Tamil Nadu

South Chennai

CC/31/2013

Madras Carbons Pvt Ltd., - Complainant(s)

Versus

Indiabulls Housing Finance Ltd - Opp.Party(s)

M/s. Sundhararajan

04 Apr 2019

ORDER

                                                                        Date of Filing  : 09.01.2013

                                                                          Date of Order : 04.04.2019

DISTRICT CONSUMER DISPUTES REDRESSAL FORUM, CHENNAI (SOUTH)

@ 2^ND Floor, T.N.P.S.C. Road, V.O.C. Nagar, Park Town, Chennai – 3.

PRESENT: THIRU. M. MONY, B.Sc., L.L.B, M.L.                    : PRESIDENT

TR. R. BASKARKUMARAVEL, B.Sc., L.L.M., BPT., PGDCLP. : MEMBER

C.C. No.31/2013

DATED THIS THURSDAY THE 04^TH DAY OF APRIL 2019

1. M/s. Madras Carbons Pvt. Ltd.,

Rep. by its Director

Mr. K. Chandra Mouli,

New No.38, 4^th Street,

Abhiramapuram,

Chennai – 600 018.     

2. M/s. Thiru Healthcare Services Pvt. Ltd.,

Rep. by its Director

Mr. K. Chandra Mouli,

New No.38, 4^th Street,

Abhiramapuram,

Chennai – 600 018.                                                     .. Complainants.                                                           

..Versus..

1. India Bulls Housing Finance Ltd.,

Rep. by its Authorised Officer,

No.448/451, Udhyog Vihar, Phase – 5,

Gurugon – 122 001.     

2. India Bulls Housing Finance Ltd.,

Represented by its Branch Manager,

No.20, Apex Chamber,

Sir Thyagaraya Road, 1^st Floor,

T. Nagar,

Chennai – 600 017.                                                ..  Opposite parties.

Counsel for the complainants                : M/s. M.S. Sundarrajan

Counsel for the opposite parties 1 & 2 : M/s. C. Umashankar &

                                                                 another

ORDER

THIRU. M. MONY, PRESIDENT

       This complaint has been filed by the complainant against the opposite parties under section 12 of the Consumer Protection Act, 1986 pray to refund a sum of Rs.7,38,271/- wrongly collected with interest at 14% p.a. from the date of final demand dated:22.06.2012 up to date of realization and to pay a sum of Rs.2,00,000/- towards compensation for loss, mental agony with cost to the complainant.

1.    The averments of the complaint in brief are as follows:-

The complainants submit that the opposite parties are carrying on the business of Housing Finance Company registered under the Indian Companies Act.  On the request of the complainants, for a business loan the opposite parties sanctioned a sum of Rs.1,30,00,000/- vide account No. HHECHE 00075662.  The complainants submit that only a sum of Rs.1,27,98,153/- was given to the complainants by way of cheque No.007024 Dated:30.10.2010.   The opposite parties wrongly withheld a sum of Rs.2,01,847/- even after the sanctioning the loan of Rs.1,30,00,000/-.  The complainants submit that the opposite parties have collected a sum of Rs.1,40,812/- towards processing fees and another sum of Rs.2,578/- towards other charges evenafter receiving Indian Bank cheque No.881581 dated:25.9.2010 for Rs.5,515/-, Indian Bank cheque No.881593 dated:06.10.2010 for Rs.82,725/- and Indian bank cheque No.881612 dated:02.11.2010 for Rs.82,725/- and a sum of Rs.2,578/- by way of cash, totalling of Rs.1,43,390/- towards processing fees.  The complainants submit that a sum of Rs.1,27,98,153/- was disbursed towards the loan amount on 30.10.2010. The opposite party by way of Cheque No.020111 dated:30.10.2010 withheld a sum of Rs.2,01,847/- towards the 1^st instalment.   But the opposite parties wrongly accounted the said amount towards EMI of October 2011 and collected a sum of Rs.27,904/- towards interest because the withheld amount of Rs.2,01,847/- was collected towards the 1^st instalment and claimed to pay the EMI from 10.01.2011.  The complainants submit that the opposite parties have claimed a sum of Rs.44,877/- towards interest for 9 days without any rhyme or reason because, a sum of Rs.1,27,98,153/- was disbursed on 30.10.2010 towards the loan amount.  Thereby, the EMI shall lie only on every first of the month i.e. 01.11.2010, 01.12.2010, 01.01.2011 respectively.  The complainants submit that the opposite parties have collected a huge sum of Rs.6,44,032/- and another sum of Rs.66,335/- towards foreclosure charges.  The complainants submit that the opposite parties without any intimation charged interest to the tune of 17% eventhough the opposite parties argued that during that period, 11 times interest has been revived.  The complainants submit that the opposite parties wantonly and deliberately withheld a portion of loan amount i.e. Rs.2,01,847/- towards 1^st EMI.   The act of the opposite parties amounts to deficiency in service and unfair trade practice which caused great mental agony.  Hence, the complaint is filed.

