Date of Filing:14.08.2008<br /> Date of Order:26.02.2009<br /> <br /> <br /> <br /> BEFORE THE II ADDITIONAL DISTRICT CONSUMER DISPUTES REDRESSAL FORUM SESHADRIPURAM BANGALORE-20<br /> <br /> <br /> Dated: 26TH DAY OF FEBRUARY 2009<br /> PRESENT<br /> <br /> <br /> <br /> Sri S.S. NAGARALE, B.A, LL.B. (SPL.), President.<br /> Smt. D. LEELAVATHI, M.A.LL.B, Member.<br /> Sri BALAKRISHNA. V. MASALI, B.A, LL.B. (SPL.), Member.<br /> <br /> <br /> COMPLAINT NO: 1781 OF 2008<br /> <br /> Dr. Aswani Kumar Srivatsava<br /> S/o. L.K. Srivatsava<br /> R/at No. 406, 9th Main<br /> HRBR I Block<br /> Bangalore 560 043 Complainant<br /> <br /> V/S<br /> <br /> IDBI Bank<br /> 328, Ashwini Complex<br /> 1st & 2nd Floor (Opp. Spencer’s Super Market)<br /> 6th Main, 80 feet Road<br /> Indiranagar, Bangalore 560 038 Opposite Party<br /> <br /> ORDER<br /> By the President Sri. S.S. Nagarale<br /> <br /> It is the case of the complainant that he has approached the opposite party for housing loan. Opposite party informed him by sanction letter dated 12.01.2008 sanction of initial home loan of Rs. 1,75,00,000/- for purchase of vacant site. Complainant expected further loan of Rs. 65,00,000/- to cover cost of construction of home. The complainant submitted that before moving to Bangalore he was employed in Baroda. He had been allotted PAN number. However, he had not received PAN Card from the IT Department. After moving to Bangalore he realized that he often needed PAN card for various purposes. He decided to surrender his old PAN no. and apply for new PAN card. Complainant was granted new PAN no. The complainant submits that after availing loan of Rs. 1,75,00,000/- he acquired vacant site at HRBR I Block, Bangalore and commenced construction of home hoping that the construction loan will come through shortly. He repeatedly requested the opposite party bank to sanction construction loan of Rs. 65,00,000/- immediately. The complainant was shocked when he received e-mail dated 11.06.2008 from the opposite party informing him that it had decided to decline the grant of construction loan of Rs. 65,00,000/-. It is the case of the complainant that he had left with no other option, he had approached another lending agency and he was informed that it was willing to fund / lend the amount provided it is able to take over the existing loan of Rs. 1,75,00,000/-. Complainant approached opposite party and informed that since it was unable to lend for the construction activity he had no other option but to approach another lending agency. Thus, the complainant offered to repay the loan he had availed form the opposite party and requested the opposite party to release documents. He received letter of opposite party dated 27.6.2008, choose to construe his request as foreclosure / prepayment of its existing loan and demanded a sum of Rs. 3,49,488/- as pre-payment penalty. Complainant left with no other option paid the prepayment penalty of Rs. 3,49,488/- under protest and recorded his protest by his letter dated 03.07.2008 and sought refund of prepayment penalty and processing fee. Opposite party refused to return prepayment penalty and processing of Rs. 78,652/-. Complainant submitted that opposite party is guilty of rendering him grossly deficient service. Therefore, complainant prayed that opposite party be directed to pay sum of Rs. 3,49,488/- the prepayment penalty and Rs. 78,652/- collected from him as processing fee and Rs. 1,00,000/- as compensation for mental agony.<br /> 2. Notice issued to opposite party. Opposite party put in appearance through advocate and defence version filed. It is admitted by the opposite party that complainant had applied for site loan and bank has sanctioned Rs. 1.75 crore vide letter dated 12.01.2008. The opposite party bank declined construction loan of Rs. 65,00,000/- on June 11, 2008. The complainant has not fulfilled the sanction condition of loan. The name of the applicant in both the PAN cards is different. Complainant failed to fulfill the terms of agreement. The loan got rejected. Same cannot be construed as deficiency of service. Opposite party had asked the complainant to close one of the PAN card as the name in the said PAN card is different. Opposite party submitted that money involved is public money. The opposite party justified in taking care of its interest before sanctioning the loan. Opposite party justified in declining the construction loan. As per agreement complainant is required to pay pre-closure charges. Hence, there is no deficiency of service. Therefore, opposite party prayed to dismiss the complaint.