NCDRC exceeded jurisdiction by capping interest on credit card dues: Supreme Court

The Supreme Court has ruled that the National Consumer Disputes Redressal Commission (NCDRC) lacks the authority to issue directives to the Reserve Bank of India (RBI) regarding the interest rates charged by banks to credit card holders for late payments..A Bench of Justices Bela Trivedi and Satish Chandra Sharma made the observation while setting aside a 2008 NCDRC ruling which had held that charging an interest in excess of 30 per cent on credit card dues was an unfair trade practice.“The National Commission has assumed jurisdiction and expertise over the Reserve Bank of India, whilst observing that a ceiling on the rates of interest, is the purported solution to the alleged exploitation of credit card holders. It has made observations, that are contrary to the legislative intent of Section 21A of the Banking Regulation Act, 1949 that provides for a statutory bar on any court/tribunal to re-open transactions, that the rate of interest charged by the banking company in respect of such transaction is excessive,” the Court said..The Bench emphasized that the RBI is the main authority for regulating the banking sector. "The RBI is the prime regulator and the decision-making authority for the economic/financial decisions of the Indian economy, any endeavor by the National Commission or any other Court/Tribunal to decide at the behest of the RBI cannot be termed to be just, fair and equitable.".However, the Bench clarified that courts can intervene to see whether such lawful authority has been abused by the RBI."It is the Reserve Bank of India alone which enacts the mandate for the banks. In this sphere, the only function of the Courts is to examine that the lawful authority is not abused, and not to appropriate itself the task entrusted to that authority," the Court said. .In the present case, the Court noted that the credit cardholders were informed and educated individuals who know about the terms set by the banks that issued credit cards. "The credit card holders in the present case are well-informed and educated and had agreed to be bound by the express stipulation by the terms issued by the respective banks. The banks...provided all necessary information with regard to fees, and charges applicable to credit cards, credit, and cash withdrawal limits.” .It added that once the terms of the credit card operations were known to the complainants and disclosed by the banking institutions before the issuance of the credit cards, the NCDRC could not have scrutinized its terms or conditions, including the rate of interest."We are of the considered opinion to re-agitate the terms and conditions of credit card facilities provided by the banks, and re-write the terms thereof, including the rates of interest charged by the banks, is exorbitant, however reasonable, is an attempt by the National Commission to constitute a new contract, which is impermissible in law," the Court held. .Supreme Court sets aside NCDRC judgment capping interest on credit card dues at 30%.Counsel who appeared for various banks included Senior Advocate Dr. Abhishek Manu Singhvi with Sanjay Gupta and Ateev Mathur from SNG & Partners.HDFC Bank was represented by Dhruv Mehta, Senior Advocate with Advocates Aman Raj Gandhi, Parthasarathy Bose, and Lakshya Kumar from Wadia Ghandy & Co. (Delhi).Citibank was represented by Suruchi Suri, partner at Suri & Co..[Read Judgment]