Haryana

Ambala

CC/44/2023

MODERN RADIO & ELECTRICALS. - Complainant(s)

Versus

IIFL HOME FINANCE LTD (FORMERLY KNOWN AS INDIAN INFOLINE FIANANCE LTD). - Opp.Party(s)

PEARL JASPAL.

03 Jun 2024

ORDER

BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, AMBALA.

Modern Radio and Electricals, RIC Store, Bal Bhawan Road, Ambala City through its, Prop. Narinder Singh. (Age about 83 years)

……. Complainant

Versus

1. IIFL Home Finance Limited (Formerly known as Indian Infoline Finance Limited), SCO-2907-08, Sector-C, Chandigarh-160022.
2. IIFL Home Finance Limited (Formerly known as Indian Infoline Finance Limited), Plot No.98, Udyog Vihar, Phase IV Gurgaon- 1220016.

….…. Opposite Parties

 Before:      Smt. Neena Sandhu, President.

                     Smt. Ruby Sharma, Member,

          Shri Vinod Kumar Sharma, Member.           

Present:       Shri B.S.Jaspal, Advocate, counsel for the complainant

                    Shri Rajeev Sachdeva, Advocate, counsel for the OPs.

Order:        Smt. Neena Sandhu, President.

                   Complainant has filed this complaint under Section 35 of the Consumer Protection Act, 2019 (hereinafter referred to as ‘the Act’) against the Opposite Parties (hereinafter referred to as ‘OPs’) praying for issuance of following directions to them:-

1. To refund Rs.1,44,904.64  illegally charged as pre pay charges/ for closure charges along with interest @ 18% per annum from the date of deposit i.e. 12.10.2020 till its realization.
2. To refund Rs.1000/- illegally charged as document retrieval charges; Rs. 26262.84 P. illegally charged as GST; and Rs.1415.50 P. illegally charged as per day interest.
3. To pay compensation amounting to Rs.1,00,000/- to the complainant for harassment and mental agony and the cost of litigation of Rs.33000/-.

2.             Brief facts of this case are that the complainant had taken a housing loan of Rs.46,22,100/- from the OPs  vide loan account no.756291 on 31.7.2016 and the rate of interest was 9.5 % repayable in monthly installments of Rs.37490/-. On 12.10.2020, he requested the OPs to supply statement of account as the complainant wants to deposit outstanding amount and wants to clear the loan. On 12.10.2020 the  OPs  had issued a letter in which they had directed the complainant to deposit Rs.1,44,904.64 as prepay charges and also charged Rs.1000/- as document retrieval charges and Rs. 26262.84 as GST for which they are not entitled as per law and Rs.1415/-, as per day interest. The complainant had requested the OPs not to charge foreclosure charges/pre-payment penalties on the loan but the OPs were adamant for the same, in violation of the guidelines of the Reserve Bank of India and had charged Rs.1,44,904.64 P. as pre pay charges and the same had been paid by him under the compelling circumstances. The complainant had so many times visited office of both the OPs and requested by giving reminders to refund the pre pay charges/foreclosure charges but on 29.12.2022 the OPs had transferred only an amount of Rs.3604.13 in his account. Hence, the present complaint.
3.           Upon notice, OPs appeared and filed written version wherein they took various preliminary objections to the effect that the complainant has not approached this Commission with clean hands; the complainant has not placed all Loan documents, wherein it can be clearly seen the nature and purpose of the Loan Facility; the complainant has got no locus standi to file and maintain the present complaint; no cause of action ever arose in favour of the complainant; the complainant is bound by terms and conditions of the written agreement. In the case of Orix Auto Finance (India) Ltd. Vs jagmander singh & Anr. (2006) 2 SCC 598); the Hon’ble Supreme Court held that “The complainant cannot get over the terms of Hire Purchase agreement by merely labeling the act of the respondent as a deficiency in service and resort to the consumer Forum”. The complainant is guilty of suppression of material facts, since the Loan agreement was entered into by the complainant along with M/s Modern Radio and Electricals (non-individual) and Narender and Manmeet Kaur the complainant have not made them parties to the present complaint, as such, the present complaint is not maintainable for non-joinder of necessary parties.  As per agreement in case of dispute between the parties arising out of or in connection with this agreement, shall be referred to the Arbitrator to be appointed by the company in accordance with the Indian Arbitration and Conciliation Act, 1996, as such, on this ground also the present complaint is not maintainable. On merits, it has been stated that M/s Modern Radio and Electricals (Borrower) alongwith Narinder and Maneet Kaur, Co-Borrowers had availed Home Equity Loan Facility. The said facility was taken for business expansion or/and working capital needs. The main borrower namely M/s Modern Radio and Electricals along with other co Borrowers had also executed End Use Letter forming part of the Loan Agreement which specifically stated that purpose of Loan facility was "Business expansion or/and working Capital needs" contrary to the averments submitted in the present complaint. At the time of issuance of final sanction letter dully endorsed by all the borrowers, it was assured and agreed upon by all the Co-borrowers that no statement is misleading, no relevant aspects have been suppressed/concealed and that the Loan shall bear prepayment charges, among other stipulations. Even the schedule of charges was informed to all the borrowers and more so they were also aware of the fact that same is published at

Following extracts of the Loan Agreement are relevant -

1.1 (aa) Prepayment - means premature repayment (whether in part or in full) as per the terms and conditions laid down by IIFL in that behalf and in force at the time of prepayment.

