A Bench of Justices Bela Trivedi and Satish Chandra Sharma overturned the NCDRC’s 2008 decision, emphasising that the Commission did not have the jurisdiction to impose such directives on the banking sector, particularly regarding the role of the Reserve Bank of India (RBI). The Court pointed out that the NCDRC had exceeded its mandate by attempting to regulate banking practices, a responsibility that falls solely under the purview of the RBI.
“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,” the Court stated.
It further noted that such actions contradicted the legislative intent behind Section 21A of the Banking Regulation Act, 1949, which bars any court or tribunal from re-opening transactions based on the rates of interest charged by banks.
The Court stressed that the RBI is the principal authority for regulating the banking sector, particularly on matters concerning interest rates. “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 just, fair, or equitable,” the Bench asserted.
While the Supreme Court confirmed the RBI’s central role, it clarified that courts can intervene to ensure that the RBI does not abuse its lawful authority. “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 explained.
In the case at hand, the Court noted that the credit cardholders involved were well-informed and educated about the terms and conditions set by the banks. “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 Bench observed. It emphasised that the banks had provided all necessary information regarding fees, charges, and limits before issuing the cards.
The Court concluded that the NCDRC had no authority to scrutinise or modify the terms of credit card agreements once they were disclosed to the consumers.
“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 an attempt by the National Commission to constitute a new contract, which is impermissible in law,” it held.
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