Punjab

Ludhiana

CC/21/64

Darshan Grover - Complainant(s)

Versus

DCB Bank - Opp.Party(s)

Arun Bagai

08 May 2024

ORDER

DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, LUDHIANA.

                                                Complaint No:  64 dated 05.02.2021.                                                        Date of decision: 08.05.2024. 

 

Darshan Grover son of Late Sh. Mulakh Raj Grover, Prop. of M/s. G.N. Restaurant, resident of #189, Aman Nagar, Ferozepur Road, Zira and at present c/o.#455, Sohan Palace, First floor, The Mall, Ludhiana.                                                                                                                         ..…Complainant

                                                Versus

  1. DCB Bank Ltd., through its MD/Manager/Officer in Charge, Regd. Office at 601 & 602, Peninsula Business Park, 6th Floor, Tower-A, Senapati Bapat Marg, Lower Parel, Mumbai-400013 (Maharashtra).
  2. Murali Mamundi Natarajn, MD of DCB Bank Ltd., having Regd. Office at 601 & 602, Peninsula Business Park, 6th Floor, Tower-A, Senapati Bapat Marg, Lower Parel, Mumbai-400013 (Maharashtra).
  3. Mustafa Hasan, Manager of DCB Bank Ltd., having Regd. Office at 601 & 602, Peninsula Business Park, 6th Floor, Tower-A, Senapati Bapat Marg, Lower Parel, Mumbai-400013 (Maharashtra).
  4. Bharat Laxmidas Sampat, CFO (KMP) of DCB Bank Ltd., having Regd. Office at 601 & 602, Peninsula Business Park, 6th Floor, Tower-A, Senapati Bapat Marg, Lower Parel, Mumbai-400013 (Maharashtra).
  5. Rubi Chaturvedi, Company Secretary of DCB Bank Ltd., having Regd. Office at 601 & 602, Peninsula Business Park, 6th Floor, Tower-A, Senapati Bapat Marg, Lower Parel, Mumbai-400013 (Maharashtra).
  6. DCB Bank Ltd., through its Branch Manager/Officer in Charge, Br. Office SCO 10-11, Feroze Gandhi Market, Opp. Maruti Showroom, Ferozepur Road, Ludhiana (Punjab).
  7. DCB Bank Ltd., through its Regional Head/Manager/Officer in Charge c/o. Reserve Bank of India, New Office Building, Sector-17, Central Vista, Chandigarh-160017.

…..Opposite parties 

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

QUORUM:

SH. SANJEEV BATRA, PRESIDENT

MS. MONIKA BHAGAT, MEMBER

 

COUNSEL FOR THE PARTIES:

For complainant            :         Sh. Yogesh Gandhi, Advocate.

For OPs                         :         Sh. Rahul Rajput, Advocate.

 

ORDER

PER SANJEEV BATRA, PRESIDENT

1.                Briefly stated, the facts of the case are that the complainant got sanctioned term loan of Rs.95.5 Lakhs (including insurance for his business purpose MSME on floating rate of interest from the DCB Bank Ltd. from it’s OP6 branch office vide letter dated 01.12.2018 against application No.APPL00973716 vide loan account No.DRBLLUD00469348. The complainant regularly paid the payments on time as per payment schedules. The complainant stated that for the purpose of foreclosing the loan account he made request with the executives of the OPs, who directed him to make payment of Rs.94,75,000/- on 11.06.2020 via RTGS. OPs also issued foreclosure statement dated 29.06.2020 to the complainant whereby they have charged an amount of Rs.4,46,523.75p as “Foreclosure Charges @4.00% of Principal amount”. Thereafter, the complainant made the payment of Rs.1,05,566/- on 04.07.2020 and Rs.3,60,263/- on 23.07.2020 via RTGS.

                   The complainant further stated that he came to know that as per RBI circular number RBI-2013-14-582DBOD. Dir.BC.No.110/13.03.00/2013-14 dated 07.05.2014, the bank cannot levy foreclosure charges in case of loan having floating rate of interest but the OPs have arbitrarily charged an amount of Rs.4,46,524/- as pre-closure charges under the head “Foreclosure Charges” @4% of the outstanding principal amount including taxes. According to the complainant, he availed loan in the financial year 2018-19 and Reserve Bank of India issued guidelines on 07.05.2014 according to which, pre-foreclosure charges are not to be levied upon the complainant whereas the OPs levied an amount of Rs.4,46,524/- which is illegal and arbitrarily and same amounts to unfair trade practice on the part of the OPs. The complainant approached the officials of the OPs with request to return back the amount illegally charged but they did not heed to his requests. The complainant claimed to have suffered mental pain, agony, harassment and financial loss due to deficiency in service and unfair trade practice on the part of the OPs for which the OPs are liable to pay compensation of Rs.20,00,000/- to the complainant. The complainant also got served a legal notice dated 08.12.2020 upon the Ops through Sh. Arun Bagai, Advocate to refund Rs.4,46,524/- along with compensation etc. but to no avail. Hence this complaint, whereby the complainant has prayed for issuing directions to the Ops to pay an amount of Rs.4,46,524/- charges and pre-foreclosure charges and also to pay compensation of Rs.20,00,000/- and litigation expenses of Rs.55,000/-.

