Chandigarh

StateCommission

A/157/2018

Inderjeet Kaur - Complainant(s)

Versus

The Federal Bank Limited - Opp.Party(s)

Pardeep Solath & Satbir Mor, Adv.

31 May 2019

ORDER

STATE CONSUMER DISPUTES REDRESSAL COMMISSION,

U.T., CHANDIGARH

 

 

Appeal No.	:	157 of 2018
Date of Institution	:	05.06.2018
Date of Decision	:	31.05.2019

 

1.  Inderjeet Kaur W/o Dr. Raminder Singh R/o H.No.3124, Sector 20-D, Chandigarh.

2.  Dr. Raminder Singh S/o Sh. Sardar Singh R/o H.No.3124, Sector 20-D, Chandigarh.

…..Appellants/Complainants.

Versus

 

The Federal Bank Ltd., Credit Hub, SCO No.139-140, Sector 8-C, Madhya Marg, Chandigarh – 160009 through its Branch Manager.

 

...Respondent/Opposite Party.

 

Appeal under Section 15 of the Consumer Protection Act, 1986  against  order  dated  01.05.2018 passed by District   Consumer Disputes Redressal Forum-I, U.T. Chandigarh  in Consumer Complaint No.667 of 2016.

 

BEFORE: JUSTICE JASBIR SINGH (RETD.), PRESIDENT.

                MRS. PADMA PANDEY, MEMBER.

                MR. RAJESH K. ARYA, MEMBER.

 

Argued by:

 

Sh. Pardeep Solath, Advocate for the appellants.

Sh. Nitin Grover, Advocate for the respondent.

 

PER  RAJESH  K.  ARYA, MEMBER

                In this appeal, the appellants/complainants have impugned order dated 01.05.2018 passed by District Consumer Disputes Redressal Forum-I, U.T., Chandigarh (in short ‘the Forum’) vide which, their complaint was dismissed.

2.             Before the Forum it was the case of the appellants/ complainants that on 06.06.2015, they got sanctioned a mortgage loan of Rs.80,00,000/- from the respondent/opposite party against their Shop situated in Pipliwala Town, Manimajra. It was stated that being highly unsatisfactory, on 30.10.2015, they got shifted their loan to IndusInd Bank. However, while doing so, the respondent/opposite party arbitrarily deducted 2% i.e. Rs.1,60,000/- of the loan amount as foreclosure charges without any prior notice.

3.             On the other hand, the case set up by the respondent/opposite party, in its written statement, was that as per Clause 8 of the loan agreement executed between the borrower/Complainants and the OP-Bank, it was agreed by the Complainants that in the event of the loan/limit being repaid before the due date for payment prescribed or being taken over by any other bank/financial institution, the borrower shall pay pre-payment charges at such rates as specified in the schedule to the Agreement.               

4.             It was argued by Counsel for the appellants/ complainants that the Forum arbitrarily dismissed the complaint without appreciating the facts on record. It was submitted that the loan was mortgage term loan and not Overdraft and as such, the respondent/opposite party – Bank could not levy any foreclosure charges in case of transfer of any loan from one bank to another. It was also argued that as per the RBI instructions dated 07.05.2014 & 14.07.2014, the Banks and other financial institutions were barred from charging foreclosure or pre-payment charges from individuals/sole proprietors, who avail loans with floating rate of interest including house, corporate, vehicle and personal loans for long terms for personal needs. It was further submitted that the appellants/complainants availed similar loan i.e. Housing Mortgage (Floating) Loan for 120 months for personal use at floating rate of interest and thus, in view of RBI instructions and the settled law, fore-closure charges levied were arbitrarily and illegal.

5.             On joint perusal of Sanction Order dated 06.06.2015 (Annexure R-2) and the ‘SCHEDULE OF PROPERTY POWER AGREEMENT’ reveals that ‘Nature of Facility’ was ‘Overdraft – Property Power’ and the limit sanctioned was Rs.80 Lakhs. The purpose for which the limit was availed was ‘Personal needs of individuals’ and the repayment period was 120 months. The rate of interest was floating @12.75% p.a. (Base Rate Plus 2.55% Spread). The prevalent Base Rate of the Bank at the relevant time was 10.20%.  The Repayment Mode was ‘OverDraft – Reducing Limit’. No doubt, it was both mortgage and term loan. Circulars dated 07.05.2014 and 14.07.2014 issued by Reserve Bank of India come to the rescue of the appellants/complainants being fully applicable to the case of the appellants/complainants.

