7/11/22, 9:58 PM Bank Of Baroda vs Dr. Kamal Gupta & 4 Ors.

on 20 December, 2019
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National Consumer Disputes Redressal
Bank Of Baroda vs Dr. Kamal Gupta & 4 Ors. on 20 December, 2019

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI   REVISIO

PETITION NO. 1944 OF 2019   (Against the Order dated 12/04/2019 in Appeal No. 683/201
of the State Commission Punjab) 1. BANK OF BARODA THROUGH ITS ATTORNEY HOLDER SH
YOGRAJ CHIEF MANAGER, POSTED AT REGINAL OFFICE BHAGWAN MAHAVIR MARG BRANCH, JALANDHA
PUNJAB ...........Petitioner(s) Versus   1. DR. KAMAL GUPTA & 4 ORS. S/O. LATE SH
SATYA PAL GUPTA, R/O. 408-A, NEAR JAIN BHAWAN ADARSH NAGAR, KAPURTHALA ROAD, JALANDHA
PUNJAB 2. MS. NIKITA GUPTA D/O. DR. KAMAL GUPTA, R/O. 408-A, NEAR JAIN BHAWAN ADARS
NAGAR, KAPURTHALA ROAD, JALANDHAR PUNJAB 3. ANKITA GUPTA D/O. DR. KAMAL GUPTA, R/O
408-A, NEAR JAIN BHAWAN ADARSH NAGAR, KAPURTHALA ROAD, JALANDHAR PUNJAB 4. DR. RUBY GUPT
W/O. DR. KAMAL GUPTA, R/O. 408-A, NEAR JAIN BHAWAN ADARSH NAGAR, KAPURTHALA ROAD, JALANDHA
PUNJAB 5. JALANDHAR IMPROVEMENT TRUST THROUGH ITS ADMINISTRATIVE OFFICER/CHAIRMA
JALANDHAR PUNJAB ...........Respondent(s)

BEFORE:     HON'BLE MR. PREM NARAIN,PRESIDING MEMBER For the Petitioner :

Mr.C.S.Pasricha , Advocate Mr. Visha Ahuja, Advocate For the Respondent :

Dated : 20 Dec 2019 ORDER This revision petition has been filed by the petitioner Bank of Baroda
against the order dated 12.04.2019 of the State Consumer Disputes Redressal Commission, Punjab, (in
short 'the State Commission') passed in MA Nos.2804 of 2018 and 552 of 2019 in FA No.683 of 2018.

2.      Brief facts of the case are that the respondents took a home loan from the petitioner bank.  The
petitioner bank charged commercial rate of interest after three years as per circular dated 01.10.2016,
which allows bank to charge commercial rate of interest, which is roughly 1.5% higher than the rate on
which loan was sanctioned.

3.      The respondents repaid total loan amount even before the expiry of the total period of loan and
the bank accepted repayment without any charges for early repayment.  The complainants later on filed
a consumer complaint before the District Consumer Disputes Redressal Forum, Jalandhar, (in short 'the
District Forum') being Complaint No.217 of 2017 alleging that the bank was not entitled to charge
commercial rate of interest on home loan sanctioned to the complainants.  The complaint was resisted
by the petitioner bank.  However, the District Forum allowed the complaint vide its order dated
23.10.2018 and directed the opposite parties bank to refund the extra amount charged on the basis of
commercial rate of interest.

4.          Aggrieved by the order of the District Forum, the opposite parties bank/petitioners preferred
appeal bearing No.683 of 2018 before the State Commission.  The State Commission vide its order
dated 12.04.2019 dismissed the appeal.

5.      Hence the present revision petition.

6.      Heard the learned counsel for the petitioners at the admission stage.  Learned counsel stated that
the bank has charged commercial rate of interest as per master circular which became effective from
01.04.2016 issued by the bank head office wherein the following provision is there:

"In case the borrower fails to complete the construction of House within a period of 3 years from the
availment of Home Loan, Branch to charge commercial rate of interest [1 year MCLR + Strategic
Premium plus maximum band or Base Rate Plus maximum band (if loan is under base rate system), as
the case may be, declared by the Bank for commercial purpose prevailing at the time of default] from
the date of first disbursement.

In case the borrower could not construct the House within the stipulated period due to circumstances
beyond his/her control or genuine difficulties, Zonal Authority is authorised to waive/refund the
commercial ROI on case to case basis and strictly on merits.  A suitable undertaking to be obtained
from the borrower to construct the House within further period of maximum- 2years without attracting
commercial ROI (as per Annexure-29)"

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7.          Learned counsel for the petitioner was asked about the applicability of the circular dated
01.10.2016 on the loan sanctioned in the year 2012.  Learned counsel then presented circular dated
28.01.2010 and stated that the same provision is there in this circular and therefore, applicable on the
loan sanctioned in the year 2012.

