Hongkong and Shanghai Banking Corp. Ltd v. Awaz & Ors.

Held: Yes – The credit card holders in the present case were well-informed and educated and agreed to be bound by the express stipulation by the terms issued by the respective banks – The banks in the most important terms and conditions provided all necessary information with regard to fees, and charges applicable to credit cards, credit and cash withdrawal limits – Once the terms of the credit card operations were known to the complainants and disclosed by the banking institutions before the issuance of the credit cards, the National Commission could not have scrutinized the terms or conditions, including the rate of interest – National Commission had no jurisdiction to re-write the said terms of the contract entered between the banks and the credit cardholders, which the parties mutually agreed to be bound by. [Paras 63, 65] Economic legislation/notification – Validity – To be tested on the touchstone of reasonableness: Hongkong and Shanghai Banking Corp.

Ltd. v. Awaz & Ors. 1486 [2024] 12 S.C.R. Held: In deciding the validity of any economic legislation or notification having a public objective sought to be attained, it is imperative to test it on the touchstone of reasonableness – In the absence of any patent arbitrariness, the directions cannot be condemned as being violative of Part III of the Constitution of India – In the present case, it is not the case of the Complainants that the directions or decisions taken by the statutory authority entrusted to manage the economy, do not pass the test of Wednesbury principle of reasonableness, or are not free from arbitrariness nor affected by bias or actuated by mala fide. [Para 61] Unfair trade practice – What is not – Whether charging rate of interests by banks in the manner as advised by RBI vide its master circulars & notifications being independent of a standard ceiling rate prescribed by the RBI, constitute an unfair trade practice: Held: No – Any trade practice adopted for promoting the sale, use, or supply of any goods, or for the provision of any service, by adopting any unfair method or unfair or deceptive practice, has to be treated as ‘unfair trade practice’ – Thus, whether an act can be condemned as an unfair trade practice, or not, the key is to examine the ‘modus operandi’ i.e. whether there is any false statement/misrepresentation or deception – In the present case, the pre-conditions of ‘deceptive practice’ and unfair method’ are manifestly absent – The Banks in no manner made any misrepresentation to deceive the credit card holders – RBI held that none of the bank acted contrary to the policy directives issued by the RBI – Even otherwise, there is no averment to establish how the charging of rates of interest upon the default by credit card holders, without a standardized rate, is usurious and constitutes an unfair trade practice – Mere inflation in the rates of interest cannot be construed as a practice, intended to cause loss or injury. [Paras 68, 69] Case Law Cited Keshav Lal Khemchang & Sons Pvt.

Ltd & Ors. v. Union of India (2015) 4 SCC 770; Central Bank of India v. Ravindran (2002) 1 SCC 367; Union of India v. Prakash P. Hinduja (2003) 6 SCC 195; Pratibha Pratisthan v. Canara Bank (2017) 3 SCC 712; Godfrey Phillips India Ltd. v. Ajay Kumar [2008] 5 SCR 937 : (2008) 4 SCC 504 : 2008 SCC OnLine SC 603; Pioneer Urban Land Supreme Court Reports [2024] 12 S.C.R. 1487 and Infrastructure v. Geetu Gidwani Verma & Anr. (2019) 5 SCC 725; Ireo Grace v. Abhishek Khanna [2021] 2 SCR 1 : (2021) 3 SCC 241; Experion Developers Pvt Ltd v. Sushma Ashok Shiroor [2022] 5 SCR 590 : (2022) 12 SCC 286; Texco Marketing Pvt. Ltd. v. TATA AIG GIC [2022] 9 SCR 1031 : [2023] 1 SCC 428; L.Chandra Kumar v. Union of India & Ors. [1997] 2 SCR 1186 : [1997] 3 SCC 261; Rameshwar Prasad Shrivastava & Ors. v. Dwarkadhis Projects Private Limited & Ors [2018] 14 SCR 1118 : (2019) 2 SCC 417; Administrator Smt. Tata Bai Desai Charitable Opthalmic Trust Hospital, Jodhpur v.

