Holding

The NCDRC lacked jurisdiction to entertain the complaint, the trusts were not consumers, and RBI‑issued interest‑rate policies are lawful and not unfair trade practices, so the NCDRC order is set aside.

Summary

The Supreme Court examined a consumer complaint filed by two trusts on behalf of credit‑card users alleging that banks were charging exorbitant interest rates of 36%‑49% p.a., which the National Consumer Disputes Redressal Commission (NCDRC) had deemed an unfair trade practice and capped at 30% p.a. The Court held that the trusts were not "persons" under the Consumer Protection Act, 1986 and therefore lacked locus standi, and that the complaint failed to satisfy the procedural requirements of Section 13(6). It further ruled that the NCDRC had no jurisdiction to interfere with banking policy, a domain exclusively reserved to the Reserve Bank of India (RBI) under the Banking Regulation Act, 1949. The Court found that the RBI’s circulars governing credit‑card interest rates were valid, reasonable and not an unfair trade practice, and that the NCDRC could not rewrite the contractual terms between banks and cardholders. Consequently, the order of the NCDRC dated 07‑07‑2008 was set aside.

Issues considered

Whether the respondent trusts had locus to approach the NCDRC under the Consumer Protection Act, 1986.
Whether the NCDRC had jurisdiction to interfere with banking operations, which is the exclusive statutory domain of the RBI.
Whether the NCDRC could fix a maximum ceiling rate of interest for credit‑card loans in the absence of an RBI directive.
Whether the impugned judgment interfered with the contract between banks and credit‑card holders.
Whether the RBI‑guided interest rates constitute an unfair trade practice under the Consumer Protection Act.

Legislation cited

Banking Regulation Act, 1949s. 21A, s. 35A
Code of Civil Procedure, 1908
Constitution of India
Consumer Protection Act, 1986s. 12(1), s. 13(6), s. 2(1)(d), s. 2(1)(m)
Consumer Protection Act, 2019
Indian Contract Act, 1872
Indian Trust Act, 1882
Reserve Bank of India Act, 1934

Headnote

Issue for Consideration (i) Whether the Respondent organization had the locus to approach the National Consumer Disputes Redressal Commission (NCDRC); (ii) Whether the NCDRC had the jurisdiction to interfere with banking operations, which is the exclusive statutory domain of the (iii) Whether the NCDRC had the jurisdiction to fix a maximum ceiling rate of interest to be charged by banks from their credit card holders for their failure to make full payment on the due date, at the behest of the Reserve Bank of India & unilaterally direct banks/non-banking financial

Subjects

Credit card holdersMaximum ceiling rate of interestReserve Bank of IndiaDomain of the RBIBorrowers/debtorsBanksNon‑banking financial institutionsUnfair trade practiceMisrepresentationTrustConsumerRepresentative capacityLocus to approach NCDRCExorbitant rates of interest

Judgment

[2024] 12 S.C.R. 1482 : 2024 INSC 1044

Hongkong and Shanghai Banking Corp. Ltd.
v.
Awaz & Ors.
(Civil Appeal No. 5273 of 2008)
20 December 2024
[Bela M. Trivedi and Satish Chandra Sharma,* JJ.]

Issue for Consideration
(i) Whether the Respondent organization had the locus to approach
the National Consumer Disputes Redressal Commission (NCDRC);
(ii) Whether the NCDRC had the jurisdiction to interfere with banking
operations, which is the exclusive statutory domain of the Reserve
Bank of India; (iii) Whether the NCDRC had the jurisdiction to fix
a maximum ceiling rate of interest to be charged by banks from
their credit card holders for their failure to make full payment on the
due date, at the behest of the Reserve Bank of India & unilaterally
direct banks/non-banking financial institutions to charge rates of
interest not beyond the 30% p.a., in absence of an instruction/
directive of the Reserve Bank of India (RBI); (iv) Whether the
Impugned Judgment interferes with the contract executed between
the parties; (v) Whether charging rate of interests by banks in the
manner as advised by RBI vide its master circulars and notifications
being independent of a standard ceiling rate prescribed by the RBI,
constitute an unfair trade practice.

Headnotes†
Consumer Protection Act, 1986 – ss.12(1), 13(6), 2(1)(d) –
“consumer” – Reserve Bank of India Act, 1934 – Respondent
nos. 1 and 2-Trusts claiming themselves to be a voluntary
consumer association fighting for consumer rights, if had the
locus to approach the National Commission – The original
complaint, if met the threshold of ss.12(1) and 13:
Held: No – The original Complaint before the Commission which
was filed in a representative capacity, by the Trust, representing
all consumers purportedly aggrieved owing to the exorbitant rates
of interest charged by the banks, was filed without complying with

* Author
[2024] 12 S.C.R. 1483

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

the mandate of Or. I, r.8, CPC prescribed u/s.13(6) – No order was
passed by the National Commission permitting the Respondent
nos.1 and 2 to represent the interest or act on behalf of any
consumer – Complainants filed the application u/s.13(6) seeking
permission to act “on behalf of consumers” only at the stage of
conclusion of arguments, and judgment being reserved – Since,
the requirement of Or. I r.8, prescribed in s.13(6) is to be read into
s.12(1), the requirement of obtaining prior permission from the
Commission, for any consumer to act in a representative capacity,
cannot be dispensed with – Further, a trust is not a “person” as
defined u/s.2(1)(m) of the 1986 Act and therefore not a consumer
and thus, cannot file a consumer dispute under the 1986 Act –
Also, the consumer complaint did not disclose any deficiency in
service or violation and was in fact a public interest litigation in
guise of a purported consumer dispute – Respondents approached
the National Commission at the behest of the Respondent no.3, a
credit card holder with Citibank, purportedly claiming an amount
of Rs. 90,000/- against excess interest charged by the bank,
which is barred by the pecuniary jurisdiction of the Commission –
Furthermore, the administrative policy decisions of banks do not
constitute provisions/facilities of banking, which may come under
the umbrella of ‘service’, defined u/s.2(1)(o) of the 1986 Act – A
policy decision pertaining to the rate of interest, and trade practices
carried out by the banks across the country is a regulatory function
within the specific statutory domain of the RBI and cannot come
under the purview of judicial scrutiny by the National Commission –
National Commission erred in holding that any complaint under
the 1986 Act to curb unfair trade practice(s) adopted by the banks
is maintainable – National Commission had no jurisdiction to
entertain a complaint having vague, ambiguous allegations and
no cause of action – Order of the National Commission set aside.
[Paras 42-47, 57]

Reserve Bank of India Act, 1934 – Banking Regulation Act,
1949 – s.21A – Whether the NCDRC has the jurisdiction to
interfere with banking operations which is the exclusive
statutory domain of the RBI – Whether the NCDRC had the
jurisdiction to fix a maximum ceiling rate of interest to be
charged by banks from their credit card holders for their
failure to make full payment on the due date, at the behest
of the RBI and unilaterally direct banks/non-banking financial
1484 [2024] 12 S.C.R.

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institutions to charge rates of interest not beyond the
30% p.a., in absence of an instruction/directive of the RBI:
Held: RBI is the prime banking institution of the country and a
statutory authority entrusted with the supervisory role over banking
and conferred with the authority of issuing binding directions having
statutory force – NCDRC assumed jurisdiction and expertise
over the RBI observing that a ceiling on the rates of interest is
the purported solution to the alleged exploitation of credit card
holders – It made observations contrary to the legislative intent
of s.21A of the 1949 Act 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 decision of the National Commission unilaterally
holding that any interest above 30% p.a. is usurious is contrary
to the legislative intent of s.21A and is an encroachment upon
the domain of the RBI – The challenge by the complainants that
the guidelines issued by the RBI are arbitrary and not in public
interest is without any basis – 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 – An endeavour to
cap the rate of interest charged by banks and dictating the need
for a Benchmark Prime Lending Rate, drawing parallels with other
economies across the world, whilst failing to trust the prudence
of the RBI which is entrusted with the fundamental responsibility
of regulation of the monetary system and banking business is
unwarranted – A direction cannot be issued to the RBI, to enact
a particular legislation. [Paras 48, 50, 51, 56, 58-60]

Consumer Protection Act, 1986 – s.2(1)(m) – “person” – Trust,
if a “person” and whether can file a consumer dispute under
the 1986 Act:
Held: A trust, whether registered under the Indian Trust Act or the
State Trust Registration Act is not a “person” as defined u/s.2(1)
(m) of the 1986 Act – The issue whether a Trust would come within
the purview of consumer has been referred to a larger bench in
Administrator Smt. Tata Bai Desai Charitable Opthalmic Trust
Hospital, Jodhpur case, however, the ratio in Pratibha Pratisthan
case holding that a trust is not a person and therefore not a
[2024] 12 S.C.R. 1485