8.          Learned counsel further drew my attention towards the following provisions in the loan
agreement:-

"7.         Notwithstanding anything contained herein or in the Scheme the said loan or any part thereof
to be disbursed shall be withheld and/or further disbursements/payments be stopped without giving any
notice, assigning any reason and/or the entire balance thereof outstanding at the time shall at BOB's
option and declaration to that effect, become forthwith due and payable by the Borrower to BOB and
BOB will at its option and after notifying the Borrower in that behalf be entitled to enforce its security
upon the happening of any of the following events, viz.

ii) Any representation or statement of the Borrower's Proposal being found incorrect or the Borrower's
committing any breach or default in the performance or observance of any terms or condition or
provision contained in these presents and/or the Borrower's proposal and/or any other terms or
conditions relating to the loan."

9.      On the basis of the above, learned counsel stated that the construction was not done in three years
and therefore, the bank was entitled to charge the commercial rate of interest from the borrower.

10.      It was further argued by the learned counsel that the complainants have purchased many
properties by taking loan from different banks. They are purchasing property for making profit. Thus,
the complainants are not consumers as they had taken loan for commercial purpose.  Learned counsel
stated that certain documents including the cibil of the complainants were filed before the State
Commission to impress upon this fact that the complainants were not consumers, however, though the
State Commission allowed for filing of these documents, but did not consider these documents in the
final judgment as no mention of these documents has been made in the judgment. To support his
argument, the learned counsel relied upon the judgment of the National Commission in Rohit Kapoor
Vs. BPTP Ltd. & 4 Ors., Consumer Case No.567 of 2015, decided on 07.12.2017, (NC).

11.    Learned counsel further mentioned that the contract of loan between the borrower and the bank
cannot be altered by any court.  Learned counsel for the petitioner further stated that Section 21-A of
the Banking Regulation Act clearly debars all the courts to interfere with the rate of interest charged by
a bank for any loan given for any purpose.  In this regard the learned counsel referred to the following
judgments:-

"1.    State Bank of India Vs. Yasangi Venkateswara Rao, Appeal (Civil) No.4607 of 1989, decided on
21.01.1999 (SC)

2.     Jayant Verma & Ors., Vs. Union of India & Ors., Writ Petition (Civil) No.134 of 2013, decided on
16.02.2018 (SC)."

12.    I have carefully considered the arguments advanced by the learned counsel for the petitioner and
have examined the record.

13.    Coming to the first point whether the complainants are consumer, it is seen that the complainants
have obtained the services of the bank for getting the loan and the consideration for this service is the
payment of interest. The banking services are covered under the Section 2(1)(o) of the Consumer
Protection Act, 1986.  This Commission in Harsolia Motors Vs. National Insurance Co. Ltd. CTJ 141
(CP) (NCDRC), has taken a view that the banking services are covered under the Consumer Protection
Act.  It has been held:-

"18. Further, what is commercial purpose is discussed by the Apex Court in various decisions.

 19.     We would refer to few relevant judgments:

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        In Regional Provident Fund Commissioner Vs. Shiv Kumar Joshi, (2000) 1 SCC 98, the Court
elaborately considered the provisions of Sections 2(1)(d) and 2(1)(o) as well as earlier decisions and
held that-

"The combined reading of the definitions of "consumer" and "service" under the Act and looking at the
aims and object for which the Act was enacted, it is imperative that the words "consumer" and
"service" as defined under the Act should be construed to comprehend consumer and services of
commercial and trade-oriented nature only. Thus any person who is found to have hired services for
consideration shall be deemed to be a consumer notwithstanding that the services were in connection
with any goods or their user. Such services may be for any connected commercial activity and may
also relate to the services as indicated in Section 2(1)(o) of the Act."

21. The aforesaid ratio makes it abundantly clear that services may be for any connected commercial
activity, yet it would be within the purview of the Act.

29. Further, from the aforesaid discussion, it is apparent that even taking wide meaning of the words
'for any commercial purpose' it would mean that goods purchased or services hired should be used in
any activity directly intended to generate profit. Profit is the main aim of commercial purpose. But, in a
case where goods purchased or services hired in an activity which is not directly intended to generate
profit, it would not be commercial purpose."

14.    So far as the question of complainants having booked more than one plot/flat it is seen that this
Commission has examined this issue in many judgments and have stated that in this regard a
commercial purpose will only be understood if the complainant is a regular trader of plots/flats and
earns profit from these transactions. 

