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

- **Citation:** 2024 INSC 1044
- **Court:** Supreme Court of India
- **Decided:** 2024-12-20
- **Case number:** Civil Appeal No. 5273 of 2008
- **Bench:** Bela M. Trivedi, Satish Chandra Sharma
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hongkong-and-shanghai-banking-corp-ltd-v-awaz-ors-37393
- **Pages:** 35

## Headnote

(i) Whether the Respondent organization had the locus to approach
the National Consumer Disputes Redressal Commission (NCDRC);
(ii) Whether the NCDRC had the jurisdiction to interfere with banking
operations, which is the exclusive statutory domain of the Reserve
Bank of India; (iii) Whether the NCDRC had the jurisdiction to fix
a maximum ceiling rate of interest to be charged by banks from
their credit card holders for their failure to make full payment on the
due date, at the behest of the Reserve Bank of India & unilaterally
direct banks/non-banking financial institutions to charge rates of
interest not beyond the 30% p.a., in absence of an instruction/
directive of the Reserve Bank of India (RBI); (iv) Whether the
Impugned Judgment interferes with the contract executed between
the parties; (v) Whether charging rate of interests by banks in the
manner as advised by RBI vide its master circulars and notifications
being independent of a standard ceiling rate prescribed by the RBI,
constitute an unfair trade practice.
Headnotes†
Consumer Protection Act, 1986 - ss.12(1), 13(6), 2(1)(d) -
"consumer" - Reserve Bank of India Act, 1934 - Respondent
nos. 1 and 2-Trusts claiming themselves to be a voluntary
consumer association fighting for consumer rights, if had the
locus to approach the National Commission - The original
complaint, if met the threshold of ss.12(1) and 13:
Held: No - The original Complaint before the Commission which
was filed in a representative capacity, by the Trust, representing
all consumers purportedly aggrieved owing to the exorbitant rates
of interest charged by the banks, was filed without complying with
* Author
[2024] 12 S.C.R.
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Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
the mandate of Or. I, r.8, CPC prescribed u/s.13(6) - No order was
passed by the National Commission permitting the Respondent
nos.1 and 2 to represent the interest or act on behalf of any
consumer - Complainants filed the application u/s.13(6) seeking
permission to act "on behalf of consumers" only at the stage of
conclusion of arguments, and judgment being reserved - Since,
the requirement of Or. I r.8, prescribed in s.13(6) is to be read into
s.12(1), the requirement of obtaining prior permission from the
Commission, for any consumer to act in a representative capacity,
cannot be dispensed with - Further, a trust is not a "person" as
defined u/s.2(1)(m) of the 1986 Act and therefore not a consumer
and thus, cannot file a consumer dispute under the 1986 Act -
Also, the consumer complaint did not disclose any deficiency in
service or violation and was in fact a public interest litigation in
guise of a purported consumer dispute - Respondents approached
the National Commission at the behest of the Respondent no.3, a
credit card holder with Citibank, purportedly claiming an amount
of Rs. 90,000/- against excess interest charged by the bank,
which is barred by the pecuniary jurisdiction of the Commission -
Furthermore, the administrative policy decisions of banks do not
constitute provisions/facilities of banking, which may come under
the umbrella of 'service', defined u/s.2(1)(o) of the 1986 Act - A
policy decision pertaining to the rate of interest, and trade practices
carried out by the banks across the country is a regulatory function
within the specific statutory domain of the RBI and cannot come
under the purview of judicial scrutiny by the National Commission -
National Commission erred in holding that any complaint under
the 1986 Act to curb unfair trade practice(s) adopted by the banks
is maintainable - National Commission had no jurisdiction to
entertain a complaint having vague, ambiguous allegations and
no cause of action - Order of the National Commission set aside.
[Paras 42-47, 57]
Reserve Bank of India Act, 1934 - Banking Regulation Act,
1949 - s.21A - Whether the NCDRC has the jurisdiction to
interfere with banking operations which is the exclusive
statutory domain of the RBI - Whether the NCDRC had the
j

