegation of powers in favour of the Reserve Bank of India and
runs contrary to the legislative intent of the Banking Regulation
Act, 1949. - It is submitted that the National Commission has
ostensibly exercised jurisdiction by supplanting itself as the
regulator of the banking systems instead and in the place of
Reserve Bank of India, notwithstanding the bar under section
21A of the Banking Regulation Act, 1949. It is contended that
Section 21A and 35A of the Banking Regulation Act, 1949 are
enabling provisions for the Reserve Bank of India to give
directions/guidelines to banks/banking companies, in the public
interest. Section 21A in specific, creates an embargo upon
courts/tribunals to re-open and adjudicate upon transactions on
the ground 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
Civil Appeal No. 5273 of 2008 Page 9 of 44
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 the banking
companies or the banking company, as the case may be,
shall be bound to comply with such directions.
(1)The Reserve Bank may, on representation made to it
or on its own motion, modify or cancel any direction
issued under 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.” - 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
Ravindran2 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
2 Central Bank of India Vs Ravindran [2002] 1 SCC 367
Civil Appeal No. 5273 of 2008 Page 10 of 44
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 to 3, which is only based on the higher
rates of interest, could not have been entertained by the National
Commission and deserved to be dismissed at the very threshold. - Further, in exercise of powers conferred under Section 35A
read with Section 56 of the Banking Regulation Act, 1959 &
being satisfied that it is necessary and expedient in the public
interest so to do, it is also well within the exclusive jurisdiction
of the Reserve Bank of India to take corrective and/or penal steps,
suo-moto or on receipt of any representation or inquiry thereof,
qua any such act in deference to its policy or circular. - The Appellants therefore urge that the maxima or minima
of the interest could not have been decided by the Consumer
Forum, as it is the specific statutory domain of the Reserve Bank
of India and it is the directives of RBI alone that may be treated
as standard for the purpose of deciding whether the interest
Civil Appeal No. 5273 of 2008 Page 11 of 44
charged is excessive, usurious or opposed to public policy3 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. - 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 authority4
. 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. - 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 liberalization of the economy and consequent
deregulation of interest rates, the RBI vide Circulars dated
21.10.2003 and 02.07.2007 provided that:
3 Keshav Lal Khemchang & Sons Pvt. Ltd & Ors. Vs Union of India [supra]
4 Union of India Vs Prakash P. Hinduja [2003] 6 SCC 195
Civil Appeal No. 5273 of 2008 Page 12 of 44
“Credit card dues are in the nature of non-priority
sector personal 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 size in
respect of loans for purchase of consumer durables,
loans to individuals against shares and
debenture/bonds, other non-priority sector personal
loans, etc. as per details given in paragraph 2.4.
2.4. Freedom to fix Lending Rates:
2.4.1 Banks are free to determine the rates of interest
without reference to BLPR and regardless of the
size………………..”
Civil Appeal No. 5273 of 2008 Page 13 of 44 - The said circulars clarify that credit card dues constitute
non-priority sector personal loans and Banks are free to
determine the rates of interest, without reference to PLR and
regardless of their size. The Reserve Bank of India had given this
discretion to the banks to determine rates of interest, as per the
market forces, while maintaining transparency with the credit
card holders. The Appellants assert that they have duly complied
with all the requirements of the Reserve Bank of India, and none
of the practices adopted by them, run contrary to the intent or
directions of the Reserve Bank of India and its circulars. - The rates of interest 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. - 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
Civil Appeal No. 5273 of 2008 Page 14 of 44
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 charges
applicable thereto, have been duly informed to all customers by
way of the Most Important Terms and Conditions issued by the
Banks, which are the standard set of conditions 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. - 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
Civil Appeal No. 5273 of 2008 Page 15 of 44
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 ‘person’ as defined under
Section 2(1)(m) of the Consumer Protection Act, 1986, and &
therefore not a consumer and consequently cannot invoke
provisions or file a consumer dispute under the provisions of this
Act5
. - It is further submitted by the Appellants that the
Respondents had approached the National Commission at the
behest of the Respondent no. 3, one Mr. Thakur a credit card
holder with Citibank, purportedly claiming an amount of
Rs. 90,000/- against excess interest charged by the bank. Ld.
Senior Counsel submits that the purported claim is ex-facie
barred by section 21(a) of the Consumer Protection Act, which
mandates the Commission to entertain claims only above
Rs. 1 crore. More-so, the alleged concern “about an excessive
exorbitant rate of interest being charged by the Respondent no. 2
and other similarly placed banks. But not getting proper guidance
about it, hence could not challenge grievances about excessive
rate of interest on credit card facilities” is wholly insufficient 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
5 Pratibha Pratisthan Vs Canara Bank (2017) 3 SCC 712
Civil Appeal No. 5273 of 2008 Page 16 of 44
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. - 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,
19866
. 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) No application seeking such permission to file a
Complaint in a representative capacity was filed up till the
point of conclusion of arguments and reservation 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.
