BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM-I, U.T. CHANDIGARH

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Hitesh Harjani, s/o Sh. S.K.Harjani for self an as special Attorney of Sh.S.K. Harjani and Smt. Savita Harjai, All r/o House No. 897, Sector 8, Panchkula

…..Complainants

                            V E R S U S

ICICI Bank Ltd., through its Branch Manager, Home Loan Section, SCO 181-182, Sector 9, Madhya Marg, U.T., Chandigarh.

                                   ……Opposite Party

CORAM:        SH.JAGROOP SINGH MAHAL                      PRESIDENT

                SH.RAJINDER SINGH GILL                 MEMBER

                DR.(MRS) MADANJIT KAUR SAHOTA          MEMBER

Argued by:       Sh. J.S. Bagga, Adv. for complainant.

Sh. Sandeep Suri, Adv. for OP.

PER SHRI JAGROOP SINGH MAHAL, PRESIDENT

             Succinctly put, the complainant availed a home equity loan of Rs.40,00,000/- from the OP on 24.01.2006 which was to be repaid in 180 equated monthly installments of Rs.41,168/-. After January 2008, he decided to repay the entire loan and asked the OP to supply him the outstanding payment of the entire loan. The OP issued letter dated 17.01.2008, in which alongwith principal outstanding and interest, the foreclosure charges of Rs.87,421.14 was also shown to be paid on the ground of closing the account before the scheduled payment time.  He repaid the entire loan of Rs.38,93,000/- on 17.01.2006 and did not pay the foreclosure charges.  The OP did not issue the NOC on the ground of non payment of foreclosure charges and also declined to release the documents and title deeds of the property mortgaged by them against the said loan. As such under pressure, he made the foreclosure payment of Rs.89,816/- on 17.01.2008. The NOC and the documents title deeds were supplied to him only after the payment of foreclosure charges.  Hence this complaint alleging that the aforesaid acts of the OP amount to deficiency in service and unfair trade practice.

2.        Notice was served to the OP. In their written reply the OP submitted that the present complaint was barred by limitation.  No valid reason had been given by the complainant for not filing the complaint in time.  It was agreed between the parties that in the case of foreclosure of loan, the complainant would pay  prepayment charges of 2% on amount prepaid including the amount prepaid during the last one year.  The RBI had also been using the same as early closure of Loans, therefore the foreclosure charges had been charged from the complainant as per the terms and conditions agreed between the parties at the time of taking the loan. The payments were made by the complainant after due verifications of the accounts. No objection of any kind was raised by the complainant in the last 2 years.  Both the cheques were issued by the complainant on the same date and same time, hence, there was no question of any pressure being exercised. Denying all the material allegations of the complainant, the OP pleaded that there has been no deficiency in service or unfair trade practice on their part and prayed for dismissal of the complaint. 
3.        The Parties led evidence in support of their contentions.
4.        We have heard the Learned Counsel for the parties and have also perused the record.
5.                 At the outset, it has been contended by the ld. counsel for the OP that since the complaint has been filed after the expiry of the limitation period of 2 years, therefore, the same is liable to be dismissed.  The complainant alongwith the complaint also moved an application for condonation of delay of 23 days in filing the complaint  which according to him occurred due to wrong advice he got from the counsel and further that he was under the impression that the limitation for filing such dispute is 3 years from the last date of cause of action.  In our view the complainant has shown sufficient cause for condoning the delay and even otherwise we think that the rightful claim of the complainant should not be dismissed for delay of just 23 days.  Hence the delay of 23 days in filing the complaint is condoned accordingly. 
6.                 The simple point involved in this complaint is regarding the levy of foreclosure charges by the OPs which according to the complainant is totally illegal and against the terms and conditions of the agreement executed between the parties.  Annexure P-1 is the account statement of the complainant which shows that the complainant had paid the installment of the said loan regularly upto January, 2008.  Subsequently the complainant intended to close his account and accordingly requested the OPs for his balance outstanding.  Annexure P-2 is the copy of the letter dated 17.1.2008 sent to the complainant by the OPs bank regarding details of the amount payable towards the prepayment of loan in which the principal outstanding amount is shown as Rs.38,85,384/-, interest for the month Rs.10,010.23 and foreclosure charges of Rs.87,421.14 @ 2.25% at Outstanding Principal.  The ld. counsel for the complainant contended that due to the act and conduct of the OPs he was forced to pay an amount of Rs.89,816/- vide payment receipt dated 17.1.2008 (Annexure P-4) as the OPs declined to release the documents and title deeds of the property mortgaged with them.  It was only on 29.1.2008 that the OPs issued the NOC (Annexure P-5) and the complainant acknowledged the receipt of the original documents on 2.2.2008 vide letter dated 29.1.2008 (Annexure P-6).
7.                 On the other hand it has been contended by the ld. counsel for the OPs that prepayment and foreclosure are interchangeable in the banking industry.   As per para 2.7 under the heading Prepayment of ICICI Bank LOAN of the Home Equity Loan agreement, original of which has been placed on record by the OPs,  the OPs were entitled to fees on full and final prepayment on the amount prepaid and on all amounts tendered by the borrower towards the prepayment of the loan from the date of final prepayment.  However, the OPs through Annexure P-2 demanded from the complainant Rs.87,421.14 as foreclosure charges @ 2.25% at Outstanding Principal. A perusal of the original copy of terms and conditions shows that there was no such term between the parties to demand or to pay foreclosure charges. This demand of Rs.87,421.14 is, therefore, unreasonable and beyond the agreement. 

