DATE OF FILING :14.8.2009.

BEFORE THE CONSUMER DISPUTES REDRESSAL FORUM, IDUKKI

Dated this the 26th day of April, 2010

Present:

SRI.LAIJU RAMAKRISHNAN PRESIDENT

SMT.SHEELA JACOB MEMBER

SMT.BINDU SOMAN MEMBER

C.C No.154/2009

Between

Complainant : C.J. James,

Chettipparambil House,

Managing Partner,

Mareena Enterprises,

Thodupuzha P.O.,

Idukki District.

(By Adv: K.M. Sanu)

And

Opposite Party : Manager,

Union Bank of India,

Thodupuzha Branch,

Thodupuzha P.O.,

Idukki District.

(By Adv: Sibi Thomas)

O R D E R

SRI. LAIJU RAMAKRISHNAN (PRESIDENT)
 

The complainant is the Managing Partner of 'M/s Mareena Enterprises' and conducting business at Thodupuzha for his livelihood as self employment. From the beginning of the partnership business firm, the complainant availed an overdraft loan from the opposite party. The period for the loan was for 1 year and it was renewed recently in the month of February, 2006. The overdraft loan was for Rs.1,30,00,000/- and sufficient surety and security was given for the same. An amount of Rs.7 lakhs was deposited as fixed in the opposite party bank for the same. The minimum balance was keeping by the complainant promptly. The opposite party was charging 14.5% interest for the overdraft. When the complainant needed much more working capital for the business in the year 2007, the complainant requested the opposite party for increasing the limit of the overdraft loan and regularise the interest as in the other banks. But the opposite party was not ready to increase the limit of the loan amount and was also not ready to regularise the interest rate of the loan as with the other banks. So the complainant approached the South Indian Bank, Axis Bank etc. for getting the increased funds. The other banks agreed to disburse an increased amount and also offered a decreased interest rate. So the complainant never renewed the agreement between the complainant and the opposite party bank in the month of February,2007 even when the date of agreement between the parties expired in February, 2006. After that in July, 2007, the complainant received Rs.1.75 crores from the South Indian Bank, Thodupuzha Branch, as overdraft loan with 12% interest. So he submitted a pay order for Rs.1.5 crores to the opposite party bank in the month of October, 2007 for closing the overdraft amount. Before closing the same, the complainant several times requested the opposite party to increase the limit of overdraft loan and also to decrease the interest rate. At the time of closing overdraft loan, the opposite party charged an additional amount of Rs.2,36,200/- as penalty charge from the complainant. The complainant was constrained to change the bank for transaction only because the opposite party was not ready to increase the loan amount and was not ready to decrease the interest rate as in the other banks. The opposite party was receiving hike interest from the complainant at the time when the complainant was using overdraft facility from the opposite party bank.. Another amount of Rs.50,000/- was received as processing fee from the complainant. The petitioner filed a complaint before the opposite party on 3.9.2007 for getting back the amount received as penalty form the complainant. After that the complainant several times contacted the opposite party through the telephone and a written complaint was given to the Regional Manager of the opposite party on 15.3.2008. This complaint was forwarded to the Regional Manager of the opposite party on 25.3.2008 and a reply was received from the Regional Office. The Regional Office also replied stating that the penalty charge was received as per the conditions of the bank. Again on 10.6.2008, the complainant filed a petition before the Banking Ombudsman, but it was decided without hearing the complainant. The opposite party charged an additional penalty amount Rs.2,36,200/- only because the complainant changed his transaction with another bank and the complainant is entitled to get back the amount from the opposite party. Hence this petition is filed.

2. The opposite party filed a written version stating that the complainant is not maintainable before this Forum. The complainant availed the loan for running Hardware cum sanitary shop at Thodupuzha. The loan as well as the purpose of the loan is purely commercial in nature and it is availed by an existing enterprise for expanding its commercial activity alone. This complaint is purely civil in nature, in order to arrive a conclusion elaborate evidence is required and civil court alone is competent to judge the dispute. The complainant here in prior to this complaint filed a complaint No.A/8750/UBI/T before the office of the Banking Ombudsman (Kerala and Union territory of Lakshadweep) and after hearing the explanation of this opposite party Ombudsman closed the complaint. Banking Ombudsman was specially constituted to hear the complaints of the customers of the bank. That Forum has already disposed the complaint as closed. The opposite party granted an overdraft by way of cash credit facility of 1 crores to the complainant. It was renewed on 28.3.2006 for a period up to February, 2007. The overdraft facilities are subjected to terms and conditions of the bank. As per terms and condition No.16 “Borrower will be liable to pay take-over (pre payment) penalty at the rate of 2% calculated on the previous 12 months average balance outstanding in the loan account, in the event of adjusting the loan account, out of funds other than from own sources, and that the onus of providing the source of funds towards adjustment of account rest on the borrower”. The complainant was enjoying over draft facilities from the opposite party for quite long period of time. In the year 2007 immediately after annual renewal of their credit facilities with the opposite party the complainant submitted a pay order from South Indian Bank towards closure of their overdraft facilities with this opposite party. The amount calculated in this case as penalty is 2,36,200/-. As per the terms and conditions pre-payment penalty is calculated at 2% on the previous 12 months average balance outstanding in the loan account and such the amount of Rs.2,36,200/- is arrived in this case. So there is no deficiency in the part of the opposite party.