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

consumer and consequently cannot invoke provisions or file a
consumer dispute under the provisions of this Act, is the position
of law in force – Indian Trust Act, 1882 – State Trust Registration
Act. [Para 44]

Reserve Bank of India Act, 1934 – Notifications, circulars,
direction/guideline issued by RBI – Nature:
Held: Any direction or guideline issued by a statutory authority is
an extension of the statute itself – Rules made under a statute
must be treated, for all purposes of construction or obligations,
exactly as if they were in that Act – The notifications, circulars and
directions of the RBI are nothing but the legislative expression of
the ‘statement of object & reasons’ encapsulated in the preamble of
the 1934 Act – Hence, the statutory presumption that the legislature
while formulating laws has inserted every part thereunder for a
purpose and that legislative intention, which should be given effect
to, would be applicable to the present guidelines as well – National
Commission had no jurisdiction to assume the jurisdiction of the
RBI, or act/decide or regulate on its behest, any monetary decision
or policy. [Paras 56, 57]

Contract – Terms of the contract, if can be re-written – Whether
the Impugned Judgment of the National Commission interferes
with the contract executed between the parties:
Held: Yes – The credit card holders in the present case were
well-informed and educated and agreed to be bound by the express
stipulation by the terms issued by the respective banks – The
banks in the most important terms and conditions provided all
necessary information with regard to fees, and charges applicable
to credit cards, credit and cash withdrawal limits – 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 National Commission could not have scrutinized
the terms or conditions, including the rate of interest – National
Commission had no jurisdiction to re-write the said terms of the
contract entered between the banks and the credit cardholders,
which the parties mutually agreed to be bound by. [Paras 63, 65]

Economic legislation/notification – Validity – To be tested on
the touchstone of reasonableness:
1486 [2024] 12 S.C.R.

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Held: In deciding the validity of any economic legislation or
notification having a public objective sought to be attained, it is
imperative to test it on the touchstone of reasonableness – In
the absence of any patent arbitrariness, the directions cannot be
condemned as being violative of Part III of the Constitution of India –
In the present case, it is not the case of the Complainants that the
directions or decisions taken by the statutory authority entrusted
to manage the economy, do not pass the test of Wednesbury
principle of reasonableness, or are not free from arbitrariness nor
affected by bias or actuated by mala fide. [Para 61]

Unfair trade practice – What is not – Whether charging rate
of interests by banks in the manner as advised by RBI vide
its master circulars & notifications being independent of a
standard ceiling rate prescribed by the RBI, constitute an
unfair trade practice:
Held: No – Any trade practice adopted for promoting the sale,
use, or supply of any goods, or for the provision of any service,
by adopting any unfair method or unfair or deceptive practice,
has to be treated as ‘unfair trade practice’ – Thus, whether
an act can be condemned as an unfair trade practice, or not,
the key is to examine the ‘modus operandi’ i.e. whether there
is any false statement/misrepresentation or deception – In the
present case, the pre-conditions of ‘deceptive practice’ and unfair
method’ are manifestly absent – The Banks in no manner made
any misrepresentation to deceive the credit card holders – RBI
held that none of the bank acted contrary to the policy directives
issued by the RBI – Even otherwise, there is no averment to
establish how the charging of rates of interest upon the default by
credit card holders, without a standardized rate, is usurious and
constitutes an unfair trade practice – Mere inflation in the rates
of interest cannot be construed as a practice, intended to cause
loss or injury. [Paras 68, 69]

Case Law Cited
Keshav Lal Khemchang & Sons Pvt. Ltd & Ors. v. Union of India
(2015) 4 SCC 770; Central Bank of India v. Ravindran (2002) 1
SCC 367; Union of India v. Prakash P. Hinduja (2003) 6 SCC 195;
Pratibha Pratisthan v. Canara Bank (2017) 3 SCC 712; Godfrey
Phillips India Ltd. v. Ajay Kumar [2008] 5 SCR 937 : (2008) 4
SCC 504 : 2008 SCC OnLine SC 603; Pioneer Urban Land
[2024] 12 S.C.R. 1487

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

and Infrastructure v. Geetu Gidwani Verma & Anr. (2019) 5 SCC
725; Ireo Grace v. Abhishek Khanna [2021] 2 SCR 1 : (2021) 3
SCC 241; Experion Developers Pvt Ltd v. Sushma Ashok Shiroor
[2022] 5 SCR 590 : (2022) 12 SCC 286; Texco Marketing Pvt.
Ltd. v. TATA AIG GIC [2022] 9 SCR 1031 : [2023] 1 SCC 428;
L.Chandra Kumar v. Union of India & Ors. [1997] 2 SCR 1186 :
[1997] 3 SCC 261; Rameshwar Prasad Shrivastava & Ors. v.
Dwarkadhis Projects Private Limited & Ors [2018] 14 SCR 1118 :
(2019) 2 SCC 417; Administrator Smt. Tata Bai Desai Charitable
Opthalmic Trust Hospital, Jodhpur v. Managing Director, Supreme
Elevators India Pvt. Ltd. & Ors., SLP(Civil) No. 18636/2019; Shri
Sitaram Sugar Company Ltd. v. Union of India [1990] 1 SCR
909 : (1990) 3 SCC 223; Small Industries Development Bank of
India v. SIBCO Investment (P) Ltd. [2022] 1 SCR 913 : (2022) 3
SCC 56; Supreme Court Employees Welfare Association v. Union
of India [1989] 3 SCR 488 : (1989) 4 SCC 187; Peerless General
Finance & Investment Co. Ltd. & Anr. v. Reserve Bank of India
[1992] 1 SCR 406 : (1992) 2 SCC 343; Rajasthan State Industrial
Development & Investment Corporation v. Diamond & Gem
Development Corporation Ltd. [2013] 4 SCR 331; Bharathi Knittting
Company v. Worldwide Express Courier Division of Airfrieght Ltd.
[1996] Supp. 2 SCR 653 : (1996) 4 SCC 704; Colgate Palmolive
(India) Ltd. v. MRTP Commission [2002] Supp. 4 SCR 219 : (2003)
1 SCC 129; Directorate of Education v. Educomp Datamatics Ltd.
[2004] 2 SCR 1010 : (2004) 4 SCC 19 – referred to.

List of Acts
Consumer Protection Act, 1986; Reserve Bank of India Act, 1934;
Banking Regulation Act, 1949; Indian Trust Act, 1882; Consumer
Protection Act, 2019; Indian Contract Act, 1872; Code of Civil
Procedure, 1908; Constitution of India.

List of Keywords
Credit card holders; Maximum ceiling rate of interest; Reserve
Bank of India; Domain of the RBI; Borrowers/debtors; Banking
operations; Banks/non-banking financial institutions; Unfair
trade practice; Misrepresentation; Trust; Consumer; “Person”;
Voluntary consumer association; Representative capacity; Locus to
approach the National Consumer Disputes Redressal Commission
(NCDRC); Exorbitant rates of interest; “On behalf of consumers”;
1488 [2024] 12 S.C.R.

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No deficiency in service; Re-write the terms of the contract;
Guidelines issued by RBI; Cap the rate of interest charged by
banks; Economic legislation/notification; Test of Wednesbury
principle of reasonableness.

Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5273 of 2008
From the Judgment and Order dated 07.07.2008 of the National
Consumers Disputes Redressal Commission, New Delhi in OP
No. 51 of 2007 and 1913 of 2004
With
Civil Appeal No(s). 5294, 5627, 5278 and 6679 of 2008

Appearances for Parties
Dr. Abhishek Manu Singhvi, Manish Singhvi, Dhruv Mehta, Jaideep
Gupta, Sr. Advs., Dr. Kishan Rawat, Ms. Mallika Joshi, Rajan
Narain, Chanchal Kumar Ganguli, Mrs. Suruchi Suri, Ms. Nupur,
Mayur Shah, Apurv Singhvi, Ms. Shalini Haldar, Shankar Divate,
Sanjay Gupta, Ateev Mathur, Ajay Monga, Ms. Varsha Kripalani,
Ms. Jagriti Ahuja, Ananta Prasad Mishra, Gagan Gupta, Amand
Raj Gandhi, Partha Sarthy Bose, Lukshay Kumar, Keith Varghese,
Ms. Bindi Girish Dave, Mrs. Shiel Sethi, Ms. Nina Gupta, Dr. Lalit
Bhasin, Ms. Radhika Gupta, Vijay Gupta, Shiv Vinayak Gupta,
Mrs. Bina Gupta, Shantanu Tyagi, Ms. Neha Goel, Shashvat
Chandra, S. S. Shroff, Manish K. Bishnoi, H. S. Parihar, Kuldeep
S. Parihar, Ms. Ikshita Parihar, Kunal Chatterjee, Satish Singh,
Riddi Bose, Ms. Sampriti Baksi, Siddarth Banerjee, Mahesh Kumar,
Advs. for the appearing parties.

