Punjab

Ludhiana

CC/21/426

Sham Lal - Complainant(s)

Versus

Aditya Birla Housing Finance Ltd - Opp.Party(s)

Harish Bhagat

22 Nov 2023

ORDER

DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, LUDHIANA.

                                                Complaint No:426 dated 16.09.2021.                                                         Date of decision: 22.11.2023.

 

Sham Lal, Aged about 50 years Son of Shri Mangat Ram, Resident of House No.499 (Old) 297 (new)          , Street No.2, Maharaja Ranjit Singh Park, Backside Shingar Cinema, Ludhiana. Mobile-98727-87283.                                                                                                                                 ..…Complainant

                                                Versus

1. Aditya Birla Housing Finance Limited, First Floor, SCO 146 & 147, Feroze Gandhi Market, Ludhiana-141001, through its Manager/General Manager.
2. Aditya Birla Housing Finance Limited, SCO 149-150, Sector 9C, Chandigarh-160017 through its Manager/General Manager.                                                                                               …..Opposite parties 

Complaint Under section 12 of the Consumer Protection Act, 1986.

QUORUM:

SH. SANJEEV BATRA, PRESIDENT

SH. JASWINDER SINGH, MEMBER

MS. MONIKA BHAGAT, MEMBER

 

COUNSEL FOR THE PARTIES:

For complainant             :         Sh. Harish Bhagat, Advocate.

For OPs                          :         Sh. D.P. Singh, Advocate.

 

ORDER

PER SANJEEV BATRA, PRESIDENT

1.                Shorn of unnecessary details, the facts of the case are that the complainant availed loan against property facility of Rs.55,00,000/- at the floating rate of interest @11.50% from the OPs as per sanction letter ref. No.DLLUDLAP-02190030577 dated 23.02.2019 granted by the OPs in his personal name. The same was informed to the complainant vide letter dated 26.03.2019. The complainant as per RBI instructions, foreclosure charges/pre-payment penalties is applicable in case of a loan in the name of firm or working establish but no foreclosure charges/pre-payment penalties are applicable in case of a loan of individual borrower. However, in his case, the foreclosure charges/re-payment penalties was liable to be paid @4.49% on the outstanding amount was liable to be paid by the complainant if he wishes to close the loan account by depositing the outstanding amount in lump sum. The complainant further stated that he is running an Electronic shop in 5the name and style of Sham Tele Shop, which is in the name of his wife Smt. Kusam Kumari. Name of brother of the complainant is Ram Kumar and his wife name is Smt. Sangeeta Bassi, who is owner of property of value of Rs.30 Crore, situated at Kashmir Nagar Near Tajpur Road, Ludhiana and they were neither surety nor co-borrowers. Rather their signatures were taken as guarantees for repayment. The same property was mortgaged with the OPs for the said loan. According to the complainant, a part payment of Rs.26,32,230/- was disbursed to him on 08.03.2019 and on 10.03.2019 his repayment schedule of the said loan amount was also prepared in his personal name and remaining amount of Rs.28,64,770/- was disbursed to the complainant on 27.03.2019 to be payable in 180 installments for 15 years having EMI @ Rs.64,251/- per month. The complainant further stated that as the loan as of an Individual Borrower which was exempted from Fore-closure/prepayment charges but the OPs entered the name of shop of the complainant and other family members beside the mortgages of the property to deprive him from benefit/exemption of said charges. The complainant started depositing monthly installments to the OPs and paid Rs.10,79,716/- in 16 monthly installments regularly without any interruption and the remaining payable amount was Rs.45,36,235/- on 16.08.2020. 

                   The complainant further stated  he took a loan of Rs.75,00,000/- from IDFC First Bank and closed the loan account of the OPs. The OPs received pre-payment/fore-closure loan amount of Rs.55,00,000/- on 16.08.2020 including foreclosure charges of Rs.2,50,296/-, which according to RBI instructions are totally illegal and wrong. The complainant visited the OPs with request to refund the foreclosure charges of Rs.2,50,296/- wrongfully received by the OPs from him but to no effect. In the end, he complainant has prayed for issuing directions to the OPs to refund the foreclosure charges/pre-payment penalties of Rs.2,50,296/- along with compensation as well as litigation expenses.