3. The point for consideration is whether there was any deficiency in service on the part of the opposite parties, and if so, for what relief the complainant is entitled to?

4.The evidence consists of the oral testimony of PW1 and Exts. P1 to P6 marked on the side of the complainant and oral testimony of DW1 and DW2 and Exts.R1 to R9 marked on the side of the opposite parties.

5. The POINT :- The complaint is filed for getting back the additional penal charge received by the opposite party at the time of closing his overdraft account in the opposite party bank. The complainant was examined as PW1. PW1 availed an overdraft facility from the opposite party bank for Rs.1,30,00,000/- and it renewed on February, 2006, Rs.7,00,000/- was given as fixed deposit for availing the loan. Solvent sureties and securities were also given. Minimum balance was kept promptly by PW1. But the interest was received by the opposite party as 14.5% which was a hike amount when comparing with the other banks. When PW1 was in need of some money, Pw1 approached the opposite party in the year 2007 for increasing the limit of the overdraft. It was also requested by the PW1 to regularise the interest for the same as that of the other banks. But the opposite party never agreed for the same and so PW1 approached the South Indian Bank. They offered a lower interest of 12% and an amount of Rs.1.75 crores as overdraft loan. The pay order for Rs.1.5 crore was submitted before the opposite party bank in the month of August, 2007 for closing the loan account when PW1 received Rs.1.75 crores from the South Indian Bank with 12% interest. But the opposite party charged an additional penalty as Rs.2,36,200/- from the complainant and another amount of Rs.50,000/- received by the opposite party as service charge at the time of renewal of the overdraft. The opposite party charged the same because the PW1 changed the transaction with another bank. Ext.P1 is the letter issued to the opposite party by the PW1 on 3.7.2007, stating that the South Indian Bank has extended a cash credit limit of Rs.175 lakhs with 12% interest and also requested for avoiding the penal interest. The petition filed by the complainant to the Deputy General Manager of the opposite party on 15^th March, 2008 is marked as Ext.P2. Reply from the Regional Office is marked as Ext.P3. And the reply from the Regional Office stating that the charges levied by the bank from the complainant was as per the norms of the bank, is marked as Ext.P4. The copy of the sanction letter from the South Indian Bank Thodupuzha Branch attaching the overdraft facility is marked as Ext.P5. The complainant has started his shop before 28 years. No other business is running by the complainant other than this. The overdraft facility from the opposite party bank is renewing for the last 10 years. The last renewal was on February, 2006. Ext.R1 is the Sanction-cum-Renewal-cum-Modification limits, dated 28.3.2006 and it is signed by the PW1. The next renewal is fixed as February, 2007. The opposite party bank offered much more facility when the complainant was having transactions at Canara Bank, but that facility was not given by the opposite party bank. The loan was shifted only because the interest of the loan was reduced and the amount was increased by another bank. The Senior Manager of the opposite party bank was examined as DW1. DW1 deposed that the complainant filed a petition before Banking Ombudsman and after hearing the explanation of the opposite party, the Ombudsman closed the complaint. The overdraft loan granted to the complainant was renewed on 28.3.2006 for a period up to February, 2007. The overdraft facilities are subject to the terms and conditions of the bank. As per the terms and conditions, clause No.16, the borrower will be liable to pay take over (pre payment) penalty at the rate of 2% calculated on the previous 12 months average balance outstanding in the loan account in the event of adjusting the loan account out of funds other than from own sources and that the onus of providing the source of funds towards adjustment of account rest on the borrower. In the year 2007, immediately after annual renewal of their credit facilities with the opposite party, the complainant submitted a pay order from South Indian Bank towards closure of their overdraft facilities. So the prepayment penalties has calculated on the previous 12 months average balance outstanding in the loan account. DW1 deposed that there is no evidence produced to show that the overdraft had renewed in 2007. The PW1 requested for increasing of overdraft. The prepayment means, if the loan closed within 12 months. DW2 is the Manager of the Union Bank, Thodupuzha Branch. DW2 admitted that the complainant is having overdraft from 1993 onwards. Several times it was increased. The copy of the demand promissory note dated 28.3.2006 is marked as Ext.R3. The hypothecation agreement of goods and debts dated 28.3.2006 is marked as Ext.R4. The copy of the supplementary agreement to hypothecation agreement is marked as Ext.R5. The copy of the letter of guarantee is marked as Ext.R6. Ext. R2 is order from the office of the Banking Ombudsman dated 5^th August, 2008. The terms and conditions of the bank was acknowledged by the complainant at the time of availing the loan. There is no specific period for the loan. In the month of February, 2007, the complainant filed a request for increasing the loan to Rs.1.5 crore, which was not able to consider by the opposite party because Regional Office was sanctioned for Rs.1,30,00,000/-. The letter from the Regional Office stating the same is marked as Ext.R7. The copy of advice at the time of increasing the overdraft was marked as Ext.R8. But the complainant never came to the office of the opposite party to fulfil the conditions as per Ext.R8. DW2 deposed that in the agreement given to the complainant in the year 1993, there was no such condition to charge 2% penal interest. The application for increasing the loan amount was decided by the opposite party only after 6 months. 2% penal charge was received as per the directions from the higher office.
 

