ORDER UNDER SECTION 26(6) OF THE COMPETITION ACT, 2002

1. The present matter relates to information filed on 08.04.2011 under Section 19 (1) (a) of the Competition Act, 2002 (hereinafter referred to as "the Act") by Mr. R. V. Ramgopal alleging that M/s Shri Ram Transport Finance Company (hereinafter referred to as 'Opposite Party') has abused its dominant position by adopting unfair practices in the business of financing commercial vehicles.

2. The facts of the case as per the information, in brief, are as under:

2.1 The informant is engaged in the business of transportation of goods throughout the country. For his business, the informant requires lorries/trucks which he purchases from the open market, partly out of his own funds and partly by taking loans from different financiers.

2.2 The Opposite Party (OP), M/s Shri Ram Transport Finance Company is a registered Non-Banking Finance Company (NBFC) under the Reserve Bank of India Act, 1934 and is operating through its regional and branch offices located at different places in India. The OP is engaged in the business of providing finance for commercial vehicles, new as well as pre-owned and also provides finances for working capital, ancillary equipments and vehicle parts for small road transport operators.

2.3 It has been stated in the information that the informant took loan from the OP in 2004 for the purchase of three lorries through its branch office located at Vijayawada, Andhra Pradesh. Two loan amounts of Rs. 9,23,000/- (Rupees Nine lakh twenty three thousand only) each were sanctioned by OP to the informant vide loan agreement no. VTA/24127 and VTA/24128 on 22.11.2004 for two vehicles and another loan amount of Rs. 10,72,674/- (Rupees Ten lakh seventy two thousand six hundred seventy four only) was sanctioned vide loan agreement no. VI/2010 on 30.04.2004 for the third vehicle. The jnformant was advised that the rate of interest would be either 5.13% or 5.70% per annum. The loan agreement was for a period of five.

2.4 It has been alleged by the informant that since he could not repay the outstanding loan within the stipulated period as calculated and demanded by the OP, he was compelled to opt for re-scheduling of the outstanding loan amount.

2.5 The informant has also alleged that at the time of re-scheduling, the OP converted the outstanding loans as fresh loan transactions by way of fresh agreements. Accordingly, the terms and conditions of the existing loan agreements have also changed. After re-scheduling, two loan agreements no. BHVPM/0903170004 and BHVPM/3170005 dated 16.03.2009 were executed for Rs. 6,00,000/- (Rupees Six lakh only) each for two vehicles and another loan agreement no. BHVPM/0000750 dated 30.04.2008 was executed for Rs. 7,25,000/- (Rupees Seven lakh twenty five thousand only) for the third vehicle.

2.6 The informant has submitted that the OP has imposed an enhanced rate of interest of 9% per annum on the re-scheduled loan amounts, much higher than the initial agreed rate of interest of 5.13% or 5.70% per annum. According to the informant, he was also compelled to avail a personal loan of Rs. 3.00 Lakh at the rate of interest of 24% per annum for repayment of some of the overdue outstanding Equated Monthly Instalments (EMIs).

2.7 It has also been submitted by the informant that the OP is not only charging higher rate of interest on the re-scheduled loan amounts but is also arbitrarily imposing other charges. As a result, the actual interest rate being charged by the OP comes to around 3% to 4% per month and 36% to 40% on an annual basis which is exceptionally high and unfair. As per the informant, high rate of interest charged by the OP is grossly usurious and excessive in violation of the Usurious Loans Act, 1918.

2.8 It has also been alleged by the informant that instead of calculating interest rate as per diminishing balance method as projected in its brochures and advertisements, the OP is following flat method of calculation of interest rate. Further

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