Judgment/Order of the Supreme Court

Judgment

Satish Chandra Sharma, J.

1. The captioned set of appeals arise out of the common Judgment &
Order dated 07.07.2008 passed by the National Consumer Disputes
Redressal Commission, Delhi (hereinafter “National Commission/
NCDRC”) in Complaint Case No. 51/2007 and Revision Petition
[2024] 12 S.C.R. 1489

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

No. 1913/2004. No appeal has been preferred from either of the
parties, in the Revision Petition No. 1913/2004.
2. The National Commission proceeded with the prima-facie view that
the charging of interest at rates ranging from 36% to 49% p.a. is
exorbitant and amounts to the exploitation of the borrowers/debtors
and is usurious, had framed the following issues:
i. Whether the Reserve Bank of India (hereinafter referred
to as RBI) is required to issue any circular or guidelines
prohibiting the Banks/Non-Banking Financial Institutions/
money lenders from charging interest above a specific rate?
ii. (a) Whether banks can charge the credit card users
interest at rates from 36% to 49% per annum if there is
any delay or default in payment within the time specified?
(b) Whether interest at the above-stated rates amounts to
charging usurious rates of interest?
3. The Appellants, Hong Kong Shanghai Corporation, Citibank,
American Express Banking Corporation, Standard Chartered Bank,
vide C.A. no. 5273/2008, C.A. No. 5294/2008, C.A. No. 5627/2008
and C.A. 5278/2008 respectively along with the Intervenor, Housing
Development Finance Corporation (I.A. No. 6/2017) [hereinafter
“Banks”] have challenged the correctness of the Impugned Order
dated 07.07.2008, whereby the National Commission has held that the
charging of interest at rates beyond 30% by the banks/non-banking
financial institutions, from credit card holders, upon delay or default in
payment, constitutes an unfair trade practice and that penal interest
could be charged only once for one period of default and the same
shall not be capitalized. The conclusive observation under challenge,
passed by the National Commission is as under:
(i) Charging of interest rates in excess of 30% p.a. from
the credit card holders by banks for the former’s failure to
make full payment on the due date or paying the minimum
amount due, is an unfair trade practice.
(ii) Penal interest can be charged only once for one period
of default and shall not be capitalized.
(iii) Charging of interest with monthly rests is also an unfair
trade practice
1490 [2024] 12 S.C.R.

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4. The Appellants have contended that determining the reasonability
and ‘fixing of the maximum or the minimum rates of interest’, is the
exclusive function of the Respondent no.6, the Reserve Bank of
India, a statutory authority responsible for the regulation of the Indian
Banking system. The Appellants have assailed the observations of
the National Commission, in light of the statutory bar under section
21A & 35A of the Banking Regulation Act, which expressly bars
courts/tribunals to re-open transactions between banks, on the
question that the rates of interest are excessive and empowers the
Reserve Bank of India, to formulate directions, as befitting the public
interest, proper management and banking policies of the country.
The Appellants have urged that the encroachment of this statutory
domain of the Reserve Bank of India, by the National Commission,
is against the mandate of the Constitution and the legislative intent
of the Reserve Bank of India Act, 1934. The Appellants have further
contended that the original complaint by the Respondent nos. 1-3
not only fails to meet the criterion of a Complaint u/s 12 r/w 13 of
the Consumer Protection Act, 1986, but is a public interest litigation,
guised as a consumer dispute which could not have been entertained
by the National Commission, being beyond its inherent jurisdiction.
5. The Respondents nos. 1 to 3, the original Complainants [hereinafter
“Complainants”] before the National Commission, have also preferred
a cross-Appeal bearing CA. 6679/2008, against the Impugned
Judgment dt. 07.07.2008 contending that the National Commission
has only partly allowed their complaint, and ought to have adjudicated
upon a benchmark restriction for the rates of interest charged by
banks from credit card holders. It is contended that the rates of
interest charged by the banks from its credit cardholders is usurious
and exploitative in nature, and in contravention of the circulars issued
by the Reserve Bank of India. The Complainants claim that they
represent the public at large, as a voluntary consumer association
voicing against the usurious rate of interest charged by the banks,
which is a deficiency in service in banking and constitutes an unfair
trade practice, in terms of the Consumer Protection Act, 1986. It
is argued on behalf of the Complainants that there ought to have
been a Notification passed by the Reserve Bank of India, fixing a
maximum ceiling rate of interest for all banks, and in pursuance
thereto had approached the National Commission by filing the
[2024] 12 S.C.R. 1491

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

Consumer Complaint no. 51 of 2007. It was prayed that the Appellant
along with Respondent nos. 5, 6 & 7 be permanently restrained
from charging excessive interest and service charges, de-hors the
Prime Lending Rate, and the directions issued by the Reserve Bank
of India. It was further prayed that all banks who have issued credit
cards to Respondent no. 3 and members of the Respondent no.1
be directed to refund the amount of interest, claiming the same to
be more than Rs. 5 crores.

SUBMISSIONS ON BEHALF OF BANKS
6. The Appellant, along with the Respondent nos. 5, 6 and 7 are
foreign banks carrying on the business of banking in India under the
provisions of the Banking Regulation Act, 1949 and are scheduled
commercial Banks as notified by the Reserve Bank of India.
7. The Appellants submit that the allegations raised by the Complainant
that the rate of interest, charged by banks from its credit card holders,
constitutes an unfair trade practice, is erroneous. It is stated that
the modus of adopting any unfair methods, or deceptive means to
promote the sale, use or supply of any goods or for providing any
service, is manifestly absent. The Banks assert that they have neither
indulged in any unfair trade practice nor have done anything which
would bring them within the mischief of Section 2(r)(l)(i) to 2(r)(l)(x).
8. Further, there are also no specific allegations raised by the
Complainants or any materials on record, to elicit any unfair trade
practices adopted by the Banks. The Counsel for the Appellant
submits that the National Commission has barely acted on the
assumption that banks are indulging in unfair trade practices. It is
stated that there are no facts to suggest that any of the scheduled
banks under the purview of the Reserve Bank of India, are indulging
in unfair trade practices, including charging exorbitant rates of interest.
The National Commission has made the observation that rates of
interest charged by banks is an unfair trade practice, without even
discussing the scope of the definition under section 2(1)(r) of the
Act. The only reason given with respect to the practice of charging
excessive interest being unfair trade practice is that “if the Banking
Regulation Act, 1949 requires that the RBI shall discharge certain
functions in the public interest and the RBI does not discharge such
1492 [2024] 12 S.C.R.

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functions, it would amount to unfair trade practice, but, that question
is not required to be dealt with finally in this matter.”
9. It is argued that the exercise of jurisdiction by the National Commission
is ostensible and non-est in law. The administrative policy decisions
of the determination of interest on credit cards and the regulation of
the banks across the country, are within the specific statutory domain
of the Reserve Bank of India. The Parliament of India, under List I
of the Seventh Schedule of the Constitution of India had conferred
upon the Reserve Bank of India, the powers of subordinate legislation
to formulate directives, circulars, and administrative policies, having
statutory force and being binding on all Banks from time to time1 Our
attention is also drawn to the Preamble of the Reserve Bank of India
Act, 1934 which enlists the endeavour of the RBI to “ secure monetary
stability in India, having a modern monetary policy framework to meet
the challenge of an increasingly complex economy, while maintaining
price stability is the endeavour of the Reserve Bank of India.
10. The observations by the National Commission that the rate of interest,
in excess of 30% per annum is an unfair trade practice, is per se
illegal and is an interference with the clear, unambiguous delegation
of powers in favour of the Reserve Bank of India and runs contrary
to the legislative intent of the Banking Regulation Act, 1949.
11. It is submitted that the National Commission has ostensibly
exercised jurisdiction by supplanting itself as the regulator of the
banking systems instead and in the place of Reserve Bank of India,
notwithstanding the bar under section 21A of the Banking Regulation
Act, 1949. It is contended that Section 21A and 35A of the Banking
Regulation Act, 1949 are enabling provisions for the Reserve Bank
of India to give directions/guidelines to banks/banking companies,
in the public interest. Section 21A in specific, creates an embargo
upon courts/tribunals to re-open and adjudicate upon transactions on
the ground that the rate of interest is excessive. The said provisions
are reproduced as under:
“21A: Rates of interest charged by banking companies
not to be subject to scrutiny by courts:

