Tamil Nadu

StateCommission

A/171/2018

Mr.Bharat Mirpuri and another - Complainant(s)

Versus

Cholamandalam Investment and Finance Rep by its Manager - Opp.Party(s)

21 Feb 2022

ORDER

 

IN THE TAMIL NADU STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI.

 

Present: Hon’ble Thiru Justice R.SUBBIAH       ... PRESIDENT

              Tmt. Dr. S.M.LATHA MAHESWARI  ... MEMBER

 

F.A. No.171 of 2018

 

(Against the Order, dt. 05.01.2018,  in C.C.No.127/2014,

on the file of  the  DCDRF, Chennai-North)

 

                                   Orders pronounced on: 21.02.2022

            

1. Bharat Mirpuri

S/o.Mohandas E.Mirpuri

 

2. Anju Mirpuri

W/o.Bharat Mirpuri

 

Both are

residing at C2, Sams Glory Towers,

F-153, Anna Nagar East,

Chennai 600 102.                    ...Appellants / Complainants

 

vs.

 

Cholamandalam Investment and

     Finance Company Ltd.,

Dare House,

No.2, N.S.C. Bose Road,

Parrys, Chennai 600 001,

rep. by its Manager.                   …Respondent / Opp. Party.

 

             Counsel for Appellants         :  Mr.V.Balaji

             Counsel for Respondent       :  Mr.M.B.Raghavan

 

 

          This First Appeal came up for final hearing on 29.01.2022 and, after hearing the arguments of both sides and perusing the materials on record and having stood over for consideration till this day, this Commission passes the following:-

 

O R D E R

 

R.Subbiah, J. - President

             The unsuccessful complainants have come up with this First Appeal, as against the Order dated 05.01.2018, passed by the DCDRF, Chennai-North, in C.C. No.127 of 2014, in and by which, the complaint filed by them, seeking refund of pre-closure charges collected by the respondent/Opposite Party at the time of pre-closure of the loan, has been dismissed on the ground that the respondent/Opposite Party has not committed any deficiency in service in collecting the said charges.

 

             2. The case of the appellants/complainants, as projected in the complaint filed before the District Forum, in brief, runs thus:-

             On 28.07.2011, vide Application No.132384, the complainants applied for Home Equity Loan with the Opposite Party, which sanctioned a loan of Rs.40 Lakh with floating rate of 14% interest per annum, for which, the house property of the complainants was mortgaged as collateral security.  From the complainants, the Opposite Party collected Rs.77,210/- towards administrative charges/service tax/education cess.  Even before disbursal of the loan, the Opposite Party recovered two EMIs on 12.07.2011 and 13.08.2011, thereby causing interest-loss of Rs.24,000/-.  Repayment of the loan was through Equated Monthly Installments (EMI) of Rs.62,107/-, from 05.09.2011 to 05.08.2021, for 120 months. One of the conditions stipulated in the Loan Sanction Letter, dated 28.07.2011, regarding pre-closure of the loan is that 2% of the amount shall be prepaid if the payment is through own funds and 4%, if paid via balance transfer of the loan to any other financier.   Pre-closure is not permitted within six months from the date of agreement and, for any pre-closure after six months, the Opposite Party would charge the amount as mentioned above in the sanction letter.

             While so, on 29.04.2014, the complainants expressed their intention to transfer the loan to Deutsche Bank, whereupon, the Opposite Party directed them to pay the foreclosure charges and the complainants paid Rs.1,62,705/- towards the same, for which, Receipt No.12599189 , dated 29.04.2014, was issued.

             Demand and collection of the above sum towards foreclosure charges is contrary to the Circular issued by the Reserve Bank of India (RBI) vide, Circular DBOD No.DIR.BC.107/13.03.00/2011-12, dated 05.06.2012, prescribing that the Banks will not be permitted to charge fore-closure charge on home loans on floating interest rate basis with immediate effect.  In the year 2014, the RBI further modified the Circular by abolishing the levy of fore-closure charges.  As such, the charge levied towards pre-payment as contained in the Loan Sanction Letter is rendered void and not enforceable. 

             Hence, the complainants sought the District Forum to direct the Opposite Party to pay  Rs.1,62,705/- that was collected towards fore-closure charges, Rs.10 lakh as compensation for mental agony and Rs.25,000/- towards costs of the complaint.

