"Analyzing the Supreme Court's Decision in 'Rajesh Monga v. HDFC Ltd': A Case Study on refund of interest contrary to Pre-contractual correspondence and Prime Lending Rate of RBI
- Meenakshi Sakhare
- Mar 28, 2024
- 2 min read
Facts:
Loan receiver received an email from HDFC that provided a comparison chart of rate of interest between HDFC and ICICI, that demonstrated the Rate of interest provided by HDFC is lower. The email also provided that that rate of interest shall be based on primary Lending rate fixed by RBI. Loan receiver signed a Loan agreement and after availing the loan, duly paid the loan with interest. Loan Receiver then approached the Consumer forum seeking refund of interest claiming that a higher rate of interest was charged contrary to assurances made in the email communication amounting to unfair trade practices.
The Hon’ble Supreme Court’s Ruling and observations:
The Hon’ble Supreme Court has upheld the decision of the National Consumer Dispute Redressal Commission that dismissed an Appeal filed by the loan receiver challenging Higher Rate of interest levied by HDFC contrary to assurances made in an email communication on following grounds:
1. Party is NBFC and a corporate body that is bound by the policies and procedures of HDFC with regards to lending and recovery.
2. Loan receiver is not illiterate and ought to have read the loan agreement.
3. Pre-contractual correspondence lose significance on having acquiesced by signing of loan agreement and cannot override the policy.
4. Grievance ought to have been made before signing the agreement and not after execution, availing of loan and repaying the loan amount with interest.
5. Nothing on record to show that loan was provided at a lower rate of interest by another institution.
Conclusion:
In the commercial realm, it is crucial to thoroughly review and comprehend loan agreements prior to signing, as this act binds individuals to the terms outlined within. Such scrutiny is particularly essential given the very business of banks and financial institutions run and thrive on interest component which cannot be ignored.
The Hon’ble Supreme Court has underscored the distinction between loan agreements and other contracts such as insurance or sales agreements. Unlike the latter, which are not typically governed by the policies and procedures of non-banking financial corporations (NBFCs) unless explicitly specified, loan agreements are subject to such policy by default.
The expectation of individuals seeking loans, particularly concerning the alignment of interest rates with the prevailing lending rates determined by the Reserve Bank of India (RBI) also seems to be deceptive and illusory.
Click below to Read Judgment
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