Per Justice Sham Sunder , President This appeal is directed against the order dated 3.8.2010, rendered by the District Consumer Disputes Redressal Forum-I, U.T.Chandigarh (hereinafter to be referred as the District Forum only), vide which it accepted the complaint with costs of Rs.5500/- and directed the OPs to refund Rs.89816/- (which were received by them as foreclosure charges) with interest @ 12% per annum from the date of recovery i.e. 17.1.2008 and pay Rs.50,000/- as penalty, within thirty days from the date of receipt of a copy of the order, failing which they would be liable to pay the entire amount alongwith penal interest @ 12% per annum, from the date of filing the complaint i.e. 26.02.2010 till actual payment. 2. The complainants(now respondents) availed of a home loan of Rs.40,00,000/- from the OP(now appellant) on 24.01.2006, which was to be repaid in 180 equated monthly installments of Rs.41,168/- each. After January 2008, the complainants decided to repay the entire loan and asked the OP to intimate the outstanding amount against them. The OP issued letter dated 17.01.2008, in which alongwith the principal outstanding amount, and the interest, the foreclosure charges of Rs.87,421.14 were also shown to be paid, on the ground of closing the account, before the scheduled payment time. It was stated that the demand of Rs.87,421.14paise, on account of foreclosure charges was wholly illegal and against the terms of contract, between the parties. The complainants repaid the entire loan amount of Rs.38,93,000/- on 17.01.2008, but did not pay the foreclosure charges. The OP did not issue the NOC, on the ground of, non payment of the foreclosure charges. The OP also declined to release the documents and title deeds of the property, mortgaged by them, against the said loan. It was further stated that, as such, under pressure, the complainants made the payment of foreclosure charges of Rs.89,816/- on 17.01.2008 vide a separate receipt. Thereafter, the NOC and the documents i.e. title deeds etc. were supplied to the complainants. It was further stated that the aforesaid acts, on the part of the OP, amounted to gross deficiency, in rendering service and indulgence into unfair trade practice. When the grievance of the complainants, was not redressed, left with no alternative, a complaint under Section 12 of the Consumer Protection Act,1986(hereinafter to be called as the Act only) was filed by them, for refund of the foreclosure charges illegally obtained by the OP, alongwith interest. 3. The OP, in its reply, stated that the complaint was barred by limitation. It was further stated that it was agreed to between the parties that, in the case of foreclosure of loan, the complainants would pay prepayment charges of 2%, on the amount prepaid, including the amount prepaid during the last one year. It was further stated that the RBI had also been using the term foreclosure as early closure of loan. It was further stated that the payments were made by the complainants, after due verification of the accounts. It was further stated that no objection was raised by the complainants, for two years, regarding the payment of foreclosure charges. It was further stated that, both the cheques were issued by the complainants, on the same date, and at the same time, and, as such, there was no question of any pressure or coercion having been exercised upon them, for making the payment of foreclosure charges. It was denied that the OP was deficient, in rendering service, or indulged into unfair trade practice. The remaining averments, were denied, being wrong. 4. The parties led evidence, in support of their case. 5. After hearing the Counsel for the parties, and, on going through the evidence and record of the case, the District Forum accepted the complaint, in the manner, referred to, in the opening para of the instant order. 6. Feeling aggrieved, the instant appeal was filed, by the appellant/OP. 7. We have heard the Counsel for the parties, and have gone through the evidence and record of the case, carefully. 