15.    In Aashish Oberai  Vs. Emaar MGF Land Limited, Consumer Case No. 70 of 2015, decided on
14.09.2016, this Commission held as follows:-

"In the case of the purchase of the houses which a builder undertakes to construct for the buyer, the
purchase can be said to be for a commercial purpose where it is shown, by producing evidence, that the
buyer is engaged in the business of a buying and selling of houses and or plots as a trading activity,
with a view to make profits by sale of such houses or plots.  A person cannot be said to have purchased
a house for a commercial purpose only by proving that he owns or had purchased more than one
houses or plots.  In a given case, separate houses may be purchased by a person for the individual use
of his family members.  A person owning a house in a city A may also purchase a house in city B for
the purpose of staying in that house during short visits to that city.  A person may buy two or three
houses if the requirement of his family cannot be met in one house.  Therefore, it would not be correct
to say that in every case where a person owns more than one house, the acquisition of the house is for a
commercial purpose".

16.      In another case, Kavit Ahuja Vs. Shipra Estate Ltd. & Jai Krishna Estate Developers Pvt. Ltd., 
I(2016) CPJ31(NC), wherein three flats were booked by the complainant, this Commission held the
complainant to be a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act,
1986 and held as follows:-

"In the case of the purchase of houses which the service provider undertakes to construct for the
purchaser, the purchase can be said to be for a commercial purpose only where it is shown that the
purchaser is engaged in the business of purchasing and selling houses and / or plots on a regular basis,
solely with a view to make profit by sale of such houses.  If however, a house to be constructed by the
service provider is purchased by him purely as an investment and he is not undertaking the trading of
houses on a regular basis and in the normal course of the business profession or services in which he is
engaged, it would be difficult to say that he had purchased houses for a commercial purpose.  A person
having surplus funds available with him would not like to keep such funds idle and would seek to
invest them in such a manner that he gets maximum returns on his investment.  He may invest such
funds in a Bank Deposits, Shares, Mutual Funds and Bonds or Debentures etc.  Likewise, he may also
invest his surplus funds in purchase of one or more houses, which is/are proposed to be constructed by

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the service provider, in the hope that he would get better return on his investment by selling the said
house(s) on a future date when the market value of such house (s) is higher than the price paid or
agreed to be paid by him.  That by itself would not mean that he was engaged in the commerce or
business of purchasing and selling the house (s).

7.      Generating profit by way of trading, in my view is altogether different from earning capital gains
on account of appreciation in the market value of the property unless it is shown that the person
acquiring the property was engaged in such acquisition on a regular basis and it was by way of a
business activity.

8.  As observed by the Hon'ble Supreme Court in Laxmi Engineering Works (supra) what is a
'commercial purpose' is a question of fact to be decided in the facts of each case and it is not the value
of the goods that matters but the purpose for which the goods brought are put to. The same would be
equally applicable to for hiring or availing services.

9.  In any case, it is not appropriate to classify such acquisition as a commercial activity merely on the
basis of the number of houses purchased by a person, unless it is shown that he was engaged in the
business of selling and purchasing of houses on a regular basis. If, for instance, a person has two-three
children in his family and he purchased three houses one for each of them, it would be difficult to say
that the said houses were purchased by him for a commercial purpose. His intention in such a case is
not to make profit at a future date but is to provide residential accommodation to his children on
account of the love and affection he has for his children. To take another example, if a person has a
house say in Delhi but he has business in other places as well and therefore, purchases one or more
houses at other places where he has to live presently in connection with the business carried by him, it
would be difficult to say that such acquisition is for commercial purpose.  To give one more example, a
person owning a house in a Metropolitan city such as Delhi, or Mumbai, may acquire a house at a hill
station or a place, which is less crowded and more peaceful than a Metropolitan city, in my view, it
cannot be said that such acquisition would be for commercial purpose.  In yet another case, a person
may be owning a house but the accommodation may not be sufficient for him and his family, if he
acquires one or more additional houses, it cannot be said that he has acquired them for commercial
purpose.  Many more such examples can be given.  Therefore, it cannot be said that merely because of
the complainant had agreed to purchase three flats in the same complex the said acquisition was for a
commercial purpose". 

17.    This Commission in Rajesh Malhotra & Ors. Vs. Acron Developers & 2 Ors., First Appeal No.
1287 of 2014, decided on 05.11.2015 has held as follows:-

"12.     Therefore, in order to determine whether the goods are purchased for commercial purpose, the
basic pre-requisite would be whether the subject goods have been purchased or the services availed of
with the prime motive of trading or business activity in them, for the purpose of making profit, which,
as held in Laxmi Engineering (supra) is always a question of fact to be decided in the facts and
circumstances of each case".

