STATE CONSUMER DISPUTES REDRESSAL COMMISSION,

                    UNIONTERRITORY,CHANDIGARH

India Bulls Housing Finance Limited, Regd. Office at 61&62, 1^st

Versus

1.    Randhir Singh Saini s/o Late Sh. Jiwa Singh Saini, r/o H.No.6, Sector 7, Panchkula.

2.    Raj Rani wife of Sh. Randhir Singh Saini, r/o H.No.6, Sector 7, Panchkula.

3.    Arvind Saini son of Sh. Randhir Singh Saini, r/o H.No.6, Sector 7, Panchkula.

4.    Ajay Saini son of Sh. Randhir Singh Saini, r/o H.No.6, Sector 7, Panchkula.

---Respondents/Complainants.

BEFORE:

Argued by:Sh.Sandeep Suri, Advocate for the appellant.

Sh.I.S.Ratta, Advocate for respondents No.1 to 4.

PER DEV RAJ, MEMBER

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2.              In brief, the facts of the case, are that a site/plot underneath the commercial building bearing No.87, Sector 5, Mansa Devi Complex, Panchkula was initially allotted in favour of complainant No.1 by HUDA, which was subsequently re-allotted in favour of all the complainant s vide re-allotment letter dated 20.07.2009 (Annexure C-1). It was stated that to pay off a part of the sale price of the said plot, 

3.              It was further stated that even the reduced demand of Rs.8,07,975.82 towards foreclosure charges and Rs.2,15,596.14 towards other charges aggregating Rs.10,23,571.96 was unjustified and illegal. It was further stated that the complainants sold the property to one Sh. Jitender Kumar Shangari and sale formalities were completed on 28.4.2011, as per sale agreement (Annexure C-9). It was further stated that out of the sale proceeds of the said property, the entire amount of Rs.3,10,81,714.63 including the foreclosure charges and other charges aggregating Rs.10,23,571.96 plus Rs.10,572, being interest for one day, was paid by the complainants to the Opposite Party (Annexure C-11). It was further stated that since the demand and coerced recovery of Rs.10,23,571.96 was unjust and illegal, notice dated 16.5.2011 was sent to the Opposite Party to refund the said amount alongwith 18% interest (Annexure C-12).

4.              It was further stated that charging of prepayment/foreclosure charges of Rs.10,23,571.96 and demand of hefty sum towards interest on the part of lenders surely tantamounted to undue enrichment. It was further stated that the Government as well as Reserve Bank of India were averse to the very idea of such a charge. It was further stated that in October, 2010, National Housing Bank, a subsidiary of Reserve Bank of India had directed Housing Finance Companies (HFCs) not to levy any penalty in the event of foreclosure of housing loans, if the borrower pays off from its own resources. It was further stated that at the instance of the Government, all the nationalized Banks have stopped levying such charges. It was further stated that the matter was also raised before the Competent Commission of India, which after thorough investigation, concluded that such a levy was unjustified.

5.              It was further stated that the Opposite Party wrongfully recovered Rs.10,23,571.96 as foreclosure chargers and, as such, they were liable to refund the said amount alongwith interest @18% per annum. It was further stated that the aforesaid acts of the Opposite Party amounted to deficiency in rendering service and indulgence into unfair trade practice. When the grievance of the complainant was not redressed, left with no alternative, a complaint under Section 12 of the Consumer Protection Act, 1986 (hereinafter to be called as the “Act” only), was filed seeking directions to the Opposite Party to refund Rs.10,23,571.96 alongwith interest @18% per annum w.e.f 28.4.2011; pay Rs.5,00,000/- as compensation for physical harassment and mental agony besides Rs.1,00,,000/- as cost of litigation.

6.              Opposite Party, in its written version, took up a preliminary objection that the dispute between the parties was in the nature of a suit for rendition of accounts, which was not covered under the purview of the Act. On merits, it was stated that it was agreed to between the parties that, in case, the complainants wished to close the loan prior to the period of loan, they shall pay prepayment charges of 5% (plus applicable tax) on the amount prepaid in the last one year. It was further stated that the charges were payable on repayment in case the loan was to be closed in full. It was further stated that charging of prepayment charges was a necessity in the finance industry. It was further stated that the Opposite Party does not have any funds of its own and borrows funds from other resources. It was further stated that the foreclosure/prepayment charges were levied to compensate the loss caused on account of early repayment. It was further stated that the issue as regards charging of prepayment charges came before the Competition Commission of India and the said Tribunal upheld the rights of the financer to be entitled to foreclosure/prepayment charges. It was further stated that the pre-EMI cheque No.176785 for Rs.1,94,907/- bounced on 6.10.2010 and the PLR differential amount of EMIs for November 2010 and December 2010 was Rs.12,443.22 and Rs.12,385.22 respectively, totaling Rs.2,19,736/-. It was further statedIt was further stated that neither there was any deficiency, in rendering service, on the part of the Opposite Party, nor did it indulge into unfair trade practice. The remaining averments, were denied, being wrong.

