Collection Of Penal Charges For Delay As Per Agreement Does Not Amount To Deficiency In Service: Telangana State Commission Dismisses Appeal Against Bajaj Finance

Brief Facts of the Case

The complainant took a personal loan of Rs. 1,10,000 from Bajaj Finance/finance company and paid monthly installments of Rs. 5,022 without delay. They even paid installments early on one occasion and made an additional payment of Rs. 4,500. However, the finance company claimed a penalty of Rs. 600 and made repeated calls. The agreed interest rate was 1.75% per month, but the company charged 35.01% annually, exceeding the agreed rate. The company also penalized the complainant unnecessarily for alleged delays. The complainant filed a complaint before the District Commission, seeking Rs. 1,00,000 with interest, Rs. 5,000 in costs, and Rs. 50,000 as compensation. The District Commission dismissed the complaint, following which the complainant appealed to the State Commission of Telangana.

Contentions of the Finance Company

The finance company argued that there is no “consumer” and “service provider” relationship between both the parties, hence, the Commission lacks jurisdiction. It was highlighted that the complainant took a loan of Rs. 1,10,000, agreed to repay it in 24 EMIs of Rs. 5,022 each at 35.01% interest, starting from the loan date. A part payment of Rs. 45,000 was made, but the complainant defaulted on the 17th EMI and bouncing charges. The lower interest scheme does not apply as the loan is under Rs. 2 crores. The finance company argued that they acted per RBI guidelines and the agreement and sought the complaint to be dismissed.

Observations by the State Commission

The Commission noted that a loan of Rs.1,11,000 was sanctioned with an annual interest rate of 35.01%, repayable in 24 monthly installments of Rs.5,022. However, the Personal Loan Agreement signed by both parties indicated a loan tenure of 36 months, with a flat interest rate of 20.95% and a reducing balance interest rate of 35.01%. This inconsistency between the two documents raised concerns about the actual loan terms. It was observed that the payments made by the complainant were often delayed, with installments paid irregularly instead of on the due date. There was no evidence provided to confirm the full payment of either 24 or 36 installments. The Commission further observed that the penal charges for delays, as stipulated in the agreement, were appropriately collected by the finance company. After reviewing the evidence, the commission concluded that the interest charged and EMI terms were as per the agreement. There was no deficiency in service or unfair trade practice by the finance company. Accordingly, the appeal was dismissed, and the District Commission's order was upheld.

Case Title: T. Sanjeeva Vs. The Manager, Bajaj Finance Limited

Case Number: F.A. No. 571/2022