Managing Director, Supreme Elevators India Pvt. Ltd. & Ors., SLP(Civil) No. 18636/2019; Shri Sitaram Sugar Company Ltd. v. Union of India [1990] 1 SCR 909 : (1990) 3 SCC 223; Small Industries Development Bank of India v. SIBCO Investment (P) Ltd. [2022] 1 SCR 913 : (2022) 3 SCC 56; Supreme Court Employees Welfare Association v. Union of India [1989] 3 SCR 488 : (1989) 4 SCC 187; Peerless General Finance & Investment Co. Ltd. & Anr. v. Reserve Bank of India [1992] 1 SCR 406 : (1992) 2 SCC 343; Rajasthan State Industrial Development & Investment Corporation v. Diamond & Gem Development Corporation Ltd. [2013] 4 SCR 331; Bharathi Knittting Company v. Worldwide Express Courier Division of Airfrieght Ltd. [1996] Supp. 2 SCR 653 : (1996) 4 SCC 704; Colgate Palmolive (India) Ltd. v. MRTP Commission [2002] Supp. 4 SCR 219 : (2003) 1 SCC 129; Directorate of Education v. Educomp Datamatics Ltd. [2004] 2 SCR 1010 : (2004) 4 SCC 19 – referred to.

List of Acts Consumer Protection Act, 1986; Reserve Bank of India Act, 1934; Banking Regulation Act, 1949; Indian Trust Act, 1882; Consumer Protection Act, 2019; Indian Contract Act, 1872; Code of Civil Procedure, 1908; Constitution of India. List of Keywords Credit card holders; Maximum ceiling rate of interest; Reserve Bank of India; Domain of the RBI; Borrowers/debtors; Banking operations; Banks/non-banking financial institutions; Unfair trade practice; Misrepresentation; Trust; Consumer; “Person”; Voluntary consumer association; Representative capacity; Locus to approach the National Consumer Disputes Redressal Commission (NCDRC); Exorbitant rates of interest; “On behalf of consumers”; Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors. 1488 [2024] 12 S.C.R. No deficiency in service; Re-write the terms of the contract; Guidelines issued by RBI; Cap the rate of interest charged by banks; Economic legislation/notification; Test of Wednesbury principle of reasonableness.

Case Arising From CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5273 of 2008 From the Judgment and Order dated 07.07.2008 of the National Consumers Disputes Redressal Commission, New Delhi in OP No. 51 of 2007 and 1913 of 2004 With Civil Appeal No(s). 5294, 5627, 5278 and 6679 of 2008 Appearances for Parties Dr. Abhishek Manu Singhvi, Manish Singhvi, Dhruv Mehta, Jaideep Gupta, Sr. Advs., Dr. Kishan Rawat, Ms. Mallika Joshi, Rajan Narain, Chanchal Kumar Ganguli, Mrs. Suruchi Suri, Ms. Nupur, Mayur Shah, Apurv Singhvi, Ms. Shalini Haldar, Shankar Divate, Sanjay Gupta, Ateev Mathur, Ajay Monga, Ms. Varsha Kripalani, Ms. Jagriti Ahuja, Ananta Prasad Mishra, Gagan Gupta, Amand Raj Gandhi, Partha Sarthy Bose, Lukshay Kumar, Keith Varghese, Ms. Bindi Girish Dave, Mrs. Shiel Sethi, Ms. Nina Gupta, Dr. Lalit Bhasin, Ms. Radhika Gupta, Vijay Gupta, Shiv Vinayak Gupta, Mrs. Bina Gupta, Shantanu Tyagi, Ms. Neha Goel, Shashvat Chandra, S. S. Shroff, Manish K. Bishnoi, H. S. Parihar, Kuldeep S. Parihar, Ms. Ikshita Parihar, Kunal Chatterjee, Satish Singh, Riddi Bose, Ms. Sampriti Baksi, Siddarth Banerjee, Mahesh Kumar, Advs. for the appearing parties. Judgment/Order of the Supreme Court Judgment Satish Chandra Sharma, J.