1 Keshav Lal Khemchang & Sons Pvt. Ltd & Ors. Vs Union of India (2015) 4 SCC 770
[2024] 12 S.C.R. 1493

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

Notwithstanding anything contained in the Usurious
Loans Act, 1918 (10 of 2018), or any other law relating to
indebtedness in force in any State, a transaction between
a banking company and its debtor shall not be reopened
by any court on the ground that the rate of interest charged
by the banking company in respect of such transaction
is excessive.”
35A: Power of the Reserve Bank to give directions:
(1) Where the Reserve Bank is satisfied that:
(a) In the public interest; or
(aa) in the interest of banking policy; or [inserted by Act
58 in the [public interest]; or
(b) to prevent the affairs of any banking company being
conducted in a manner detrimental to the interests of the
depositors or in a manner prejudicial to the interests of
the banking company; or
(c) to secure the proper management of any banking
company generally, it is necessary to issue directions to
banking companies generally or to any banking company
in particular, it may, from time to time, issue such directions
as it deems fit, and the banking companies or the banking
company, as the case may be, shall be bound to comply
with such directions.
(1)The Reserve Bank may, on representation made to it or
on its own motion, modify or cancel any direction issued
under sub-section (1), and in so modifying or cancelling any
direction may impose such conditions as it thinks fit, subject
to which the modification or cancellation shall have effect.”
12. The scope of the statutory bar under section 21-A of the Banking
Regulation Act, 1949 has been comprehensively dealt with by this
Hon’ble Court in the Central Bank of India Vs Ravindran2 wherein
it has been observed that “With effect from 15.2.1984, Section 21A

2 Central Bank of India Vs Ravindran (2002) 1 SCC 367
1494 [2024] 12 S.C.R.

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has been inserted in the Act, which takes away power of the court to
reopen a transaction between a banking company and its debtor on
the ground that the rate of interest charged is excessive. The provision
has been given an overriding effect over the Usurious Loans Act,
1918 and any other provincial law in force relating to indebtedness.”
It was also observed by this Hon’ble Court, that for all transactions,
which may not be squarely governed by such circulars, the RBI
directives may be treated as standards for the purpose of deciding
whether the interest charged is excessive, usurious or opposed to
public policy. Thus, in view of this statutory bar, the Complaint of the
Respondent nos.1 to 3, which is only based on the higher rates of
interest, could not have been entertained by the National Commission
and deserved to be dismissed at the very threshold.
13. Further, in exercise of powers conferred under Section 35A read with
Section 56 of the Banking Regulation Act, 1959 & being satisfied
that it is necessary and expedient in the public interest so to do, it
is also well within the exclusive jurisdiction of the Reserve Bank of
India to take corrective and/or penal steps, suo-moto or on receipt of
any representation or inquiry thereof, qua any such act in deference
to its policy or circular.
14. The Appellants therefore urge that the maxima or minima of the
interest could not have been decided by the Consumer Forum, as
it is the specific statutory domain of the Reserve Bank of India and
it is the directives of RBI alone that may be treated as standard for
the purpose of deciding whether the interest charged is excessive,
usurious or opposed to public policy3 Ld. Counsel for the Banks,
also submits that in absence of a statutory direction by the Reserve
Bank of India, with respect to a maximum ceiling rate, the Banks
could not be held liable for any unfair trade practices. More-so, they
are bound by the circulars of the Reserve Bank of India and have
formulated policies accordingly.
15. It has been further argued that once an executive authority exercises
a legislative power by way of subordinate legislation, pursuant to a
delegated authority of a legislature, such executive authority cannot
be asked to enact a law, which he has been empowered to do
under the delegated legislative authority.4 A direction by the National

3 Keshav Lal Khemchang & Sons Pvt. Ltd & Ors. Vs Union of India [supra]
4 Union of India Vs Prakash P. Hinduja (2003) 6 SCC 195
[2024] 12 S.C.R. 1495

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

Commission to the Reserve Bank of India to issue directions on
Benchmark Rates of Interest, is an attempt to usurp the jurisdiction,
and can in no manner be considered lawful and tenable.
16. On merits, it is the assertion of the Appellants that the rates of interest
formulated by them, are in conformity with the directions of the Reserve
Bank of India. As a matter of policy pursuant to the liberalization of
the economy and consequent deregulation of interest rates, the RBI
vide Circulars dated 21.10.2003 and 02.07.2007 provided that:
“Credit card dues are in the nature of non-priority sector
personal loans, and as such, banks are free to determine
the rate of interest on credit card dues without reference
to their BPLR and regardless of the size”
The same circulars also gave comprehensive directions on charging
interest rates on advances and the Benchmark Prime Lending Rate
(BPLR) as under:
“Benchmark Prime Lending Rate (BPLR) and Spreads:
2.2.1 With effect from October 18, 1994, RBI has
deregulated the interest rates on advances above Rs.
2 lakhs and the rates of interest on such advances are
determined by the banks themselves subject to BPLR
and Spread guidelines. For credit limits up to Rs. 2 lakh
banks should charge interest not exceeding their BPLR.
Keeping in view the international practice, and to provide
operational flexibility to commercial banks in deciding their
lending rates, banks can offer loans at below BPLR to
exporters or other creditworthy borrowers, including public
enterprises, on the basis of a transparent and objective
policy approved by their respective Boards. Banks will
continue to declare the maximum spread of interest rates
over BPLR.
2.2.3. Banks are free to determine the rates of interest
without reference to BPLR and regardless of the size in
respect of loans for purchase of consumer durables, loans
to individuals against shares and debenture/bonds, other
non-priority sector personal loans, etc. as per details given
in paragraph 2.4.
1496 [2024] 12 S.C.R.

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2.4. Freedom to fix Lending Rates:
2.4.1 Banks are free to determine the rates of interest without
reference to BLPR and regardless of the size………………..”
17. The said circulars clarify that credit card dues constitute non-priority
sector personal loans and Banks are free to determine the rates
of interest, without reference to PLR and regardless of their size.
The Reserve Bank of India had given this discretion to the banks
to determine rates of interest, as per the market forces, while
maintaining transparency with the credit card holders. The Appellants
assert that they have duly complied with all the requirements of the
Reserve Bank of India, and none of the practices adopted by them,
run contrary to the intent or directions of the Reserve Bank of India
and its circulars.
18. The rates of interest on credit card dues are neither usurious nor do
they constitute a practice that is unfair, arbitrary or unreasonable. The
practice of charging any interest on credit-cards dues is such that
credit card generally carry an interest rate on an annualised basis
(Annual Interest Rate-APR). The interest due is calculated only on
unpaid balances. Any customer who pays in the entire amount being
the value of the said transaction, within the due date of payment,
is not charged any interest. The penalty or cost of such interest is
incurred once, there is default, which takes into account costs to
the bank of non-performing loans (bad debt), acquisition costs, and
are not unreasonable.
19. It is submitted that the charging of interest by the Bank is in
accordance with the circulars issued by the RBI and cannot an unfair
trade practice as the interest is paid only by those who default in
making payments of their credit-card bills, after having enjoyed free
credit for periods ranging between 17-55 days, or those who do not
make payment of the entirety of their dues on each bill, and then
on the balance dues. Most pertinently, the terms and conditions for
charging of rates of interest or charges applicable thereto, have been
duly informed to all customers by way of the Most Important Terms
and Conditions issued by the Banks, which are the standard set of
conditions for the issuance and usage of credit cards, thereby defining
the responsibilities of the card issuer and the cardholder, and contain
information with regard to fee, charges applicable on credit cards,
[2024] 12 S.C.R. 1497

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

finance charges and withdrawal limits, and are also provided at the
time of the generation of each monthly bank/billing statement. The
customer from day one is aware that in the event of there being a
delayed payment, he would be liable to pay the interest.
20. A preliminary objection has also been raised by the Banks, that the
Respondent nos. 1 & 2, do not qualify as a ‘consumer’ under the
Consumer Protection Act, 1986 and have no locus standi to approach
the National Commission. The Respondent nos. 1 & 2, are registered
trusts, that claim to fight for consumer rights, are not purchasers of
any goods, nor have they availed any services. The Complainant
trust does not meet the requirements under section 2(b) & 2(d)) read
with Section 12(c) and 13(6) of the Consumer Protection Act, 1986
and cannot be considered a voluntary consumer association. Be that
as it may, a trust, whether registered under the Indian Trust Act, or
the State Trust Registration Act, is not a person ‘person’ as defined
under Section 2(1)(m) of the Consumer Protection Act, 1986, and &
therefore not a consumer and consequently cannot invoke provisions
or file a consumer dispute under the provisions of this Act.5
21. It is further submitted by the Appellants that the Respondents had
approached the National Commission at the behest of the Respondent
no. 3, one Mr. Thakur a credit card holder with Citibank, purportedly
claiming an amount of Rs. 90,000/- against excess interest charged
by the bank. Ld. Senior Counsel submits that the purported claim
is ex-facie barred by section 21(a) of the Consumer Protection Act,
which mandates the Commission to entertain claims only above
Rs. 1 crore. More-so, the alleged concern “about an excessive
exorbitant rate of interest being charged by the Respondent no. 2
and other similarly placed banks. But not getting proper guidance
about it, hence could not challenge grievances about excessive rate
of interest on credit card facilities” is wholly insufficient to constitute
an unfair trade practice. Further, the pleading raised by the said
Complainant, is improper and devoid of any material particulars to
sustain a complaint. It not only fails to indicate how the concerned
Respondent has suffered a deficiency of service; it does not disclose
the date of purported default or alleged damage, or any particular
date/rate of interest charged from him due to such default.