<br /> 3. Affidavit evidences are filed.<br /> 4. Arguments are heard.<br /> 5. The points for consideration are:<br /> “1. Whether the opposite party is justified in collecting prepayment charges of Rs. 3,49,488/-from the complainant?<br /> 2. Whether the complainant is entitled for refund of prepayment charges?<br /> 3. Whether the complainant is entitled for refund of processing fee of Rs. 78,652/-”<br /> 6. All most all the facts are admitted in this case. The only point for controversy or dispute is that the opposite party bank had collected Rs. 3,49,488/- as prepayment charges from the complainant. The learned advocate for the opposite party argued that the complainant has paid the loan amount and closed the account well before the tenure. Therefore, the bank is entitled to recover prepayment charges at 2% on the sanctioned loan amount. In this case Rs. 1,75,00,000/- was the sanctioned loan amount. It is the case of the complainant that he has asked additional loan of Rs. 65,00,000/- for construction of house and his request is not accepted by the bank for one or other reason. It is absolutely unnecessary for me to discuss whether the refusal of the bank to sanction loan is justified or not. Refusal to advance further loan or fresh loan cannot be considered as deficiency of service. It is legally opened to the bank to take decision in good faith as to whether it is safe to make advance to a particular party after due consideration of the relevant factors. If the bank in its discretion decides not to grant further advance amount it may not amount to deficiency in service on the part of the bank. Therefore, the case made out by the complainant that there was some confusion regarding income tax PAN No. etc., is not at all relevant point to be considered or discussed here. The only point for consideration is whether the opposite party bank is justified in collecting prepayment charges of Rs. 3,49,488/-. Admittedly, the opposite party bank has not produced RBI Circular or guideline before this forum to show that as per the RBI guidelines or circular the bank has collected pre-payment / pre-closure charges. The opposite party bank has not produced any authority of law or circular or banking guidelines or guidelines of Banks of India Association. The Reserve Bank of India which came into being on April 1, 1935 under the Reserve Bank of India Act, 1934 is Central Bank of Country vested with very vide powers of control and supervision under the Banking Regulation Act. The opposite party bank has not produced any rules or circular or guidelines or regulation which authorizes or empowers the bank to recover prepayment charges from the customers. In the absence of any rules or regulations in respect of payment of pre-closure charges the opposite party bank is not justified in law to collect the prepayment charges from the complainant. The learned counsel for the opposite party submitted that there was home loan agreement signed by the party and as per that agreement prepayment charges at 2% was collected. Therefore, the complainant shall not have any grievance. I am of the opinion that home loan agreement and the condition mentioned therein in respect of prepayment charges is having no sanction of law. The said condition is not based on the RBI Circular or guidelines or banking regulations. The bank cannot arbitrarily mention the clause or condition in the home loan agreement and take the prepayment charges without foundation or backing of law. Pre-payment charges is not justified. It is not made clear for what reason the prepayment charges are being recovered from the customers. The bank has not established any loss suffered due to prepayment of loan amount. Without there being any loss or inconvenience or injury to the bank how can the bank recover prepayment charges from the customers. Admittedly, the bank had sanctioned loan at Rs. 1,75,00,000/- to the complainant. For one or the other reason the customer opted to close the account. The bank has recovered entire due along with interest when the account was closed. Under these circumstances no specific reasons are mentioned or disclosed or proved for demand of prepayment charges. So under these circumstances pre-payment charges recovered from the complainant is wholly unjustified and unjust. On this point there is a direct decision of Hon’ble Karnataka State Consumer Disputes Redressal Forum. The gist of the judgment was appeared and published in the newspaper “The Hindu” dated 29.12.2008. The Hon’ble State Commission has held as under:<br /> “The Karnataka State Consumer Disputes Redressal Commission has directed the Union Bank of India to pay compensation to an education institution for illegally collecting pre-closure charges.