No objection can be raised to the interest rate after the loan receiver repays the amount: Supreme Court

While hearing the Rajesh Monga vs. Housing Development Finance Corporation Limited & Ors. case on March 04, 2024, the Supreme Court (SC) held that once the loan has been availed by a person (loan receiver) at an agreed rate of interest then he/she cannot raise any objection when the rate of interest is increased after having acquiesced by signing the agreement. The bench said, “Having executed the agreement; having agreed to the terms and conditions; having received the loan amount, the appellant cannot raise any objection for the first time when the rate of interest was increased after having acquiesced by signing the agreement.” The matter was heard by a two-judge bench consisting of Justice AS Bopanna and Justice MM Sundresh. The appeal before the SC was against the order of the National Consumer Disputes Redressal Commission (NCDRC) which stated that the appellant (Rajesh Monga) was bound by the terms and conditions of the agreement while the respondent (HDFC) was bound by various instructions of the Reserve Bank of India at the time of signing the agreement. Hence, the complaint filed by the appellant was dismissed and he approached the top court. Rajesh Monga was in need of a home loan. The case of the appellant was that respondents No. 2 and 3 being the direct sales agent and the resident manager of HDFC convinced the Monga that the rate of interest charged by HDFC on home loans was lesser than what was being charged by ICICI Bank. 

In this regard, the appellant relied on an email from a sales agent to contend that a comparison was provided in the said email to the appellant that the rate of interest offered by respondent No.1 was cheaper. The grievance of the appellant was that the HDFC revised the rate of interest to 8.25 %, despite RBI not having changed the Prime Lending Rate. In spite of the complainant contacting respondent No. 2 and other officers, there was no relief, instead, the HDFC raised the rate of interest to 8.75 %, to 9.25% and again to 10.5% though there was no change made by RBI about the Prime Lending Rate. The appellant therefore got issued a legal notice demanding to return the interest amount which was charged over and above 7.5% p. a. The HDFC vide their reply to the notice contended that the appellant through the agreement opted for an ‘Adjustable Rate of interest’, as such rate of interest was varying as per the retail prime lending rate of the respondent. 

After hearing the matter, the SC bench observed that “In the instant case, at the outset, it is to be noted that the respondent No. 1 being a NBFC and as a corporate body would be bound by its policies and procedures with regard to lending and recovery. In that regard, the applicability of the rate of interest to be charged is also a matter of policy and cannot be case-specific unless the individual agreement entered into between the parties indicates otherwise.” Moreover, the SC said that the appellant should be wise while entering into a contract and remarked, “At the threshold, it can be noted that the appellant is not an illiterate person to take the benefit of the precedents relied upon. On the other hand, when it is contended that the appellant had the option of securing loan from other banks and that being misled by the email had entered into the transaction, would by itself indicate that the appellant was worldly wise. In such circumstance when the parties have signed the agreement dated 01.11.2006, the terms agreed therein would bind the parties and the email exchanged between the parties cannot override the policy decisions of the respondent No.1 institution...”

The top court concluded that “Having executed the agreement; having agreed to the terms and conditions; having received the loan amount, the appellant cannot raise any objection for the first time when the rate of interest was increased after having acquiesced by signing the agreement. Further, the appellant having repaid the loan amount with interest as per the terms of agreement cannot make out a grievance in hindsight and seek refund of the amount paid.” The bench further said, “Therefore, if all these aspects of the matter are kept in perspective and the order passed by the NCDRC is perused, we are of the view that no error has been committed so as to call for interference.” It dismissed the appeal with no order as to costs.