The captioned set of appeals arise out of the common Judgment & Order dated 07.07.2008 passed by the National Consumer Disputes Redressal Commission, Delhi (hereinafter “National Commission/ NCDRC”) in Complaint Case No. 51/2007 and Revision Petition Supreme Court Reports [2024] 12 S.C.R. 1489 No. 1913/2004. No appeal has been preferred from either of the parties, in the Revision Petition No. 1913/2004.

The National Commission proceeded with the prima-facie view that the charging of interest at rates ranging from 36% to 49% p.a. is exorbitant and amounts to the exploitation of the borrowers/debtors and is usurious, had framed the following issues: i. Whether the Reserve Bank of India (hereinafter referred to as RBI) is required to issue any circular or guidelines prohibiting the Banks/Non-Banking Financial Institutions/ money lenders from charging interest above a specific rate? ii. (a) Whether banks can charge the credit card users interest at rates from 36% to 49% per annum if there is any delay or default in payment within the time specified? (b) Whether interest at the above-stated rates amounts to charging usurious rates of interest?

The Appellants, Hong Kong Shanghai Corporation, Citibank, American Express Banking Corporation, Standard Chartered Bank, vide C.A. no. 5273/2008, C.A. No. 5294/2008, C.A. No. 5627/2008 and C.A. 5278/2008 respectively along with the Intervenor, Housing Development Finance Corporation (I.A. No. 6/2017) [hereinafter “Banks”] have challenged the correctness of the Impugned Order dated 07.07.2008, whereby the National Commission has held that the charging of interest at rates beyond 30% by the banks/non-banking financial institutions, from credit card holders, upon delay or default in payment, constitutes an unfair trade practice and that penal interest could be charged only once for one period of default and the same shall not be capitalized. The conclusive observation under challenge, passed by the National Commission is as under: (i) Charging of interest rates in excess of 30% p.a. from the credit card holders by banks for the former’s failure to make full payment on the due date or paying the minimum amount due, is an unfair trade practice. (ii) Penal interest can be charged only once for one period of default and shall not be capitalized. (iii) Charging of interest with monthly rests is also an unfair trade practice Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors. 1490 [2024] 12 S.C.R.

The Appellants have contended that determining the reasonability and ‘fixing of the maximum or the minimum rates of interest’, is the exclusive function of the Respondent no.6, the Reserve Bank of India, a statutory authority responsible for the regulation of the Indian Banking system. The Appellants have assailed the observations of the National Commission, in light of the statutory bar under section 21A & 35A of the Banking Regulation Act, which expressly bars courts/tribunals to re-open transactions between banks, on the question that the rates of interest are excessive and empowers the Reserve Bank of India, to formulate directions, as befitting the public interest, proper management and banking policies of the country. The Appellants have urged that the encroachment of this statutory domain of the Reserve Bank of India, by the National Commission, is against the mandate of the Constitution and the legislative intent of the Reserve Bank of India Act, 1934. The Appellants have further contended that the original complaint by the Respondent nos. 1-3 not only fails to meet the criterion of a Complaint u/s 12 r/w 13 of the Consumer Protection Act, 1986, but is a public interest litigation, guised as a consumer dispute which could not have been entertained by the National Commission, being beyond its inherent jurisdiction.

