Consent must for fixed to floating loan shift

When the loan agreement was submitted in the revision proceedings, it revealed the interest rate column, which should have mentioned fixed or floating, had been left blank

Bijay Kumar Singh, an employee of State Bank of India (SBI), had taken a housing loan from the same bank. The loan amount of Rs 2 lakh was sanctioned on February 27, 2004, at 8 per cent fixed interest. The equated monthly instalment (EMI) amounting to Rs 2,340 was to be deducted from Singh’s salary over a period of 120 months.

After 15 EMIs were paid, Singh was transferred from Salkia Branch to Howrah Maidan Branch. EMI deductions continued. Singh cleared 112 EMI instalments without any default. When merely eight instalments remained, Singh received a notice from the bank claiming Rs 24,480 as outstanding dues towards increase in EMI from Rs 2,400 to Rs 3,805. The bank also demanded the original title deed.

Singh attempted to convince the bank that there were no arrears as all the instalments had been paid on time. However, the bank insisted that the outstanding dues on July 15, 2013, amounted to Rs 70,356. Singh’s request for furnishing of the accounts and statements were also ignored. Instead, the bank threatened to dispossess Singh of his accommodation if he failed to pay up.

Singh then filed a complaint before the Howrah District Consumer Commission. He sought a direction to the bank to collect only the actual dues without demanding higher EMI instalments. He also sought compensation and litigation costs. The bank failed to file its reply despite several opportunities. So, the complaint proceeded ex-parte.

The District Commission indicted the bank for arbitrarily demanding “imaginary arrears”, when actually only eight EMIs amounting to Rs 19,200 remained to be paid. It pointed out that increasing the EMI from Rs 2,400 to Rs 3,805 constituted a gross unfair trade practice.

SBI appealed to the West Bengal State Commission, contending that the order was incorrect as the bank was unable to place the true facts on record. The bank claimed that even though the loan had been issued on a floating rate basis, the claim was allowed on the assumption that interest was payable at a fixed rate of 8 per cent. Singh pointed out that the bank had recovered 130 instalments from his salary account instead of 120 EMIs, thereby misusing its power.

The State Commission observed that the bank had failed to file the agreement to show that interest was chargeable on floating rate. It dismissed the appeal. It also castigated SBI for deducting excess EMIs and causing economic hardship to Singh.

Not content with harassing its own employee, SBI then filed a revision, contending that the judgments in Singh’s favour were incorrect.

The National Commission observed that the bank had displayed gross negligence by not bothering to contest the complaint before the District Commission. It observed that the factual findings in the concurrent orders of the District as well as the State Commission could not be challenged in revision proceedings. The loan agreement was finally brought on record in the revision proceedings. It revealed a “sorry state of affairs” as the column regarding interest had been left blank and there was no mention of floating rate of interest.

Accordingly, by its order of February 27, 2023, delivered by Justice Sudip Ahluwalia, the National Commission held that the bank’s conduct was high handed and amounted to deficiency in service as well as unfair trade practice. It dismissed SBI’s revision and ordered it to pay Singh a further amount of Rs 10,000 as litigation cost.

The writer is a consumer activist