In a recent ruling, the Supreme Court reaffirmed the prerogative of Non-Banking Financial Companies (NBFCs) to determine interest rates on loans, emphasizing that borrowers cannot contest the interest rates after repaying the loan amount. The decision, handed down by Justices A.S. Bopanna and M.M. Sundresh, emphasized the contractual nature of loan agreements and upheld the autonomy of NBFCs in setting interest rates.
The case in question involved a dispute between an appellant, who had availed a housing loan from an NBFC, and the NBFC itself. The appellant alleged that despite assurances from the NBFC’s sales agent regarding the interest rate being based on the Prime Lending Rate set by the RBI, the NBFC revised the rate upward, causing the appellant to seek a refund of the excess interest paid.
The National Consumer Dispute Redressal Commission (NCDRC) had previously dismissed the appellant’s complaint, stating that the terms and conditions of the loan agreement were binding and that pre-contractual correspondence held no significance once the contract was executed. The Supreme Court upheld this decision, emphasizing the importance of honoring contractual obligations and rejecting the appellant’s attempt to rely on pre-contractual correspondence.
The court further highlighted the appellant’s responsibility to exercise due diligence while entering into contracts, noting that the appellant, being a knowledgeable individual, could not claim ignorance of the terms agreed upon. It emphasized that objections to interest rates cannot be raised after the borrower has acquiesced by signing the agreement and repaying the loan amount as per the agreed terms.
In its conclusion, the Supreme Court found no error in the NCDRC’s decision and dismissed the appeal, underscoring the principle that once a contract is entered into, its terms are binding on all parties involved. The ruling serves as a reminder of the importance of understanding and adhering to contractual obligations in financial transactions.
This landmark decision reinforces the autonomy of NBFCs in setting interest rates and underscores the significance of contractual agreements in governing financial transactions.
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