7.              The Parties led evidence, in support of their case.

8.              After hearing the Counsel for the contesting parties, and, on going through the evidence and record of the case, the District Forum, allowed the complaint as stated above, in the opening para of the instant order.

9.              Feeling aggrieved, the instant appeal, has been filed by the Appellant/Opposite Party.

10.            We have heard the Counsel for the parties and have gone through the evidence and record of the case, carefully.

11.            The Counsel for the appellant/Opposite Party submitted that, as per the loan agreement (Annexure

12.            The Counsel for the respondents/complainants, submitted that as was evident from Annexure C-1, the property was Shop-cum-Office for which land was acquired during 1989 for raising housing project. It was further submitted that the terms ‘Home’ and ‘House’ are synonyms. The respondents/complainants paid the loan amount after selling property. It was further submitted that the housing finance companies could not charge prepayment charges or penalty on pre-closure of housing loans in view of the Policy dated 19.10.2011 of the National Housing Bank. The Counsel for the respondents/complainants placed reliance on the judgment titled as, First Appeal No.07/130 decided by State Consumer Disputes Redressal Commission, New Delhi on 27.04.2007, against which Revision Petition filed before the National Commission was decided on 26.07.2007 and subsequently, S.L.P (Civil) No.16345/2007 filed before the Hon’ble Supreme Court was dismissed on 19.09.2008.

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“(d) "Consumer" means any person who, -

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised or under any system of deferred payment when such use is made with the approval of such person but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii)[hires or avails of] any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other then the person who [hires or avails of] the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person [but does not include a person who avails of such services for any commercial purpose]; Added by Act 62 of 2002 w.e.f. 15.03.2003.

[Explanation. For the purposes of this sub-clause "commercial purpose" does not include use by a consumer of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood, by means of self-employment;]

Section 2(1)(o) defines service as under:-

(o) "service" means service of any description which is made available to potential 16[users and includes, but not limited to, the provision of] facilities in connection with banking, Financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, 17[housing construction] entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.”

14.        . Economic Transport Organization Vs. Charan Spinning Mills (P) Ltd., & Anr., I (2010) CPJ 4 (SC), a five Judges Bench, of the Hon’ble Apex Court, also held that, after the amendment of Section 2(d) of the Act w.e.f.15.03.2003, the services of the carriers, if had been availed of, for any commercial purpose, then the person availing of the services will not be a consumer.  In  Birla  Technologies Ltd. Vs Neutral Glass and Allied Industries Ltd.  2011 (I) SCC 525 and Sanjay D. Ghodawat Vs R.R.B. Energy Ltd. IV(2010) CPJ178(NC), a case decided by a full Bench of the Hon’ble National Commission, similar principle of law was laid down.  In Shushma Goel Vs Punjab National Bank, 2011 CPJ 270(NC), the complaint related to the operation of bank account, maintained by a commercial entity, for commercial purpose.  It was held that the complainant did not fall within the definition of a consumer. Since, the services of the appellant/Opposite Party, in the instant case, were availed of, by the respondents/complainants, for commercial purpose, for earning huge profits, they did not fall within the ambit of a consumer, and, as such, the complaint was not maintainable.

15.            The next question, which arises for consideration, is, as to whether, the complaint under Section 12 of the Consumer Protection Act, was maintainable or not before the District Forum, on account of specific objection that the dispute between the parties was in the nature of a suit for rendition of accounts, which was not covered under the purview of the Act. With a view to appreciate the controversy, in its proper perspective, reference to Section 3 of the Act is made, which reads as under;

“3.Act not in derogation of any other law.—

The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.”

