Supreme Court Rules in Favor of NBFCs: Loan Receiver Can’t Object to Interest Rate After Repayment
March 5, 2024
In a significant judgment, the Supreme Court on Monday clarified that once an individual has availed a loan at the agreed rate of interest from a Non-Banking Financial Company (NBFC), they cannot later claim a refund of the interest amount, even if it exceeds the rate fixed by the Reserve Bank of India (RBI). The bench, consisting of Justices A.S. Bopanna and M.M. Sundresh, emphasized that the determination of interest rates on lending and recovery is a policy matter within the purview of NBFCs.
The court’s decision came in response to a case where the appellant, who had obtained a housing loan from a NBFC, claimed that the company had charged a higher interest rate than initially assured, despite the RBI not altering its Prime Lending Rate. The appellant, having repaid the loan amount with interest according to the agreed-upon terms, sought a refund based on the alleged discrepancy.
The judgment, authored by Justice A.S. Bopanna, highlighted the binding nature of the policies and procedures set by NBFCs in matters of lending and recovery. The court emphasized that the rate of interest is a matter of policy and cannot be case-specific unless individual agreements between the parties dictate otherwise.
The court rejected the appellant’s argument that email correspondence with the NBFC’s sales agent indicated a different understanding of the interest rate calculation. It held that once a contract is established between the parties, pre-contractual correspondence loses significance, and the terms agreed upon in the contract prevail.
Examining the loan agreement, the court noted that the ‘Rate option’ was ‘Adjustable,’ signifying an Adjustable Rate of Interest dependent on fluctuations in interest rates. The judgment advised individuals to exercise caution and wisdom while entering into contracts.
In conclusion, the Supreme Court held that the National Consumer Dispute Redressal Commission (NCDRC) had not committed any errors warranting interference, dismissing the appeal. The ruling asserts that objections regarding the interest rate cannot be raised once the receiver has acquiesced by signing the agreement and repaid the loan as per the agreed terms.
Source: Supreme Court
Case Details: RAJESH MONGA VERSUS HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED & ORS.,
CIVIL APPEAL NO.1495 OF 2023
Click Here to Read/Download Judgment
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