M. Ashok Kumar & Ors. Vs. The Theyarayanagar Fund Ltd.
Complainant: Mr. M. Ashok Kumar and Mr. A. Mallika (plaintiff)
Respondent 1: The Theyarayanagar Fund Ltd.
Respondent 2: Messrs Balajee & Co.
FACTS OF THE CASE
The plaintiffs, Mr M. Ashok Kumar and Mr A. Mallika, are facing a lawsuit for a loan they received from a finance company. They claim to be law-abiding citizens with no past antecedents and that they learned about the defendant’s finance company through telesales. The plaintiffs claim to have built a modest residence for their family and saved money for years together.
The plaintiffs were forced to obtain a loan from the defendant company, which approved Rs.7,20,000/-. The plaintiffs argue that the defendant guilefully and deceptively asked the plaintiffs to attach their property without stating any reasons to manipulate them. The plaintiffs also claim that the defendant manipulated them by signing specific papers and threatened them with dire consequences for making payments without proof or receipt.
The plaintiffs claim they were unaware of the unlawful means of hidden exorbitant interest carried out by the defendant and his agents. The defendant charged high interest rates at 16.2%, which is adverse in the financial market and was not informed to the plaintiff during the loan sanction. The plaintiffs claim they were a man of virtue and righteousness and have been paying the loan amount with a principal amount of Rs.6,750/- and an interest of Rs.10,125/- every month from 03.05.2018 without any default.
However, due to the lockdown imposed by the Indian Government on 23.03.2020, their work came to a standstill. The plaintiffs argue that they were forced to pay for the loan due to the lockdown and were not given any receipt for any payment.
In conclusion, the plaintiffs argue that the defendant’s finance company pressured them into obtaining a loan for their land construction and that they were unaware of the unlawful means of interest charges.
The plaintiff, a petty wager, is still attempting to pay back the defendants after a lockdown that left the economy on halt. She states that she is guilty of dues and faces several difficulties. One of the agents for the defendants called the plaintiff on the phone and verbally abused her by making threats to pay the pending amount loss.
The plaintiff requested proper accounts for the balance payment and was further harassed by the defendants.
The plaintiff received an auction notice for sale from the second defendant, which was out of the blue. They reached out to the defendants seeking time and an exception but were mercilessly abused by them. The plaintiff has invested her life savings in the property, which she has slaved day and night to buy. She wants to settle the claim but is currently not financially stable.
ISSUES
- Were the plaintiffs fully aware of the terms and conditions of the loan agreement, including the attachment of their property?
- Did the defendant finance company adequately disclose the high interest rate of 16.2% to the plaintiffs at the time of loan approval?
- Did the defendant provide the plaintiffs with proper receipts and records for the payments made towards the loan?
- Did the defendant finance company issue an auction sale notice for the plaintiffs’ property without prior warning or adequate notice?
TIMELINE OF EVENTS
|
S.No |
Date |
Particulars of Documents |
|
|
13.03.2006 |
Sale deed executed in favour of Plaintiffs Vide Doc.No. 613 of 2006 |
|
|
20.08.201 |
Auction sale notice given by the 2nd defendant |
|
|
2018-2021 |
Payment receipt issued by the 1st defendant |
|
|
31.07.2013 |
Encumbrance certificate mortgage sale deed with the 1st defendant Vide Doc. 1849/2013 |
|
|
|
|
ANALYSIS
The plaintiffs, Mr M. Ashok Kumar and Mr A. Mallika accused a finance company of coercing them into borrowing under terms that were not only unfair but also deceitful. They had no idea of the exorbitant interest rates and were made to sign the papers without full disclosure. Their financial strain worsened during the COVID-19 pandemic and was aggravated by threats, harassment, and auction notices for their property. The plaintiffs allege that the defendant manipulated them into signing blank sheets without explaining the purpose, which were presumably used to finalise the loan agreement under terms the plaintiffs were unaware of. If the plaintiffs’ manipulation claim is substantiated, the defendant could be held liable for fraud and misrepresentation, which might nullify the contract or lead to damages.
The plaintiffs are charged a high interest rate of 16.2%, which they claim was not disclosed at the time of loan approval. They allege that they were not informed about these rates, which are exorbitant compared to standard market rates. Legal considerations include Contract Law, High Interest Rate Disclosure, and Fair Practice Code. The defendant could be liable for failing to disclose the high interest rate, violating fair lending practices, and potentially rendering the loan agreement voidable.
Despite making regular payments, the plaintiffs received an auction notice without prior warning. They were not given any expense receipts or adequately informed about the impending auction. Legal considerations include the right to notice, breach of contract, and consumer protection. If proven, the court may find the defendant liable for fraud, rendering the loan agreement voidable.
It is open to contention that the defendant is liable for failing to disclose the high interest rate as an unfair trade practice, giving space for modifying or nullifying the loan agreement. The plaintiffs contend that they have not been informed of the auction of their property while making regular payments. Issuing an auction notice without prior warning or explanation violates principles of natural justice and contractual obligations. The defendant’s failure to notify the plaintiffs can be seen as a breach of contract and may attract legal consequences, including halting the auction process.
A notice is a fundamental right of a fair hearing, requiring the affected party to show cause and seek an explanation before taking action. A notice must include the time, place, date, jurisdiction, charges, and proposed action. Failure to give a notice can make a statute void ab initio. The article should contain all essentials, and if it only includes charges but not the ground, time, or date, the notice is invalid and vague. Non-issue of the notice or defective service does not affect the authority’s jurisdiction but violates the principle of natural justice. In the Punjab National Bank v. All India Bank Employees Federation case, the penalty was imposed on charges not mentioned in the notice, making the imposition of the penalty invalid. The notice should be unambiguous and specify the action and the property to be acquired. In preventive detention cases, Clause (5) of Article 22 requires the order to communicate the grounds on which the detention has been made and give the detainee the earliest opportunity to represent against the order.
QUESTIONS FOR CROSS-EXAMINATION
- Were all the necessary documents and information provided to the plaintiffs before they signed the loan agreement?
- Did you explain the reasons for attaching the property to the plaintiffs?
- How do you document and acknowledge payments made by borrowers?
- Can you describe your standard procedures for approving and processing a loan?
- Were the plaintiffs given any prior warning or opportunity to resolve their dues before the auction notice was issued?
- Can you provide evidence of communication with the plaintiffs regarding the auction notice and their outstanding payments?