The Respondents nos. 1 to 3, the original Complainants [hereinafter “Complainants”] before the National Commission, have also preferred a cross-Appeal bearing CA. 6679/2008, against the Impugned Judgment dt. 07.07.2008 contending that the National Commission has only partly allowed their complaint, and ought to have adjudicated upon a benchmark restriction for the rates of interest charged by banks from credit card holders. It is contended that the rates of interest charged by the banks from its credit cardholders is usurious and exploitative in nature, and in contravention of the circulars issued by the Reserve Bank of India. The Complainants claim that they represent the public at large, as a voluntary consumer association voicing against the usurious rate of interest charged by the banks, which is a deficiency in service in banking and constitutes an unfair trade practice, in terms of the Consumer Protection Act, 1986. It is argued on behalf of the Complainants that there ought to have been a Notification passed by the Reserve Bank of India, fixing a maximum ceiling rate of interest for all banks, and in pursuance thereto had approached the National Commission by filing the Supreme Court Reports [2024] 12 S.C.R. 1491 Consumer Complaint no. 51 of 2007. It was prayed that the Appellant along with Respondent nos. 5, 6 & 7 be permanently restrained from charging excessive interest and service charges, de-hors the Prime Lending Rate, and the directions issued by the Reserve Bank of India. It was further prayed that all banks who have issued credit cards to Respondent no. 3 and members of the Respondent no.1 be directed to refund the amount of interest, claiming the same to be more than Rs. 5 crores. SUBMISSIONS ON BEHALF OF BANKS

The Appellant, along with the Respondent nos. 5, 6 and 7 are foreign banks carrying on the business of banking in India under the provisions of the Banking Regulation Act, 1949 and are scheduled commercial Banks as notified by the Reserve Bank of India.

The Appellants submit that the allegations raised by the Complainant that the rate of interest, charged by banks from its credit card holders, constitutes an unfair trade practice, is erroneous. It is stated that the modus of adopting any unfair methods, or deceptive means to promote the sale, use or supply of any goods or for providing any service, is manifestly absent. The Banks assert that they have neither indulged in any unfair trade practice nor have done anything which would bring them within the mischief of Section 2(r)(l)(i) to 2(r)(l)(x).

Further, there are also no specific allegations raised by the Complainants or any materials on record, to elicit any unfair trade practices adopted by the Banks. The Counsel for the Appellant submits that the National Commission has barely acted on the assumption that banks are indulging in unfair trade practices. It is stated that there are no facts to suggest that any of the scheduled banks under the purview of the Reserve Bank of India, are indulging in unfair trade practices, including charging exorbitant rates of interest. The National Commission has made the observation that rates of interest charged by banks is an unfair trade practice, without even discussing the scope of the definition under section 2(1)(r) of the Act. The only reason given with respect to the practice of charging excessive interest being unfair trade practice is that “if the Banking Regulation Act, 1949 requires that the RBI shall discharge certain functions in the public interest and the RBI does not discharge such Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors. 1492 [2024] 12 S.C.R.

functions, it would amount to unfair trade practice, but, that question is not required to be dealt with finally in this matter.” It is argued that the exercise of jurisdiction by the National Commission is ostensible and non-est in law. The administrative policy decisions of the determination of interest on credit cards and the regulation of the banks across the country, are within the specific statutory domain of the Reserve Bank of India. The Parliament of India, under List I of the Seventh Schedule of the Constitution of India had conferred upon the Reserve Bank of India, the powers of subordinate legislation to formulate directives, circulars, and administrative policies, having statutory force and being binding on all Banks from time to time1 Our attention is also drawn to the Preamble of the Reserve Bank of India Act, 1934 which enlists the endeavour of the RBI to “ secure monetary stability in India, having a modern monetary policy framework to meet the challenge of an increasingly complex economy, while maintaining price stability is the endeavour of the Reserve Bank of India.

The observations by the National Commission that the rate of interest, in excess of 30% per annum is an unfair trade practice, is per se illegal and is an interference with the clear, unambiguous delegation of powers in favour of the Reserve Bank of India and runs contrary to the legislative intent of the Banking Regulation Act, 1949.

