IN THE TAMILNADU STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI.

Present:  Hon’ble THIRU. JUSTICE R. SUBBIAH       :    PRESIDENT

                                  THIRU S. KARUPPIAH       :  JUDICIAL MEMBER

     THIRU R VENKATESAPERUMAL  :      MEMBER

C.C.No.27 of 2015

Tuesday, the 30^th day of August 2022

M/s.G.G. Hospitals

Rep. by its Sole Proprietor

Mrs. Kamala Selvaraj

6-E, Nungambakkam High Road

Nungambakkam

Chennai – 600 034.                                                 .. Complainant

- Vs –

1.  Bank of Baroda

 Rep. by its General Manager (CMR)

 Chennai Metro Region

 II Floor,

 10, C.P. Ramasamy Road

 Alwarpet,  Chennai – 600 018.

2.  Bank of Baroda

Nungambakkam Branch

Rep. by its Chief Manager

Dwaraka Building

Nungambakkam High Road

Chennai – 600 034. .. Opposite Party

    Counsel for the Complainant           :  M/s. N.R.R.Arun Natarajan

    Counsel for the Opposite parties      :  M/s. K. Ravikumar 

This complaint is coming before us for final hearing today, on 22.08.2022 and on hearing the arguments of both sides and on perusing the material records, this Commission made the following :-

O R D E R

R.SUBBIAH J., PRESIDENT

                This complaint has been filed by the Complainant against the opposite parties, under Section 17 of the Consumer Protection Act, 1986 for the following directions to the opposite parties;

1. To refund the sum of Rs.87,14,478/- to the complainant which was charged by the 2^nd opposite party towards prepayment charges;
2. To pay interest at 12% on Rs.87,14,478/- from the date of payment till the date of repayment but not exceeding a sum of Rs.5,00,000/-. ;
3. To pay a sum of Rs.5,00,000/- to the complainant towards damages and mental agony; and
4. To pay a sum of Rs.30,000/- to the complainant towards cost of the complaint.

             2.     The gist of the Complaint averments are as follows:  The complainant is running a Hospital at 6E, Nungambakkam High Road, Nungambakkam, Chennai – 600 034.  The complainant wanted to construct a new hospital and decided to purchase land at No.21, Dr. Thirumurthy Nagar Main Road, Nungambakkam,      Chennai-34.  In this regard, the complainant approached the 2^nd opposite party for sanction of fresh credit facilities for purchase of the said land to construct a hospital, construction cost of the hospital building and for purchase of medical/ hospital equipments for the new hospital.  The 2^nd opposite party by letter dated 11.06.2010 sanctioned fresh credit facilities and also reviewed the existing term loan.  Even prior to the sanction letter dated 11.06.2010 issued by the 2^nd opposite party, the complainant had availed term loans and credit facilities    from the 2^nd opposite party, wherein the complainant was prompt in repayment.  Under the letter of sanction dated 11.06.2010, the 1^st Term Loan already granted on 06.02.2008 was reviewed with regard to the rate of interest and the 2^nd and 3^rd Term Loan were sanctioned afresh.  Along with the sanction letter dated 11.06.2010 the terms and conditions for the term loan were enclosed.  Under the heading “Other General Terms and Conditions” with regard to pre-payment of term loan it is stated as follows :-

“Prepayment of Term Loan will attract additional interest at 0.50% for the period prepaid as per the extant guidelines of our bank.”

By letter dated 13.12.2013, the 2^nd opposite party reviewed the Term Loan -1, Term Loan-2 and Term Loan- 3 granted under the letter of sanction dated 11.06.2010 and sanctioned a fresh demand loan of   Rs.7 crores.  The term loans granted to the complainant, by the opposite parties vide the letters of sanction dated 11.06.2010 and 16.12.2013 was reviewed and sanctioned, as detailed below:-