2.      The brief averments in the written version filed by  opposite parties 1 & 2 is as follows:

The opposite parties 1 & 2 specifically deny each and every allegations made in the complaint and put the complainant to strict proof of the same.     The opposite parties state that the complainants have approached the opposite parties for availing loan for commercial purpose.   The opposite parties sanctioned a sum of Rs.1,30,00,000/-.  Due Loan Agreement also signed by the complainants and the opposite party.  The opposite parties state that this Forum has no jurisdiction to try this case because, the opposite parties are registered under Companies Act.  The complainants are also a company and the transaction is made for commercial purpose.  The opposite parties state that as per the Loan Agreement, there is one arbitration clause and the complainants without approaching the arbitrator filed this case before this Forum.  The opposite parties state that all the transactions in this case arisen on the basis of the contractual.  The opposite parties state that on the Loan Application of the complainants, the loan was sanctioned on 30.09.2010 solely on the basis of ESCROW of rentals from M/s. Iron Mountain to pay the rent from the property of both the properties.  The opposite parties state that as per the Loan Agreement, the complainants have accepted the terms and conditions of loan, rate of interest as per prime lending rate etc and thereafter, the complainants has no right to question the same.   The opposite parties state that the opposite parties are duty bound by Reserve Bank of India guidelines and National Housing Board and they cannot independently collect any amount.  The opposite parties state that the loan sanctioned for business purpose and the loan is not classified as Home Loan.   The opposite parties state that the loan sanctioned to the complainants was a HOME EQITY (loan against property) in Loan Account No.HHCHE00015662 since the loan was for business purposes and not a Home Loan, therefore foreclosure charges are applicable as per the terms of the Loan Agreement.  The opposite parties state that the loan offer letter / Sanction letter dated:30.09.2010 mentions the type of interest as Floating along with the loan sanction amount, type of facility, loan tenure, interest type,  monthly instalments (EMI), processing fee etc.  The opposite parties state that after accepting the terms of the Sanction letter, the complainants executed the Loan Agreement and other Security Documents.  Therefore, there is no deficiency in service on the part of the opposite parties and hence, the complaint is liable to be dismissed.

3.     To prove the averments in the complaint, the complainants have filed proof affidavit as their evidence and documents Ex.A1 to Ex.A13 are marked.  Proof affidavit of the opposite parties 1 & 2 is filed and documents Ex.B1 to Ex.B7 are marked on the side of the opposite parties 1 & 2.  

4.      The points for consideration is:-

1. Whether the complainants are entitled to a sum of Rs.7,38,271/- wrongly collected with interest at the rate of 14% p.a. from the date of final demand as prayed for?
2. Whether the complainants are entitled to a sum of Rs.2,00,000/- towards compensation for loss, mental agony and deficiency in service with cost as prayed for?

