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Case Title: Rajesh Monga versus Housing Development Finance Corporation  Limited and Ors.

Case No: Civil Appeal NO.1495 of 2023

Quorum: Judge A.S.Bopanna

Facts of the case:-

In August of 2005, the appellant, who was in need of a home loan, was approached by respondents Nos. 2 and 3, who were employed by respondent No. 1. In addition, the appellant was considering the possibility of obtaining a loan from another financial institution. In the appellant’s case, respondents Nos. 2 and 3, who are respondent No. 1’s (HDFC) resident manager and direct sales representative, respectively, persuaded the appellant that respondent No. 1’s interest rate on a house loan was lower than what ICICI Bank was charging. Regarding this, the appellant mentioned an email from respondent No. 2 dated October 5, 2005, arguing that the communication presented a comparison showing that respondent No. 1’s interest rate was less expensive.

The respondent No. 2 promised respondent No. 1 that the interest rate would be determined by the Prime Lending Rate of the RBI. Based on these claims, the appellant is said to have applied to respondent No. 1 for a home loan in the amount of Rs. 3,50,00,000/= (Rupees Three Crores and Fifty Lakhs), which was approved and a loan agreement dated 11.01.2006 was signed. 

Even though this was the case, the appellant is upset that respondent No. 1 increased the interest rate to 8.25% even though the RBI did not alter the prime lending rate between January 11, 2006, and May 1, 2006. Despite the complainant contacting respondent No. 2 and other officers, there was no resolution; instead, respondent No. 1 increased the interest rate to 8.75 percent, 9.25%, and 10.5% on Page 3 of C.A. No. 1495 of 2023, even though the RBI did not alter the Prime Lending Rate. Thus, on September 27, 2007, the appellant received a legal notification requesting that the interest amount that was imposed above and beyond the 7.5% annual percentage rate be returned. The appellant sought the Consumer Forum against this backdrop.

Contentions:

It is contended by the Learned Counsel of the Appellant that the Respondent No. 2, speaking on behalf of Respondent No. 1, had promised that the interest rate assessed by Respondent No. 1 would be in line with the retail prime lending rate that the RBI would announce. Although the agreement states that the interest rate will be in line with respondent No. 1’s prime lending rate, this contradicts the assurance given to the appellant that the adjustable interest rate would only be agreed upon in the event that the RBI changed the interest rate, not in line with respondent No. 1’s interest. In this context, the appellant’s senior counsel has heavily relied on the email dated October 5, 2005, to assert that the appellant received such an assurance.

Furthermore, plethora of cases were relied on by the Counsel of Appellant to establish that despite the fact that the parties may have reached a consensus on some points in the agreement, what really matters is the parties’ intention, and any correspondence that the parties exchanged prior to the transaction or before signing the agreement will be pertinent to understanding the parties’ intention.

Court Analysis and Judgement:

Having perused the precedents on which reliance was placed, the court was of the opinion that the same does not come to the aid of the appellant. It was noted that respondent No. 1 would be subject to its lending and recovery policies and processes because it was an NBFC and a business entity. In this sense, unless the parties’ express agreement specifies otherwise, the application of the interest rate to be charged is likewise a matter of policy and cannot be case-specific.

It is evident at the threshold that the appellant is not too ignorant to benefit from the precedents cited. However, the argument that the appellant was sufficiently intelligent to know better than to enter into the transaction after being duped by the email and to have the option of obtaining a loan from another bank would suggest otherwise. Under such circumstances, the parties to the agreement would be bound by its provisions, and any correspondence between the parties would not supersede the respondent No. 1 institution’s policy decisions. 

The Court pointed out that in order to argue that the appellant was deceived or that the previous representation will result in unfair trade practices, the appellant should have brought up this argument at the time the agreement was scheduled to be signed. It was noted that there is nothing in the record or evidence presented to show that the appellant actually pursued other financial institutions that had consented to approve loans, or to show that the deal was better and that the appellant would have been better off if it had come from one of those institutions.

The Court dismissed the appeal with the view that no error has been committed so as to call for interference.

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Judgement Analysis Written by – K.Immey Grace

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