The 2^nd opposite party was charging high rate of interest at 13.25% for term loan Nos. 1 to 3 and 13.75% for the 4^th Term Loan and did not enhance the credit limits as requested by the complainant, though she was prompt in payment of dues.  Hence, the complainant approached HDFC Bank, Nelson Manickam Road Branch, Chennai for takeover of the existing loans/ facilities from the 2^nd opposite party.  The HDFC Bank submitted an offer wherein the Bank agreed to charge a lesser rate of interest at 11.40%, compared to the interest rate of 13.25% and 13.75% charged by the 2^nd opposite party and the value of the collateral required by HDFC Bank was lesser than what was required by the 2^nd opposite party.  The proposal submitted by HDFC Bank was duly communicated by the complainant to the 2^nd opposite party and the complainant requested the 2^nd opposite party to match the offer submitted by HDFC Bank since she is a customer of the 2^nd opposite party for the last 34 years.   But there was no response from the 2^nd opposite party.  Hence, the complainant decided to shift the loan facilities from the 2^nd opposite party to HDFC Bank, who accepted to take over the loan availed by the complainant from the 2^nd opposite party.  Hence, the complainant sent an e-mail dated 15.03.2014 to the opposite parties stating that the complainant had decided to shift the loan to HDFC Bank from the 2^nd opposite party.  Further, a cheque for the outstanding amount as on 14.03.2014 was also made ready by HDFC Bank for the takeover of the loan from the 2^nd opposite party.  Hence, the complainant requested the 2^nd opposite party to accept the cheque drawn on HDFC Bank for the takeover of the terms loans and close the loan account Nos. 08040400000120, 0804600000852, 08040600001115, 08040600001228 and 08040600001334 at the earliest.  Thereafter, the 2^nd opposite sent a letter dated 10.04.2014 to the complainant enclosing the statement showing the actual position of the terms loans and overdraft facilities availed by her.  In the statement attached to the letter, the outstanding amount under the six Loan Account Numbers as on 31.03.2014, shows as Rs.34,68,05,001/-.  The penalty plus service tax @ 12.36% shown in the last column is Rs.87,14,478/- for the four Term Loans.  Apparently, penalty including service tax was charged towards prepayment charges for pre-closure of the four Term Loans.  The complainant in her letter dated 11.04.2014 addressed to the 2^nd opposite party had stated that she decided to transfer the loan accounts to HDFC Bank from the 2^nd opposite party since she has got a better offer from HDFC Bank and the collateral is getting released.  However, the complainant offered to continue its Proprietor’s home loan account with the 2^nd opposite party,  to value the relationship.  In the said letter, the complainant had requested the 2^nd opposite party to waive the prepayment penalty for the four Term Loan accounts, considering their long relationship and healthy banking transactions.  On the same day, i.e., on 11.04.2014, the 2^nd opposite party sent a reply to the complainant stating that her request for waiver of prepayment of penalty charges cannot be accepted and the complainant was called upon to pay the entire loan outstanding amount including the prepayment penalty charges.  It  was further stated in the said letter by the 2^nd opposite party that only on full and final settlement of the loan accounts, the documents given as collateral would be released.  The 1^st opposite party also rejected the request of the complainant, for waiver of the penalty charges for prepayment of the loans.  The HDFC Bank, by letter dated 30.04.2014 sanctioned a secured loan to a tune of Rs.38 crores, at an interest of 11.40%, for takeover of the term loans from the 2^nd opposite party.  Hence, on 30.04.2014, the complainant was forced to pay the prepayment penalty of Rs.87,14,478/- to the 2^nd opposite party, in order to save further payments of higher rate of interest to the 2^nd opposite party.  In fact, on 07.05.2014 RBI had issued a circular to all the scheduled commercial banks, directing as follows :-

        “Accordingly it is advised that Banks will not be permitted to charge foreclosure charges/ prepayment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect”.

As per letter dated 08.05.2014, the 2^nd opposite party closed the term loans availed by the complainant and returned the property documents given as collateral, to the complainant.  Based on the issuance of the RBI circular dated 07.05.2014, the complainant sent a letter on 12.05.2014 requesting the 1^st opposite party to reverse the prepayment penalty charged by them.  But the said request of the complainant was rejected stating that the prepayment penalty charges levied was in order.  Hence, aggrieved by the prepayment penalty charges levied by the 2^nd opposite party, the present complaint has been filed for the relief stated supra.