It is submitted that the National Commission has ostensibly exercised jurisdiction by supplanting itself as the regulator of the banking systems instead and in the place of Reserve Bank of India, notwithstanding the bar under section 21A of the Banking Regulation Act, 1949. It is contended that Section 21A and 35A of the Banking Regulation Act, 1949 are enabling provisions for the Reserve Bank of India to give directions/guidelines to banks/banking companies, in the public interest. Section 21A in specific, creates an embargo upon courts/tribunals to re-open and adjudicate upon transactions on the ground that the rate of interest is excessive. The said provisions are reproduced as under:

21A: Rates of interest charged by banking companies not to be subject to scrutiny by courts: 1 Keshav Lal Khemchang & Sons Pvt. Ltd & Ors. Vs Union of India (2015) 4 SCC 770 Supreme Court Reports [2024] 12 S.C.R. 1493 Notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 2018), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.

35A: Power of the Reserve Bank to give directions: (1) Where the Reserve Bank is satisfied that: (a) In the public interest; or (aa) in the interest of banking policy; or [inserted by Act 58 in the [public interest]; or (b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or (c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions. (1)The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.”

The scope of the statutory bar under section 21-A of the Banking Regulation Act, 1949 has been comprehensively dealt with by this Hon’ble Court in the Central Bank of India Vs Ravindran2 wherein it has been observed that

With effect from 15.2.1984, Section 21A 2 Central Bank of India Vs Ravindran (2002) 1 SCC 367 Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors. 1494 [2024] 12 S.C.R. has been inserted in the Act, which takes away power of the court to reopen a transaction between a banking company and its debtor on the ground that the rate of interest charged is excessive. The provision has been given an overriding effect over the Usurious Loans Act, 1918 and any other provincial law in force relating to indebtedness.

It was also observed by this Hon’ble Court, that for all transactions, which may not be squarely governed by such circulars, the RBI directives may be treated as standards for the purpose of deciding whether the interest charged is excessive, usurious or opposed to public policy. Thus, in view of this statutory bar, the Complaint of the Respondent nos.1 to 3, which is only based on the higher rates of interest, could not have been entertained by the National Commission and deserved to be dismissed at the very threshold.

Further, in exercise of powers conferred under Section 35A read with Section 56 of the Banking Regulation Act, 1959 & being satisfied that it is necessary and expedient in the public interest so to do, it is also well within the exclusive jurisdiction of the Reserve Bank of India to take corrective and/or penal steps, suo-moto or on receipt of any representation or inquiry thereof, qua any such act in deference to its policy or circular.

The Appellants therefore urge that the maxima or minima of the interest could not have been decided by the Consumer Forum, as it is the specific statutory domain of the Reserve Bank of India and it is the directives of RBI alone that may be treated as standard for the purpose of deciding whether the interest charged is excessive, usurious or opposed to public policy3 Ld. Counsel for the Banks, also submits that in absence of a statutory direction by the Reserve Bank of India, with respect to a maximum ceiling rate, the Banks could not be held liable for any unfair trade practices. More-so, they are bound by the circulars of the Reserve Bank of India and have formulated policies accordingly.

It has been further argued that once an executive authority exercises a legislative power by way of subordinate legislation, pursuant to a delegated authority of a legislature, such executive authority cannot be asked to enact a law, which he has been empowered to do under the delegated legislative authority.4 A direction by the National 3 4 Keshav Lal Khemchang & Sons Pvt. Ltd & Ors. Vs Union of India [supra] Union of India Vs Prakash P. Hinduja (2003) 6 SCC 195 Supreme Court Reports [2024] 12 S.C.R. 1495 Commission to the Reserve Bank of India to issue directions on Benchmark Rates of Interest, is an attempt to usurp the jurisdiction, and can in no manner be considered lawful and tenable.