2.                Upon notice, the OPs filed written statement and assailed the complaint by taking preliminary objections on the ground of maintainability of complaint; non-joinder of other borrowers as party etc. The OPs averred that the complainant and other borrowers availed finance facility for business purpose by equitably mortgaging their property. Moreover, as per circular RBI i.e. RBI/2019-20/30 DNBR (PD) CC. No.101/03.10.001/2019-20 dated August 02, 2019 it was clarified that if finance facility is availed for business purpose then NBFC can charge pre-payment facility.  The relevant clause of which is reproduced as under:-

“2. It is clarified that NBFCs shall not charge foreclosure charges/pre-payment penalties on any floating rate term loan sanctioned for purposes other than business to individual borrowers with or without co-obligant (s).”

The OPs further stated that the complainant availed loan for business expansion which was duly signed by him and other borrowers and during the period, the complainant continued with said loan and never challenged the same not being business loan or for business purpose and even otherwise. However, the complainant after grant of said credit facility reaped all the benefits but has miserably failed to maintain the financial discipline required under the terms and conditions of the credit facility and in fulfilling contractual and legal obligations towards the OPs.

                   On merits, the OPs reiterated the crux of averments made in the preliminary objections and facts of the case. The OPs have denied that there is any deficiency of service and have also prayed for dismissal of the complaint.

3.                In support of his claim, the complainant tendered his affidavit Ex. CA in which he reiterated the allegations and the claim of compensation as stated in the complaint. The complainant also tendered documents Annexure-C/1 is the copy of sanction letter, Annexure-C/2 is the copy of loan documents, Annexure-C/3 is the copy of RBI letter dated 07.05.2014, Annexure-C/4 is the circular dated 14.08.2014 of  National Housing Bank, Annexure-C/5 is the copy of statement of account of loan, Annexure-C/6 is the copy of repayment schedule for loan, Annexure-C/7 is the copy of statement of account, Annexure-C/8 is the copy of loan agreement, Annexure-C/9 is the copy of foreclosure letter dated 18.07.2020 and closed the evidence.

4.                On the other hand, counsel for the OPs tendered affidavit Ex. RA of Sh. Vikas Arora, authorized representative of the OPs along with documents Ex.  R1 is the copy of RBI notification dated 02.08.2019, Ex. R2 is the copy of resolution dated 25.04.2022, Ex. R3 is the copy of loan sanction letter, Ex. R4 is the copy of Aadhar card of Ram Kumar, Ex. R5 is the copy of Aadhar card of Kusam Kumari, Ex. R6 is the copy of registration certificate of Sham Tele Shop, Ex. R7 GSTN number of the complainant, Ex. R8 is the copy of PAN card of the complainant, Ex. R9 is the copy of Aadhar card of Ram Kumar, Ex. R10 is the copy of PAN card of Sangeeta Bassi, Ex. R11 is the copy of PAN card of Kusum Kumari, Ex. R12 is the copy of loan agreement, Ex. R13 is the copy of demand promissory note, Ex. R14 is the copy of letter of continuity for demand promissory note, Ex. R15 is the copy of end use declaration format, Ex. R16 is the copy of request for disbursal, Ex. R17 is the copy of declaration for signing in vernacular language, Ex. R18 is the copy of letter from borrower confirming communication through emails, Ex. R19  is the copy of irrevocable power of attorney, Ex. R20 is the copy of stamp papers, Ex. R21 is the copy of affidavit of Ram Kumar Bassi, Ex. R22 is the copy of jamabandi for the year 2007-08, Ex. R23 is the copy of jamabandi for the year 2002-03, Ex. R24 is the copy of jamabandi for the year 1997-98, Ex. R25 is the copy of jamabandi for the year 2002-08, Ex. R26 is the copy of agreement to sell commercial property, Ex. R27 is the copy of original page No.3, Ex. R28 is the copy of insurance policy and closed the evidence.

5.                We have heard the arguments of the counsel for the parties and also gone through the complaint, affidavit and annexed documents and written reply along with documents produced on record by both the parties.