                3. The opposite party has filed a version stating that the complaint is not maintainable either in law or on facts.  The complainant is not a consumer as per the provisions of Consumer Protection Act.  There is no deficiency of service on the part of the opposite parties, as alleged by the complainant.  The complainant M/s.G.G Hospitals, a Proprietary concern, represented by its Proprietor Mrs. Kamala Selvaraj, approached the opposite parties for availing certain credit facilities.  Accordingly, certain credit facilities were sanctioned by the opposite parties bank vide their letter dated 11.06.2010, on the terms and conditions specified in Annexure-D of the letter for Review of existing term loan and sanction of fresh credit facilities.  The opposite parties initially sanctioned the credit facilities for a period of 12 months with effect from 05.06.2010.  The 1^st Term Loan limit was reviewed to Rs.10.00 crores, sanctioned for purchase of land for the purpose of constructing Hospital, with a repayment schedule of 27 quarterly instalments of Rs.36 lakhs each and 28^th quarterly instalment of Rs.28 lakhs (84 months), to be commenced from quarter ending March 2011.  The concessional rate of interest of 0.50% below BPLR presently 11.50% p.a. with monthly rests subject to change in BPLR and/or credit rating.  Interest to be serviced as and when applied.  The 2^nd Term Loan was on a fresh limit of Rs.20.89 crores, for the purpose of constructing Hospital building on the plot of land acquired out of 1^st Term Loan, with a repayment period of 10 years including holiday period of 15 months from the date of first disbursement. The repayment to be made in 34 quarterly instalments of Rs.59.68 lakhs each and 35^th quarterly instalment of Rs.59.88 lakhs, which shall commence from December 2011 quarter.  The concessional rate of interest of 0.50% below BPLR presently 11.50% p.a. with monthly rests subject to change in BPLR and/or credit rating. The interest to be serviced as and when charged including moratorium period.  The 3^rd Term Loan on a fresh limit of Rs.3.75 crores, for the purpose of purchasing Medical/ Hospital equipments, with a repayment period of 10 years including holiday period of 15 months from the date of first disbursement. The repayment to be made in 34 quarterly instalments of Rs.10.71 lakhs each and 35^th instalment of Rs.10.86 lakhs, commencing from December 2011 quarter.  The concessional rate of interest of 0.50% below BPLR presently 11.50% p.a. with monthly rests subject to change in BPLR and/or credit rating. The interest to be serviced as and when charged including moratorium period.  The credit facilities were reviewed and additional term loan was sanctioned as per the terms and conditions and the same was informed to the complainant by the opposite parties vide their letter dated 13.12.2013, whereby the term loan limit for the Term Loan-1 was revised to Rs.600/- lakhs and Term Loan-2 limit was revised to Rs.14.01 crores and the 3^rd Term Loan limit was Rs.298 lakhs besides a demand loan was sanctioned to the limit of Rs.700 lakhs for the purpose of paying statutory dues.  At the time of sanctioning the term loan to the complainant, the opposite parties informed the complainant that the penal interest at the rate of 2% is applicable for non compliance of any of the terms and conditions of sanction including delay in submission of periodical statements and also on over dues for the period of overdue.  Regarding the prepayment of term loan, the opposite parties have very specifically mentioned and informed the complainant that prepaying of term loan will attract additional interest @ 0.50% for the period prepaid as per extant guidelines of its bank.  The complainant had also agreed for the terms and conditions of the term loan sanction.  On receipt of the letter dated 07.04.2014 from the complainant with a request for closure of loan accounts of M/s. G.G Hospital, in respect of their loan Account Nos. 08040600001334, 08040600000852, 08040600001115, 08040600001228, 08040400000124 and 08040400000120 of Mrs. Kamala Selvaraj, the opposite parties vide its letter dated 10.04.2014 informed the complainant that the said intimation is without prejudice to and shall not be construed as waiver of any rights or remedies which may have, including without limitation, the right to make further demands in respect of sums owing to the bank if the balance amount stated therein is not paid on or before closure of the above loan accounts and also requested the complainant to hand over the set of documents pertaining to two AAA loans, for Rs.150 lakhs and Rs.50 lakhs and clear overdraft account with a limit of Rs.350 lakhs in the name of G.G. Hospital, duly signed.  On receipt of letter dated 11.04.2014 from the complainant requesting to waive the prepaying penalty for the loan Accounts Nos. 08040600000852, 08040600001115, 08040600001228 and 08040600001334, the opposite parties vide their reply letter dated 11.04.2014 informed the complainant that they are unable to consider the request of the complainant and requested the complainant to deposit the entire amount outstanding to enable them to release the documents on the full and final settlement of loan accounts.  On receipt of the letter of the complainant dated 15.04.2014, the opposite parties informed that considering the patronage and banking transaction the complainant had with the opposite parties that they have provided timely and adequate financial assistance, by way of fund based credit facilities amounting to Rs.5929 lakhs as requested by the complainant from time to time.  It has been further stated in the letter that as a special case the opposite parties provided Financial Bank Guarantee for Rs.850 lakhs with a minimum cash margin of 10%.  The opposite parties have also provided the complainant concession in the effective ROI ranging from 1.75% to 2.25% p.a., as a special case for the period from 04.12.2011 to 31.05.2013 and sanctioned a demand loan of Rs.700 lacs on 16.12.2013 on urgent basis for payment of income tax arrears.  The opposite parties have also given concession in rate of interest (ROI) of base rate + 2.25% i.e., 12.50% p.a., at present on all the loans of G.G. Hospital involving concession ranging from 0.75% to 1.25%.  On 08.05.2014 the opposite parties closed the loan accounts and over draft accounts of the complainant and handed over all the original documents to the complainant.  In the reply dated 22.05.2014 the opposite parties informed the complainant that her request for waiver of prepayment penalty for loan accounts bearing Nos. 08040600000852, 08040600001115, 08040600001228 and 08040600001334 cannot be considered in lieu of the RBI Circular dated 07.05.2014 since the above said loan accounts were in the name of M/s. G.G Hospitals, a Proprietary firm.  The RBI circular No.RBI/13-14/ 582 dated 07.05.2014 DBOD Dir.BC:No.110/13.03.00/ 2013-14, inter alia states that,

