The court affirmed the contractual nature of interest rates in home loans under consumer protection law, emphasizing adherence to established guidelines.

1. Leave granted. This appeal is directed against an order passed by the National Consumer Disputes Redressal Commission (in short "the National Commission") dated 29-9-2014 [ ICICI Bank Ltd. v. Maharaj Krishan Datta , 2014 SCC OnLine NCDRC 824] dismissing the revision petition filed by the appellant Bank. The Commission held that the revision petition is disposed of with an order that up to 30-11-2006, the Bank was entitled to charge interest at floating reference rate (FRR) per annum minus 1.5% p.a., whereas w.e.f. 1-12-2006, the Bank would charge interest @ 8.75% p.a., irrespective of any increase or decrease in the FRR.

2. The said order dated 29-9-2014 was passed by the National Commission on the following facts: the complainant 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% p.a. Later, it was confirmed by the Bank that w.e.f. April 2006 the loan would carry an interest @ 7.75% p.a.

3. It was the further case of the respondent complainants that an additional loan of Rs. 3,00,000 was sanctioned on 30-10-2006 with an obligation to pay interest @ 8.75% p.a. The grievance expressed by the respondents was that instead of charging interest at the agreed rate, the Bank had charged the same @ 11.25% p.a. for the period from 1-4-2007 to 31-3-2008, besides charging interest during pre - EMI period @ 9.5% p.a. Hence, the respondent complainants filed a complaint before the District Forum, alleging deficiency in the service provided by the appellant Bank to them. 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% p.a. and could be enhanced as per the guidelines issued by Reserve Bank of India and in accordance with the agreement between the parties.

4. The District Forum passed an order in the matter directing the appellant Bank to charge interest @ 7.25% p.a. till 31-3-2006 and thereafter @ 7.75% p.a. from 1-4-2006 to 30-10-2006 and thereafter @ 8.75% p.a. 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 compensation, as a result whereof, the Bank preferred an appeal before the State Commission. The State Commission, by its order dated 19-3-2010, permitted the appellant Bank to vary the rate of interest only as per the variation allowed by Reserve Bank of India from time to time, granting the complainants benefit of minus 1.5% of FRR.

5. 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 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.

6. Being aggrieved, the appellant Bank had to knock the doors of this Court by filing this appeal by way of special leave.

7. 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 intere