## Text

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[2024] 12 S.C.R. 1482 : 2024 INSC 1044
Hongkong and Shanghai Banking Corp. Ltd.
v.
Awaz & Ors.
(Civil Appeal No. 5273 of 2008)
20 December 2024
[Bela M. Trivedi and Satish Chandra Sharma,* JJ.]
Issue for Consideration
(i) Whether the Respondent organization had the locus to approach
the National Consumer Disputes Redressal Commission (NCDRC);
(ii) Whether the NCDRC had the jurisdiction to interfere with banking
operations, which is the exclusive statutory domain of the Reserve
Bank of India; (iii) Whether the NCDRC had the jurisdiction to fix
a maximum ceiling rate of interest to be charged by banks from
their credit card holders for their failure to make full payment on the
due date, at the behest of the Reserve Bank of India & unilaterally
direct banks/non-banking financial institutions to charge rates of
interest not beyond the 30% p.a., in absence of an instruction/
directive of the Reserve Bank of India (RBI); (iv) Whether the
Impugned Judgment interferes with the contract executed between
the parties; (v) Whether charging rate of interests by banks in the
manner as advised by RBI vide its master circulars and notifications
being independent of a standard ceiling rate prescribed by the RBI,
constitute an unfair trade practice.
Headnotes†
Consumer Protection Act, 1986 - ss.12(1), 13(6), 2(1)(d) -
"consumer" - Reserve Bank of India Act, 1934 - Respondent
nos. 1 and 2-Trusts claiming themselves to be a voluntary
consumer association fighting for consumer rights, if had the
locus to approach the National Commission - The original
complaint, if met the threshold of ss.12(1) and 13:
Held: No - The original Complaint before the Commission which
was filed in a representative capacity, by the Trust, representing
all consumers purportedly aggrieved owing to the exorbitant rates
of interest charged by the banks, was filed without complying with
* Author
[2024] 12 S.C.R.
1483
Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
the mandate of Or. I, r.8, CPC prescribed u/s.13(6) - No order was
passed by the National Commission permitting the Respondent
nos.1 and 2 to represent the interest or act on behalf of any
consumer - Complainants filed the application u/s.13(6) seeking
permission to act "on behalf of consumers" only at the stage of
conclusion of arguments, and judgment being reserved - Since,
the requirement of Or. I r.8, prescribed in s.13(6) is to be read into
s.12(1), the requirement of obtaining prior permission from the
Commission, for any consumer to act in a representative capacity,
cannot be dispensed with - Further, a trust is not a "person" as
defined u/s.2(1)(m) of the 1986 Act and therefore not a consumer
and thus, cannot file a consumer dispute under the 1986 Act -
Also, the consumer complaint did not disclose any deficiency in
service or violation and was in fact a public interest litigation in
guise of a purported consumer dispute - Respondents approached
the National Commission at the behest of the Respondent no.3, a
credit card holder with Citibank, purportedly claiming an amount
of Rs. 90,000/- against excess interest charged by the bank,
which is barred by the pecuniary jurisdiction of the Commission -
Furthermore, the administrative policy decisions of banks do not
constitute provisions/facilities of banking, which may come under
the umbrella of 'service', defined u/s.2(1)(o) of the 1986 Act - A
policy decision pertaining to the rate of interest, and trade practices
carried out by the banks across the country is a regulatory function
within the specific statutory domain of the RBI and cannot come
under the purview of judicial scrutiny by the National Commission -
National Commission erred in holding that any complaint under
the 1986 Act to curb unfair trade practice(s) adopted by the banks
is maintainable - National Commission had no jurisdiction to
entertain a complaint having vague, ambiguous allegations and
no cause of action - Order of the National Commission set aside.
[Paras 42-47, 57]
Reserve Bank of India Act, 1934 - Banking Regulation Act,
1949 - s.21A - Whether the NCDRC has the jurisdiction to
interfere with banking operations which is the exclusive
statutory domain of the RBI - Whether the NCDRC had the
jurisdiction to fix a maximum ceiling rate of interest to be
charged by banks from their credit card holders for their
failure to make full payment on the due date, at the behest
of the RBI and unilaterally direct banks/non-banking financial
1484
[2024] 12 S.C.R.
Supreme Court Reports
institutions to charge rates of interest not beyond the
30% p.a., in absence of an instruction/directive of the RBI:
Held: RBI is the prime banking institution of the country and a
statutory authority entrusted with the supervisory role over banking
and conferred with the authority of issuing binding directions having
statutory force - NCDRC assumed jurisdiction and expertise
over the RBI observing that a ceiling on the rates of interest is
the purported solution to the alleged exploitation of credit card
holders - It made observations contrary to the legislative intent
of s.21A of the 1949 Act that provides for a statutory bar on any
court/tribunal to re-open transactions, that the rate of interest
charged by the banking company in respect of such transaction is
excessive - The decision of the National Commission unilaterally
holding that any interest above 30% p.a. is usurious is contrary
to the legislative intent of s.21A and is an encroachment upon
the domain of the RBI - The challenge by the complainants that
the guidelines issued by the RBI are arbitrary and not in public
interest is without any basis - RBI is the prime regulator and the
decision-making authority for the economic/financial decisions of
the Indian economy, any endeavor by the National Commission
or any other Court/Tribunal to decide at the behest of the RBI
cannot be termed to be just, fair and equitable - An endeavour to