“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/ Prepayment penalty”

        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.”

Since the term loans referred above are not housing loans but business loans granted in the name of M/s.G.G Hospitals, a Proprietary concern and not an individual borrower they are not covered by the RBI circular referred above.  Hence, the pre payment charges levied by the opposite parties are in order.  The entire transactions, the complainant had with the 2^nd opposite party are purely commercial in nature.  So, it will not come under the purview of the Consumer Protection Act and therefore the complaint may be dismissed in limine.  Section 14 of the Consumer Protection Act, 1986 provides for payment to be awarded by way of compensation to a consumer only for any loss or injury suffered by the consumer due to negligence of the opposite parties.  In the absence of any proof that the complainant had suffered any loss due to negligence of the opposite parties, the complaint does not fall within the scope of Section 14 of the Act.  Thus, there is no deficiency of service on the part of the opposite parties and they sought for dismissal of the complaint. 

        4.    In order to prove the case, the complainant, along with proof affidavit, has filed 13 documents and the same have been marked as Ex.A1 to A13.   On the side of the opposite parties, proof affidavit has been filed but no documents were marked.

        5.  Considered the submissions of the counsel for the complainant and that of the opposite parties and carefully perused the materials available on record.  

        6.  When the matter was taken up for consideration, the counsel for the complainant made a detailed submission adverting to the averments in the complaint.  But, it is the main contention of the counsel for the opposite parties that the complainant would not come under the purview of the Consumer Protection Act, 1986 since the transaction is purely commercial in nature and on this ground alone the complaint is liable to be dismissed.  In support of his submission, the counsel for the opposite parties had drawn our attention to the following judgments:

1. The judgement of the National Commission in the case of Primus Chemicals Ltd. Vs. IFCI Limited, reported in I(2017) CPJ 615 (NC), wherein it was held that, “Loan was taken for establishing the industry and industry is a commercial venture with a motive of profit – Availing services of a financial institution for loan have all the four components, namely, sanction of loan, disbursement of loan, repayment of loan and then return of documents.  As the main service availed was for getting which was commercial purpose, all other components of this service including return of documents shall be considered for commercial purpose – Complainant is not a consumer”.
2. The judgement of National Commission in the case of Sutlej Industries Ltd. Vs. Punjab National Bank reported in 1(2018) CPJ 593 (NC) also covers the case on hand.
3. The judgement of the Hon’ble Apex Court in Shrikant G.Mantri vs. Punjab National Bank, reported in 2022 SCC online SC 218 wherein their Lordships has held that, “this Court has held that the question, as to 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 of business to business transactions between commercial entities; that the purpose of the goods or service should have a close and direct nexus with a profit generating activity.” 