5 Pratibha Pratisthan Vs Canara Bank (2017) 3 SCC 712
1498 [2024] 12 S.C.R.

Supreme Court Reports

22. It has been further submitted that the consumer complaint was
purportedly filed in a representative capacity by the Respondents,
ought to have complied with the provisions of Order 1 Rule VIII
of the Code of Civil Procedure, 1908 as mandated under Section
13(6) of the Consumer Protection Act, 1986.6 In terms of Section
13(6) of the Consumer Protection Act, 1986, it was necessary for
the Complainants to take necessary permission of the National
Commission to sustain a complaint in a representative capacity. Our
attention is drawn to an application filed by the Complainant, under
section 13(6) of the Consumer Protection Act, 1986, and it has been
brough to our notice that:
(a) No application seeking such permission to file a Complaint in a
representative capacity was filed up till the point of conclusion
of arguments and reservation of judgment 22.05.2008.
(b) Even otherwise, the application (undated) filed by the
Complainant was done so subsequently, upon the reservation
of the Judgement.
(c) The application was never adjudicated upon by the Commission,
and no attempt had been made by the Complainants to file
review against the final order in this regard.
23. It is stated that the Complaint could not have been filed in a
representative capacity on behalf of all credit card holders across the
spectrum, as only a handful of banks were impleaded as a party to
the Complaint. Even otherwise, no notice of any kind whatsoever was
issued to any other bank by the Hon’ble Commission for adequate
representation, so as to further treat the complaint in a representative
capacity. The scheduled banks notified by the Reserve Bank of India
are engaged in the business of credit card, hence any representation
at the behest of other banks, or directions to other banks, could not
be done in a piecemeal manner. Most pertinently, all banks come
under the regulation and supervision of the Reserve Bank of India,
which is the statutory authority empowered to regularize, notify and
further direct guidelines for the functioning of these Banks.

6 Godfrey Phillips India Ltd. v. Ajay Kumar (2008) 4 SCC 504 : 2008 SCC OnLine SC 603
[2024] 12 S.C.R. 1499

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

24. It is further submitted a Complaint against any purported grievance
owing to rate of interests, charged by banks, cannot be the subject
matter of a proceeding before the National Commission and an
alternate remedy has been provided by the legislature. The present
regime under the Consumer Protection Act, 2019, provides a
mechanism for redressal of grievances of consumers. By virtue
of section 10 of the Consumer Protection Act, 2019, the Central
Government is to notify a Central Consumer Protection Authority for
regulating the matters pertaining to the violation of rights of consumers,
including against grievances of unfair trade practice. The said authority
is thus empowered to enforce the rights of consumers, exclusively.

SUBMISSIONS BY THE COMPLAINANTS
25. It is the grievance of the Respondent Complainants that the National
Commission has partially allowed the Complaint by holding that
charging of interest at rates in excess of 30% p.a. by the bank from
its credit card holders, was an unfair trade practice and did not
consider the violation of the Benchmark Restrictions to be fixed by
the banks in accordance with the circulars issued by the Reserve
Bank of India. It is stated the banks have been allegedly charging
rates of interest on credit cards in excess of their Benchmark Prime
Lending rate (BPLR) on credit limits of less than Rs. 2 lakhs, in
contravention to the annual policy 2003-2004. By way of the original
Complaint, it had been sought that the banks may be permanently
restrained from charging excess rates of interest & subsequently
refund the excess amount of interest and service charges collected
by the banks.
26. It is argued that the Bank Statement issued by the Banks, for availing
the credit card facility, have several heads of hidden miscellaneous
expenses for the issue of credit card facility, and entailed exorbitant
penalty even during the interest free period. A Bank Statement from
American Express Bank has been produced and it is averred that
banks are charging: (a) Transaction Fees of 2.5 % on cash advance
or on purchase on the credit card required to be borne even during
the interest free period of 20-50 days. (b) in case of default, interest,
which may have to be paid from credit free period till the date of
payment, would be payable over the 2.5 % transaction fee (c) late
payment of fees of 30 % of the minimum due up-to Rs. 500 per
1500 [2024] 12 S.C.R.

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month. (d) Interest which is to be compounded on a monthly basis
(d) the penalty charged to be capitalized every month.
27. Our attention is drawn to the same 2003 Circular issued by the
Reserve Bank of India, whereby the RBI has given guidelines as
caution to banks, with respect to excessive interest charged by
banks, and the same reads as under:
“2.12. Excessive interest charged by banks
2.12.1 Though interest rates have been deregulated,
charging of interest beyond a certain is seen to be usurious,
and can neither be sustainable nor be conforming to
normal banking practice. Boards of banks have therefore
been advised to lay out appropriate internal principles and
procedures so that usurious interest including processing
and other charges, are not levied by them on loans and
advances, in laying down such principles and procedures
in respect of small value loans, particularly personal loans
and such other loans of similar nature, banks should take
into account, inter-alia the following broad guidelines: …...”
28. The Counsel for the Complainant has referred to various other
circulars issued by the Reserve Bank of India, wherein the RBI
has acknowledged that it has been receiving many complaints with
regard to banks charging excessive rates of interests and vide such
circulars, the RBI has directed the banks to not charge such high
rates of interest. It is submitted that the current practice is such that,
if a person fails to make the due payment within 30/45 Days, he will
have to pay interest @ 36-49%, which is exorbitant, and unfair. It
is argued that since services of banking, fall within the definition of
“services” under section 2(1)(o) of the Act, any deficiency/dispute
in such services arising therefrom shall also be governed under the
Consumer Protection Act, 1986.
29. It is argued by the Complainants that a person aggrieved by the
excessive rates of interest cannot be rendered helpless and by virtue
of section 2 of the Banking Regulation Act, 1949, the operation of other
laws is not expressly barred. It is the grievance of the Complainants
that since the person who opens a bank account with a Bank, is
a consumer of the bank’s facilities, the provisions of Consumer
[2024] 12 S.C.R. 1501

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

Protection Act, 1986 and the Consumer Forums are the necessary
medium for grievance redressal.
30. It is also the case of the Complainants that the terms and conditions
laid down by the Banks, at the time of issuance of the credit cards,
constitute a unilateral, and one-sided contract. The counsel for the
Complainants has drawn a parallel with the contracts of adhesion from
the French term (contracts d’ adhesion) as they symbolise a single will
so unilaterally dominant that it dictates its terms not to an individual, but
to an indeterminate collectively. The characteristics associated with a
contract, such as freedom of contract and consensus are absent from
such contracts, which makes such terms unfair and unconscionable.
The term “unfair contracts” has been defined under section 2(46) of
the Consumer Protection Act, 1986 and include all such contracts
that have terms which cause significant change in the rights of such
consumer. It is submitted that the unilateral terms of the banks, in
charging such excessive rates of interest, is such an unfair contract.
31. Our attention is drawn to the 103 rd Report submitted by the
Law Commission on “Unfair Terms in Contract”, wherein it had
recommended an amendment in the Indian Contract Act, 1872 against
such unconscionable terms under any contract. It is the grievance of
the Complainants that banks under the veil of providing credit card
facilities, is executing unilateral contracts, for their own profit and
gain, and such practice, cannot be fair by any means. It is submitted
that such one-sided contracts, offering no choice to the consumer,
have been struck down as “unfair trade practices”.7
32. It is submitted that the definition clause of the Act itself, gives
adequate ammunition to the court to declare any form of unfair trade
practice as illegal and grant the resultant relief to the consumer.8 It
is urged that the Consumer Forum has the necessary jurisdiction,
to entertain the plea of a consumer, and further adjudicate on the
terms of a contract, in the present case being the rates of interest,
being charged by the banks. It is also argued that the question of

7 Pioneer Urban Land and Infrastructure Vs Geetu Gidwani Verma & Anr. (2019) 5 SCC 725; Ireo Grace v
Abhishek Khanna (2021) 3 SCC 241; Exeprion Developers Pvt Ltd v Sushma Ashok Shiroor (2022) 12
SCC 286
8 Texco Marketing Pvt. Ltd. Vs TATA AIG GIC (2023) 1 SCC 428
1502 [2024] 12 S.C.R.

