28th day of October 2024
CC 47/21 filed on 01/02/2021
Complainant : Mapranam Anthappan Thomas, S/o Anthappan,
Mapranam House, Azhikodan Street, Kuriachira P.O.,
Thrissur – 680 006.
(By Advs. Saji Joseph & Majo C.J., Thrissur)
Opposite Parties : 1) Tata Capital Financial Services Ltd., Regional Office,
Jain Tower – 11, Ground Floor, NH 17,
Nr. Lulu Mall, Edapally, Cochin – 682 024.
Rep. by Manager (loan against property)
2) Tata Capital Financial Services Ltd., Ground Floor,
Trichur Trade Centre, Opp. Raymond Shop,
Kuruppam Road, Thrissur – 680 001.
Rep. by the Branch Head.
(OP 1 & 2 Ex-parte )
O R D E R
By Sri. C.T. Sabu, President :
1) The case of the complainant in brief is as follows:
The complainant availed of a home equity loan of Rs. 2,50,00,000/- (Rupees Two crore fifty lakh only) from the opposite party on 29-10-2016, under loan account No. 6637704. The loan amount was disbursed on the same date, with an interest rate of 10.25% as per the loan terms. The opposite party is a Non-Banking Financial Company (NBFC) engaged in lending money to the public. The first opposite party is its regional office, and the second opposite party is its branch office in Thrissur. The opposite parties collected Rs.2,97,500/- from the complainant as a processing fee for sanctioning the loan. The complainant paid all monthly instalments promptly without default.
The complainant later decided to close the loan account and requested that the opposite parties provide the outstanding balance. In response, the opposite parties issued a letter dated 07-10-2020 stating that the outstanding balance in the loan account was Rs. 1,80,43,868/- (Rupees One crore eighty lakh forty-three thousand eight hundred and sixty-eight only). However, the total amount required to close the loan was shown as Rs. 1,90,57,195.18 (Rupees One crore ninety lakh fifty-seven thousand one hundred and ninety-five and eighteen paisa only), including an additional Rs. 10,13,327.18 (Rupees Ten lakh thirteen thousand three hundred and twenty-seven and eighteen paisa only) as foreclosure charges. As the complainant urgently needed to retrieve the original title deeds, they were forced to remit Rs. 1,88,96,866/- (Rupees One crore eighty-eight lakh ninety-six thousand eight hundred and sixty-six only) under protest via demand draft on 06-10-2020. The opposite parties thus collected an additional Rs. 8,52,998/- from the complainant as foreclosure charges.
The letter dated 29-10-2016 issued by the opposite parties at the time of loan sanction did not mention foreclosure charges as a condition for closing the loan account. The letter was issued to ensure transparency in the loan transaction. Additionally, as per directives issued by the Reserve Bank of India (RBI), NBFCs are prohibited from demanding pre-closure charges when a borrower pays the outstanding loan balance to close the account.
Despite receiving the amount, the opposite parties delayed issuing the loan closure letter until 27-11-2020, causing a delay of over 51 days. This delay caused the complainant financial loss and hardship. The opposite parties, which was able to disburse a loan of Rs. 2,50,00,000/- within three days, unnecessarily protracted the closure process, seemingly to harass the complainant. The opposite parties unlawfully collected Rs. 8,52,998/- from the complainant, exploiting their situation.
Further, the opposite parties, as an NBFC under RBI regulations, should not engage in the practices of a private moneylender. The opposite parties' actions contravened the RBI's guidelines prohibiting foreclosure charges, and it is both legally and morally bound to return the unauthorized amount collected from the complainant.
The complainant sent a registered lawyer's notice to the opposing parties on 14-12-2020, demanding the return of Rs. 8,52,998/- with 12% interest from 07-10-2020 until realization, along with Rs. 5,00,000/- as compensation. Although the opposing parties acknowledged receipt of the notice on 16-12-2020, they have not responded or paid the amount to date.
The opposite parties' conduct constitutes a clear deficiency in service and an unfair trade practice, causing the complainant mental distress and financial loss. The complainant prays for compensation of Rs. 5,00,000/- for inconvenience and losses. Therefore, the opposite parties should be directed to pay Rs. 8,52,998/- with 12% interest from 07-10-2020 until realization, Rs. 5,00,000/- as compensation, and the entire cost of this litigation.