8.           As per  Collins Concise Dictionary Third  Edition at page 496 defines ‘foreclose’ as under :-

“Foreclose – closes, -closing, -closed

1. Law. to deprive (a mortgagor, etc.) of the right to redeem (a mortgage or pledge). 2. to shut out; bar. 3. to prevent or hinder……… -foreclosure n.”

9.           Mitra’s Legal & Commercial Dictionary Fifth Edition 1990 at page 323 defines ‘foreclosure’ as a legal term which implies that the relief given be equity against forfeiture of the security is withdrawn. The effect of foreclosure is that the conditional conveyance in a mortgage becomes absolute and the property mortgaged vests absolutely in the mortgagee. 

10.          The Law Lexicon  by P Ramanatha Aiyar 2nd Edition 1997 at page 744 defines ‘foreclosure’ as follows :-

                     “Foreclosure in theory, at least, is merely a decree determining the equitable right of a mortgagor to redeem after the mortgagee‘s estate has become absolute at law. [See Bonham v. Necomb, (1806 1 Vern 232; 23 ER 435; Sampson v. Pattison, (1842) 1 Hare 533; 66 ER1143; 58 RR 178; Carter v. Wake, (1877) 4 Ch D 605.]  The term is also loosely applied to any of the various methods statutory or otherwise, known in different jurisdictions, of enforcing payment of the debt secured by a mortgagee, by taking and selling the mortgaged estate.”

11.          The prepayment fees and foreclosure charges are, therefore, not interchangeable words.  The OPs could be entitled to prepayment charges but in the present case no prepayment charges were assessed or demanded by the OPs. They have rather charged foreclosure charges @ 2% plus service tax @ 0.25% on the outstanding amount which the complainant is not liable to pay at all.  Moreover, since the complainant as per  the terms and conditions of the loan was to pay only prepayment charges whereas in Annexure P-2 the amount demanded is foreclosure charges @ 2.25% which again shows that it is not the prepayment fees. In the absence of the agreement demanding foreclosure charges, we are of the opinion that the amount of Rs.87,421.14 has been illegally demanded from the complainant.

12.          We are, therefore, of the firm view that the OP are not entitled to foreclosure charges.  As per the terms and conditions placed on record by the OPs themselves, they were entitled only to prepayment charges. Hence, the demand of Rs.87,421.14 was illegal and contrary to law which has been made by the OP by adopting an unfair trade practice. 

13.          We have come across a number of cases in which the OP bank is demanding foreclosure charges though there is no such agreement between the parties to pay the same.  The orders have already been passed against the bank to stop this unfair trade practice but they are not mending their ways.  There are number of customers who are being harassed by the OP bank by demanding foreclosure charges which in view of the agreement could not have been demanded.  We are, therefore, of the opinion that the OP should be penalized to pay Rs.50,000/- as penalty for adopting this unfair trade practice of demanding foreclosure charges and not releasing the documents and title deeds of the property mortgaged against the said loan and non issuance of NOC.

14.          In view of the above discussion, we are of the opinion that the present complaint succeeds. The same is accordingly allowed. The OPs are directed to pay to refund Rs.89,816/- (which was received by them as foreclosure charges) with interest @ 12% per annum from the date of recovery i.e. 17.1.2008 alongwith Rs.5,500/- as litigation expenses and Rs.50,000/- as penalty within thirty days from the date of receipt of copy of this order failing which they would be liable to pay the entire amount alongwith penal interest @ 12% per annum since the filing of the present complaint i.e. 26.02.2010 till the amount is actually received by the complainant. 

              Certified copies of this order be sent to the parties free of charge.  The file be consigned.