Punjab

Ludhiana

CC/20/289

Gurdeep Singh - Complainant(s)

Versus

Capital First Home - Opp.Party(s)

Kamalpreet Singh

05 Apr 2024

ORDER

DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, LUDHIANA.

                                                Complaint No:  289 dated 05.11.2020.                                                       Date of decision: 05.04.2024. 

 

Gurdeep Singh S/o. Late S. Gurdial Singh, R/o.#3191, Sector-38, Ward No.14, Ludhiana-141003.                                                                                                                                                                                   ..…Complainant

                                                Versus

1. Capital First Home Finance Pvt. Ltd., Through its Manager, SCO-24, 2^nd Floor, Trade Tower, Firoze Gandhi Market, Ludhiana-141001.
2. Capital First Home Finance Pvt. Ltd., India Bulls Finance Center, 15^th Floor Tower-2, Senapati Bapat Marg, Elphinstone (W) Mumbai-400013 (India) Through its authorized representative.

…..Opposite parties 

Complaint Under Section 35 of the Consumer Protection Act, 2019.

QUORUM:

SH. SANJEEV BATRA, PRESIDENT

SH. MONIKA BHAGAT, MEMBER

 

COUNSEL FOR THE PARTIES:

For complainant             :         Sh. Kamalpreet Singh, Advocate.

For OPs                          :         Sh. Anand Sabherwal, Advocate.

 

ORDER

PER SANJEEV BATRA, PRESIDENT

 

1.                Shorn of unnecessary details, the facts of the case are that the complainant availed Housing Loan/LAP from the OPs vide loan agreement No.4814119 for an amount of Rs.22,00,000/- sanctioned on 29.11.2015 and  also availed another loan vide agreement No.4814950 for an amount of Rs.38,00,000/- sanctioned on 22.12.2015, which the complainant was repaying in installments as per schedule of the OPs. On 27.03.2017, the complainant approached Axis Bank for taking loan from their bank and provided all the documents for sanctioning of loan and for taking over previous loans taken from the OPs. The officers of Axis Bank inspected all the documents, took legal opinion from their legal advisor and showed readiness for sanctioning the loan to the complainant. Axis Bank Pvt. Ltd. taken over loans of the complainant from the OPs after making full payment of amount of the loans but the OPs had charged hefty amount of Rs.48,691/- and Rs.84,706/- as foreclosure charges along with service tax on foreclosure charges. On asking, the officer of the OPs replied that when the loan is being paid in advance then the party has to pay foreclosure charges along with service tax. The complainant again approached the OPs and requested them that he is not liable to pay the said foreclosure charges or other charges as the loan was housing loan/LAP and also requested the OPs to refund the same but the OPs refused to refund the foreclosure charges and service tax to the complainant. The complainant many times visited the Ops with request to refund the foreclosure charges and services charges  but no heed was paid to his requests rather refused to refund the same. Even a legal notice dated 23.06.2020 was sent to the OPs but to no effect. The complainant claimed to have suffered mental agony, torture, harassment etc. due to deficiency in service on the part of the OPs for which he is entitled to compensation and litigation expenses. In the end, the complainant has prayed for issuing directions to the OPs to refund the foreclosure charges of Rs.48,691/- and Rs.84,706/- along with compensation of Rs.5,00,000/- and litigation expenses of Rs.55,000/-.

2.                Upon notice, the OPs appeared and filed joint written statement and assailed the complaint by taking preliminary objections on the ground of maintainability; suppression of material facts; lack of cause of action; the complaint being barred by limitation etc.

                   The OPs stated that IDFC First Bank Limited earlier known as IDFC Bank Limited had taken over the erstwhile Capital First Home Finance Ltd which as accent from the Reserve Bank of India and all its debts and liabilities have been transferred to IDFC Bank Limited now known as IDFC First Bank Ltd.

                   The OPs further stated that the complainant along with Kharey Induction Hardenings, Gurdeep Kaur, K.L. Industries, Maninder Singh and Rosel Kharey had applied and availed housing loan LAP vide  Loan Agreement no. 4814119 of an amount of Rs.22,00,000/- sanctioned on 29.11.2015 and another Loan against property vide Loan Agreement No.4814950 of an amount of Rs.38,00,000/- sanctioned on 22.12.2015 and accordingly signed the terms and conditions agreed and mentioned in the loan application form and loan agreement thereof. The OPs further stated that the loan facility was availed by the complainant along with M/s. Kharay Induction Hardenings being its Prop. and M/s. K.L. Industries as its Auth. Signatories as co-applicants. It seems that the complainant being engaged in such different kinds of business activities, thereby earning huge profits and is not carrying the said business for merely livelihood. As such,  the complainant is not a consumer as per Section 2 (d) of the Consumer Protection Act, 1986. The OPs further stated that the complainant availed the loan for business purpose/expansion and the same was also mentioned in loan application forms/End Use Letter submitted by the complainant with them. During pendency of loan, the complainant approached the OPs with request to foreclose the loan. The OPs provided the details of payment required to pay for foreclosing the loan. The said payments were made without raising any protest. The OPs further stated that the complainant made the payment through AXIS Bank with free consent. The complainant has taken the loan along with the proprietorship firm and therefore, being a Non-Individual Entity a foreclosure charges has been collected in terms of the agreement and also the policy circular bearing No.NHB(ND)/DRS/Policy circular No.66/2014-15 dated 03.09.2014 issued by the National Housing Bank (NHB). Moreover, the foreclosure charges were paid by the complainant in the month of April 2017 and the cause of action and limitation to file the present complaint expired in April 2019 but the complainant preferred this complaint on 05.11.2020 which is beyond limitation and is liable to be dismissed being time barred.

