Suits on credit cards

Counsel for Kini, M P Rao, on his part argued his client had not used the card. He contended the summary suit cannot be filed under CPC since the transaction under a credit card is similar to a bank giving credit facility under cash credit, and therefore such a summary suitis not maintainable. He had also argued the amount in a cash credit facility is in nature of a current account and no interest such as service charge is payable on it.

Justice F I Rebello, who was hearing the case, had called upon many banks and institutions to intervene and argue if such a suit is maintainable. Counsel for banks like Citibank and BoBcard were heard in the matter. It was the case of the counsel for Central Bank, H N Vakil and A V Joshi from the solicitor firm of Mulla amp; Mulla that a summary suit is maintainable and is speedier since ordinary suits take ten to 15 years to recover the money due.

In his order, Justice Rebello held that since the agreement between the card holder and the bank itself stated and the parties agreed it was not an interest but a service charge, not payable if dues are paid within a certain time, it is the term of the contract that will have to be followed and not a judicial interpretation of what it might possibly be.

He also held the mere fact that the bank maynot be complying with the formality if any in law, that they are bound to comply with, does not and will not be a reason to hold that it is not a service charge. On the contention that the service charge was a penalty clause and attracted provisions of the Usurious Loans Act, the Justice dismissed these also since it was already held the service charge was not an interest or a tax. It was held to be an amount charged during repayment of the amount outstanding for services rendered. It was not interest.

The court also held that writing and signing of voucher slips at the sellers shops resulted in a contract in writing under which an ascertained or liquidated amount became due and payable. 8220;If there is a dispute regarding the user of a card, that dispute will only be an issue as to whether the defendents are entitled to conditional leave or unconditional leave8230; Having said so, I am clearly of the opinion that the suit based on the use of credit card is maintainable as a summary suit,8221; reads theorder.

Since Kini claimed the accounts were not submitted to him and he had stopped using the card since August 1994, the court granted him conditional leave to defend the suit and directed him to deposit Rs 75,000 with the court within four weeks.