The only dispute is that whether the penal charge received by the opposite party from the complainant is as per the terms and conditions of loan agreement. The complainant was availing the benefits of overdraft facility from the opposite party bank for more than 10 years. Ext.R4 is the hypothecation agreement of goods and debts signed by the complainant at the time of availing the overdraft facility, which is dated 28^th March, 2006. The overdraft loan was renewing in every year. Ext.R5 is the supplementary agreement to hypothecation agreement signed by the complainant to the opposite party bank. The Ext.R3, Ext.R4 agreement and Ext.R5 agreement never reveals any condition of penal interest for the overdraft facility at the time of closing. The complainant requested for increasing his overdraft limit because of need of money, after renewing his agreement in February 2006. But is is not seen that the complainant never renewed the overdraft loan in the year February, 2007. As per DW1 the next renewal date for the overdraft loan availed by the complainant as 27.2.2007. The last renewal was done on 28.3.2006. But there is no evidence produced to show the renewal was done in the year 2007, by the complainant. As per 16^th condition of Ext.R1 produced by the opposite party states about the penal charge of 2% . Column 17 and 18 of Ext.R1 condition dated 28.3.2006 are kept as blank. It is deposed by the DW1 that it was kept as blank because it is keeping for writing anything further. As per Ext.R1, clause 16, discloses about prepayment of the loan and DW1 deposed that if the complainant prepays the loan amount within 12 months, the condition 16 of the Ext.R1 will apply. As per DW2, the then Manager deposed that the application for increasing the loan limit was decided only after 6 months. DW2 deposed that the column 17 and 18 of the Ext.R1 is kept blank in order to fill up the same at the time of signing the document. There is no statement of penal interest written in Ext.R4 agreement and supplementary agreement Ext.R4. DW2 deposed that the agreement are renewing in once in 3 years and if there is any change in condition in the agreement, the agreement should be renewed. Nothing is written in the agreement made by the complainant and the opposite party about penal interest and the complainant is a good customer of the opposite party. DW2 also deposed that 2% penal charge was received as per the order of higher authority.
 

So the complainant was regularly renewing the overdraft amount once in an year and the last date of renewal was on February, 2007. But after 2006, the complainant never renewed the loan because he availed loan form another bank with increase of amount and decrease of interest. The Ext.R4 and Ext.R5 hypothecation agreement created between the complainant and the opposite party bank never reveals about any condition of 2% penal charge at the time of closing the loan. But as per Ext.R8, special instructions statement, produced by the opposite party states about 2% penal interest. But the DW2 Manager deposed that the complainant never came to sign Ext.R8 condition in 2007 because he availed loan from another bank. As per Ext.R1, the letter written to the complainant firm by the opposite party stating sanction, renewal and modification of limits, dated 28.3.2006 produced by the opposite party in which it is written that the limits sanctioned are due for review in the month of February, or earlier whichever the bank deems fit. Certain terms and conditions are also written which are numbered as 1 to 18 and signed by the Senior Manager, but the columns 17 and 18 are kept blank in which the 16^th says about the 2% penal interest in the event of closing loan account out of funds other than own sources. It is the penalty on prepayment. The 2% penal interest calculated on the previous 12 months average balance outstanding in the loan account. DW1 and DW2 deposed that columns 17 and 18 in their conditions are kept blank and that would be filled after one year at the time of signing Ext.R1. So there are different opinion about the blank column by DW1 and DW2. Anyway, DW2 deposed that there is no such condition of 2% penal interest in Ext.R4 and Ext.R5 agreement created between opposite party and the complainant. There is no such clause for 2% penal interest in the agreement at the time of availing the loan in 1993. So we think that Ext.R1 is applicable only if the loan is closed in premature. The opposite party decided the request of the increase in the loan was decided only after 6 months of the application. So the complainant availed another loan with increase of amount and decrease of interest from another bank. That is not challenged by the opposite party. As per the complainant, Ext.R1 is not reliable when comparing with Ext.R4 and Ext.R5. And also as per the version of DW1 and DW2. Hence we think that the opposite party charged 2% penal interest from the complainant is unlawful and it is a gross deficiency in the part of the opposite party.

