GE COUNTRY WIDE CONSUMER FINANCIAL SERVICES LIMITED REP. BY ITS ASSISTANT LEGAL MANAGER Vs. B.HARINATH REDDY

JUDGEMENT

(1.) The opposite party is the appellant. The appeal is filed challenging the order of the District forum whereby the appellant was directed to pay a sum of Rs.10,000/-, to collect principle amount with interest @ 10.10% per annum and Rs.1,000/- towards costs.

(2.) The facts of the case as represented by the respondent are that the appellant had sanctioned loan an amount of Rs.6,15,000/- under loan account no.HHYH1533 repayable with interest @ 10.10% per annum. The loan was sanctioned on deposit of title deeds by the respondent who created a mortgage in favour of the appellant as security for repayment of the loan. The appellant, at the time of disbursement of the loan deducted an amount of Rs.13,555/- towards documentation and processing charges and disbursed a sum of Rs.6,01,445/- to the respondent. The appellant charged higher rate of interest than what was agreed in the case of secured loan which amounts to unfair trade practice and is a mischief under the provisions Usurious Loan Act. As per the terms and conditions of the loan agreement, the appellant cannot charge higher rate of interest than the one initially fixed at the time of sanctioning of the loan to the respondent. The appellant is not a banking company. Exemption from the provisions of Usurious Loan Act under Sec.21A of the Banking Regulation Act is not available to the appellant. The coverage of entire interest component for the complete loan period of 10 years in advance, the appellant had been adjusting the subsequent instalments of the EMIs towards the payment of the principle component.

(3.) The front end method of calculating interest compound is illegal as the respondent had cleared off the loan within two years therefore he cannot be compelled to pay the interest component on the principle sum for the balance 8 years of the loan period. The appellant had charged factual rate of interest/internal rate of return. The appellant had incorporated certain clauses in fine print in the contract. The respondent paid 28 EMIs of Rs.10,302/- each totaling to Rs.2,88,456/- and requested the appellant to accept the foreclosure as he wanted to repay the entire outstanding amount. The appellant issued statement of account demanding the respondent to pay an amount of Rs.5,68,226/- towards outstanding loan amount and an additional sum amounting to Rs.25,000/- towards foreclosure charges.