8. The Counsel for the appellant, submitted that, at the time of taking home loan, by the complainants, from the respondent, an agreement, at pages 32 to 44 of the District Forum file, was executed between the parties. He further submitted that this agreement was duly signed by the complainants. He further submitted that according to clause 2.7 of the said agreement, the OP was entitled to levy pre-payment charges. He further submitted that, as such, in fact pre-payment charges, as per the said clause, were charged from the complainants, when they prepaid the loan, before the normal period of expiry. He further submitted that the terms ‘prepayment charges’ and ‘foreclosure charges’ are interchangeable. He further submitted that the term “prepayment” means premature repayment as per the terms and conditions, laid down by ICICI bank, in that behalf and as in force at the time of prepayment. He further submitted that it was under clause 2.7 of the agreement, that prepayment charges @ 2% and service tax required to be paid by the bank @ 0.25%, were charged from the complainants. He further submitted that the mere fact that in P-2 the letter sent to the complainants, the words ‘foreclosure charges’ were inadvertently written instead of ‘prepayment charges’ did not make the payment of 2.25% at O/s principal, as ‘foreclosure charges’. He further submitted that P-2 document, which was duly accepted by the complainants, at so many places, the word ‘foreclosure’ was mentioned. He further submitted that mere change of nomenclature of ‘foreclosure’ instead of ‘prepayment’ did not make the payment of 2.25%, by the complainants/respondents at the time of prepayment of loan, as illegal. He further submitted that the Consumer Fora, is required to interpret the document, as a whole, to come to the conclusion, as to what was the intention of the parties, in executing the same. He further submitted that the District Forum was wrong, in coming to the conclusion, that the words ‘prepayment charges’ and ‘foreclosure charges’ are not interchangeable. He also while placing reliance upon R-3 ‘RTI Disclosures of Common Interest’ placed at pages 39& 40 of the appeal file, submitted that even the RBI with effect from September,1999 had allowed the banks to fix service charges for various types of services with the approval of their respective Boards, at reasonable rates. He further submitted that the order of the District Forum, being illegal, was liable to be set aside. 9. On the other hand, the Counsel for the respondents/complainants, submitted that, it was not that ‘prepayment charges’ were demanded by the OP, from the complainants, but there was a specific demand, with regard to the ‘foreclosure charges @2.25 at O/S principal’. He further submitted that there was no agreement for payment of foreclosure charges, at that rate, and, as such, the amount of Rs.87,421.14/- charged by the appellant/OP on account of foreclosure charges, was illegal. He further submitted that the District Forum, after considering the true interpretation of the words ‘foreclosure charges’ and ‘prepayment charges’ came to the conclusion that the amount of Rs.87,421.14/- was illegally charged. He further submitted that the order of the District Forum, being legal and valid, is liable to be upheld. 10. After giving our thoughtful consideration, to the rival contentions, advanced by the Counsel for the parties, in our considered opinion, the appeal deserves to be accepted, for the reasons, to be recorded hereinafter. There is hardly any dispute, between the parties, that, at the time of taking home loan, the agreement, referred to above, was executed between the parties. This agreement was duly signed by the complainants and authorized signatory on behalf of the bank. Clause 1.8 of this agreement reads as under ; “The term “PREPAYMENT” means premature repayment as per the terms and conditions laid down by ICICI Bank in that behalf and as in force at the time of prepayment.” Similarly clause 2.7 of the said agreement, reads as under ; “ICICI Bank may in its sole discretion and on such terms as to pre-payment charges etc. ,as it may prescribe, permit prepayment/acceleration in payment of EMIs at the request of the BORROWER, subject that ICICI Bank may specify, from time to time, the minimum amount of prepayment/amounts payableon account of acceleration of EMIs. In the event ICICI Bank permits any prepayment/acceleration, the repayment schedule for the Loan shall be amended/altered by ICICI Bank for giving effect to such prepayment/acceleration, and such amended/altered repayment schedule shall be binding upon the BORROWER. In case, if any amount is prepaid by the BORROWER, the same shall be adjusted first towards the incidental charges, additional interest, PEMII, EMI outstanding, EMI of current month and balance towards the principal amount of the ICICI Bank Loan. In the event of prepayment, the amortization schedule shall be effective from first day of the subsequent month. ICICI Bank at its sole discretion may permit swap of the post-dated cheques for re-scheduling of EMI only if such minimum amount, as may be decided by ICICI Bank from time to time is prepaid.” 