6 Godfrey Phillips India Ltd. v. Ajay Kumar, (2008) 4 SCC 504 : 2008 SCC OnLine SC
603
Civil Appeal No. 5273 of 2008 Page 17 of 44
(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. - 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 of these Banks. - It is further submitted a Complaint against any purported
grievance owing to rate of interests, charged by banks, cannot be
the subject matter of a proceeding before the National
Commission and an alternate remedy has been provided by the
legislature. The present regime under the Consumer Protection
Act, 2019, provides a mechanism for redressal of grievances of
Civil Appeal No. 5273 of 2008 Page 18 of 44
consumers. By virtue of section 10 of the Consumer Protection
Act, 2019, the Central Government is to notify a Central
Consumer Protection Authority for regulating the matters
pertaining to the violation of rights of consumers, including
against grievances of unfair trade practice. The said authority is
thus empowered to enforce the rights of consumers, exclusively.
SUBMISSIONS BY THE COMPLAINANTS - It is the grievance of the Respondent Complainants that the
National Commission has partially allowed the Complaint by
holding that charging of interest at rates in excess of 30% p.a. by
the bank from its credit card holders, was an unfair trade practice
and did 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- - 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. - It is argued that the Bank Statement issued by the Banks,
for availing the credit card facility, have several heads of hidden
Civil Appeal No. 5273 of 2008 Page 19 of 44
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 from credit
free period till the date of payment, would be payable over the
2.5 % transaction fee (c) late payment of fees of 30 % of the
minimum 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. - 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
Civil Appeal No. 5273 of 2008 Page 20 of 44
take into account, inter-alia the following broad
guidelines: ……” - The Counsel for the Complainant has referred to various
other circulars issued by the Reserve Bank of India, wherein the
RBI has acknowledged that it has been receiving many
complaints with regard to banks charging excessive rates of
interests and vide such circulars, the RBI has directed the banks
to not charge such high rates of interest. It is submitted that the
current practice is such that, if a person fails to make the due
payment within 30/45 Days, he will have to pay interest @ 36-
49%, which is exorbitant, and unfair. It is argued that since
services of banking, fall within the definition of “services” under
section 2(1)(o) of the Act, any deficiency/dispute in such services
arising therefrom shall also be governed under the Consumer
Protection Act, 1986. - It is argued by the Complainants that a person aggrieved
by the excessive rates of interest cannot be rendered helpless and
by virtue of section 2 of the Banking Regulation Act, 1949, the
operation of other laws is not expressly barred. It is the grievance
of the Complainants that since the person who opens a bank
account with a Bank, is a consumer of the bank’s facilities, the
provisions of Consumer Protection Act, 1986 and the Consumer
Forums are the necessary medium for grievance redressal.
Civil Appeal No. 5273 of 2008 Page 21 of 44 - 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. - 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 the Indian Contract Act, 1872
against such unconscionable terms under any contract. It is the
grievance of the Complainants 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
Civil Appeal No. 5273 of 2008 Page 22 of 44
no choice to the consumer, have been struck down as “unfair
trade practices”7
. - 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
consumer8
. 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 Court has the
jurisdiction to adjudicate. - It is submitted that the Complainant, that represents a
voluntary consumer association, working for the sake of
consumer rights, is well within the scope of the definition of a
complainant, under Section 12(1)(b) of the Consumer Protection
Act, 1986. The original Complaint, preferred by the
Complainants, meets the necessary requirements under section
12 read with section 13 of the Act. In addition, the Respondents
had also filed an Application under section 13(6) of the Act, to
7 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
8 Texco Marketing Pvt. Ltd. Vs TATA AIG GIC [2023] 1 SCC 428
Civil Appeal No. 5273 of 2008 Page 23 of 44
substantiate their bona fide, however the same was never
adjudicated upon.
SUBMISSIONS ON BEHALF OF THE RESERVE BANK
OF INDIA - The Reserve Bank of India has the statutory power under
section 21 and 35A of the Banking Regulation Act, 1949 for
determining the policy in relation to the advances to be followed
by the bank from time to time, which the banks are bound to
follow. In accordance with this power granted by the Act, the RBI
has from time to time issued directives/guidelines to the banks
regarding interest rates on advances, credit cards 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. - 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
Civil Appeal No. 5273 of 2008 Page 24 of 44
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. - 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 regulatory guidelines contained in the Master DirectionReserve Bank of India (Interest Rate on Advances) Directions,
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. - 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. - 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
Civil Appeal No. 5273 of 2008 Page 25 of 44
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 rate of interest to be charged by the Banks on the credit
card transactions9
.