6.                Admittedly, the complainant Sham Lal along with co-borrowers namely Kusum Kumari, Ram Kumar Bassi, Sangeeta Bassi and M/s. Sham Tele Shop (Non-complainants) availed commercial – BT+Top Up loan of Rs.55,00,000/- at the floating rate of interest 11.50% per annum from the OPs vide sanction letter dated 23.02.2019 Annexure-C/1 = Ex. R3. The loan was repayable in 180 monthly installments of Rs.64,251/-. Ex. R12 is the loan agreement which bears the signatures of the complainant and other co-borrowers. Ex. C9 is the foreclosure letter wherein the request of the complainant to foreclose was accepted by the OPs. The details of the outstanding amount is given hereunder:-

Principal Outstanding as on 18.07.2020	53,15,305.00
Installment Pending	0.00
Pre-Emi Pending	0.00
Interest accrued for the month	13,361.00
Accrued Late Payment Charges	0.00
Bounced Cheque Charges	0.00
Other Charges	0.00
Foreclosure Charges @4.00% on o/s Principal	2,12,612.20
State Goods and Service Tax @9%, Central Goods and Service Tax@9%	38,270.19
Refunds	20.00

 

After the receipt of an amount, on 24.08.2020, the OPs issued “No Due Certificate” to the complainant and all the property documents were released. Now the complainant has challenged the levying of foreclosure charges by the OPs on pre-payment of outstanding loan amount as he claimed to have obtained the loan for personal use.

7.                The point of issue that arises for consideration is that whether levying of foreclosure charges by the OPs is justifiable or not?

8.                The matter in controversy revolves around the application of the circular/notification issued from time to time.

“Annexure-C/3 is a letter dated 07.05.2014 issued by the RBI addressed to al Scheduled Commercial Banks with regard to levying of foreclosure charges/pre-payment penalty on Floating Rate Term Loans

“Please refer to our circular DBOD No.Dir.BC.107/13.03.00/2011-12 dated June 5, 2012 on ‘Home Loans-Levy of Fore-closure Charges/Pre-payment Penalty’.

2. A reference is invited to Part B of the First Bi-monthly Monetary Policy Statement 2014-15 announced on April 1, 2014 proposing certain measures for consumer protection. It was indicated that in the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Accordingly, it is advised 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.”

Annexure-C/4 is the Policy Circular dated 14.08.2014 issued by the National Housing Bank to all registered Housing Finance Companies with regard to levying of foreclosure charges/prepayment penalty on pre=closure of housing loan.

“2. As a measure of customer protection and also in order to bring the uniformity with regard to prepayment of various loans by borrowers of banks, NBFCs and HFCs, it is advised that HFCs shall not charge foreclosure charges/pre-payment penalties on a floating rate term loans sanctioned to individual borrowers, with immediate effect.”

Ex. R1 is a letter dated 02.08.2019 addressed to all Non-Banking Financial Companies (NBFCs) with regard to levying of foreclosure charges/pre-payment penalty on Floating Rate Loans by NBFC.

“Pease refer to paragraph 30(4) of Chapter VI of Master Direction – Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and paragraph 30(4) of Chapter V of Master Direction – Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking company (Reserve Bank) Directions, 2016 on waiver of foreclosure charges/prepayment penalty on al floating rate term loans sanctioned to individual borrowers.

2. It is clarified that NDFCs shall not charge foreclosure charges/pre-payment penalties on any floating rate term loan sanctioned for purpose other than business to individual borrowers, with or without co-obligant(s).

3. The Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and the Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 have accordingly been updated.”