2.                Upon notice, the OPs appeared and filed joint written statement and assailed by complaint by taking preliminary objections on the ground of maintainability; the complaint being an abuse of process of law; suppression of material and correct facts; lack of cause of action; the complainant is not a consumer as defined under the Act etc. The OPs averred that the loan was taken by the complainant being the proprietor of M/s. G.N. Restaurant for business purpose which is evident from the sanction letter issued to the complainant with a specific mention of type of loan as business loan. The complainant being proprietor of firm M/s. G.N. Restaurant along with Ms. Sarvesh Grover approached the OP bank for the grant of business loan by mortgaging the property. The OPs issued sanction letter along with terms and conditions. The sanction letter was duly signed and acknowledged by the complainant and other borrowers and they did not raise any dispute regarding terms and conditions of the loan. According to the OPs, the foreclosure was charged as per clause 28 of the sanction letter which were charged as per contractual agreement between the borrowers and the bank.

                   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.                The complainant filed rejoinder to the written statement reiterating the facts mentioned in the complaint and controverted those mentioned in the written statement.

4.                In evidence, the complainant tendered his affidavit as Ex. CA and reiterated the averments of the complaint. The complainant also placed on record documents Ex. C1 is copy of foreclosure letter dated 29.06.2020, Ex. C2 is the copy of account statement of the complainant with Punjab National Bank, Ex. C3 is the copy of statement of account of M/s. GN Restaurant with HDFC Bank Ltd., Ex. C4 is the copy of circular dated 07.05.2014 of the Reserve Bank of India, Ex. C5 is the copy of legal notice dated 08.12.2020, Ex. C6 to Ex. C12 are the postal receipts, Ex. C13 is the copy of Email dated 19.08.2020, Ex. C14 is the copy of Email dated 01.09.2020, Ex. C15 to Ex. C17 are the copies of Email dated 10.09.2020, Ex. C18 is the copy of Email dated 29.09.2020, Ex. C19 is the copy of Email dated 01.10.2020, Ex. C20 is the copy of 02.10.2020, Ex. C21 is the copy of Email dated 21.11.2020, Ex. C22 is the copy of screen shot, Ex. C23 is the copy of details of the complaints  and closed the evidence.

5.                On the other hand, the counsel for the Ops tendered affidavit  Ex. RA of Sh. Gurjinder Singh, authorized person, DCB Bank Ltd., Feroze Gandhi market, Ludhiana branch along with documents Ex. R1 is the copy of foreclosure letter dated 29.06.2020 as well as sanction letter etc., Ex. R2 is the copy of power of attorney and closed the evidence. 

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

7.                Admitted the complainant Darshan Grover along with other co-borrower namely Sarvesh Grover and M/s. G.N. Restaurant availed business loan of Rs.95,50,000/- (Rs.95,00,000/- as loan and Rs.50,000/- as insurance premium amount) at the floating rate of interest @10.50% per annum from the Ops vide sanction letter dated 01.12.2018 Ex. R1 (page 3), as per which the loan was repayable in 180 EMIs of Rs.1,05,566/-. Ex. R1 bears the signatures of the complainant Darshan Grover and other co-borrower Sarvesh Grover as well as stamp of M/s. G.N. Restaurant with signatures of Darshan Grover. Ex. R1 (page 1 and 2) is the foreclosure letter wherein the request of the complainant to foreclose was accepted by the OPs. The detail of outstanding amount is given as under:-

Principal outstanding

INR 94,60,249.00

Interest till date of foreclosure

INR 33,427.00

Foreclosure charge @4.00% of principal outstanding + Applicable Taxes

INR 4,46,523.75

Late payment Fee charge

INR 0.00

Late payment Interest charge

INR 0.00

Cheque bounce charge

INR 0.00

Other Charges

INR 118.00

Pending instalments, if any

INR 1,05,566.00

Refund, if any

INR 94,85,097.00

Add: Part prepayment charges (if any)

 

Total amount receivable

INR 5,60,786.75

Per day interest

INR 2,786.00

Additional Charges:

 

Foreclosure Statement Charges

INR 118.00

 Now the complainant has challenged the levying of foreclosure charges by the OPs in view of notification dated 07.05.2014 of Reserve Bank of India Ex. C4.

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

9.                The matter in controversy revolves around the application of the circular/notification of Reserve Bank of India:-

Ex. C4 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.”

It is evident that Ex. C4 has been issued in continuation of earlier circular dated 05.06.2012 which refers to “Home Loans” only and not to other kind of loans. Further reference can be made to notification issued by Reserve Bank of India vide 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.”

Further reference can be made to a letter dated 02.08.2019 of Reserve Bank of India 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.”

Therefore,  letter dated 02.08.2019 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. 

10.              In the present case, the OPs have charged floating interest @10.50% per annum as is mentioned in the sanction letter Ex. R1. Further, perusal of the complaint and the documents relied upon by the complainant reveal that the complainant is running a restaurant under the name and style of M/s. G.N. Restaurant. The loan applied by the complainant is referred to as M.S.M.E. term loan which means that the loan was intended to be taken by the complainant along with other co-borrowers for the purpose of running Micro Small Medium Entrepreneur Thus, loan obviously was to be obtained for commercial purpose. Nowhere in the complaint, it has been mentioned by the complainant that he intended to avail the loan for the purpose of earning his livelihood. No detail of the business being run by the complainant under the name and style of M/s. G.N. Restaurant has been given. It is evident that the said loan facilities were required by the complainant for the purpose of "business”. The loan was availed by the complainant along with Mr. Sarvesh Grover and M/s. G.N. Restaurant as co-applicants.

11.              Therefore, as per the guidelines mentioned hereinbefore, issued by the Reserve Bank of India, the OPs were well within their rights to levy foreclosure charges and no illegality has been committed by the OPs by charging the same.

                   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."

12.              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.

13.              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.            

14.              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:08.05.2024.

Gobind Ram.

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