Section 3 of the Act, is worded in widest terms, and leaves no manner of doubt, that the provisions of the Act, shall be, in addition to, and not in derogation of any other law, for the time being, in force. The mere objection raised by the appellant/Opposite Party, would not oust the jurisdiction of the Consumer Fora, in view of the provisions of Section 3 of the Act. Similar principle of law, was laid down, in . In this view of the matter, the submission of the Counsel for the Appellant/Opposite Party, being devoid of merit, must fail, and the same stands rejected.

16.            The next question, which falls for consideration, is, as to whether, the loan secured by the respondents/Opposite Parties was exempted or not from payment of prepayment charges. As already discussed above, copy of theapplication for loan, placed on record, vide Annexure ‘X’ indicates that the type of property is shown as commercial by the complainants themselves. The loan agreement (Annexure C-4) was signed by all the respondents/complainants for M/s J& K Aluminum Company. In Schedule-1 of Annexure C-4, the name of the Company/Firm is indicated as M/s. J&K Alluminium Company and it also clearly states that part prepayment fees and foreclosure charges shall be 5% + service tax of amount prepaid. The District Forum in its order has clearly held that the document regarding foreclosure charges is duly signed by the parties. The appellant/Opposite Party has charged the prepayment charges of Rs.8,07,975.82, which is 2.76% of the outstanding amount as a concession to the respondents/complainants. The District Forum held that as per Policy dated 19.10.2011 of the National Housing Bank regarding prepayment penalty on pre-closure of housing loans, Housing Finance Companies should not charge prepayment levy/penalty on pre-closure of housing loans. Clause 4.3 of the loan agreement deals with prepayment charges, which is extracted hereunder:

4.3.1 That IHFL may in its sole and absolute discretion and subject to such terms and conditions as IHFL may prescribe and also upon the payment of prepayment charge which has been mutually decided and are specified in the applicable Schedule on the amount so prepaid, permit pre-payment/acceleration in payment of EMIs at the request of the Borrower/s subject to that no prepayment shall be made within the number of months(as mentioned in the Schedule 1) of the commencement of the EMI. The Borrower/s further agrees that IHFL may specify, from time to time, the minimum amount of prepayment/amounts payable on account of acceleration of EMIs.

4.3.2 That in the event of IHFL permitting the Borrower/s for prepayment/acceleration, the repayment schedule for the loan shall be amended/altered by IHFL for giving effect to such prepayment/acceleration, and such amended/altered repayment schedule shall be binding upon the Borrower/s. That in such an eventuality the Borrower/s undertakes and agrees to execute such document(s) as IHFL may require, in case if any amount is prepaid by the Borrower/s, the same shall be adjusted first towards the prepayment charges, interest, incidental charges, additional interest, PEMI, EMI outstanding, EMI of current month and balance towards the principal amount of the Loan. The interest and any other charges etc. would be leviable till the end of the month in which the prepayment has been made. In the event of prepayment, the amortization schedule shall be effective from first day of the subsequent month. IHFL at its sole discretion may permit swap of the post-dated cheques or any other repayment/payment mode for re-scheduling of EMI only if such minimum amount, as may be decided by IHFL from time to time is prepaid.

4.3.3 The Borrower/s declares that the pre-payment charges have been mutually agreed between the parties, and the Borrower/s further understands and agrees that the pre-payment charges are towards pre-determined liquidated damages which would be suffered/incurred by IHFL and the Borrower/s shall at no point of time challenge and/or object to the levy of the same. Further, the pre-payment charges shall also be payable in case IHFL recalls the Loan for any reason whatsoever.”

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21.        In, the principle of law, laid down, was that the Financial Corporation had authority to charge premium for prepayment/foreclosure of the loan account, on the outstanding loan balance. In C.S.No.513 of 2001-Hatsun Agro Products Chennai Vs. Industrial Development Bank of India, Chennai,

22.        , are distinguishable, in as much as, initially in the loan agreement, there was a clause for charging prepayment charges, which was later on scored off. So, there was no agreement between the parties for payment of prepayment charges. No help, therefore, from the aforesaid case, can be drawn. by the respondents/complainants.

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24.        No other point, was urged, by the Counsel for the parties.

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Pronounced.

24^th

Sd/-

PRESIDENT

Sd/-

[DEV RAJ]

MEMBER

AD

STATE COMMISSION

(First Appeal No.469 of 2013)

Argued by:

Sh.I.S.Ratta, Advocate for respondents No.1 to 4.

Dated the 24^th 

ORDER

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Ad