        7.  A mere reading of the complaint would show that the complainant, who is running a Hospital has approached the opposite party Bank for sanction of Term Loan.  Pursuant to the sanction letter dated 11.06.2010 Term Loans 1, 2, and 3 were sanctioned to the tune of Rs.34.64 crores.  By letter dated 13.12.2013 the Term Loans 1, 2 and 3 were reviewed and a fresh demand loan of Rs.7 crores was sanctioned.  The purpose of obtaining the said loans were for purchase of land for construction of a Hospital, constructing hospital building and for purchasing medical/ hospital equipments for the new hospital.  Hence, it is apparently clear that the loan was obtained for developing the hospital, through which the complainant is generating income.  Therefore, as per the dictum laid down by the National Commission in the case of Primus Chemicals Ltd. Vs. IFCI Limited, reported in I(2017) CPJ 615 (NC), the complainant cannot be construed as a Consumer.  The definition for ‘Consumer’ is given under Section 2(1)(d) of the Consumer Protection Act, 1986, wherein an exception is given stating that, clause “Commercial purpose” does not include use by a consumer of goods bought and used by him and services availed by him exclusively for the purpose of earning his livelihood, by means of self employment.”  In this case, the complainant is a proprietary firm and the commercial activities carried out by it, cannot be construed for its earning livelihood by means of self employment.     

        8.  Therefore, this Complaint will not come under the purview of Consumer Protection Act.  Hence, without going into the merits of the case, the complaint is liable to be dismissed on the sole ground, the transactions done by the complaint is purely commercial in nature.  As such the complaint is not maintainable before this Consumer Commission. 

        9.  Therefore, the complaint is liable to be dismissed and the same is dismissed.

R. VENKATESAPERUMAL               S. KARUPPIAH                        R.SUBBIAH

       MEMBER                               JUDICIAL MEMBER                PRESIDENT

DOCUMENTS MARKED ON THE SIDE OF THE COMPLAINANT

Ex. A1       11.06.2010       Letter of sanction issued by the 2^nd opposite  

 party along with Annexure D

Ex.A2        13.12.2013       Letter of sanction issued by the 2^nd opposite

 party enclosing Annexure-D.

Ex.A3        15.03.2014       E-mail issued by the complainant to the

                                         Opposite parties 1 and 2

Ex.A4        10.04.2014       Letter issued by the 2^nd opposite party

 enclosing the details of the facilities availed

 by the complainant.

Ex.A5        11.04.2014       Letter issued by the complainant

Ex.A6        11.04.2014       Letter issued by the 2^nd opposite party

Ex.A7        22.04.2014       Letter issued by the 1^st opposite party

                                         Enclosing Annexure D

Ex.A8        30.04.2014       Letter of sanction issued by HDFC Bank

Ex.A9        07.05.2014       Circular issued by RBI with regard to waiver

 of repayment charges

Ex.A10      08.05.2014       Letter issued by the 2^nd opposite party

Ex.A11      12.05.2014       Letter issued by the complainant

Ex.A12      22.05.2014       Letter issued by the 2^nd opposite party

Ex.A13      14.07.2014       Circular issued by RBI to Non-banking

 Financial companies / Residuary Non-

 Banking companies with regard to

 prepayment penalty on floating rate loans

DOCUMENTS MARKED ON THE SIDE OF THE OPPOSITE PARTY

•   NIL    -

R. VENKATESAPERUMAL               S. KARUPPIAH                        R.SUBBIAH

       MEMBER                               JUDICIAL MEMBER                PRESIDENT

Index :  Yes/ No

AVR/SCDRC/Chennai/Orders/August/2022

C.C.No.27 of 2015

HON’BLE  JUSTICE

THIRU R.SUBBIAH, PRESIDENT

        Therefore, the complaint is liable to be dismissed and the same is dismissed.

MEMBER              JM        PRESIDENT              

30.08.2022  30.08.2022  30.08.2022