Argued by: Complainant in person

Sh. Sandeep Suri, Adv. for OP

PER SHRI JAGROOP SINGH MAHAL, PRESIDENT

             Succinctly put, lured by advertisements on internet, newspaper etc. of lower rate of interest given by the OP, the complainants took a loan of Rs.13,00,000/-  from the OP against H.No.136, Govind Vihar, Baltana, NAC Zirakpur which was insured by the ICICI agent and the loan amount was revised to Rs.13,37,180/-. Interest was agreed @7.25% in November 2005 but the same was subsequently revised time and again by the OP arbitrarily. Even the number of instalments were revised from 240 in November 2005 to 386 in August 2008 which badly affected the financial condition of the complainants and finally they decided to transfer the loan from OP bank to Indian Bank.  However, they were surprised when the OP bank asked them to deposit Rs.13,06,415/- in spite of paying Rs.3,90,493/- in 30 instalments without any break. The OP also even arbitrarily charged ‘foreclosure charges’ of Rs.28,958/- which were never agreed.  Hence this complaint alleging that the aforesaid acts of the OPs amount to deficiency in service and unfair trade practice.

2.             In their written reply the OP admitted the factum of grant of loan to the complainants but it has been submitted that the insurance of the property was done with another company.  It has been submitted that the rate as applicable was offered to the complainants which was also accepted by them. It has been further submitted that the rate was dependent upon FRR and on account of change in FRR the rate applicable to the complainant was also changed.  It has been denied that any excess amount was taken from the complainants.  It has been pleaded that a special scheme offered at a particular period of time does not entitle the complainants to the benefits of the same.  The transfer of loan by the complainants to some other bank has been denied.  It has been submitted that on account of change in the rates of interest it was necessary to change the payment period also otherwise the instalment payable would have much exceeded the capacity of the complainants to pay the same. Denying all the material allegations of the complainant and pleading that there has been no deficiency in service or unfair trade practice on their part prayer for dismissal of the complaint has been made. 

3.             Parties led evidence in support of their contentions.

4.             We have heard the complainant in person, ld. Counsel for the OP and have also perused the record including written arguments. 

5.             The complainant has produced the loan agreement (now marked as Annexure C-1), which was entered into between the parties at the time of taking the loan.  The complainant had opted for adjustable rate of interest which in view of clause 2.2 was to be regulated as per schedule B of the agreement. As per schedule B (now marked as Annexure C-2) of the agreement, the interest was to be reset quarterly, based on the then prevailing FRR, and the borrower shall pay interest at such reset rate as may be notified by the bank. It is further mentioned that adjustable interest rate will be reset on first day of the month following the quarter in which FRR is changed. The OPs have placed on file the letters dated 1^st April, 2006, 12^th July, 2006, 27^th January, 2007 and 10^th April, 2007 Annexure R-1 to Annexure R-4 vide which the Learned Counsel alleges that the interest rate was notified to the complainant. As per clause 9.7 of the loan agreement Annexure C-1, the notice or request to be given or made by a party to the other shall be in writing and would be deemed to have been duly received by the party to whom it is addressed if it is given or made at such parties’ address specified below or at such address as such party shall have designated by notice to the other party giving such notice or making such request. Though the address of the complainant in Annexure R-1 to Annexure R-4 has been correctly given as is mentioned in letter now marked Annexure C-3 and schedule I of the agreement Annexure C-1 but there is no document to suggest as to how these notices were sent to the complainant.  If the notices were sent by post, the postal receipt and the acknowledgment given by the complainant having received the said notices has not been placed on file. If the notices were sent per bearer even then the receipt regarding delivery of the notices had not been produced.  However, since the interest rate was enhanced through these notices beyond the period of 2 years and the complainant has not come to the Forum, challenging the increase in the rate of interest within 2 years from the date on which the interest rate was increased, we do not entertain the request of the complainant against the enhancement of the rate of interest prior to October, 2007 being barred by time as the present complaint was filed on 6.10.2009.

6.             It is not disputed by the parties that the interest being charged from the complainant since May, 2007 was 11.25% which was enhanced to 12% in August, 2008.  The OP has not produced any evidence to suggest if the said increase in the rate of interest was notified to the complainant as required vide clause B(ii) of schedule B now marked as Annexure C-2. Unless the enhancement in rate of interest was notified to the complainant, the complainant would not be bound to pay the enhanced interest.     The OP bank therefore cannot charge interest in excess of 11.25%. 

7.             The Learned Counsel for the complainant has argued that when the loan amount was to be paid, the OP demanded foreclosure charges @2.25% at outstanding principal amounting to Rs.28,958.42P.  He has referred to the letter now marked Annexure C-5 vide which the foreclosure charges were demanded from the complainant.  His contention is that there was no agreement between the parties for paying any foreclosure charges.  We have gone through the loan agreement Annexure C-1, which does not authorize the OP to charge foreclosure charges.  The demand of foreclosure charges by the bank was therefore not justified and the complainant was not liable to pay the same.

8.              The Learned Counsel for the OP has referred to the letter Annexure C-3 detailing the terms and conditions of the loan which provided full and final repayment fee @2% on  amount prepaid and on all amounts tendered by the borrower towards prepayment of the loan during the last one year from the date of final prepayment. This fee is prepayment fee which admittedly in this case has not been demanded from the complainant. However the foreclosure charges demanded vide Annexure C-5 cannot be compared with prepayment fee. 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.”

              a)    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. 

              b)    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.”

              In view of the above discussion, we are of the opinion that the prepayment fee and foreclosure charges do not denote the same thing but are two different connotations which are not interchangeable with each other.  The demand of foreclosure charges through Annexure C-5, and the recovery thereof from the complainant was not justified.

9.              In view of the above discussion, we are of the opinion that the present complaint must succeed.  The same is accordingly allowed.  The OP is directed to overhaul the entire account of the complainant and charge interest @11.25% with effect from May, 2007 till the payment was made by the complainant.  They are directed to refund the excess amount received by them and also refund Rs.28,958.42P recovered from the complainant as foreclosure charges.  The OP shall pay the aforesaid amount alongwith litigation charges of Rs.5,000/- within 30 days from the receipt of the copy of this order failing which it would be liable to pay penal interest @12% on the above amount with effect from 9^th August, 2008, till the amount is actually paid to the complainant.

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