Supreme Court Reports

this excessive rate of interest amounts to penalty falls well-within
the meaning of Section 74 of the Indian Contract Act upon which
any Civil Court has the jurisdiction to adjudicate.
33. It is submitted that the Complainant, that represents a voluntary
consumer association, working for the sake of consumer rights,
is well within the scope of the definition of a complainant, under
Section 12(1)(b) of the Consumer Protection Act, 1986. The original
Complaint, preferred by the Complainants, meets the necessary
requirements under section 12 read with section 13 of the Act. In
addition, the Respondents had also filed an Application under section
13(6) of the Act, to substantiate their bona fide, however the same
was never adjudicated upon.

SUBMISSIONS ON BEHALF OF THE RESERVE BANK OF INDIA
34. The Reserve Bank of India has the statutory power under section
21 and 35A of the Banking Regulation Act, 1949 for determining the
policy in relation to the advances to be followed by the bank from
time to time, which the banks are bound to follow. In accordance
with this power granted by the Act, the RBI has from time to time
issued directives/guidelines to the banks regarding interest rates on
advances, credit cards and is of the considered opinion that there
exist no extraneous circumstances of violation that warrant an action
by the RBI against any bank or the banking sector.
35. The bone of contention raised by the original Complainants that the
RBI ought to have taken action against the Banks, has been clarified
by the Reserve Bank of India, stating that there is no material before
it or the Complainants or the National Commission, to establish that
any of the banks have acted contrary to the policy directives issued
by the Reserve Bank of India. Hence, the question of directing
the RBI to act against any bank does not arise in the facts and
circumstances of the present case. The RBI has also submitted
that there is no question of the RBI being directed to impose any a
cap on the rate of interest, either on the banking sector as a whole,
or in respect of any one particular bank, contrary to the provisions
contained in the Banking Regulation Act, and the circulars/directions
issued thereunder.
36. Even on merits, it has been submitted that the interest rates on
advances are determined by individual banks as per their internal
[2024] 12 S.C.R. 1503

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

policies approved by their Board of Directors, subject to the regulatory
guidelines contained in the Master Direction-Reserve Bank of India
(Interest Rate on Advances) Directions, 2016 issued vide DBR.
Dir. No. 85/13/03/00/2015-16 dated March 3, 2016 (as updated till
September 12, 20230. In regard to fixed rate loans, it has been
specified that the fixed rate of tenor below 3 years shall not be less
than the benchmark rate for similar tenor.
37. It has been submitted that in terms of the regulatory guidelines
issued vide Master Direction-Credit Card & Debit Card-Issuance and
Conduct dated April 21, 2022 as on March 07, interest charged on
credit cards shall be justifiable having regard to the cost incurred
and the extent of return that could be reasonably expected by the
card user.
38. Most pertinently, it is the assertion of the Reserve Bank of India, that
it is only the Hon’ble Supreme Court under Article 32 and the High
Courts under Article 226, that have the power of judicial review of
statutory instruments. It is not within the executive domain of the
National Commission to judicially review the circulars/directives
and hold that the policy contained therein is invalid. The National
Commission is bound to accept the policy contained in the circulars
as valid and cannot question the policy decision of the Reserve Bank
not to impose a ceiling on the rate of interest to be charged by the
Banks on the credit card transactions.9

CONSIDERATION OF SUBMISSIONS
39. Upon hearing the counsels for the parties & the intervenor and
considering their detailed written submissions, the questions for
determination before this Hon’ble Court are as under:
(i) Whether the Respondent organization has the locus to approach
the National Commission?
(ii) Whether the National Consumer Disputes Redressal Commission,
has the jurisdiction to interfere with banking operations, which
is the exclusive statutory domain of the Reserve Bank of India?
(iii) Whether the National Consumer Disputes Redressal Commission
had the jurisdiction to fix a maximum ceiling rate of interest to be

9 L.Chandra Kumar vs Union of India & Ors. (1997) 3 SCC 261
1504 [2024] 12 S.C.R.

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charged by banks from their credit card holders for their failure
to make full payment on the due date, at the behest of the
Reserve Bank of India & unilaterally direct banks/non-banking
financial institutions to charge rates of interest not beyond the
30% p.a., in absence of an instruction/directive of the Reserve
Bank of India?
(iv) Whether the Impugned Judgment interferes with the contract
executed between the parties?
(v) Whether charging rate of interests by banks in the manner
as advised by Reserve Bank of India vide its master circulars
& notifications being independent of a standard ceiling rate
prescribed by the Reserve Bank of India, constitute an unfair
trade practice?

ANALYSIS

i. Whether the Respondent organization has the locus to
approach the National Commission?
40. To maintain a complaint under the provisions of the Consumer
Protection Act, 1986, a complainant must be either a ‘consumer’
within the meaning of Section 2(1)(d) of the Act or it must fit into
Section 12(1) of the Act. The definition of the term “consumer” is
defined herein as under:
“2.(1)(d) “consumer” means any person who—
(i) buys any goods for a consideration which has been
paid or promised or partly paid and partly promised, or
under any system of deferred payment and includes any
user of such goods other than the person who buys such
goods for consideration paid or promised or partly paid or
partly promised, or under any system of deferred payment,
when such use is made with the approval of such person,
but does not include a person who obtains such goods
for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration
which has been paid or promised or partly paid and partly
promised, or under any system of deferred payment and
includes any beneficiary of such services other than the
person who hires or avails of the services for consideration
[2024] 12 S.C.R. 1505

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

paid or promised, or partly paid and partly promised, or
under any system of deferred payment, when such services
are availed of with the approval of the first mentioned
person; but does not include a person who avails of such
services for any commercial purpose;
Explanation.—For the purposes of this clause, “commercial
purpose” does not include use by a person of goods bought
and used by him and services availed by him exclusively
for the purposes of earning his livelihood by means of
self-employment;”
41. Section 12(1)(b) also permits a “any recognised consumer association
whether the consumer to whom the goods sold or delivered or
agreed to be sold or delivered or service provided or agreed to be
provided is a member of such association or not” to file a complaint,
in terms of the procedure prescribed under section 13 of the Act.
The Respondent nos. 1 and 2 herein, have taken refuge under this
provision claiming themselves to be a voluntary consumer association,
to approach the National Commission.
42. The Complaint however, failed to meet the threshold of section 12(1)
and 13 of the Act. The original Complaint before the Commission,
which is said to have been filed in a representative capacity, by
the Trust, representing all consumers who have been purportedly
aggrieved owing to the exorbitant rates of interest charged by the
banks, was filed without complying with the mandate of Order I
Rule 8, prescribed under Section 13(6) of the Act. No order has been
passed by the National Commission permitting the Respondent nos.1
and 2 to represent the interest or act on behalf of any consumer.
An application under section 13(6) of the Act seeking permission to
act “on behalf of consumers” was only filed by the Complainants, at
the stage of conclusion of arguments, and judgment being reserved.
43. Since, this Court has held that the requirement of Order I Rule 8,
prescribed in Section 13(6) is to be read into section 12(1) of the
1986 Act,10 the requirement of obtaining prior permission from the
Commission, for any consumer to act in a representative capacity,
can in no way be dispensed with.

10 Rameshwar Prasad Shrivastava & Ors. vs. Dwarkadhis Projects Private Limited & Ors, 3 (2019) 2 SCC
417
1506 [2024] 12 S.C.R.

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44. The Respondent nos.1 and 2 have also handed over the Trust
Deed dt 06.06.1994 only during the course of arguments, to
demonstrate that the Complainants are a registered association
representing consumer rights, does not help the cause insofar as
a trust, whether registered under the Indian Trust Act, or the State
Trust Registration Act, is not a “person” as defined under Section
2(1)(m) of the Consumer Protection Act, 1986. The decision in
Pratibha Pratisthan Vs Canara Bank11 by this Hon’ble Court that a
trust is not a person & therefore not a consumer and consequently
cannot invoke provisions or file a consumer dispute under the
provisions of this Act. The issue whether a Trust would come within
the purview of consumer has been referred to a larger bench in
Administrator Smt. Tata Bai Desai Charitable Opthalmic Trust
Hospital, Jodhpur Vs Managing Director, Supreme Elevators
India Pvt. Ltd. & Ors.12 vide judgment dated 04.10.2019; however,
the ratio in Pratibha Pratisthan Vs Canara Bank (supra), is the
position of law in force.
45. We are further of the considered view that the consumer Complainant
fails to disclose any deficiency in service or violation and is in
fact a public interest litigation in guise of a purported consumer
dispute. We also agree with the contention of the Appellants, that
the Respondents had approached the National Commission at the
behest of the Respondent no. 3, a credit card holder with Citibank,
purportedly claiming an amount of Rs. 90,000/- against excess interest
charged by the bank, which is barred by the pecuniary jurisdiction
of the Commission.
46. Even otherwise, the administrative policy decisions of banks, do not
constitute provisions/facilities of banking, which may come under the
umbrella of ‘service’, defined under section 2(1)(o) of the Consumer
Protection Act, 1986. A policy decision pertaining to the rate of
interest, and trade practices carried out by the banks across the
country, is a regulatory function within the specific statutory domain
of the Reserve Bank of India and cannot come under the purview
of judicial scrutiny by the National Commission.