11. The combined reading of these clauses, clearly goes to shows that ‘prepayment’ means premature repayment. In other words, it means prepayment of loan, before the expiry of the actual duration thereof. It was admittedly prepayment of loan, as per clause 1.8. It is also evident from clause 2.7 of the agreement, extracted above, that the bank was entitled to charge prepayment charges. The amount of Rs.87421.14p was, in fact, on account of prepayment charges on account premature repayment of loan, but instead thereof the words ‘foreclosure charges’ were written. In the context of the facts of this case, the terms “foreclosure charges” and “prepayment charges” are interchangeable and one and the same thing. In other words, the meaning of both the aforesaid terms, in the context of the facts of this case, is the same. Mere change of nomenclature does not make any difference. The Consumer Foras are required to see intention of the parties, and not to literally interpret the terms and conditions of the document, so as to defeat the very purpose thereof. Even, the appellant placed, on record, a document at pages 39 and 40 of the appeal- nomenclatured as “RTI Disclosures of Common Interest” down loaded from the internet. The information sought vide query No.589/2008-09 at page 40 of the appeal, and answer given to the same on 7.10.2008, by the RBI, in the question answer form, reads as under ; “589/2008-09 | Whether a bank can charge money in the name of foreclosure charges in case of prepayment of personal loan if it is being repaid in 14th month when the entire loan is repayable in 36 months? If yes, whether such charges can be 5.62% at O/S Principal | We have not issued any guidelines regarding foreclosure charges. In the context of granting greater functional autonomy to banks, operational freedom has been given to banks on all matters pertaining to service charges on banking transactions. Accordingly, with effect from September,1999, banks have been given the freedom to fix service charges for various types of services with the approval of their respective Boards. However, banks have been advised that while fixing service charges, they should ensure that the charges are reasonable and not out of line with the average cost of providing these services. Further, the management of loan recovery activity in a bank is essentially an internal management function and each bank’s Board is authorized to frame suitable policies in this regard.” |
The afore extracted information, supplied by the RBI, also makes it abundantly clear that the bank can charge money, in the name of foreclosure charges in case of prepayment of personal loan, if it is being repaid in 14th month when the entire loan is payable in 36 months. Not only this, in Hotel Vrinda Prakash Vs Karnatka State Financial Corporation (AIR 2007Kant 187) relied upon by the Counsel for the appellant, the principle of law, laid down, was to the effect, that the Financial Corporation had authority to charge premium for prepayment/foreclosure of the loan account on the outstanding loan balance. In Hatsun Agro Products Chennai Vs Industrial Development Bank of India Chennai, decided on 14.10.2009 by the Madras High Court, relied upon by the Counsel for the appellant, the plaintiff was charged Rs.51,42,895/- as prepayment charges/premium, before foreclosing the loan. The demand was challenged as illegal. The Hon’ble High Court held that the prepayment charges, before foreclosing the loan, were legally charged by the defendant and ultimately dismissed the suit. The principle of law laid down, in these cases, is fully applicable to the instant case. 12. The Counsel for the respondents, on the other hand relied upon State Bank of India Vs Usha Vaid (Dr) & Anr. II(2008)CPJ 166,(SCDRC Delhi), M.Anees- UR-Rehman & Ors Vs Jammu &Kashmir Bank Ltd. & Ors III(2008) CPJ 178 (SCDRC Karnataka) and S.Krupanidhi Educational Trust Vs Union Bank of India III(2009) CPJ 82 (SCDRC Karnataka) that no foreclosure charges could be charged by the appellant. In State Bank of India’s case (supra), loan was taken from Standard Chartered Bank. It was transferred to State Bank of India. Again, it was transferred to ICICI Bank, as much lower rate of interest, was being charged by it. The SBI charged prepayment charges. It was held that it was a case of taking over of loan by a