AWAZ & OTHERS V. RBI & OTHERS

PARTIES OF THE CASE –

  • PETITIONER: Awaz & Others
  • RESPONDENT: Reserve Bank of India & Others

CONSUMER COMPLAINT NO.: 51 OF 2007 

BENCH: J. M.B. Shah, J. Mrs. Rajyalakshmi Rao, J. Mr. Anupam Dasgupta

BRIEF FACTS

The present case arose out of a complaint filed by Awaz, a registered trust and a consumer organization, to protect the consumers from unjustified exploitation of their needs by banks or non-banking financial institutions in their money lending activity.

ISSUE

Whether the then current activities of banks and non-banking financial institutions were exploitative to consumers?

JUDGMENT 

Summons were issued to responsible officers of the RBI. The Registry was also directed to issue summons to the Chief General Manager, Department of Non-Banking Financial Companies and the Chief General Manager, Department of Banking Operations of the RBI, to remain personally present. In the meantime, the commercial banks, which had not filed their written version, were instructed to file the same.
The Court opined that from the scenario, it appeared that both the Union of India and the RBI have given green signal to the NBFCs or the Banks to charge rate of interest depending upon the vulnerable circumstances of the borrower. This is against the spirit and object of the Consumer Protection Act, 1986 and amounts to unfair trade practice and the consumers are to be completely protected from the same. Further, various circulars issued by the RBI while exercising powers under Section 45L of the Reserve Bank of India Act,1934, clearly provided that usurious rate of interest could not be charged. But, as it was, there seemed to be no control on this issue and the banks/non-banking financial institutions were indeed exploiting the situation. Hence the Court rightly decided that the exorbitant rates of interest were against the Consumer Protection Act, 1986.

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