Chandigarh

DF-I

CC/985/2019

Ravinder Singh Barara - Complainant(s)

Versus

India Infoline Finance Ltd. - Opp.Party(s)

B.S. Jaspal & Pearl Jaspal

21 Nov 2022

ORDER

DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION-I,

U.T. CHANDIGARH

                                     

Consumer Complaint No.	:	CC/985/2019
Date of Institution	:	04/10/2019
Date of Decision	:	21/11/2022

 

Ravinder Singh Barara, Prop. Modern Arcade, H.No.838, Urban Estate, Sector 7, Ambala City.

… Complainant

V E R S U S

1. India Infoline Finance Ltd., 12-A, 13^th Floor, Prinee Crescenzo, C-38 and C-39, G Block, Behind MCA, Bandra Kurla Complex, Bandra East, Mumbai 400051.
2. India Infoline Finance Ltd., SCO No.2907/2908, Sector 22-C, Second Floor, Chandigarh.

… Opposite Parties

CORAM :	SHRI PAWANJIT SINGH	PRESIDENT
	MRS. SURJEET KAUR	MEMBER
	SHRI SURESH KUMAR SARDANA	MEMBER

 

                                                                               

ARGUED BY	:	Ms. Pearl Jaspal, Counsel for complainant
	:	Sh. Vineet Sehgal, Counsel for OPs

 

Per Pawanjit Singh, President

1. The present consumer complaint has been filed by Sh.Ravinder  Singh against the opposite parties (hereinafter referred to as the OPs).  The brief facts of the case are as under :-

1. It transpires from the allegations as projected in the consumer complaint that the complainant is proprietor of Modern Arcade whereas the OPs are having their office at Mumbai and Chandigarh. The complainant had taken loan of ₹15,60,000/- from the OPs vide loan account No.765364 with 10.50% interest and monthly installment of ₹17,244/-. The first installment started w.e.f. 5.11.2016 and the last was to be paid on 5.10.2031. On 9.3.2018, complainant requested the OPs that he wanted to deposit the outstanding amount in order to clear the loan account. However, on 9.3.2018 OPs had issued a letter (Annexure B) in which they had asked the complainant to deposit an amount of ₹44,832.96 as prepay charges alongwith interest for which they were not entitled.  Not only this, OPs had also charged an amount of ₹435.87 illegally as per day interest. The complainant had requested the OPs not to charge foreclosure charges/prepayment penalty on the loan, but, despite of that the OPs had charged an amount of ₹44,832.96 in violation of the RBI guidelines and the same was deposited by the complainant under compelling circumstances. In this manner, the act of OPs amounts to deficiency in service on their part as a result of which the complainant had suffered harassment and mental agony and he is entitled for compensation and refund of the aforesaid amount. Hence, the present consumer complaint. 
2. OPs resisted the consumer complaint and filed their written statement, inter alia, taking preliminary objections of maintainability, concealment of facts, non-joinder of necessary party and also that the complainant is not covered under the definition of consumer. On merits, admitted that loan was sanctioned in favour of complainant, but, alleged that in addition to the complainant, two other co-borrowers were party to the said loan agreement and as the complainant has intentionally withheld that fact, consumer complaint of the complainant is not maintainable. It is further alleged that in fact there was default on the part of complainant and his co-borrowers as a result of which broken period interest was charged from them.  It is further alleged that no request of any sort was received from the complainant and since the loan agreement was executed between the complainant, co-borrowers and OPs, foreclosure charges/prepayment penalty on the untimely closure of loan was correctly charged from the complainant and his co-borrowers. So far as RBI guidelines are concerned, same are only applicable where the loan has been sanctioned to an individual borrower and not in case where their existed more than one or many borrowers.  Neither any loss has been caused to the complainant nor there is any deficiency in service on the part of the OPs.  The cause of action set up by the complainant is denied.  The consumer complaint is sought to be contested.
3. In replication, the complainant re-asserted his claim put forth in the consumer complaint and prayer has been made that the consumer complaint be allowed as prayed for.

2. In order to prove their case, parties have tendered/proved their evidence by way of respective affidavits and supporting documents.
3. We have heard the learned counsel for the parties and also gone through the file carefully, including the written arguments. For the reasons to be recorded hereinafter, following points are formulated for discussion and proper adjudication :-

1. Whether there is deficiency in service or unfair trade practice on the part of OPs?
2. Whether the complainant is entitled for the claim as prayed for?
3. Relief.

Point No.(i) & (ii)

4. Both these points are interconnected, hence are taken together to avoid repetition of facts and evidence.
5. Admittedly, a loan of ₹15,60,000/- was sanctioned in favour of Modern’s Arcade through its proprietor Sh. Ravinder Singh Barara (complainant), as is also evident from the loan application (Annexure R-1).  It is further an admitted case of the parties that the aforesaid loan was advanced in favour of the complainant on floating rate of interest, as is also evident from the loan application (Annexure R-1), loan agreement (Annexure R-2) as well as copy of account statement (Ex.C-1).  It is further an admitted case of the parties that the complainant approached the OPs for clearance of the aforesaid loan account by depositing the outstanding amount in the month of March 2018 and the complainant was asked by the OPs to deposit an amount of ₹44,832.96 as prepay charges, as is also evident from Ex.C-3.  It is further an admitted case of the parties that only after deposit of ₹44,832.96 the aforesaid account of the complainant was closed by the OPs.  The case of the complainant is that as the OPs had asked him to pay foreclosure charges to the tune of ₹44,832.96 before the closure of the loan account, which was a clear cut violation of the RBI guidelines, complainant is entitled for the reliefs as prayed for.  On the other hand, defence of the OPs is that as the loan was sanctioned in favour of the complainant and other co-borrowers, the guidelines issued by the RBI are not applicable in the present case and the consumer complaint of the complainant being false and frivolous be dismissed.
6. Close scrutiny of the entire evidence on record of the case file, coupled with the rival contentions of the learned counsel for the parties, are discussed as under :-