5.      On point:-

Both parties filed their respective written arguments.  Heard their Counsels also.   Perused the records namely the complaint, written version, proof affidavits and documents.  The learned Counsel for the complainants would contend that the opposite parties are carrying on the business of Housing Finance Company registered under the Indian Companies Act.  On the request of the complainants, for a business loan the opposite parties sanctioned a sum of Rs.1,30,00,000/- vide account No. HHECHE 00075662.  Ex.A3 is the offer letter dated:30.09.2010.  Ex.A4 is the Loan Agreement dated:30.10.2010.   Further the contention of the complainants is that only a sum of Rs.1,27,98,153/- was disbursed/ given to the complainants by way of cheque No.007024 Dated:30.10.2010.   The opposite parties wrongly withheld a sum of Rs.2,01,847/- even after the sanctioning the loan of Rs.1,30,00,000/-.  Thereby, the opposite parties have committed deficiency in service.   Further the contention of the complainants is that the opposite parties have collected a sum of Rs.1,40,812/- towards processing fees and another sum of Rs.2,578/- towards other charges evenafter receiving Indian Bank cheque No.881581 dated:25.9.2010 for Rs.5,515/-, Indian Bank cheque No.881593 dated:06.10.2010 for Rs.82,725/- and Indian bank cheque No.881612 dated:02.11.2010 for Rs.82,725/- and a sum of Rs.2,578/- by way of cash, totalling of Rs.1,43,390/- towards processing fees as per Ex.A5, Ex.A6 & Ex.A7.  Hence, it is apparently proved that the opposite party collected processing fee twice.   Wherein, the opposite parties admitted in their email dated:11.01.2011 as per Ex.A7 which reads as follows:

“This is in reference to your letter dated 17^th December 2010 regarding the loan amount for your loan account number HHECHE00075662, we would like to inform you that the total sanctioned loan amount is Rs.1,30,00,000/- in which amount of Rs.12,798.153/- disbursed to you however the amount of Rs.2,01,847/- taken as advance EMI for escrow account for security purpose. 

Please note that once your escrow account will operational the difference amount of Rs.2,01,847/- will be disbursed to you.

Again in reference to your query regarding the processing fee, we would like to inform you that we have received the processing fee of Rs.1,43,390/- vide cheque number 881612 (Amount of Rs.55,150/-), 881593 (Amount of Rs.82,725/-) and 881581 (Amount of Rs.5,515/-)” proves the unfair trade practice.    

6.     Further the contention of the complainants is that a sum of Rs.1,27,98,153/- was disbursed towards the loan amount on 30.10.2010 as per Ex.A5.  It is seen that disbursal of cheque being issued to you vide

Accordingly, the 1^st EMI shall lie on 01.12.2010.   The opposite party by way of Cheque No.020111 dated:30.10.2010 withheld a sum of Rs.2,01,847/- towards the 1^st instalment.   It is also seen in Ex.A5 that

The deductions are on account of:

But the opposite parties wrongly accounted the said amount towards EMI of October 2011 and collected a sum of Rs.27,904/- towards interest amounts to deficiency in service because the withheld amount of Rs.2,01,847/- was collected towards the 1^st instalment and claimed to pay the EMI from 10.01.2011.  As per Ex.A11, email dated:14.06.2012 which reads as follows:

“We would like to inform you that the EMI of Rs.2,01,847/- has been kept as un-disbursed which is as per the policy of the escrow account opening for rental properties and same is applicable in your case as well.

Moreover, the said EMI has been adjusted towards the bounced EMI of October 2011 and hence we would not be able to refund the interest in the said context”.

proves that the opposite parties eventhough withheld an amount of Rs.2,01,847/- on 30.10.2010 has not accounted till October 2011 EMI proves the unfair trade practice. 