On merits, it is the assertion of the Appellants that the rates of interest formulated by them, are in conformity with the directions of the Reserve Bank of India. As a matter of policy pursuant to the liberalization of the economy and consequent deregulation of interest rates, the RBI vide Circulars dated 21.10.2003 and 02.07.2007 provided that: “Credit card dues are in the nature of non-priority sector personal loans, and as such, banks are free to determine the rate of interest on credit card dues without reference to their BPLR and regardless of the size” The same circulars also gave comprehensive directions on charging interest rates on advances and the Benchmark Prime Lending Rate (BPLR) as under: “Benchmark Prime Lending Rate (BPLR) and Spreads:

2.2.1 With effect from October 18, 1994, RBI has deregulated the interest rates on advances above Rs. 2 lakhs and the rates of interest on such advances are determined by the banks themselves subject to BPLR and Spread guidelines. For credit limits up to Rs. 2 lakh banks should charge interest not exceeding their BPLR. Keeping in view the international practice, and to provide operational flexibility to commercial banks in deciding their lending rates, banks can offer loans at below BPLR to exporters or other creditworthy borrowers, including public enterprises, on the basis of a transparent and objective policy approved by their respective Boards. Banks will continue to declare the maximum spread of interest rates over BPLR.

2.2.3. Banks are free to determine the rates of interest without reference to BPLR and regardless of the size in respect of loans for purchase of consumer durables, loans to individuals against shares and debenture/bonds, other non-priority sector personal loans, etc. as per details given in paragraph 2.4. Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors. 1496 [2024] 12 S.C.R.

2.4. Freedom to fix Lending Rates:

2.4.1 Banks are free to determine the rates of interest without reference to BLPR and regardless of the size………………..”

The said circulars clarify that credit card dues constitute non-priority sector personal loans and Banks are free to determine the rates of interest, without reference to PLR and regardless of their size. The Reserve Bank of India had given this discretion to the banks to determine rates of interest, as per the market forces, while maintaining transparency with the credit card holders. The Appellants assert that they have duly complied with all the requirements of the Reserve Bank of India, and none of the practices adopted by them, run contrary to the intent or directions of the Reserve Bank of India and its circulars.

The rates of interest on credit card dues are neither usurious nor do they constitute a practice that is unfair, arbitrary or unreasonable. The practice of charging any interest on credit-cards dues is such that credit card generally carry an interest rate on an annualised basis (Annual Interest Rate-APR). The interest due is calculated only on unpaid balances. Any customer who pays in the entire amount being the value of the said transaction, within the due date of payment, is not charged any interest. The penalty or cost of such interest is incurred once, there is default, which takes into account costs to the bank of non-performing loans (bad debt), acquisition costs, and are not unreasonable.

It is submitted that the charging of interest by the Bank is in accordance with the circulars issued by the RBI and cannot an unfair trade practice as the interest is paid only by those who default in making payments of their credit-card bills, after having enjoyed free credit for periods ranging between 17-55 days, or those who do not make payment of the entirety of their dues on each bill, and then on the balance dues. Most pertinently, the terms and conditions for charging of rates of interest or charges applicable thereto, have been duly informed to all customers by way of the Most Important Terms and Conditions issued by the Banks, which are the standard set of conditions for the issuance and usage of credit cards, thereby defining the responsibilities of the card issuer and the cardholder, and contain information with regard to fee, charges applicable on credit cards, Supreme Court Reports [2024] 12 S.C.R. 1497 finance charges and withdrawal limits, and are also provided at the time of the generation of each monthly bank/billing statement. The customer from day one is aware that in the event of there being a delayed payment, he would be liable to pay the interest.