CONSIDERATION OF SUBMISSIONS - Upon hearing the counsels for the parties & the intervenor
and considering their detailed written submissions, the questions
for determination before this Hon’ble Court are as under:
(i) Whether the Respondent organization has the locus
to approach the National Commission?
(ii) 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?
(iii) 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 &
9 L.Chandra Kumar vs Union of India & Ors. [1997] 3 SCC 261
Civil Appeal No. 5273 of 2008 Page 26 of 44
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?
(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? - 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
Civil Appeal No. 5273 of 2008 Page 27 of 44
payment, when such use is made with the approval of
such person, but does not include a person who obtains
such goods for resale or for any commercial purpose;
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;” - 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.
Civil Appeal No. 5273 of 2008 Page 28 of 44 - The Complaint however, failed to meet the threshold of
section 12(1) and 13 of the Act. The original Complaint before
the Commission, which is said to have been filed in a
representative capacity, by the Trust, representing all consumers
who have been purportedly aggrieved owing to the exorbitant
rates of interest charged by the banks, was filed without
complying with the mandate of Order I Rule 8, prescribed under
Section 13(6) of the Act. No order has been passed by the
National Commission permitting the Respondent nos.1 and 2 to
represent the interest or act on behalf of any consumer. An
application under section 13(6) of the Act seeking permission to
act “on behalf of consumers” was only filed by the Complainants,
at the stage of conclusion of arguments, and judgment being
reserved. - 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 Act10
, 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 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
10 Rameshwar Prasad Shrivastava & Ors. vs. Dwarkadhis Projects Private Limited & Ors,
3 (2019) 2 SCC 417
Civil Appeal No. 5273 of 2008 Page 29 of 44
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 Bank11 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.
12 vide judgment dated
04.10.2019; however, the ratio in Pratibha Pratisthan Vs
Canara Bank (supra), is the position of law in force. - 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
11 Pratibha Pratisthan Vs Canara Bank (2017) 3 SCC 712
12 Administrator Smt. Tata Bai Desai Charitable Opthalmic Trust Hospital, Jodhpur Vs
Managing Director, Supreme Elevators India Pvt. Ltd. & Ors SLP(Civil) No. 18636/2019
Civil Appeal No. 5273 of 2008 Page 30 of 44
of Rs. 90,000/- against excess interest charged by the bank, which
is barred by the pecuniary jurisdiction of the Commission. - 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 and
cannot come under the purview of judicial scrutiny by the
National 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. We are thus 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’.
ii. 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?
iii. 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
Civil Appeal No. 5273 of 2008 Page 31 of 44
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? - 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 force13
. 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. - 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.
13 [2002] 1 SCC 367
Civil Appeal No. 5273 of 2008 Page 32 of 44 - 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. - 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. - In the case of Central Bank of India Vs Ravindra & Ors.
[2002] 1 SCC 367, 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
Civil Appeal No. 5273 of 2008 Page 33 of 44
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. - This Hon’ble Court has observed that an attempt of the
courts, to intervene in the policy decisions taken by the Reserve
Bank of India is to tread an unknown path. The National
Commission has gone one step further, and while treading this
unknown path has made casual passing remarks on the conduct
of functions by the Reserve Bank of India, 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. - We have also considered all the circulars/notifications on
credit card operations, up till 2022, issued by the RBI, which
Civil Appeal No. 5273 of 2008 Page 34 of 44
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 MITC should specifically
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. - 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.
Civil Appeal No. 5273 of 2008 Page 35 of 44
“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.” - 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
made under a statute must be treated, for all purposes of
construction or obligations, exactly as if they were in that Act14
.
