Rajesh Lifespaces and Rajsanket Realty had launched a group housing project called Raj Infinia at Borivali in Mumbai.
Its advertising campaign said that a flat could be purchased in the project under a 'subvention scheme', which provided that the flat purchaser would have to pay 20 per cent of the cost and the remaining 80 per cent would be financed by ICICI Bank.
Akshay Gupta expressed interest in acquiring a flat under this scheme.
It was explained to him that the subvention scheme provided for finance of 80 per cent of the cost of the flat.
The equated monthly instalment (EMIs) would be paid by the builder for 36 months, or till date of possession which would be sometime in 2016 -- whichever was later.
Gupta and the builder entered into an agreement on August 17, 2013.
Based on Gupta's application, ICICI Bank sanctioned the home loan and disbursed Rs 12.33 lakh to the builder on August 21, 2013.
Subsequently, the Reserve Bank of India issued a circular on September 3, 2013, advising banks to ensure that payment of housing loans should be linked to stages of construction to prevent diversion of funds by builders.
Sometime in 2018, Gupta informed the builder that he was no longer interested in continuing with the scheme.
However, he did not intimate the bank. The loan continued in his name, with the builder paying the EMIs.
On May 30, 2019, the builder informed Gupta that it would not be able to pay the remaining EMIs due to poor financial condition.
It asked him to pay the outstanding EMI of Rs 3.12 lakh.
Later, the bank served Gupta a loan recall notice for default in repayment.
Gupta requested the bank not to take any coercive action, but the bank didn't respond.
So, Gupta filed a complaint before the National Commission alleging that the bank had indulged in unfair trade practice by violating the RBI guidelines.
ICICI Bank contested the complaint. The bank pointed out that the loan was disbursed under Gupta's instructions.
It relied on the agreement which provided that Gupta would be liable for making payment of EMIs if the builder failed to make payments on his behalf.
The bank denied that it had engaged in unfair trade practice by violating the instructions given in the RBI circular since there was no such circular in force on the date when the loan was disbursed.
It argued that a subsequent circular would not be applicable to loans that had already been disbursed.
The bank accused Gupta of raising objections instead of making payment in accordance with the terms of the loan agreement.
The National Commission observed that there was no agreement which cast an obligation on the builder to pay the EMIs to the bank till date of possession.
On the contrary, the agreement entitled the bank to recover the EMI from the flat purchaser in case the builder failed to make payment on his behalf.
It observed that the subvention scheme merely provided for financing 80 per cent of the cost of the flat, and did not absolve the flat purchaser, who was the borrower, from paying the EMIs.
Accordingly, in its order dated January 2, 2023 delivered by the bench of Justices Ram Surat Ram Maurya and Inderjit Singh, the National Commission dismissed the complaint, holding that Gupta was the borrower and so the bank was entitled to demand the EMI payments from him.