7.     Further the contention of the complainants is that the opposite parties have claimed a sum of Rs.44,877/- towards interest for 9 days without any rhyme or reason because, a sum of Rs.1,27,98,153/- was disbursed on 30.10.2010 towards the loan amount.  Thereby, the EMI shall lie only on every first of the month i.e. 01.11.2010, 01.12.2010, 01.01.2011 respectively.  The opposite parties has not explained the reason for claiming EMI from 10.01.2011 with interest for 9 days amounts to unfair trade practice.  Thereby, 9 days interest of Rs.44,877/- has been wrongly claimed by the opposite parties caused great inconvenience and mental agony.   As per Ex.A7, it is admitted in letter dated:30.12.2010 which reads as follows:

“We would like to inform you that query raised by you is under process.

We request you to provide us some more time to revert with the resolution”.

proves the deficiency and unfair trade practice exercised by the opposite parties.  

8.     Further the contention of the complainants is that the opposite parties have collected a huge sum of Rs.6,44,032/- and another sum of Rs.66,335/- towards foreclosure charges.  The opposite parties in Ex.A4, Loan Agreement, Schedule “1”, under the head Charges in handwriting tampered the foreclosure charges column instead of Rs.1,000/-, 5% + S.T. is noted.   

As per Circular of the Chief General Manager, Reserve Bank of India in ref No.RBI/2015-16/16 DNBR (PD) CC. No.054/03.10.119/2015-16 dated:01.01.2015 addressed to All Non-Banking Financial Companies (NBFCs) and Residuary Non-Banking Companies (RNBCs) which reads as follows:

“As you are aware, in order to have all current instructions on the subject at one place, the Reserve Bank of India issues updated circulars / notifications.   The instructions related to the captioned subject contained in various circulars issued by RBI updated as on June 30, 2015 are reproduced below.  The updated circular has also been placed on the RBI web-site (

(a) The NBFCs should give notice to the borrower in the vernacular language or a language as understood by the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc.  NBFCs should also ensure that changes in interest rates and changes are effected only prospectively.  A suitable condition in this regard should be incorporated in the loan agreement.

(c) NBFCs should release all securities on repayment of all dues or on realisation of the outstanding amount of loan subject to any legitimate right or lien for any other claim NBFCs may have against borrower.  If such right of set off is to be exercised, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which NBFCs are entitled to retain the securities till the relevant claim is settled /paid.

(iv) General

(d) 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.

And

As per the Notifications in Ref No.RBI/2013-14/582 DBOD Dir BC.No.110/13.03.00/2013-14 dated:07.05.2014 by the Chief General Manager, Reserve Bank of India which reads as follows:

Levy of foreclosure charges/pre-payment penalty on Floating Rate Term Loans

2. A reference is invited to Part B of the First Bi-monthly Monetary Policy Statement 2014-15 announced on April 1, 2014 proposing certain measures for consumer protection.  It was indicated that in the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty.  Accordingly, it is advised that banks will not be permitted to charge foreclosure charges pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect.

As per the notifications by the Principal Chief General Manager, Reserve Bank of India in Ref No. RBI/2014-15/121 DNBS (PD).CC. No.399/03.10.42/2014-15 dated:14.07.2014 which reads as follows:

Levy of foreclosure charges / pre-payment penalty on Floating Rate Loans

Please refer to paragraph (iii) of Guidelines on Fair Practices Code for NBFCs issued vide Circular DNBS(PD) CC No.80/03. 10.042/2005-03 dated:28.09.2006 and paragraph 2(A) (iii) of Master Circular DNBS(PD). CC. No.388/03.10.042/2014-15 dated:01.07.2014

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 change foreclosure charges/pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect”.

proves that the opposite party is not entitled to collect any foreclosure charges. Since the opposite party is coming under non-banking financial companies and residuary non-banking companies. 