different bank, from the earlier bank and did not amount to foreclosure/prepayment of loan and, as such, prepayment charges were illegally charged. Accordingly, the complaint of the consumer was allowed by the District Forum and the appeal was dismissed by the State Commission. In M.Anees-UR-Rehman’s case (supra), no agreement was produced, by the bank, despite the order of the Commission, according to which, it had charged prepayment charges on foreclosure/prepayment of loan. Thus, the State Commission held that that prepayment charges were wrongly charged and, thus, ordered the refund. In S.Krupanidhi’s case (supra), no rule was brought to the notice of the Commission, by the bank, which authorized it to charge prepayment charges. It was, under these circumstances, that the complaint, filed by the complainant, was allowed and the OP was directed to refund the prepayment charges, with interest. In the instant case, the prepayment/foreclosure charges were charged, as per the terms and conditions of the agreement and document annexure R2. The facts of the cases, referred to, in the para, and relied upon by the Counsel for the respondents, being completely distinguishable from the facts of this case, no help can be drawn, by him, therefrom. The submission of the Counsel for the respondents, being devoid of merit, is rejected. Under these circumstances, the District Forum was wrong, in coming to the conclusion, that the foreclosure charges in the sum of Rs.87421.14p, in view of the agreement, referred to above, which in fact constituted prepayment charges of loan, could not be charged. The findings of the District Forum in this regard, being not correct, are reversed. 13. Not only this, the amount of loan which was advanced, in favour of the complainants, to the tune of Rs.40 lacs on 24.1.2006 was to be repaid in 180 equated monthly installments of Rs.41.168/-. Since the complainants wanted to make prepayment of loan, they made a request to the bank. They repaid the entire loan amount, outstanding against them, to the tune of Rs.38,93,000/- on 17.1.2008. They also made payment of the prepayment charges/foreclosure charges, in the sum of Rs.89,816/- on 17.1.2008 vide a separate receipt C4, whereas, filed the complaint on 26.2.2010. At the time of making payment of the prepayment charges/foreclosure charges on 17.1.2008, they did not raise any objection. They did not write on the payment receipt, that they were making payment of this amount under protest. In its letter dated 29.1.2008 P-5 written by the bank to the complainant namely Hitesh Harjani, it was certified that the bank had no claim or right anymore, whatsoever, against him or his property in respect of the said loan. On 2.2.08, Hitesh Harjani complainant wrote a letter P6 to the bank that he was acknowledging the receipt of original documents mentioned therein. He did not raise any objection that he was acknowledging the receipt of documents, under protest, and was not liable to pay the prepayment charges/foreclosure charges. Even, he did not write any letter immediately thereafter, that he was not liable to pay the foreclosure charges, and the same had been illegally charged from him, by playing fraud or exercising coercion upon him. He slept over the matter, for a period of more than two years and, ultimately, filed the complaint on 26.2.2010. In case, he had any grouse against the bank on account of, charging of the foreclosure charges/prepayment charges at the time of pre-payment of loan, he was required to raise protest on the date of making prepayment/foreclosure charges or, immediately thereafter. The complainants, however, woke up, out of their deep slumber after more than two years. This clearly goes to show that neither any fraud was played upon the complainants, nor any coercion was exercised upon them while obtaining the foreclosure/prepayment charges. This also clearly goes to show that the claim made by the complainants, regarding the refund of the prepayment charges/foreclosure charges, was nothing, but a false one. 14. The order rendered by the District Forum suffers from illegality and perversity, warranting the interference of this Commission. 15. For the reasons recorded above, the appeal is accepted with costs, quantified at Rs.3000/-. The impugned order of the District Forum is set aside. 16. Certified Copies of this order be sent to the parties, free of charge. 17. The file be consigned to record room.
| | HON'BLE MRS. NEENA SANDHU, MEMBER | HON'BLE MR. JUSTICE SHAM SUNDER, PRESIDENT | , | |