The notifications, circulars and directions of the RBI are nothing
but the legislative expression of the ‘statement of object &
reasons’ encapsulated in the preamble of the Reserve Bank of
India Act, 1934. Hence, the statutory presumption that the
legislature whilst formulating laws has inserted every part
thereunder for a purpose and that legislative intention, which
should be given effect to, would be applicable to the present
guidelines as well. - In this respect alone, the National Commission had no
jurisdiction to either entertain a Complaint, having vague,
ambiguous allegations & no cause of action, and further also had
no jurisdiction to assume the jurisdiction of the Reserve Bank of
India, or act/decide or regulate on its behest, any monetary
14 Peerless General Finance & Investment Co. Ltd. & Anr. Vs Reserve Bank of India
[1992] 2 SC 343
Civil Appeal No. 5273 of 2008 Page 36 of 44
decision or policy. This Hon’ble Court has also answered the
question of want of judicial review of directions, within the
specific domain of an expert body in the case of Shri Sitaram
Sugar Company Ltd. Vs Union of India15 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.” - 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.16
, this Hon’ble Court has been pleased to observe:
“19. A conjoint reading of the statutory provisions
mentioned above, makes it abundantly clear that for
“public interest” RBI is empowered to issue any
15 [1990] 3 SCC 223
16 (2022) 3 SCC 56
Civil Appeal No. 5273 of 2008 Page 37 of 44
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 defined in Section 5(ca)
to mean any policy specified by RBI (i) in the interest of
the banking system, (ii) in the interest of monetary
stability, and (iii) sound economic growth. Public
interest permeates all these areas.” - In addition, we are also of the considered view, that an
endeavour to cap the rate of interest charged by banks and
dictating the need for a Benchmark Prime Lending Rate, drawing
parallels with other economies across the world, whilst failing to
trust the prudence of the Reserve Bank of India which has been
entrusted with the fundamental responsibility of regulation of the
monetary system and banking business is unwarranted. - There is also merit in the submission made by the
Appellants, that a direction cannot be issued to the Reserve Bank
Civil Appeal No. 5273 of 2008 Page 38 of 44
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 authority17.” - In deciding the 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
India18
. 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?
17 Supreme Court Employees Welfare Association Vs Union of India [1989] 4 SCC 187
18Peerless General Finance & Investment Co. Ltd. & Anr. Vs Reserve Bank of India
[1992] 2 SC 343
Civil Appeal No. 5273 of 2008 Page 39 of 44 - 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. - The credit card holders in the present case are wellinformed 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. - The National Commission, whilst making observations,
has made stipulations to the terms of contract agreed between the
parties, so much so it has supplanted itself as the custodian of the
Civil Appeal No. 5273 of 2008 Page 40 of 44
terms and conditions between the parties. We are of the
considered opinion to re-agitate the terms and conditions of credit
card facilities provided by the banks, and re-write the terms
thereof, including the rates of interest charged by the banks, is
exorbitant, however reasonable, is an attempt by the National
Commission to constitute a new contract, which is impermissible
in law. It is a settled cannon of law, that a contract, being a
creature of an agreement between two or more parties, is to be
interpreted giving the actual meaning to the words contained in
the contract and it is not permissible for the Court to make a new
contract, however reasonable, if the parties have not made it
themselves19
.” - Therefore, when a person signs a document which contains
certain contractual terms, that normally parties are bound by such
contract; it is for the parties to establish an exception in a suit.
When a party to the contract disputes the binding nature of the
signed document, it is for him to prove the terms, in the contract,
or circumstances in which he came to sign the documents, need
to be established20
. Hence, the National Commission had no
jurisdiction to re-write the said terms of the contract entered
19 Rajasthan State Industrial Development & Investment Corporation Vs Diamond &
Gem Development Corporation Ltd.
20 Bharathi Knittting Company Vs Worldwide Express Courier Division of Airfrieght
Ltd.[1996] 4 SCC 704
Civil Appeal No. 5273 of 2008 Page 41 of 44
between the banks and the credit cardholders, which the parties
have mutually agreed to be bound by. - 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 obligations21
. - 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 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.22
21 Directorate of Education vs Educomp Datamatics Ltd. [2004] 4 SCC 19
22 Colgate Palmolive (India) Ltd. Vs MRTP Commission [2003] 1 SCC 129
Civil Appeal No. 5273 of 2008 Page 42 of 44 - 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. - 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. Even otherwise, there is not even a single averment so as to
establish how the charging of rates of interest upon the default by
credit card holders, without a standardized rate, is usurious and
constitutes an unfair trade practice. The mere inflation in the rates
of interest cannot be construed as a practice, intended to cause
loss or injury.
Civil Appeal No. 5273 of 2008 Page 43 of 44 - 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. - Thus, we agree with the submissions made by the Reserve
Bank of India, that 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 - In light of the aforesaid, the appeals bearing C.A. No. 5273
of 2008, C.A. No. 5294 of 2008, C.A. No. 5627 of 2008, C.A.
5278 of 2008 and C.A. No. 6679 of 2008 are allowed and the
Civil Appeal No. 5273 of 2008 Page 44 of 44
final Judgment/Order dated 07.07.2008 passed by the National
Commission in “Awaz & Ors. Vs Reserve Bank of India 23 is set
aside. - No order as to costs.
……………………………………J.
[BELA M. TRIVEDI]
……………………………………J.
[SATISH CHANDRA SHARMA]
NEW DELHI
DECEMBER 20, 2024
23 Complaint Case No. 51 of 2007 before the National Consumer Disputes Redressal
Commission, New Delhi