9.     As per the letter of the General Manager, Department of Regulation and Supervision, National Housing Bank in Ref. No.NHB (ND)/DRS/POL-No.36/2010 dated:18.10.2010 addressed to All Registered Housing Finance Companies regarding Pre-payment penalty on pre-closure of housing loans reads as follows:

“The issue of levying pre-payment penalty or pre-payent charges by housing finance companies on pre closure of housing loans by the borrowers out of their own sources has been considered by the National Housing Bank and it has been decided that housing finance companies should not charge prepayment levy or penalty in such cases.

2. It is, therefore, advised that pre-payment levy or penalty should not be collected from the borrowers when the housing loan is pre-closed by the borrowers out of their own sources.  All HFCs are advised to ensure compliance of the above with immediate effect.

3. Please note that non-compliance with the above advisory may attract penal consequences under the National Housing Bank Act, 1987”.

proves the opposite parties are not  entitled to collect any foreclosure charges.  

10.    Further the contention of the complainants is that the opposite parties without any intimation charged interest to the tune of 17% eventhough the opposite parties argued that during that period, 11 times interest has been revived.  The opposite parties miserably failed to produce the document to prove the revived interest rates proves unfair trade practice.  Further the contention of the complainants is that the opposite parties wantonly and deliberately withheld a portion of loan amount i.e. Rs.2,01,847/- towards 1^st EMI but has not given any account and thereafter, the opposite parties contended that the said amount of Rs.2,01,847/- is kept under Escrow account etc are total false because in this case, the complainants have not opened any Escrow account.  The opposite parties also has not created any Escrow account in the name of the complainants proves the negligence and unfair trade practice on the part of the opposite parties.  The complainants are claiming a sum of Rs.7,38,271/- with interest and compensation of Rs.2,00,000/-.

11.    The contention of the opposite parties is that admittedly, the complainants have approached the opposite parties for availing loan for commercial purpose.   Ex.B1 is the offer letter issued by the opposite parties duly signed by the complainants after the production and verification of documents related to the loan, the opposite parties sanctioned a sum of Rs.1,30,00,000/-.  Due Loan Agreement vide Ex.B2 also signed by the complainants and the opposite party.  But on a careful perusal of Ex.B2, it is seen under schedule “1”, in the charges column: the interest and amount are filled in manual.   In sub-division (a), there are some tamperings namely; PEMI interest 5% per annum is written initially and the same was striked out and rewritten as 14% per annum and (d) Foreclosure charges @ Rs.1,000/- written initially and striked out and rewritten as 5% + ST also found.  The opposite parties has not explained the reason for preparation of schedule by handwriting and such tamperings evenafter the strong objection and protest raised by the complainants in this case. 

12.    Further the contention of the opposite parties is that this Forum has no jurisdiction to try this case because, the opposite parties are registered under Companies Act.  The complainants is also a company and the transaction is made for commercial purpose.  But the entire case is based on the service and the deficiency of service by the opposite parties who is carrying on the business of Non–banking Financial Company Business.  The deficiency of service squarely comes under the Consumer Protection Act, 1986.   Further the contention of the opposite parties is that as per Ex.B2, there is one arbitration clause and the complainants without approaching the arbitrator filed this case before this Forum.  But the arbitration proceedings are not a bar to the Consumer Forum.   The opposite parties also has not taken any steps under the Arbitration Act.   Further the contention of the opposite parties is that all the transactions in this case arisen on the basis of the contractual agreement as per Ex.B2.   The disputes related to contractual agreement cannot be tried by this Forum except the Civil Court.  But in this case, all the allegations are based on deficiency in service and unfair trade practice related to the loan and disbursement, foreclosure etc can be tried only by the Consumer Forum. 