11 Pratibha Pratisthan Vs Canara Bank (2017) 3 SCC 712
12 Administrator Smt. Tata Bai Desai Charitable Opthalmic Trust Hospital, Jodhpur Vs Managing Director,
Supreme Elevators India Pvt. Ltd. & Ors SLP(Civil) No. 18636/2019
[2024] 12 S.C.R. 1507

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

47. A direction by the National Commission or any other Court, must
be based on material or evidence and not on surmises, and bald
averments made by complainants. Any such directions issued
otherwise is unsustainable. We are thus unable to subscribe to the
view adopted by the National Commission, that ‘any complaint under
the Consumer Protection Act, 1986 to curb unfair trade practice(s)
adopted by the banks is maintainable’.

ii. Whether the National Consumer Disputes Redressal
Commission, has the jurisdiction to interfere with banking
operations, which is the exclusive statutory domain of the
Reserve Bank of India?
iii. Whether the National Consumer Disputes Redressal
Commission had the jurisdiction to fix a maximum ceiling
rate of interest to be charged by banks from their credit card
holders for their failure to make full payment on the due
date, at the behest of the Reserve Bank of India & unilaterally
direct banks/non-banking financial institutions to charge
rates of interest not beyond the 30% p.a., in absence of an
instruction/directive of the Reserve Bank of India?
48. The Reserve Bank of India is the prime banking institution of the
country, and a statutory authority entrusted with the supervisory
role over banking and conferred with the authority of issuing
binding directions, having statutory force. 13 No other entity or
banking institution has been conferred by the legislature, the power
of subordinate legislation to formulate and enact new directives/
guidelines in public interest and for the growth of the Indian economy.
49. The Reserve Bank of India has time & time again acted on its
salient duty and issued master directions/circulars which are clear,
unambiguous and specific instructions to banking institutions to
carry out their operations in a transparent and fair manner, and
the banks across the country are bound to follow. 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

13 (2002) 1 SCC 367
1508 [2024] 12 S.C.R.

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entrusted to that authority. However, the National Commission has
done just that.
50. 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.
51. Although, the National Commission has recorded that by virtue of its
decision, it is not re-opening any transaction between the banking
company and its debtor on the ground that the rate of interest is
excessive, as barred under section 21A; and has only decided the
limited question on “whether a bank has adopted any unfair trade
practice, as defined under section 2(1)(r)(I)”; we do not subscribe to
this rationale. The decision of the National Commission to unilaterally
hold that any interest above 30% p.a. is usurious, is in contrary to
the legislative intent of section 21A and is an encroachment upon
the domain of the Reserve Bank of India.
52. In the case of Central Bank of India Vs Ravindra & Ors. [2002]
1 SCC 367, this Hon’ble Court had decided on the issue, when
banks in India were not following a uniform practice, and other banks
charged interest with monthly or quarterly rests while others charged
with yearly or six-monthly rests. It was held by this Hon’ble Court,
that a distinction was drawn between the court’s power to interfere
on the promise that the interest charged is excessive under the
general law, and the court’s interference on the premise that the
interest charged is in contravention of the circulars and directions
issued by the Reserve Bank of India. In the former case, it would
not be permissible in view of the bar enacted by Section 21A of
the Banking Regulation Act, while in the latter case, it would be
permissible because of the Reserve Bank of India’s circulars and
directions having statutory force under section 21/35A of the Act,
having been violated.
53. This Hon’ble Court has observed that an attempt of the courts, to
intervene in the policy decisions taken by the Reserve Bank of India
[2024] 12 S.C.R. 1509

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

is to tread an unknown path. The National Commission has gone
one step further, and while treading this unknown path has made
casual passing remarks on the conduct of functions by the Reserve
Bank of India, stating that “unfortunately, in our country, the regulator
who is empowered under section 35A of the Banking Regulation has
left it to absolute discretion of the banks”. We do not subscribe to
the observation made by the Commission or the manner in which
it has been made.
54. We have also considered all the circulars/notifications on credit
card operations, up till 2022, issued by the RBI, which provide a
comprehensive compendium of guidelines for Banks to carry out
operations with respect to credit cards. This Court is certainly not going
into the actuarial principles adopted by the Reserve Bank of India,
as the basis to formulate its directives, but we are of the considered
opinion that the RBI must have acted with prudence while giving the
apparent discretion to the banks to decide the rates of interest. One
of the directions in the annexures also includes “educating customers
on the implication of paying only the minimum amount due” on credit
cards. It has been carefully opined under the RBI instructions, for
issue and action to be taken by banks, that “Banks should step up
their efforts on educating the cardholders on the implications of paying
only the ‘minimum amount due’. The MITC should specifically explain
that the ‘free credit period’ is lost, if any balance of the previous
month’s billing is outstanding. For this purpose, they could work out
illustrative examples and include the same in the Welcome Kit sent
to cardholders as also place it on their websites.
55. One such endeavour is also apparent from the fact that the same 2003
Circular, also enunciates the enabling clauses in a loan agreement,
which reads herein as under:
“2.7.1 Banks should invariably incorporate the following
proviso in the loan agreements in the case of all advances,
including the term loans, thereby enabling banks to charge
the applicable interest rate in conformity with the directives
issued by RBI from time to time.
“Provided that the interest payable by the borrower shall
be subject to the changes in the interest rates by the
Reserve Bank from time to time.”
1510 [2024] 12 S.C.R.

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56. We are thus, of the considered opinion that the challenge by the
complainants that the guidelines issued by the RBI are arbitrary and
not in public interest, is wholly without basis. It is no more res integra
that any direction or guideline, issued by a statutory authority, is an
extension of the statute itself. Rules made under a statute must be
treated, for all purposes of construction or obligations, exactly as if
they were in that Act.14 The notifications, circulars and directions of
the RBI are nothing but the legislative expression of the ‘statement
of object & reasons’ encapsulated in the preamble of the Reserve
Bank of India Act, 1934. Hence, the statutory presumption that the
legislature whilst formulating laws has inserted every part thereunder
for a purpose and that legislative intention, which should be given
effect to, would be applicable to the present guidelines as well.
57. In this respect alone, the National Commission had no jurisdiction to
either entertain a Complaint, having vague, ambiguous allegations &
no cause of action, and further also had no jurisdiction to assume the
jurisdiction of the Reserve Bank of India, or act/decide or regulate on
its behest, any monetary decision or policy. This Hon’ble Court has
also answered the question of want of judicial review of directions,
within the specific domain of an expert body in the case of Shri
Sitaram Sugar Company Ltd. Vs Union of India15 and was pleased
to observe as under:
“Judicial review is not concerned with matters of economic
policy. The Court does not substitute its judgement for
that of the legislature or its agents as to matters within
its province of either. The Court does not supplant the
feel of expert by its own views. When the legislature acts,
within the sphere of its authority and delegates power to
an agent, it may empower the agent to make findings of
fact which are conclusive provided such findings satisfy the
test of reasonableness. In all such cases, judicial inquiry is
confined to the question whether the findings of fact, are
reasonably based on evidence and whether such findings
are consistent with the laws of the land.”

14 Peerless General Finance & Investment Co. Ltd. & Anr. Vs Reserve Bank of India (1992) 2 SC 343
15 (1990) 3 SCC 223
[2024] 12 S.C.R. 1511

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

58. 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. Reliance is placed on: Small Industries Development
Bank of India v. SIBCO Investment (P) Ltd.,16 this Hon’ble Court
has been pleased to observe:
“19. A conjoint reading of the statutory provisions
mentioned above, makes it abundantly clear that for “public
interest” RBI is empowered to issue any directive to any
banking institution, and to prohibit alienation of an NBFC’s
property. The term “public interest” has no rigid definition.
It has to be understood and interpreted in reference to
the context in which it is used. The concept derives its
meaning from the statute where it occurs, the transaction
involved, the state of society and its needs. [Bihar Public
Service Commission v. Hussain Abbas Rizwi (2012) 13
SCC 61 : (2014) 2 SCC (Civ) 131] V. Ramasubramanian,
J., speaking for a three-Judge Bench in Internet & Mobile
Assn. of India [Internet & Mobile Assn. of India v. RBI (2020)
10 SCC 274] , gave a wide meaning to “public interest”,
in context of Section 35-A of the Banking Regulation Act,
1949 : (SCC p. 370, para 176)
“176. … As we have indicated elsewhere, the power under
Section 35-A to issue directions is to be exercised under
four contingencies, namely, (i) public interest, (ii) interest of
banking policy, (iii) interest of the depositors, and (iv) interest
of the banking company. The expression “banking policy”
is defined in Section 5(ca) to mean any policy specified
by RBI (i) in the interest of the banking system, (ii) in the
interest of monetary stability, and (iii) sound economic
growth. Public interest permeates all these areas.”
59. In addition, we are also of the considered view, that an endeavour
to cap the rate of interest charged by banks and dictating the need

16 (2022) 3 SCC 56
1512 [2024] 12 S.C.R.