9.                Therefore, Ex. R1 is the clarification circular issued by the Reserve Bank of India wherein it has been mandated that the bank shall not charge foreclosure charges/pre-payment penalty on any floating rate term loan sanctioned for purposes other than business, to individual borrowers with or without co-obligants.  In the present case, the OPs have charged floating interest @11.50% per annum as is mentioned in the letter Annexure-C/1 = Ex. R3. The counsel for the OPs has further referred to the loan agreement Ex. R12 and in the Schedule-I attached with the loan agreement, the rate of interest is mentioned as 1.50% per annum floating (as per sanction letter). Even in the end use declaration format Ex. R5 dated 27.02.2019, the loan facility was taken for the purpose of business expansion for Sham Tele Shop. As such, the complainant obtained the loan from the OPs for the purpose of business expansion and also for commercial concern and not for personal use by him. It is evident that the said loan facilities were required by the complainant for the purpose of "business expansion", Loan was availed by the complainant along with M/s. Sham Tele Shop as a co-applicant. It is also evident from the record, that the complainant was not carrying on the business for merely to earn his livelihood, but for earning huge profits by engaging himself in different kinds of business activities.

10.              As regard the foreclosure charges of Rs.2,50,882.20, in this regard, the counsel for the OPs has referred to the letter dated 02.07.2019 issued by the Reserve Bank of India to all the NBFCs wherein it has been mentioned the NBFCs shall not charge foreclosure charges/pre-payment penalties on any floating rate term loan sanctioned for purpose other than business to individual borrowers, with or without co-obligant(s).  In this case, the complainant has obtained the loan from the OPs for the purpose of business expansion as is clearly evident from Ex. R5. Therefore, as per the guidelines dated 02.07.2019 issued by the Reserve Bank of India, the OPs could charge foreclosure charges and no illegality has been committed by the OPs by charging foreclosure charges.

                   Even otherwise, the complainant cannot be termed to be a consumer within meaning of Section 2(7) of the Consumer Protection Act, 2019 as held in its citation by the Hon’ble Supreme Court of India passed in "Lilavati Kirtilal Mehta Medical Trust Vs. Unique Shanti Developers and others", Civil Appeal No.12322 of 2016, decided on 14.11.2019, reported in 2020 (2) Supreme Court cases 265, in which it has been held as under:-

“7. To summarize from the above discussion, though a straightjacket formula cannot be adopted in every case, the following broad principles can be culled out for determining whether an activity or transaction is 'for a commercial purpose':

1. The question of whether a transaction is for a commercial purpose would depend upon the facts and circumstances of each case. However, ordinarily, 'commercial purpose' is understood to include manufacturing/industrial activity or business-to-business transactions between commercial entities.
2. The purchase of the good or service should have a close and direct nexus with a profit-generating activity.
3. The identity of the person making the purchase or the value of the transaction is not conclusive to the question of whether it is for a commercial purpose. It has to be seen whether the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the purchaser and/or their beneficiary.
4. If it is found that the dominant purpose behind purchasing the good or service was for the personal use and consumption of the purchaser and/or their beneficiary, or is otherwise not linked to any commercial activity, the question of whether such a purchase was for the purpose of 'generating livelihood by means of self employment' need not be looked into."

11.              Further reference can be made to the decision dated 20.01.2022 passed by the Hon’ble State Consumer Disputes Redressal Commission, Punjab, Chandigarh in Consumer Complaint No.91 of 2019 titled as Subhash Gupta Vs Indiabulls Housing Finance Ltd., whereby the Hon’ble State Commission has reiterated the legal proposition and also observed as under:-

“(IV) the complainant has voluntarily repaid the entire loan amount “without protest” and without reserving his right to challenge the payment of the amount along with the foreclosure charges later on. By clearing the loan, he has ceased to be a “Consumer”, hence, not entitled to invoke the jurisdiction under the Consumer Protection Act. Otherwise, also, he is estopped from challenging his own action once the payment had been made without protest.”

By applying the ratio of the above cited case, it is our considered view that the complaint is not maintainable and same deserves dismissal and is hereby dismissed.

12.              As a result of above discussion, the complaint is hereby dismissed being devoid of any merits. However, there shall be no order as to costs. Copies of order be supplied to parties free of costs as per rules. File be indexed and consigned to record room.            

13.              Due to huge pendency of cases, the complaint could not be decided within statutory period.

 

(Monika Bhagat)          (Jaswinder Singh)             (Sanjeev Batra)

Member                         Member                              President        

 

Announced in Open Commission.

Dated:22.11.2023.

Gobind Ram.