6.             Circular dated 07.05.2014 issued by Reserve Bank of India to all Scheduled Commercial Banks (excluding RRBs) clearly states that banks will not be permitted to charge foreclosure charges/pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect.

7.             Further vide Circular dated 14.07.2014 issued to all the Non Banking Financial Companies/Residuary Non Banking Companies, as a measure of customer protection and also in order to bring uniformity with regard to prepayment of various loans by borrowers of banks and NBFCs, it was advised by Reserve Bank of India that NBFCs shall not charge foreclosure charges/pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect.

8.             Not only as above, in the case of Ajay Partap Singh Vs. India Bulls Housing Finance ltd. & Anr., III (2018) CPJ 88, cited by Counsel for the appellants/complainants, this Commission while allowing the appeal by Sh. Ajay Partap Singh against dismissal of his complaint, ordered refund of the amount of Rs.2,38,821/- deducted on account of foreclosure charges, alongwith interest @8% p.a. besides awarding Rs.20,000/- as litigation expenses. In the said case also, reference was made to circulars letters dated 14.08.2014 and 03.09.2014 from National Housing Bank to all registered housing finance companies wherein it was observed that “foreclosure charges/pre-payment penalties shall not be applicable to the individual borrowers.”

9.             In the instant case, while closing the account of the appellants/complainants by way of taking over of loan by another financial institution, the respondent/opposite party - Bank illegally deducted 2% foreclosure charges to the tune of Rs.1,60,000/-, which it could not do. Though on the request of the appellants/complainants yet the amount towards foreclosure charges was arbitrarily deducted from the FDR proceeds of the appellants/complainants. Further perusal of Clause 2  in Loan Agreement for ‘Property Power’, it was agreed that the loan/limit shall be utilized only for the purpose for which it has been applied for/granted and shall not be utilized for any other purpose. Further as per Clause 3, interest on the amount of the loan/limit was to be applied at the base rate of the bank, which implied that it was floating rate of interest. As such, as per aforesaid RBI instructions, the banks and other financial institutions were barred from charging foreclosure charges and pre-payment penalties on all floating rate term loans sanctioned to individual borrowers. In the instant case, loan was taken in the capacity as individual borrower and therefore, the loan being mortgage-cum-term loan, the respondent/opposite party wrongly charged foreclosure charges, which it is liable to refund to the appellants/complainants alongwith interest. The appellants/complainants are also held entitled to compensation for suffering mental agony and physical harassment suffered by them due to deficiency in rendering service and unfair trade practice on the part of the respondent/opposite party.

10.           However, the judgment cited by the Counsel for the respondent/opposite party in the case of Vikas Jain and others Vs. Reliance Capital ltd. and another, 2015 (2) CPJ 190 (NC) is of no help to the respondent/opposite party being distinguishable on facts.

12.              No other point was argued by the Counsel for the appellants/complainants.

13.           For the reasons recorded above, the appeal is allowed and the impugned order dated 01.05.2018 passed by District Forum – I, U.T., Chandigarh is set aside. Consequently, the complaint bearing No.667 of 2016 is partly allowed with costs and the respondent-opposite party is directed as under:-

(i)          To refund the amount of Rs.1,60,000/- alongwith interest @8% p.a. (simple) to the appellants/ complainants from the date of deducting the aforesaid foreclosure charges i.e. w.e.f. 27.11.2015 till the date of realization; within a period of 30 days from the date of receipt of a certified copy of the order, failing which, the aforesaid amount shall carry interest @10% p.a. (simple), instead of 8% p.a. (simple), from the date of default i.e. after expiry of period of 30 days, till realization.

(ii)        To pay an amount of Rs.35,000/- to the appellants/complainants towards compensation on account of mental agony and physical harassment within a period of 30 days from the date of receipt of a certified copy of the order, failing which, the aforesaid amount shall carry interest @8% p.a. (simple), from the date of filing the complaint till realization.

(iii)      To pay an amount of Rs.20,000/- to the appellants/complainants towards litigation expenses within a period of 30 days from the date of receipt of a certified copy of the order, failing which, the aforesaid amount shall carry interest @8% p.a. (simple), from the date of filing the complaint till realization.

13.           Certified copies of this order, be sent to the parties, free of charge.

14.           The file be consigned to Record Room, after completion.

Pronounced.

31.05.2019.

[JUSTICE JASBIR SINGH (RETD.)]

PRESIDENT

 

 

(PADMA PANDEY)

        MEMBER

 

 

(RAJESH  K. ARYA)

MEMBER

Ad