                   On merits, the OPs reiterated the crux of averments made in the preliminary objections and facts of the case. However, the OPs stated that they duly replied the legal notice dated 23.06.2020 of the complainant vide their reply dated 07.09.2020. The OPs have denied that there is any deficiency of service and have also prayed for dismissal of the complaint.

3.                In evidence, the complainant tendered his affidavit as Ex. CA and reiterated his averments of the complaint. The complainant also placed on Ex. C1 copy of loan agreement No.4814119, Ex. C2 is the copy of loan agreement No.4814950, Ex. C3 is the copy of account statement of loan account No.4814950, Ex. C3/A is the copy of account statement of account of Kharay Induction Hardenings with Punjab National Bank, Ex. C4 is the copy of home loan/loan against property docket of Axis Bank, Ex. C5 is the copy of foreclosure letter dated 10.04.2017 of loan account No.4814119, Ex. C6 is the copy of foreclosure letter dated 10.04.2017 of loan account No.4814950, Ex. C7 is the copy of legal notice, Ex. C8 is the copy of postal receipt and closed the evidence.

4.                On the other hand, the learned counsel for the OPs tendered affidavit Ex. RA of Sh. Manpreet Singh, Authorized Officer/Legal Manager of the OPs at Ludhiana branch along with document Ex. R1 is the copy of authority letter, Ex. R2 is the copy of order passed by NCLT, Chennai, Ex. R3 is the copy of order passed by NCLT, Mumbai, Ex. R4 is the copy of certificate of incorporation pursuant to change of name, Ex. R5 is the copy of loan agreement No.4814119, Ex. R6 is the copy of loan agreement No.4814950, Ex. R7 is the copy of End Use Letter dated 24.11.2015 of loan account No.4814950, Ex. R8 is the copy of circular dated 22.07.2016 of National Housing Bank regarding levy of foreclosure charges/pre-payment penalties-clarification, Ex. R9 is the copy of circular dated 03.09.2014 of National Housing Bank regarding levy of foreclosure charges/pre-payment penalties on floating rate term loans-clarification, Ex. R10 is the copy of reply to legal notice dated 07.09.2020, Ex. R11 and Ex. R12 are the copies of postal receipts 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 statements along with affidavits and documents produced on record by the both parties.

6.                Admittedly, the complainant Gurdeep Singh along with co-borrowers namely Kharay Induction Hardenings, Gurdeep Kaur, K.L. Industries, Maninder Singh and Rosel Kharay (Non-complainants) availed Housing Loan/Loan Against Property of Rs.22,00,000/- at the floating rate of interest 11% per annum from the OPs vide loan agreement No.4814119 dated 29.11.2015 Ex. C1 = Ex. R5. The loan was repayable in 180 monthly installments of Rs.25,006/-. The loan agreement Ex. C1 = Ex. R5 which bears the signatures of the complainant and other co-borrowers along with seals of Kharay Induction Hardenings as well as K.L. Industries. Ex. C5 is the foreclosure letter dated 10.04.2017 wherein the request of the complainant to foreclose was accepted by the OPs. The detail of the foreclosure is given hereunder:-

Total POS (Principal O/S)	2,11,7,012.82
Current Month Interest (BPI)	9,702.98
Installment overdue (a+b)                   Overdue Principle (a)                   Overdue Interest (b)	0.00 0.00 0.00
Foreclosure Charges	42,340.00
Service Tax on FC Charges	6,351.04
Excess Amount	0.00
Bounce Charges	400.00
Penal Charges	0.00
Other Charges	0.00
Foreclosure Amount	2,175,807.10

 

                   Further, the complainant Gurdeep Singh along with co-borrowers namely Kharay Induction Hardenings, Gurdeep Kaur, K.L. Industries, Maninder Singh and Rosel Kharay (Non-complainants) availed Housing Loan/Loan Against Property of Rs.38,00,000/- at the fixed rate of interest 12.50% per annum from the OPs vide loan agreement No.4814950 dated 22.12.2015 Ex. C2 = Ex. R6. The loan was repayable in 180 monthly installments of Rs.46,836/-. The loan agreement Ex. C2 = Ex. R6 which bears the signatures of the complainant and other co-borrowers along with seals of Kharay Induction Hardenings as well as K.L. Industries. As per End Use Letter Ex. R7 the complainant along with other applicants availed the loan for the purpose of business expansion. Ex. C6 is the foreclosure letter dated 10.04.2017 wherein the request of the complainant to foreclose was accepted by the OPs. The detail of the foreclosure is given hereunder:-