 

             3. The respondent/Opposite Party resisted the same by filing a written version, wherein, among other things, it is stated as follows:-

             The Opposite Party is not a Bank, rather, it is a Non Banking Finance Company (in short NBFC) and hence, the complainants cannot invoke the circulars issued by the RBI in respect of Banks, as against the Opposite Party. The complaint is based on a misconception/misrepresentation that the RBI had prohibited collection of foreclosure/pre-payment charges by reference to Circulars applicable to Banks, whereas, no such Circular applicable to NBFCs was in force on the date of foreclosure by the complainants.  It was only on 14.07.2014 that the RBI had issued the relevant Circular, which was long after the closure of the complainants’ account and much later to the filing of the complaint.  As there was no earlier circular as against the NBFCs, the Opposite Party charged the specified pre-closure charges in terms of the Agreement, when the complainants had approached them for foreclosure of the account in April, 2014.  Therefore, the complainants cannot allege any deficiency in service against the Opposite Party, since they acted only as per terms of the loan agreement.

             When the complainants had approached the Opposite Party for the loan, the latter agreed to release the same in terms of the Sanction Letter, dated 28.07.2011, wherein, among various terms, it is stipulated that, if a customer intends to pre-close the loan through own funds, he/she shall pay 2% of the outstanding  and 4%,  if it was through a balance transfer of the loan to any other financier. The sanction letter also specified that the tenure of the loan would be 120 months with 14% interest p.a. It was stipulated clearly that, in the event of the loan being prematurely closed, the Opposite Party would be entitled to collect pre-closure charges, as mentioned in the Sanction Letter. The complainants accepted all those terms & conditions and believing the same, the Opposite Party was induced to provide the loan.  While so, the complainants sought to pre-close the loan by transferring it to another financial institution, whereupon, as per the Loan Agreement read with the Sanction Letter, the Opposite Party charged Rs.1,53,043.44 including service Tax of Rs.16,835/- towards 4% pre-closure charges on the outstanding sum.  Without any whisper, dispute or protest, the complainants had paid the said charges and, in turn, the Opposite Party handed over all the documents and also issued the closure letter, dated 14.05.2014.  In fact, neither at the time of the agreement nor subsequently until closure of the loan, there was any prohibition for the NBFCs including the Opposite Party to collect the pre-closure charges, since the same was based on the relevant clause contained in the valid contract.  Inasmuch as the Opposite Party duly performed their part of the contract and there being no element of deficiency in service, the complainants are estopped from making any demand for refund of the pre-closure charges by reference to the RBI Circulars, which have no applicability to the loan agreement between the complainants and the Opposite Party.

             Accordingly, the Opposite Party pleaded the District Forum for dismissal of the complaint.

 

             4.  In order to substantiate their respective claims, both sides filed their respective proof affidavits and while, on the side of the complainants, 5 documents were marked as Exs.A1 to A5, the Opposite Party filed 6 documents as Exs.B1 to B6.   By the impugned order, dated 05.01.2018, the District Forum dismissed the complaint by concluding that the Opposite Party has not committed any deficiency of service and therefore, the complainants are not entitled to any relief.  The said conclusion was based on the finding that the RBI Circular, dated 05.06.2012, which came into effect from the date of its issuance, has only prospective effect and hence, it is not applicable to the case inasmuch as both the loan availed as well as the pre-closure charges paid were prior to the said circular coming into force.  Hence, the present appeal by the complainants.

 

             5.  Learned counsel for the appellants, after summarizing the case projected in the complaint and inviting our attention to the Circular, dated 05.06.2012, issued by the RBI to the effect that Banks will not be permitted to levy fore-closure charges on home loans on floating interest rate basis with immediate effect, would submit that the District Forum, while holding that the said circular will be applied from the date of its issuance prospectively, miserably failed to note that the said Circular came into force on 05.06.2012, whereas, the pre-closure was made only subsequently i.e., on 29.04.2014 while the circular was very much in force; as such, the said finding is rendered erroneous.  It is next submitted that, as per the version of the respondent, although it is an NBFC, it would be governed by the Regulations of the National Housing Bank (in short NHB), formed under the control and guidance of the RBI.  The said NHB had issued a Circular, dated 19.10.2011, in NHB (ND)/DRS/Pol-No.43/2011-12/October 19, 2011, on the subject “Pre-payment Penalty on Pre-closure of Housing Loans’, wherein, after making reference to previous Circular No.NHB (ND)/DRS/POL-No.36/2010, dated October 18, 2010, on the same subject and, after stating that the issue of levying pre-payment penalty or pre-closure charges by housing finance companies on pre-closure of housing loans by the borrowers has been considered by the National Housing Bank in the light of subsequent developments, it is said to have been decided that hereafter, housing finance companies should not charge pre-payment, levy or penalty on pre-closure of housing loans under the following situations:-

     a) where the housing loan is on floating interest rate basis (pre-closed through any source).

     b) Where the housing loan is on fixed interest rate basis and the loan is pre-closed by the borrowers out of their own sources.