<br /> The Union Bank of India’s Koramangala Branch sanctioned to S. Krupanidhi Educational Trust a term loan of Rs. 21.6 crore in May 2006. The trust was asked to repay the loan in 72 monthly installments starting from May 2007 with each installment being Rs. 30 lakh. The trust asked the bank for additional term loan, which was not accepted. The trust approached Axis Bank, which agreed to sanction loan.<br /> The trust wrote a letter in January 2008 and asked Union Bank of India to close the account. While acting on the application, the bank demanded Rs. 64.8 lakh as pre-closure charges. It also asked the trust to pay Rs. 1.69 lakh as renewal charges. The trust reluctantly paid the amount and challenged the bank’s decision before the Commission. The Commission said the pre-closure charges were taken as per the circular issued by the Union Bank of India’s head office. In the absence of rules on the payment of pre-closure charges, it was not appropriate to collect it, it said.<br /> The commission said the bank had collected Rs. 1.69 lakh even before the expiry of 72 installments to repay the amount. The commission has directed the bank to pay compensation of Rs. 66.49 lakh with an interest of 12 percent. It also asked the bank to pay Rs. 10,000/- towards the cost of the proceedings.”<br /> <br /> 7. The above authority of law is applicable with all force and the facts of the case herein are very much similar with the facts of the case referred above. Therefore, the authority or ruling of the State Commission is full and complete answer to the argument advanced by the learned counsel for the opposite party. Therefore, in view of the above authority it is unnecessary for me to discuss more as regards pre-closure charges is concerned. The opposite party bank is bound to refund the amount of Rs. 3,49,488/- recovered from the complainant. The complainant has also sought refund of Rs. 78,652/-, the processing fee paid by him. As regards this amount is concerned the complainant is not justified in seeking or praying refund of processing fee. Admittedly, loan had been sanctioned by the bank and the complainant had received the loan amount and enjoyed it. The bank would be put to expenses for processing loan application. It has to undergo so many legal process, verify the documents and to take the legal opinion. Therefore, naturally the bank is entitled to charge processing fee. The complainant is not entitled for refund of the processing fee of Rs. 78,652/-. The complainant has also prayed grant of Rs. 1,00,000/- as compensation. Again the complainant is not justified in asking compensation from the opposite party bank. It is not made clear that as to why complainant wants compensation. There is absolutely no justification on the part of the complainant to pray for grant of compensation of Rs. 1,00,000/- from the opposite party bank. Therefore, the request of the complainant for grant of compensation is rejected. Taking into consideration of all the facts and circumstances of the case and arguments by the learned advocates for the parties, the points 1 & 2 are answered in favour of the complainant and point No. 3 is answered against the complainant. In the result I proceed to pass the following:<br /> ORDER<br /> 8. The Complaint is allowed. The opposite party bank is directed to refund / pay Rs. 3,49,488/- (pre-payment charges) to the complainant within 30 days from the date of this order. In the event of non-compliance of order within 30 days the said amount carries an interest at 12% p.a. from the date of this order till payment / realization.<br /> 9. The complainant is also entitled for Rs. 2,000/- towards costs of the present proceedings from the opposite party.<br /> 10. Send the copy of this Order to both the parties free of costs immediately. <br /> 11. Pronounced in the Open Forum on this 26TH DAY OF FEBRUARY 2009. <br /> Order accordingly,<br /> <br /> <br /> PRESIDENT<br /> We concur the above findings.<br /> <br /> <br /> MEMBER MEMBER<br />