1. At the very outset, it may be observed that when it is an admitted case of the parties that the loan was sanctioned in favour of Modern Arcade of which the complainant is the sole proprietor and OPs have already charged an amount of ₹44,832.96 from the complainant as foreclosure charges due to untimely closure of the account by him, the case is reduced to a narrow compass as it is to be determined if OPs illegally levied the foreclosure charges/pre-payment penalty on the complainant, as is the case of the complainant, or if the OPs were justified in levying the same, as is the defence of the OPs.
2. The learned counsel for the complainant contended with vehemence that as it stands proved on record that the complainant, Sh. Ravinder Singh Barara is the sole proprietor of Modern Arcade, and further it is admitted by the OPs that they have charged an amount of ₹44,832.96 as foreclosure charges from the complainant, and that too is the violation of the guidelines issued by the RBI, the complainant is entitled for the refund of the aforesaid amount alongwith compensation.  On the other hand, learned counsel for the OPs contended with vehemence that the said guidelines are not applicable in the present case since the complainant is not individual borrower, rather Smt. Baljit Kaur is also co-borrower who has also signed loan documents, the complaint of the complainant being false and frivolous be dismissed with costs.  There is no force in the contention of the learned counsel for the OPs as the loan application and loan agreement clearly proves that in fact loan was applied by Modern Arcade through complainant being sole proprietor of the same and the signatures of Smt.Baljit Kaur have been obtained by OPs on certain documents including schedule of loan agreement by not disclosing her status as co-borrower or guarantor.  Not only this, when the loan has been sanctioned in favour of a sole proprietorship firm, it is safe to hold that loan was sanctioned in favour of the firm, which is equivalent to that of a natural person. It was held by the Hon’ble High Court of Calcutta in case titled as Devendra Surana Vs. Bank of Baroda in W.P. No.5521 (W) of 2017 decided on 12.12.2018 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.”

3. Moreover, when it is an admitted case of the parties that the loan was sanctioned to the complainant by the OPs on floating rate of interest and the same was being paid by him, on the date of pre depositing of the loan amount, as is also evident from the copy of statement of account, the complainant otherwise could not be charged with foreclosure charges by the OPs.  In support of his argument, learned counsel for the complainant has relied upon the judgment of the Hon’ble Punjab and Haryana High Court at Chandigarh in the case of Seema Tulisan Vs. India Housing Finance Ltd. & Anr., CWP No.17501 of 2012 decided on 9.4.2013 in which 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 respondents to refund the foreclosure charges of the said loan account as per guidelines issued by the National Housing Bank.”

4. Not only this, even the RBI circular dated 14.7.2014 (Ex.C-5) clearly provides that all non banking financial companies/Residuary Non Banking Companies were directed not to charge foreclosure charges/prepayment penalties on all floating rate term loans sanctioned to individual borrowers with immediate effect. Relevant portion of the said circular is reproduced as under :-

        “2.     As a measure of customer protection and also in order to bring in uniformity with regard to prepayment of various loans by borrowers of banks and NBFCs, it is advised that NBFCs shall not charge foreclosure charges/pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect.”

5. Learned counsel for the OPs has contended that vide circular dated 22.7.2016, the National Housing Bank has clarified that sole proprietorship concern/firm or an HUF as borrower or co-borrower will not be treated as an individual borrower, hence, the complainant cannot be treated as individual borrower and the benefit of the RBI circular cannot be given to the complainant. However, the aforesaid circular issued by National Housing Bank cannot overrule the earlier circular of RBI, governing body of all banks and financial institutions.  Moreover, the said circular relied upon by the OPs, cannot overrule the ratio of law laid down in the judgment of Hon’ble Calcutta High Court in the case of Devendra Surana Vs. Bank of Baroda (supra).

7. In view of the foregoing discussion, coupled with the RBI guidelines and the ratio of law laid down in Devendra Surana Vs. Bank of Baroda (supra) and Seema Tulisan Vs. India Housing Finance Ltd. & Anr. (supra), it is safe to hold that the OPs have charged foreclosure charges/prepayment amount from the complainant contrary to the RBI circular and against the law.  Hence, the complainant has successfully proved deficiency in service on the part of the OPs and the instant consumer complaint deserves to be allowed. 

Relief

8. In the light of the aforesaid discussion, the present consumer complaint succeeds, the same is hereby partly allowed and OPs are directed as under :-

1. to refund the aforesaid amount of ₹44,832.96 to the complainant alongwith interest @ 9% per annum from the date of deposit by the complainant i.e. 22.3.2019 till realization of the same.
2. to pay an amount of ₹20,000/- to the complainant as compensation for causing mental agony and harassment to him;
3. to pay ₹10,000/- to the complainant as costs of litigation.

9. This order be complied with by the OPs within thirty days from the date of receipt of its certified copy, failing which, they shall make the payment of the amounts mentioned at Sr.No.(i) & (ii) above, with interest @ 12% per annum from the date of this order, till realization, apart from compliance of direction at Sr.No.(iii) above.
10. Certified copies of this order be sent to the parties free of charge. The file be consigned.

Announced 21/11/2022 hg			Sd/- [Pawanjit Singh] President
			Sd/- [Surjeet Kaur] Member
			Sd/- [Suresh Kumar Sardana] Member