The expression ‘own sources’ for this purpose means any source other than by borrowing from a bank/HFC/NBFC and/or a financial institution. “

Learned counsel would further submit that, in the above Circular, the NHB, after stating thus, accordingly advised that pre-payment, levy or pre-closure charges should not be levied on the borrowers in the above cases and further advised the HFCs to ensure compliance of the above with immediate effect.   According to him, as per the said Circular of the NHB, the appellants are eligible to get the benefit given in regard to pre-closure of the loan.

             Ultimately, by relying upon a decision, dated 27.08.2014, rendered by the National Commission in Shishir Tiwari vs. M/s.Deutsche Post Bank Home Finance Limited, (R.P. No.239 of 2012), and highlighting the following passages there-from,

       “ 7. We may note that the respondent is a non-banking financial company and as such would be governed by the regulations of National Housing Bank formed under the control and guidance of the RBI. …

8. …...In any case, keeping in view  the need for such regulation, both the RBI and the National Housing Bank have already issued instructions for removal of pre-payment penalty on the foreclosure of housing loans to the respective institutions under their control but these instructions are applicable for foreclosures of housing loans prospectively, i.e., during the period from the date of issue of those circulars.

9.     Besides the above, this Commission vide its orders dated 21.5.2013 in the Revision Petition No.2163 of 2011 [Nitin Vashishth and Gagan Vashisth Vs. Central Bank of India] and another order passed on 11.3.2014 in Revision Petition No.1629 of 2008 [S. Seshadri & Another Vs. The Housing Development Finance Corporation Ltd.], has held that the parties are bound by the terms and conditions of the loan agreement and as such charging of pre-closure penalty by the concerned bank/finance companies cannot be termed as illegal. Situation of course would be different if levying of such pre-closure is removed or declared as irregular/illegal by the concerned regulatory authority. The issue in question, therefore, is no longer res integra.”,

learned counsel would submit that, in view of such categorical pronouncement of the National Commission, the respondent/Opposite Party is bound by the circular, dated 19.10.2011, of the NHB and the appellants/complainants are eligible for the benefit under the said circular.  Accordingly, it is prayed that the impugned order may have to be set aside by allowing the prayer of the complainants/appellants.

 

             6.  Countering the above submissions, learned counsel for the respondent/opposite party,  at the first instance, would point out that, irrespective of any circular, the appellants had agreed for paying the pre-closure charges and accordingly, paid the same also, without any murmur or dispute, whereupon, the respondent closed the account and handed over all the documents to the appellants. While so, the complaint filed without any prior protest or dispute over payment of pre-closure charges undoubtedly exhibits clear abuse of the Consumer Protection Act.  With much stress, it is submitted that the RBI Circular, dated 05.06.2012, has relevance only in respect of Banks and shall not apply to an NBFC like the respondent herein, which is governed only by the RBI’s Circular, dated 14.07.2014, that requires the NBFCs to avoid pre-closure charges for the sake of uniformity.  Even the said Circular, dated 14.07.2014, cannot be applied to the case and claim of appellants for the simple reason that it was not in force on the date of closure of the account/payment of pre-closure charges by the appellants to the respondent.   In respect of the Circular, dated 19.10.2011 issued by the NHB, it is submitted that the respondent is not covered by the same, since they are an NBFC registered with the RBI and not a Housing Finance Company (HFC) registered with the NHB.   More importantly, no ground or pleading was ever made before the District Forum by citing or marking the said Circular, dated 19.10.2011, hence, it is glaring that the appellants are now attempting to introduce a new case under the said circular.  Since the transaction dated 29.04.2014, which is the subject matter of the complaint, was much before the relevant RBI Circular, dated 14.07.2014, issued exclusively for NBFCs and the appellants had also paid the pre-closure charges without any dispute, as held by the National Commission in 2015 (2) CPR (NC) 626 (IDBI Bank vs. Aswani Kumar Srivastava), in such  scenario, by no stretch of imagination, it can be said that the NBFC was deficient in service when there was no RBI instructions against the charging of pre-closure penalty at the relevant time.  Thus, there being no merit in the case and claim of the appellants, the appeal may have to be dismissed, he pleaded.