The complainant is a good customer of the opposite party and it is admitted by the opposite party also. The complainant was promptly keeping the minimum balance and also renewing the same promptly. So the complainant approached another bank in order to get money of low interest

and increase of amount. It is quite natural and he duly cleared the dues from the opposite party bank without any delay. But the opposite party deliberately made 6 months time to decide on the request of increasing the loan of the complainant. And when the complainant paid the amount, the opposite party charged Rs.2,36,200/ as penal interest. So the complainant is entitled to get back the same amount form the opposite party.
 

Hence the petition allowed. The opposite party is directed to return the amount paid by the complainant as penal interest which is Rs.2,36,200/- to the complainant within 1 month and Rs.2000/- as cost of this petition within 30 days of receipt of this order failing which the amount shall carry 12% interest per annum from the date of default.
 

Pronounced in the Open Forum on this the 26th day of April, 2009.
 

Sd/-

SRI. LAIJU RAMAKRISHANAN (PRESIDENT)

Sd/-

SMT. SHEELA JACOB (MEMBER)

Sd/-

SMT. BINDU SOMAN (MEMBER)

APPENDIX

Depositions :

On the side of the Complainant :

PW1 - C.J. James.

On the side of the Opposite party :

DW1 - V. Rajasekharan Pillai.

DW2 - C.A. Abraham.
 

Exhibits :

On the side of Complainant :

Ext.P1 - Copy of the letter issued by the complainant to the opposite party, dated 3.9.2007.

Ext.P2 - Copy of the petition filed by the complainant to the Deputy General Manager of the opposite party, dated 15^th March, 2008.

Ext.P3 - Copy of the reply letter from the Regional Office of the opposite party, dated 25.3.2008, to the complainant.

Ext.P4 - Copy of the letter from the Regional Office of the opposite party, dated 30.5.2008 to the complainant.

Ext.P5 - Copy of the sanction letter from the South Indian Bank for the overdraft facility of the complainant at Thodupuzha Branch.

Ext.P6 - Copy of the partnership deep of the business of the complainant dated 1^st October, 2000.

On the side of the Opposite party :

Ext.R1 - Copy of the letter of Sanction/Renewal/Modification of limits from the Union Bank of India, Thodupuzha Branch, dated 28.3.2006 which is signed by the complainant.

Ext.R2(1) - Copy of the complaint by the complainant to the Banking Ombudsman, dated 10.6.2008.

Ext.R2(2) - Copy of the letter from the Deputy General Manager, Union Bank of India,

Regional Office,Thiruvananthapuram, to the Deputy Secretary/Manager, Office of the Banking Ombudsman, No.ROT:CRLD:702 dated 18.7.2008.

Ext.R2(3) - Copy of the order from the Banking Ombudsman, No.OBO(T)/588/8750/2008-09 dated 5,8,2008.

Ext.R2(4) - Copy of the letter from the Senior Manager, Union Bank of India, Thodupuzha

Branch,to the Senior Manager (Credit), Union Bank of India, Regional Office, Thiruvananthapuram, No.GEN 398 dated 12.8.2008.

Ext.R2(5) - Copy of the letter from the Chief Manager, Union Bank of India, Regional Office,

Thiruvananthapuram, to the Manager, Office of the Banking Ombudsman, No. ROT:CRLD:769 dated 14.8.2008.

Ext.R2(6) - Copy of the order from the Banking Ombudsman No.OBO(T)/1007/8750/2008-09.

Ext.R3 - Copy of the Demand Promissory Note dated 28.3.2006, signed by the complainant.

Ext.R4 - Copy of the Hypothecation Agreement of Goods and Debts dated 28.3.2006.

Ext.R5 - Copy of the Supplementary Agreement to the Hypothecation Agreement dated 28.3.2006.

Ext.R6 - Copy of the letter of guarantee dated 28.3.2006.

Ext.R7 - Copy of the sanction advice of the Union Bank of India, Regional Office, Thiruvananthapuram, No. ROT:GEN:120 dated 9.8.2007 for the loan of Rs.130 lacs.

Ext.R8 - Copy of the Annexure to sanction advice No.ROT:GEN:120 and dated 9.8.2007, of Union Bank of India, Regional Office, Thiruvanathapuram.

Ext.R9 - Copy of the Statement of Account for the period from1.2.2006 to 1.9.2007, issued by the opposite party to the complainant.