A preliminary objection has also been raised by the Banks, that the Respondent nos. 1 & 2, do not qualify as a ‘consumer’ under the Consumer Protection Act, 1986 and have no locus standi to approach the National Commission. The Respondent nos. 1 & 2, are registered trusts, that claim to fight for consumer rights, are not purchasers of any goods, nor have they availed any services. The Complainant trust does not meet the requirements under section 2(b) & 2(d)) read with Section 12(c) and 13(6) of the Consumer Protection Act, 1986 and cannot be considered a voluntary consumer association. Be that as it may, a trust, whether registered under the Indian Trust Act, or the State Trust Registration Act, is not a person ‘person’ as defined under Section 2(1)(m) of the Consumer Protection Act, 1986, and & therefore not a consumer and consequently cannot invoke provisions or file a consumer dispute under the provisions of this Act.5

It is further submitted by the Appellants that the Respondents had approached the National Commission at the behest of the Respondent no. 3, one Mr. Thakur a credit card holder with Citibank, purportedly claiming an amount of Rs. 90,000/- against excess interest charged by the bank. Ld. Senior Counsel submits that the purported claim is ex-facie barred by section 21(a) of the Consumer Protection Act, which mandates the Commission to entertain claims only above Rs. 1 crore. More-so, the alleged concern

about an excessive exorbitant rate of interest being charged by the Respondent no. 2 and other similarly placed banks. But not getting proper guidance about it, hence could not challenge grievances about excessive rate of interest on credit card facilities

is wholly insufficient to constitute an unfair trade practice. Further, the pleading raised by the said Complainant, is improper and devoid of any material particulars to sustain a complaint. It not only fails to indicate how the concerned Respondent has suffered a deficiency of service; it does not disclose the date of purported default or alleged damage, or any particular date/rate of interest charged from him due to such default. 5 Pratibha Pratisthan Vs Canara Bank (2017) 3 SCC 712 Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors. 1498 [2024] 12 S.C.R.

It has been further submitted that the consumer complaint was purportedly filed in a representative capacity by the Respondents, ought to have complied with the provisions of Order 1 Rule VIII of the Code of Civil Procedure, 1908 as mandated under Section 13(6) of the Consumer Protection Act, 1986.6 In terms of Section 13(6) of the Consumer Protection Act, 1986, it was necessary for the Complainants to take necessary permission of the National Commission to sustain a complaint in a representative capacity. Our attention is drawn to an application filed by the Complainant, under section 13(6) of the Consumer Protection Act, 1986, and it has been brough to our notice that: (a) No application seeking such permission to file a Complaint in a representative capacity was filed up till the point of conclusion of arguments and reservation of judgment 22.05.2008. (b) Even otherwise, the application (undated) filed by the Complainant was done so subsequently, upon the reservation of the Judgement. (c) The application was never adjudicated upon by the Commission, and no attempt had been made by the Complainants to file review against the final order in this regard. It is stated that the Complaint could not have been filed in a representative capacity on behalf of all credit card holders across the spectrum, as only a handful of banks were impleaded as a party to the Complaint. Even otherwise, no notice of any kind whatsoever was issued to any other bank by the Hon’ble Commission for adequate representation, so as to further treat the complaint in a representative capacity. The scheduled banks notified by the Reserve Bank of India are engaged in the business of credit card, hence any representation at the behest of other banks, or directions to other banks, could not be done in a piecemeal manner. Most pertinently, all banks come under the regulation and supervision of the Reserve Bank of India, which is the statutory authority empowered to regularize, notify and further direct guidelines for the functioning of these Banks. 6 Godfrey Phillips India Ltd. v. Ajay Kumar (2008) 4 SCC 504 : 2008 SCC OnLine SC 603 Supreme Court Reports [2024] 12 S.C.R. 1499

It is further submitted a Complaint against any purported grievance owing to rate of interests, charged by banks, cannot be the subject matter of a proceeding before the National Commission and an alternate remedy has been provided by the legislature. The present regime under the Consumer Protection Act, 2019, provides a mechanism for redressal of grievances of consumers. By virtue of section 10 of the Consumer Protection Act, 2019, the Central Government is to notify a Central Consumer Protection Authority for regulating the matters pertaining to the violation of rights of consumers, including against grievances of unfair trade practice. The said authority is thus empowered to enforce the rights of consumers, exclusively. SUBMISSIONS BY THE COMPLAINANTS It is the grievance of the Respondent Complainants that the National Commission has partially allowed the Complaint by holding that charging of interest at rates in excess of 30% p.a. by the bank from its credit card holders, was an unfair trade practice and did not consider the violation of the Benchmark Restrictions to be fixed by the banks in accordance with the circulars issued by the Reserve Bank of India.