2) On receiving the complaint, proper notice was sent to the opposite parties. The opposite parties appeared before the Commission through counsel but, despite availing several chances, didn't file a version on time. Hence, the opposite parties were set as ex-parte, and the case was posted for the complainant's evidence.
3) When the case came for evidence, the complainant filed a proof affidavit in which they affirmed and explained all the averments in tune with the complaint. The complainant produced six documents marked as Exts. A1 to A6. Ext. A1 is the copy of Letter dtd. 29/10/16 issued by the opposite parties to the complainant. Ext. A2 is the copy of letter dtd.07/10/2020 issued by the opposite parties to the complainant. Ext. A3 is the copy of the Demand Draft for Rs.1,88,96,866/- drawn on Yes Bank drawn in favour of the opposite parties dtd. 06/10/2020. Ext. A4 is the copy of the lawyer notice issued to the opposite parties dtd. 12/12/2020. Ext. A5 is the Postal Receipts (2 Nos.) dtd.14/12/2020. Ext. A6 is the Postal Acknowledgment cards (2 Nos.).
4) After perusing the documents and evidence produced, the Commission finds the following:
Foreclosure Charges Not Disclosed in Loan Agreement:
Upon examining Ext. A1, the loan availing letter, it is evident that there is no mention of any foreclosure charges. This document does not imply that the loan was availed for business purposes, and thus, it would not justify the additional charges for early repayment. The complainant had a reasonable expectation that the loan could be closed by paying only the outstanding balance without any extra charges for early closure.
Imposition of Foreclosure Charges by the opposite parties:
It was only in Ext. A2, the foreclosure request, where the opposite parties mentioned the terms and foreclosure charges. The opposite parties’ failure to mention these charges during loan disbursement indicates a lack of transparency in the loan agreement process. The complainant could not have been aware of these charges until the point of requesting foreclosure, putting the complainant at a disadvantage and forcing them to pay the additional amount under duress to retrieve the title deeds. The opposite parties delayed closing the loan account by more than 51 days after receiving the full payment, causing the complainant financial loss and hardship.
Violation of RBI Guidelines:
Moreover, as per the RBI's guidelines, foreclosure charges on loans, particularly those availed for non-business purposes, are prohibited. NBFCs are expected to comply with these guidelines and refrain from engaging in practices akin to private moneylenders. The opposite parties’ action in demanding foreclosure fees contravenes these regulations, and they are both legally and morally bound to return the amount collected.
Based on the discussion above, the Commission concludes that the opposite parties’ actions amount to a clear deficiency in service and an unfair trade practice. By imposing foreclosure charges without prior notice and unnecessarily delaying the closure of the loan account, the opposite parties have violated established guidelines. As a result, the complainant is entitled to a refund of the unauthorized amount collected by the opposite parties.
5) In the result, the complaint is allowed, and the opposite parties are jointly and severally directed to pay the complainant:
1. refund of ₹ 8,52,998/- (Rupees Eight lakh fifty-two thousand
nine hundred and ninety-eight only), the unauthorizedly collected
amount as foreclosure charges with 12% interest per annum from
the date of foreclosure payment i.e. 06/10/2020 till realization,
2. a sum of ₹ 50,000/- (Fifty Thousand only) as compensation for the
financial loss and inconvenience caused,
3. a sum of ₹10,000/- (Rupees Thirty Thousand only) towards the
costs of the complaint.
The opposite parties are directed to comply with this order within 30 days of receiving the copy of this order, failing which the entire awarded amounts shall carry interest at the rate of 12% per annum from the date of foreclosure payment i.e. 06/10/2020, till realization.
Dictated to the Confidential Assistant, transcribed by her, corrected by me and pronounced in the open Commission this the 28th day of October 2024.
Sd/- Sd/- Sd/-
Sreeja S. Ram Mohan R C. T. Sabu
Member Member President
Appendix
Complainant’s Exhibits :
Ext. A1 copy of Letter dtd. 29/10/16 issued by the opposite parties to the
complainant.
Ext. A2 copy of letter dtd.07/10/2020 issued by the opposite parties to the
complainant.
Ext. A3 copy of the Demand Draft for Rs.1,88,96,866/- drawn on Yes Bank
drawn in favour of the opposite parties dtd. 06/10/2020.
Ext. A4 copy of the lawyer notice issued to the opposite parties dtd. 12/12/2020. Ext. A5 Postal Receipts (2 Nos.) dtd.14/12/2020.
Ext. A6 Postal Acknowledgment cards (2 Nos.).
Id/-
President
