IMPORTANT POINT
Commercial Purpose – The logic of a Bank providing overdraft against purchase of KVPs for commercial purpose as advanced by the appellant cannot be accepted.

ORDER

Per Mr Subhash Chandra

These appeals have been filed under Section 19 of the Consumer Protection Act, 1986 (in short, ‘the Act’) against the order of the Punjab State Consumer Disputes Redressal Commission, Chandigarh (in short, ‘the State Commission’) in CC nos. 43, 44 and 45 of 2016 dated 07.12.2017. As these first appeals arise from the same order and pertain to a similar set of facts, they are disposed of by way of a common order. For the sake of convenience FA no.790 of 2018 is taken as the lead case.

2. In brief, the relevant facts of the case are that the appellant who is a scheduled Bank had promoted an investment scheme named Kisan Vikas Patra (KVP) Margin Funding Scheme under which 10% of the amount was to be invested by the applicant for the purchase of KVPs and the balance 90% was undertaken to be provided by the appellant Bank as loan under the KVP Margin Funding Scheme. The investors were assured of getting return of 21.01% or tax free return of 13.65% after 103 months as per the flow chart prepared by the appellant. The interest rate chargeable by the appellant on the 90% margin fund was fixed at 7% and the KVP was to earn interest at 8%. The respondent invested Rs.3.5 lakh on 29.09.2005 as margin money and the appellant sanctioned loan of Rs.31.50 lakh on 29.09.2005 to him to purchase KVPs through the Bank for Rs.35 lakhs, which were then pledged as security with the appellant. The appellant informed the respondent subsequently that the rate of interest had been changed from 7 to 7.5 % with retrospective effect from 28.03.2006 and thereafter, on various dates, about the increase of interest rate to 8% with effect from 24.04.2006 and 12% with effect from 20.10.2008. The appellant has stated that the rate of interest was a floating rate of interest and was therefore changed as per the provisions of the scheme.

3. The respondent approached the State Commission in CC no. 43 of 2016 on the grounds that despite their protest, the appellant had been arbitrarily charging a higher rate of interest and statement of accounts had been showing negative figures and prayed that the appellant be held deficient in service and for adopting unfair trade practice. Compensation of Rs.20 lakh for deficiency in service and mental harassment with directions to refund the excess amount of Rs.20,41,612/- taken by it along with interest from 20.05.2014 till payment, along with cost of litigation was prayed for.

4. On contest, the State Commission upheld the complaint on the basis of this Commission’s orders in Rohit Bajaj and Others vs ICICI Bank Ltd., and Ors.. [II (2008) CPJ 271 (NC)] decided on 17th April 2008 and HDFC Bank Limited vs Surinder Kumar Goyal [11 (2011) CPJ 229 (NC)] decided on 11.03.2011 that the primary condition for grant of loan stated in the Customer Approval Sheet (CAS) had mentioned the rate of interest as 7% per annum which could not be altered arbitrarily by the Bank. It was also held that the contention of the appellant that the investment in the KVP Margin Fund Scheme was a commercial transaction since an overdraft facility had been provided was not justifiable. The State Commission accordingly, directed that “this complaint is accepted and OPs are directed to refund the amount charged by them in excess of interest @ 7% per annum to the complainant in this case and to credit the above referred amount to the account of the complainant and to charge interest only @ 7% per annum. The complainant is held entitled to compensation of Rs.1,00,000/- for mental harassment and deficient service on the part of OPs and Rs.30,000/- as costs of litigation from OPs in this complaint.”

5. The appellants have impugned this order on the grounds that the State Commission had erroneously came to its conclusion on the basis of Rohit Bajaj (supra) and HDFC Bank Limited (supra) since those cases were distinguishable on the ground that the KVP had been purchased prior to the execution of the loan agreement, and hence the rate of