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for a Benchmark Prime Lending Rate, drawing parallels with other
economies across the world, whilst failing to trust the prudence
of the Reserve Bank of India which has been entrusted with the
fundamental responsibility of regulation of the monetary system and
banking business is unwarranted.
60. There is also merit in the submission made by the Appellants, that
a direction cannot be issued to the Reserve Bank of India, to enact
a particular legislation. It is a settled cannon of law that “when an
executive authority, exercises a legislative power by way of subordinate
legislation pursuant to the delegated authority of a legislature, such
executive authority, cannot be asked to enact a law, which he has
been empowered to do under the delegated legislative authority.”17
61. In deciding the validity of any economic legislation or notification
having a public objective sought to be attained, it is imperative to test
it on the touchstone of reasonableness, and in the absence of any
patent arbitrariness, the directions cannot be condemned as being
violative of Part III of the Constitution of India.18 In the present context,
it is not the case of the Complainants, or pleaded otherwise, that the
directions or decisions taken by the statutory authority entrusted to
manage the economy, do not pass the test of Wednesbury principle
of reasonableness, or are not free from arbitrariness nor affected by
bias or actuated by mala fide.

iv. Whether the Impugned Judgment interferes with the
contract executed between the parties?
v. Whether charging rate of interests by banks in the manner
as advised by Reserve Bank of India vide its master circulars
& notifications being independent of a standard ceiling
rate prescribed by the Reserve Bank of India, constitute
an unfair trade practice?
62. It is a well-settled principle that the terms of a contract executed
between two parties, are not open to judicial scrutiny unless the
same is arbitrary, discriminatory, mala fide or actuated by bias. The

17 Supreme Court Employees Welfare Association Vs Union of India (1989) 4 SCC 187
18 Peerless General Finance & Investment Co. Ltd. & Anr. Vs Reserve Bank of India (1992) 2 SC 343
[2024] 12 S.C.R. 1513

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

courts cannot strike down the terms of a contract, because it feels
that some other terms would have been fair, wiser or logical.
63. The credit card holders in the present case are well-informed and
educated & had agreed to be bound by the express stipulation by
the terms issued by the respective banks. The banks in the most
important terms and conditions, as provided by the Banks have
provided all necessary information with regard to fees, and charges
applicable to credit cards, credit and cash withdrawal limits. We
are of the considered opinion 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 National Commission could not have scrutinized the terms or
conditions, including the rate of interest. More-so, the Respondent
has not approached the statutory authority, the Reserve Bank of India,
for any objection against the rate of interest, or the high Benchmark
Prime Lending Rate.
64. The National Commission, whilst making observations, has made
stipulations to the terms of contract agreed between the parties, so
much so it has supplanted itself as the custodian of the terms and
conditions between the parties. 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. It is a settled cannon of law, that a
contract, being a creature of an agreement between two or more
parties, is to be interpreted giving the actual meaning to the words
contained in the contract and it is not permissible for the Court to
make a new contract, however reasonable, if the parties have not
made it themselves.”19
65. Therefore, when a person signs a document which contains certain
contractual terms, that normally parties are bound by such contract;
it is for the parties to establish an exception in a suit. When a party
to the contract disputes the binding nature of the signed document,

19 Rajasthan State Industrial Development & Investment Corporation Vs Diamond & Gem Development
Corporation Ltd.
1514 [2024] 12 S.C.R.

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it is for him to prove the terms, in the contract, or circumstances
in which he came to sign the documents, need to be established.20
Hence, the National Commission had no jurisdiction to re-write the
said terms of the contract entered between the banks and the credit
cardholders, which the parties have mutually agreed to be bound by.
66. Even otherwise, it is not the case of the Complainants or as
adjudicated by the National Commission, that the decision by the
Reserve Bank of India, being a statutory authority whilst imposing
interest acts contrary to public good, public interest, unfairly, unjustly
and unreasonably, in its contractual, constitutional or statutory
obligations.21
67. In addition, thereto, the Hon’ble Court in the case of Colgate
Palmolive (India) Ltd. Vs MRTP Commission [2003] 1 SCC 129,
had laid down five ingredients before a trade practice could be an
“unfair trade practice”, as under:
(1) There must be a trade practice [within the meaning
of Section 2(u) of the Monopolies and Restrictive
Trade Practices Act].
(2) The trade practice must be employed for the purpose
of promoting the sale, use or supply of any goods or
the provision of any services.
(3) The trade practice should fall within the ambit of one
or more of the categories enumerated in clauses (1)
to (5) of Section 36A
(4) The trade practice should cause loss or injury to the
consumers of goods or services.
(5) The trade practice under clause (1) should involve
making a statement whether orally or in writing or by
visible interpretation.22
68. Thus, any trade practice which is adopted for the purpose of
promoting the sale, use, or supply of any goods, or for the provision

20 Bharathi Knittting Company Vs Worldwide Express Courier Division of Airfrieght Ltd. (1996) 4 SCC 704
21 Directorate of Education vs Educomp Datamatics Ltd. (2004) 4 SCC 19
22 Colgate Palmolive (India) Ltd. Vs MRTP Commission (2003) 1 SCC 129
[2024] 12 S.C.R. 1515

Hongkong and Shanghai Banking Corp. Ltd. v. Awaz & Ors.

of any service, by adopting any unfair method or unfair or deceptive
practice, has to be treated as ‘unfair trade practice’. Hence, whether
an act can be condemned as an unfair trade practice, or not, the key
is to examine the ‘modus operandi’ i.e. whether there is any false
statement/misrepresentation, or deception.
69. In the present context, the pre-conditions of ‘deceptive practice’ and
unfair method’ are manifestly absent. The Banks have in no manner
made any misrepresentation, to deceive the credit card holders.
Upon availing the facility of the credit cards, the customers, are
made aware of ‘the most important terms and conditions’, including
the rate of interest, that shall be charged by the Banks. Even on
merits, the Reserve Bank of India, has made it clear that there exists
no material on record, to establish that any bank has acted contrary
to the policy directives issued by the RBI. Even otherwise, there is
not even a single averment so as to establish how the charging of
rates of interest upon the default by credit card holders, without a
standardized rate, is usurious and constitutes an unfair trade practice.
The mere inflation in the rates of interest cannot be construed as a
practice, intended to cause loss or injury.
70. It is correct to say that the National Commission has been duly
empowered under the statute to set aside unfair contracts, which
may symbolise a single will or are unilaterally dominant or incorporate
terms which are unfair and unconscionable. However, the rate of
interest, charged by the banks, determined by the financial wisdom
& directives issued by the Reserve Bank of India, and is duly
communicated to the credit card holders from time to time, cannot
be in any manner unconscionable or unilateral. The credit card
holders are duly educated and made aware of their privileges and
obligations, including timely payment & levying of penalty on delay.
71. Thus, we agree with the submissions made by the Reserve Bank of
India, that the question of directing the RBI to act against any bank
does not arise, in the facts and circumstances of the present case
and that there is no question of the RBI being directed to impose any
cap on the rate of interest, either on the banking sector as a whole,
or in respect of any one particular bank, contrary to the provisions
contained in the Banking Regulation Act, and the circulars/directions
issued thereunder.
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CONCLUSION
72. In light of the aforesaid, the appeals bearing C.A. No. 5273 of 2008,
C.A. No. 5294 of 2008, C.A. No. 5627 of 2008, C.A. 5278 of 2008
and C.A. No. 6679 of 2008 are allowed and the final Judgment/Order
dated 07.07.2008 passed by the National Commission in “Awaz &
Ors. Vs Reserve Bank of India23 is set aside.
73. No order as to costs.

Result of the case: Appeals allowed.

†
Headnotes prepared by: Divya Pandey

23 Complaint Case No. 51 of 2007 before the National Consumer Disputes Redressal Commission,
New Delhi