2.9 Pre Payment of the Loan (a) The Borrower may choose to prepay the Loan amount either partly or fully during continuity of the Loan facility. All such payments shall be made and accepted as per IIFL policy and rules, including as to the prepayment charges, applicable from time to time, unless specifically mentioned in the schedule hereto and in accordance with statutory guidelines issued from time to time. The latest update on IIFL charges are also listed on the official website of IIFL. viz www.iifl.com. (b) That in case of non individual loan facility, the pre payment charges will be applicable as per the statutory guidelines and policy of IIFL, as on date of such prepayment. Refer schedule for current charges. The latest update on IIFL charges are also listed on the official website of IIFL viz www.iifl.com.

Page 21 Loan Agreement on Foreclosure in case on non individual 3% of any amount pre paid

The Loan disbursement was made in the bank account of M/s Modern Radio and Electricals and schedule EMIs were also paid from bank account in the name of M/s Modern Radio and Electricals. Prepayment/foreclosure charges were levied in terms of the agreement dully signed & executed between the parties/Borrowers which was duly accepted. It was agreed between the parties/Borrowers that charges would be applicable if there is any prepayment by the Borrowers including complainant/Co-borrower. The Borrowers including Complainant/co-borrower at the time of signing the Loan Agreement, agreed to pay the prepayment/foreclosure charges and therefore, the OPs were within its rights to charge prepayment/foreclosure charges and the complainant cannot seek modification of the said terms of the Loan agreement by way of the present Complaint. The Loan Facility in question is a Home Equity Loan(for non-individual category), which is availed by company or non-individual category, like in present case, it was availed by M/s Modern Radio and Electricals i.e. an non-individual Category. The Foreclosure/prepayment charges are levied on the Loan Facility as per the National Housing Bank vide (ND)/DRS/Misc. Circular No. 17/2016-17 dt. 22.07.2016 which states that foreclosure/prepayment charges are applicable on any Sole Proprietorship Concern/Firm or an HUF as borrower/co-borrower and the same will not be treated as an individual borrower. The Borrowers had never raised any issue or concern about paying an amount towards foreclosure charge at the time of foreclosure of Loan Facility or thereafter.  Rest of the averments of the complainant were denied by the OPs and prayed for dismissal of the present complaint.