Our attention is drawn to the same 2003 Circular issued by the Reserve Bank of India, whereby the RBI has given guidelines as caution to banks, with respect to excessive interest charged by banks, and the same reads as under: “2.12. Excessive interest charged by banks

2.12.1 Though interest rates have been deregulated, charging of interest beyond a certain is seen to be usurious, and can neither be sustainable nor be conforming to normal banking practice. Boards of banks have therefore been advised to lay out appropriate internal principles and procedures so that usurious interest including processing and other charges, are not levied by them on loans and advances, in laying down such principles and procedures in respect of small value loans, particularly personal loans and such other loans of similar nature, banks should take into account, inter-alia the following broad guidelines: …...”

The Counsel for the Complainant has referred to various other circulars issued by the Reserve Bank of India, wherein the RBI has acknowledged that it has been receiving many complaints with regard to banks charging excessive rates of interests and vide such circulars, the RBI has directed the banks to not charge such high rates of interest. It is submitted that the current practice is such that, if a person fails to make the due payment within 30/45 Days, he will have to pay interest @ 36-49%, which is exorbitant, and unfair. It is argued that since services of banking, fall within the definition of “services” under section 2(1)(o) of the Act, any deficiency/dispute in such services arising therefrom shall also be governed under the Consumer Protection Act, 1986.

It is argued by the Complainants that a person aggrieved by the excessive rates of interest cannot be rendered helpless and by virtue of section 2 of the Banking Regulation Act, 1949, the operation of other laws is not expressly barred. It is the grievance of the Complainants that since the person who opens a bank account with a Bank, is a consumer of the bank’s facilities, the provisions of Consumer Supreme Court Reports [2024] 12 S.C.R. 1501

Protection Act, 1986 and the Consumer Forums are the necessary medium for grievance redressal. It is also the case of the Complainants that the terms and conditions laid down by the Banks, at the time of issuance of the credit cards, constitute a unilateral, and one-sided contract. The counsel for the Complainants has drawn a parallel with the contracts of adhesion from the French term (contracts d’ adhesion) as they symbolise a single will so unilaterally dominant that it dictates its terms not to an individual, but to an indeterminate collectively. The characteristics associated with a contract, such as freedom of contract and consensus are absent from such contracts, which makes such terms unfair and unconscionable. The term “unfair contracts” has been defined under section 2(46) of the Consumer Protection Act, 1986 and include all such contracts that have terms which cause significant change in the rights of such consumer. It is submitted that the unilateral terms of the banks, in charging such excessive rates of interest, is such an unfair contract.

Our attention is drawn to the 103rd Report submitted by the Law Commission on “Unfair Terms in Contract”, wherein it had recommended an amendment in the Indian Contract Act, 1872 against such unconscionable terms under any contract. It is the grievance of the Complainants that banks under the veil of providing credit card facilities, is executing unilateral contracts, for their own profit and gain, and such practice, cannot be fair by any means. It is submitted that such one-sided contracts, offering no choice to the consumer, have been struck down as “unfair trade practices”.7

It is submitted that the definition clause of the Act itself, gives adequate ammunition to the court to declare any form of unfair trade practice as illegal and grant the resultant relief to the consumer.8 It is urged that the Consumer Forum has the necessary jurisdiction, to entertain the plea of a consumer, and further adjudicate on the terms of a contract, in the present case being the rates of interest, being charged by the banks. It is also argued that the question of 7