 

             7. We have carefully considered the rival submissions advanced on either side in the light of the materials available on record.

            

        8. Although the appellants/complainants grounded and canvassed their whole claim in the complaint before the District Forum on the basis of the RBI Circular, dated 05.06.2012, the said Circular was never marked or seemed to have been produced before the District Forum.    The said Circular is now available before us after the same has been filed along with the written arguments of the respondent that was received on 27.01.2022.   A perusal of the same indicates that it was addressed to ‘All Scheduled Commercial Banks’ with the ultimate prohibition to the effect that the ‘banks’ will not be permitted to charge fore-closure charges/pre-payment penalties on home loans on floating interest rate basis, with immediate effect.  While so, the respondent herein, being an NBFC and not a Bank, which aspect is not disputed by the appellants before us,  is justified in claiming that they are not governed by the said Circular as it  was addressed only to scheduled commercial banks, under which category, the respondent does not fall.

             Having failed to succeed on the basis of the above circular, for the first time, in this Appeal, the appellants project the circular, dated 19.10.2011, issued by the NHB to the effect that finance companies should not charge pre-payment levy on pre-closure of housing loans.  While it is the case of the respondent that they were never registered with the NHB as a Housing Finance Company, rather, they were registered as an NBFC with the RBI, by citing the decision of the National Commission in Shishir Tiwari (cited above), an endeavor has been made by the appellants to portrait the respondent as “an NBFC governed by the NHB”.   In this regard, it is the contention of the respondent that the said decision is per incuriam and cannot be treated as a binding precedent for the reason that the lender therein was a Housing Finance Company. 

              The decision cited by the appellants in Shishir Tiwari (cited supra), in particular the factual details available in paragraph No.2 thereof, would indicate that the plea and admission of the Finance Company therein was that they were governed by the NHB, whereas, it is the case of the present respondent that they are registered with the RBI as an NBFC and they are in no way concerned with the NHB. Hence, the same is distinguishable on facts.   Pausing here, it must be pointed out that the appellants herein, who have introduced a new ground through this Circular, dated 19.10.2011, have not even come forward to file a copy of the said Circular, as similarly done before the District Forum in respect of the RBI Circular, dated 05.06.2012.  On a perusal of the Circular, dated 19.10.2011, filed only by the respondent along with the written arguments, we could find that the Advice for compliance was given only to the HFCs and not to any NBFC.  The said Circular also contains a list of companies registered with the NHB.  On verifying those details, we do not find the name of the respondent in the said list, thereby, it is clear that this Circular is not applicable to the respondent.  While holding so, we caution that no new ground containing new material/facts could be introduced for the first time in an appeal when admittedly those grounds were not originally raised in the proceedings before the District Forum.  In that perspective, we observe that the present endeavor of the appellants in projecting a ground, which was never raised before the District Forum, ex facie indicates that their case lacks bona fides.

             Coming to the Circular, dated 14.07.2014,  issued by the RBI to all the NBFCs like the respondent, no doubt, the same prohibits collection of fore-closure charges.  However, as rightly pointed out, the benefit available there-under cannot be made applicable to the appellants owing to the reason that the said circular having prospective effect, came into existence much later to the filing of the complaint and also, it was not in force on the date of pre-closure.  More importantly, the appellants neither disputed nor recorded any protest at the time of settling the pre-closure charges.  Therefore, on the issue of foreclosure, both sides having acted clearly in terms of the agreement and in the absence of any Circular issued at the relevant time by the RBI/regulatory authority, prohibiting the NBFC/Opposite Party from collecting foreclosure charges, the appellants are estopped from seeking return of foreclosure charges, that too, by introducing new grounds, which practice is highly deprecated.   Although the District Forum ultimately dismissed the complaint on the grounds specified by it, we reject this appeal for the above reasons indicated by us.

 

             9.  In the result, the first appeal is dismissed as devoid of any merit.  No costs.

 

S.M.LATHA MAHESWARI                     R.SUBBIAH, J.

MEMBER                                              PRESIDENT.

 

ISM/TNSCDRC/Orders/Feb/2022.