18.     Therefore, it cannot be said that the complainants are not a consumers.  The judgment of this
Commission in Rohit Kapoor Vs. BPTP Ltd. & 4 Ors., Consumer Case No.567 of 2015, decided on
07.12.2017, (NC) is by a single Member Bench, whereas the judgment in Rajesh Malhotra & Ors. Vs.
Acron Developers & 2 Ors. (supra) is the judgment given by the division bench.  Hence I will be going
along with the judgment given by the division bench.  So far as the circular dated 01.10.2016 of the
head office of bank of Baroda relied by the learned counsel for the petitioner is concerned, this circular
is of 2016 and has been made effective w.e.f. 1.4.2016, whereas the loan was sanctioned in the year
2012, therefore this Circular cannot be made applicable in the present case. Learned counsel has stated
that even the circular dated 28.01.2010 also mentions the same condition, but it is seen that only the
following is mentioned in this circular:-

"iv    Purchase of plot of land, subject to the condition that a house will be constructed thereon within
-3- years or upto the period allowed by Development authority, whichever is earlier, from the date of
purchase of plot, without restoring to penal interest.  Please note that there is no exclusive scheme for

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purchase of plot under home loan product and provision of plot is a part of home loan project.  As
such, only a reasonable part of the total home loan eligibility should be sanctioned/disbursed for
purchase of plot, keeping margin for construction of house over the plot.

Since the compliance of the undertaking rests with the borrower, Branches are required to incorporate
suitable covenants in the loan documents at the time of sanction, to enable them to recall the loan
and/or charge higher rate of interest, ab initio, in the event of non-compliance by the borrower with his
undertaking.

In this background, or the benefit of the branches, we would like to clarify the issue as under:

In case the borrower fails to construct the house within a period of three years from the availment of
the said finance:

i. Branch to charge commercial rate of interest (PLR/BPLR plus maximum band declared by the Bank)
from the date of first disbursement.

Ii. Branch to recall the loan and recover total loan with revised interest."

19.    From the above, it is clear that there were clear instructions that the branches were authorised to
charge commercial rate of interest if the construction was not made within three years, however, the
branches were also advised to incorporate suitable covenants in the loan documents.  In the present
case, it is seen that neither in the loan sanction letter dated 30.04.2012 nor in the loan agreement dated
30.04.2012 there is any clause mentioning that if the construction is not made within three years, the
commercial rate of interest will be charged.  So even if there are internal guidelines of the bank to
charge commercial rate of interest in case the construction is not made within three years, the same was
not communicated to the complainants either in the loan sanction letter or in the loan agreement.  Thus,
there is no agreement between the parties that if the construction is not completed within three years,
the complainants will be liable to pay commercial rate of interest.  In my view and on the basis of
circular of head office of the bank, the branch is not authorised to charge commercial rate of interest
until the same is incorporated in the loan sanction letter or in the loan agreement.  The District Forum
has disallowed charging of commercial rate of interest by the bank on the ground that there was no
question of construction being even started, within three years from the sanction of loan as the
complainants could not get the plot during this period from the improvement trust.  The same argument
has been accepted by the State Commission.  The learned counsel agreed that the plot has been given
to the complainants only in the year 2015 which is clearly after a lapse of three years after sanction of
loan.  Thus, prima facie there seems to be no illegality in the order of the District Forum or the State
Commission.  Moreover, against the concurrent finding of facts given by the fora below, this
Commission cannot reassess the facts at the stage of revision petition as held by the Hon'ble Supreme
Court in Mrs. Rubi (Chandra) Dutta vs. United India Insurance Company, 2011 (3) Scale 654, wherein
the following has been observed:-

"Also, it is to be noted that the revisional powers of the National Commission are derived from Section
21 (b) of the Act, under which the said power can be exercised only if there is some prima facie
jurisdictional error appearing in the impugned order, and only then, may the same be set aside. In our
considered opinion there was no jurisdictional error or miscarriage of justice, which could have
warranted the National Commission to have taken a different view that what was taken by the two
Forums. The decision of the National Commission rests not on the basis of some legal principle that
was ignored by the Courts below, but on a different (and in our opinion, an erroneous)  interpretation of
the same set of facts. This is not the manner in which revisional powers should be invoked. In this view
of the matter, we are of the considered opinion that that the jurisdiction conferred on the National
Commission under Section 21(b) of the Act has been transgressed. It was not a case where such a view
could have been taken, by setting aside the concurrent finding of two fora."

20.    Now coming to the question of Section 21 A of the Banking Regulation Act, it is seen that this
Section provides that courts cannot interfere in respect of the interest being charged by the bank on the
ground that interest is excessive.  The District Forum or the State Commission has not passed its

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respective order on the basis that interest being charged was excessive.  The fact is that there is no
mention of charging commercial rate of interest in the loan agreement or in the loan sanction letter,
therefore, the agreed rate of interest i.e. 12.25% has not been disturbed either by the District Forum or
by the State Commission. Thus, in the present case, there is no question of violation of Section 21 A of
the Banking Regulation Act.

21.      Based on the above discussion, I do not find any merit in the present revision petition and
accordingly revision petition no.1944 of 2019 is dismissed at the admission stage.

  ...................... PREM NARAIN PRESIDING MEMBER

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