Total POS (Principal O/S)	3,682,907.95
Current Month Interest (BPI)	19,181.81
Installment overdue (a+b)                   Overdue Principle (a)                   Overdue Interest (b)	0.00 0.00 0.00
Foreclosure Charges	73,658.16
Service Tax on FC Charges	11,048.72
Excess Amount	0.00
Bounce Charges	800.00
Penal Charges	0.00
Other Charges	0.00
Foreclosure Amount	3,787,596.64

 

The complainant has repaid the above said loan amounts by further availing loan facility from AXIS Bank Ltd.  Now the complainant has challenged the levying of foreclosure charges by the OPs on pre-payment of both outstanding loan amounts as he claimed to have obtained the loan as Housing Loan/Loan Against Property.

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.

“Ex. R8 is a letter dated July 22, 2016 issued by National Housing Bank addressed to all Registered Housing Finance Companies with regard to levying of foreclosure charges/pre-payment penalty – Clarification.

“Please refer to our Circulars NHB(ND)/DRS/Policy Circlar-63/2014-15 and 66/2014-15 dated August 14, 2014 and September 3, 2014, respectively, in terms of which, inter-alia, all floating rate term loans sanctioned to individuals borrowers by the Housing Finance Companies (HFCs), are exempted from any foreclosure charges/prepayment penalties.

2. It has come to our notice some of the HFCs continue to levy foreclosure charges/pre-payment penalties on term loan sanctioned to individual borrowers under different nomenclatures, such as loan origination cost, loan maintenance cost, etc. This is in contravention of the provisions of the Circulars referred to above. We clarify that these provisions apply to all term loans sanctioned only to individual borrowers.

3. Further, the issue relating to applicability of the aforesaid Circulars to a Sole Proprietorship Concern/Firm or an HUF, as a borrower/co-borrower has also been examined in the light of complaints/representations received by us. We clarify that the intent and spirit of the circular is to protect the interest of the individual borrowers. Therefore, a Sole Proprietorship Concern/Firm or an HUF, as borrower or co-borrower will not be treated as an individual borrower for the purpose of these circulars……”

“ Ex. R9 is the Policy Circular dated 03.09.2014 issued by the National Housing Bank to all registered Housing Finance Companies with regard to levying of foreclosure charges/prepayment penalties on floating rate term loans-Clarification.

“Please refer to our Circular NHB(ND)/DRS/Pol. Circular No.63/2014 dated August 14, 2014 advising HFCs not to charge foreclosure charges/pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect.

Enquiries are being received with regard to the applicability of the said Circular on floating rate term loans sanctioned prior to August 14, 2014 and in cases where a company, firm, etc. is a co-borrower.

2. The issues have been examined by us. It is clarified that the provisions of the said Circular are applicable in respect of all floating rate term loans sanctioned to individual borrowers by HFCs, irrespective of the date of sanction, and prepaid on or after August 14, 2014. The provisions of the said Circular cover both part as well as full pre-payments.

3. Further, the applicability of the said Circular is on foreclosure charges/pre-payment penalties in respect of all floating rate term loans sanctioned to individual borrowers. Loan in which company, firm, etc. is a borrower or co-borrower, therefore, is excluded from its purview.”

 

9.                Therefore, Ex. R8 and Ex. R9 are the clarification circulars issued by the National Housing Bank 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 or co-borrowers.  In the present case, the OPs have charged floating interest @11% per annum as is mentioned in the loan agreement No.4814119 Ex. C1 = Ex. R5. Further the OPs have charged fixed interest @12.50% per annum  as is mentioned in the loan agreement No.4814950 Ex. C2 = Ex. R6. As per schedule mentioned in loan agreement Ex. C1 = Ex. R5 under the column (ii) Purpose: End Use of Loan, the purpose of loan has been mentioned as loan payout. Further as per schedule mentioned in loan agreement Ex. C2 = Ex. R6 under the column (ii) Purpose: End Use of Loan, the purpose of loan has been mentioned as cashout to customer. Even in the End Use Letter Ex. R7 dated 24.11.2015 of loan agreement No.4814950 the purpose of loan has been mentioned as Business Expansion. 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 co-borrowers namely Kharay Induction Hardenings, Gurdeep Kaur, K.L. Industries, Maninder Singh and Rosel Kharay. 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. Even in the complaint it has nowhere been mentioned by the complainant that he is carrying on business for the purpose of earning livelihood.

10.              As regard the foreclosure charges of Rs.48,691/- and Rs.84,706/-, in this regard, the counsel for the OPs has referred to the letter Ex. R8 and Ex. R9 issued by National Housing Bank to all registered Housing Finance Companies wherein it has been mentioned the HFCs 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. C1 = Ex. R5 as well as Ex. C2 = Ex. R6. Therefore, as per the guidelines mentioned in Ex. R8 and Ex. R9 by National Housing Bank, 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)                              (Sanjeev Batra)               Member                                         President  

Announced in Open Commission.

Dated:05.04.2024.

Gobind Ram.