cap the rate of interest charged by banks and dictating the need
for a Benchmark Prime Lending Rate, drawing parallels with other
economies across the world, whilst failing to trust the prudence
of the RBI which is entrusted with the fundamental responsibility
of regulation of the monetary system and banking business is
unwarranted - A direction cannot be issued to the RBI, to enact
a particular legislation. [Paras 48, 50, 51, 56, 58-60]
Consumer Protection Act, 1986 - s.2(1)(m) - "person" - Trust,
if a "person" and whether can file a consumer dispute under
the 1986 Act:
Held: A trust, whether registered under the Indian Trust Act or the
State Trust Registration Act is not a "person" as defined u/s.2(1)
(m) of the 1986 Act - The issue whether a Trust would come within
the purview of consumer has been referred to a larger bench in
Administrator Smt. Tata Bai Desai Charitable Opthalmic Trust
Hospital, Jodhpur case, however, the ratio in Pratibha Pratisthan
case holding that a trust is not a person and therefore not a
[2024] 12 S.C.R.
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Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
consumer and consequently cannot invoke provisions or file a
consumer dispute under the provisions of this Act, is the position
of law in force - Indian Trust Act, 1882 - State Trust Registration
Act. [Para 44]
Reserve Bank of India Act, 1934 - Notifications, circulars,
direction/guideline issued by RBI - Nature:
Held: Any direction or guideline issued by a statutory authority is
an extension of the statute itself - Rules made under a statute
must be treated, for all purposes of construction or obligations,
exactly as if they were in that Act - The notifications, circulars and
directions of the RBI are nothing but the legislative expression of
the 'statement of object & reasons' encapsulated in the preamble of
the 1934 Act - Hence, the statutory presumption that the legislature
while formulating laws has inserted every part thereunder for a
purpose and that legislative intention, which should be given effect
to, would be applicable to the present guidelines as well - National
Commission had no jurisdiction to assume the jurisdiction of the
RBI, or act/decide or regulate on its behest, any monetary decision
or policy. [Paras 56, 57]
Contract - Terms of the contract, if can be re-written - Whether
the Impugned Judgment of the National Commission interferes
with the contract executed between the parties:
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:
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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
[2024] 12 S.C.R.
1487
Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
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";
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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.
1.
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
[2024] 12 S.C.R.
1489
Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
No. 1913/2004. No appeal has been preferred from either of the
parties, in the Revision Petition No. 1913/2004.
2.
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?
3.
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
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4.
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.
5.
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
[2024] 12 S.C.R.
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Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
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
6.
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.
7.
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).
8.
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
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functions, it would amount to unfair trade practice, but, that question
is not required to be dealt with finally in this matter."
9.
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.
10. 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.
11. 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
[2024] 12 S.C.R.
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Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
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."
12. 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
1494
[2024] 12 S.C.R.
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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.
13. 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.
14. 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.
15. 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
Keshav Lal Khemchang & Sons Pvt. Ltd & Ors. Vs Union of India [supra]
4
Union of India Vs Prakash P. Hinduja (2003) 6 SCC 195
[2024] 12 S.C.R.
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Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
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.
16. 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.
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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...................."
17. 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.
18. 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.
19. 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,
[2024] 12 S.C.R.
1497
Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
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.
20. 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
21. 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
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22. 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.
23. 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
[2024] 12 S.C.R.
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Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.
24. 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
25. 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.