4.           Learned counsel for the complainant tendered affidavit of the complainant as Annexure C-A alongwith documents as Annexure C-1 to C-5 and closed the evidence on behalf of the complainant. On the other hand, learned counsel for the OPs tendered affidavit of Vijay Kumar, Authorized Person of the OPs-IIFL Home Finance Limited (formerly known as India Infoline Housing Finance Limited) Branch Office at Mugal Canal Market, Karnal as Annexure RW1/A alongwith documents-Annexure OPP/01 to OPP/07 and closed the evidence on behalf of OPs.
5.           We have heard the learned counsel for the parties and have also carefully gone through the case file.
6.           Learned counsel for the complainant submitted that complainant alongwith other co-borrowers had taken the loan in question from the OPs, on floating rate of interest. He foreclosed the said loan for which the OPs charged prepayment/foreclosure charges in violation of the agreement. The said act of the OPs, amounts to deficiency in providing service. In support of his contention, the learned counsel for the complainant has placed reliance upon the judgment dated 27.09.2021, passed by the Hon’ble State Consumer Disputes Redressal Commission, UT, Chandigarh in the case of Ravinder Singh Barara & Anr. Vs. India Infoline Finance Limited & Anr.
7.           On the other hand, learned counsel for OPs  while reiterating the  objections and contentions raised in the written version submitted that the Loan Facility in question is a Home Equity Loan(for non-individual category), which is availed by company or non-individual category, like in present case, it was availed by M/s Modern Radio and Electricals i.e. an non-individual Category. He further submitted that the Foreclosure/prepayment charges are levied on the Loan Facility as per the National Housing Bank vide (ND)/DRS/Misc. Circular No. 17/2016-17 dated 22.07.2016 which states that foreclosure/prepayment charges are applicable on any Sole Proprietorship Concern/Firm or an HUF as borrower/co-borrower and the same will not be treated as an individual borrower. He further submitted that Borrowers had never raised any issue or concern about paying an amount towards foreclosure charge at the time of foreclosure of Loan Facility or thereafter.   
8.           First coming to objection taken regarding Arbitration, it is also pertinent to mention here that this issue has already been put at rest by the larger Bench of the Hon’ble National Commission in Aftab Singh  Vs. Emaar MGF Land Limited & Anr., Consumer Case No. 701 of 2015, wherein, vide order dated 13.07.2017, it has been held that an Arbitration Clause in the Agreements/contracts cannot circumscribe the jurisdiction of a Consumer Fora notwithstanding the amendments made to Section 8 of the Arbitration Act. Civil appeal bearing No.23512-23513 of 2017 and  Review Petition (C) Nos.2629-2630 of 2018 filed by the builder, before the Hon’ble Supreme Court of India, also stood dismissed vide orders dated 13.02.2018 and 10.12.2018 respectively.
9.           The moot question which falls for consideration is as to whether the OPs were right in charging the foreclosure/prepayment charges from the complainant.  It is not disputed that complainant alongwith other co-borrower had taken the home equity loan (for non-individual category) on floating rate of interest from the OPs. Perusal of record reveals that the only stand taken by the OPs in their written version is that the prepayment charges were levied by them because the complainant being Sole Proprietorship Concern/Firm as such, the said charges are payable in view of Circular No.17/2016-17 dated 22.07.2016, issued by the RBI. It may be stated here that a similar controversy fell for adjudication before the Hon’ble High Court of Calcutta  in W.P. No. 5521 (W) of 2017 – “Devendra Surana Versus Bank of Baroda”, decided on 12.12.2018, wherein it was held that no prepayment/ foreclosure charges can be levied on a proprietary concern on floating rate of interest on loans and the nature of a sole proprietorship firm is equivalent to that of a natural person and the natural person owning the firm do not enjoy the benefit of being treated as separate legal entity.  Similar view was taken by the Hon’ble Punjab and Haryana High Court in Civil Writ Petition No.17501 of 2012 titled as “Seema Tulisan Versus India Housing Finance Ltd. and Another”,  decided on 09.04.2013, wherein it was held that the Petitioner was paying floating rate of interest on the date of pre-deposit of the loan amount and thus, the Petitioner could not be charged foreclosure charges. The Hon’ble High Court directed the OPs to refund the foreclosure charges of the loan account, as per guidelines issued by National Housing Bank. In the case of Ravinder Singh Barara & Anr. Vs. India Infoline Finance Limited & Anr. (Supra), in para No.9 of the order dated 27.09.2021, passed by the Hon’ble State Consumer Disputes Redressal Commission, UT, Chandigarh, it has been stated that “the Reserve Bank of India issued notification/circular dated 02.08.2019 addressed to all the NBFCs regarding levy of foreclosure charges/pre-payment penalty on Floating Rate Loans by NBFCs. Para 2 of the said notification is very material to the present Consumer Complaint and the same reads as thus: - 

“2.     It is clarified that NBFCs shall not charge foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned for purposes other than business to individual borrowers with or without co-obligant(s).” 

                Perusal of above makes it emphatically clear that banks shall not charge foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned, for purposes other than business, to individual borrowers with or without co-obligant(s) as the case may be” and  by placing reliance on the judgments, referred to above, has allowed the complaint and directed the OPs to refund the foreclosure/pre-payment charges received from the complainant.  Thus, applying the principles of law laid down in “Seema Tulisan Versus India Housing Finance Ltd. and Another” (supra) “Devendra Surana Versus Bank of Baroda” (supra) and Ravinder Singh Barara & Anr. Vs. India Infoline Finance Limited & Anr.” (Supra), we do not hesitate to hold that the action of the OPs in charging foreclosure charges/pre-payment from the complainant amounts to deficiency in providing service.  The proprietor of the complainant is therefore held entitled to get refund of the amount of Rs.144904.64, minus the amount if any already received, alongwith tax imposed thereupon.

10.           In view of the aforesaid discussion, we hereby allow the present complaint and direct the OPs, in the following manner:-

1.   To refund to the proprietor of the complainant the amount of Rs.144904.64 minus the amount if any already received, alongwith tax imposed thereupon alongwith interest @6% p.a. from the date of deduction of the said amount, till realization.
2.   To pay compensation to the tune of Rs.5,000/- and cost of litigation of Rs.3,000/- to the proprietor of complainant for deficiency in service and negligence.

The OPs are further directed to comply with the aforesaid directions within the period of 45 days, from the date of receipt of the certified copy of the order, failing which the OPs shall pay interest @ 8% per annum on the awarded amount, from the date of default, till realization.

Announced:- 03.06.2024.