13.    Further the contention of the opposite parties is that on the Loan Application of the complainants, the loan was sanctioned on 30.09.2010 as per Ex.B1 solely on the basis of ESCROW of rentals from M/s. Iron Mountain to pay the rent from the property of both the properties.  But the opposite parties have miserably failed to create an ESCROW account in the name of the complainants and failed to collect the rent amount from the tenants of the complainants related to M/s. Iron Mountain Property and another property mortgaged towards security.   The allegation that the complainants has not come forward to open the ESCROW account; cannot be accepted because, the complainants has duly mortgaged the property towards security.   Further the contention of the opposite parties is that as per Ex.B2, Loan Agreement, the complainants accepted the terms and conditions of loan, rate of interest as per prime lending rate etc and thereafter, the complainants has no right to question the same.   In this case, admittedly, the complainants accepted for floating rate of interest at the rate of 14% p.a.  But the opposite parties had claimed 15.5% and other increased rate of interest. Eventhough the opposite parties pleaded and contended that during that period, the rate of interest has been increased several times.  But failed to produce the documents to show the rate of interest except the Loan Agreement as per Ex.B2 showing 14% of interest.  On the other hand, RBI circular produced by the opposite party 3 & 4 shows the changes in interest and charges effected only prospectively not retrospectively which reads as follows:  As per Circular of the Chief General Manager, Reserve Bank of India in ref No.RBI/2015-16/16 DNBR (PD) CC. No.054/03.10.119/2015-16 dated:01.01.2015 addressed to All Non-Banking Financial Companies (NBFCs) and Residuary Non-Banking Companies (RNBCs) which reads as follows:

(iv) General

“(d) 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”.

Further the contention of the opposite parties is that on a careful perusal of Ex.B2, loan agreement, it is very clear that the opposite parties are duty bound by Reserve Bank of India guidelines and National Housing Board and they cannot independently collect any amount.  But in this case, it is apparently very clear that the opposite parties evenafter sanctioning Rs.1,30,00,000/- towards loan withheld a sum of Rs.2,01,847/- stating that by way of 1^st EMI in one place by way of ESCROW amount in another place and adjusted towards October 2011 instalment etc proves the unfair trade practice exercised by the opposite party.  

14.    Further the contention of the opposite parties is that admittedly, the loan sanctioned for business purpose and the loan is not classified as Home Loan.   In Reserve Bank of India vide Circular  No.RBI/2012-12/73 DBOD. No.DIR.BC.07/08.12.001/2012-13 in clause 6, there are different categories of loans defined.  The foreclosure charges cannot be waived the loans related to business purposes.  But the Circular of the Reserve Bank of India is very specific if floating rate of interest is opted and exercised, there shall be no foreclosure charges. Hence, the claim of 5% towards foreclosure charges; is not maintainable.  On the other hand, the opposite parties had collected huge amount towards foreclosure charges as 5%.  Considering the facts and circumstances of the case this Forum is of the considered view that the opposite parties shall refund a sum of Rs.7,38,271/- being amount collected in excess along with interest at the rate of 9% from the date of complaint to till the date of this order with a compensation of Rs.50,000/- for mental agony with cost of Rs.5,000/- to the complainants.

In the result, this complaint is allowed in part.   The opposite parties 1 & 2 are jointly and severally liable to pay a sum of Rs.7,38,271/- (Rupees Seven lakhs thirty eight thousand two hundred and seventy one only) being amount collected in excess along with interest at the rate of 9% p.a. from the date of complaint (i.e.) 09.01.2013 to till the date of this order (i.e.) 04.04.2019 and to pay a sum of Rs.50,000/- (Rupees Fifty thousand only) towards compensation for mental agony with cost of Rs.5,000/- (Rupees Five thousand only) to the complainants.

The aboveamounts shall be payablewithin six weeks from the date of receipt of the copy of this order, failing which, the said amounts shall carry interest at the rate of 9% p.a. to till the date of payment.

Dictated  by the President to the Steno-typist, taken down, transcribed and computerized by her, corrected by the President and pronounced by us in the open Forum on this the 04^th day of April 2019. 

MEMBER                                                                  PRESIDENT

COMPLAINANTS’ SIDE DOCUMENTS:-

OPPOSITE PARTIES 1 & 2 SIDE DOCUMENTS:-

MEMBER                                                                  PRESIDENT