DISTRICT CONSUMER DISPUTES REDRESSAL FORUM-II, U.T. CHANDIGARH

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1.   Ajit Goel s/o Late Sh. Baldev Krishan, resident of House No. 41, Sector 12, Panchkula.

2.   Sidharath Goel s/o Sh. Ajit Goel, resident of House No. 41, Sector 12, Panchkula.

              ---Complainants

Vs.

Standard Chartered Bank, SCO No. 137-138, Sector 9-C, Madhya Marg, Chandigarh – 160017.

---- Opposite Party

BEFORE:   MRS.MADHU MUTNEJA            PRESIDING MEMBER

SH. JASWINDER SINGH SIDHU    MEMBER

Argued By:    Sh. Gunjan Rishi, Counsel for Complainants.

            Sh. Satish Chaudhary, Proxy Counsel for

Sh. Jatin Kumar, Counsel for Opposite Party.

PER MADHU MUTNEJA, PRESIDING MEMBER

1.          The Complainants had been sanctioned a Loan against Property (LAP) by the Opposite Party vide letter dated 17.07.2010 [Annexure C-1]. As per the said sanction letter, loan against property was sanctioned for Rs.1.4 crores, the tenure was for 156 months and the rate of interest to be charged by the Bank was bifurcated as Base Rate (7.25%), Margin (3.56%), Special Rate applicable (10.51% p.a.). The monthly installment was computed to Rs.1,64,934/. For sanctioning the aforesaid loan, the Opposite Party had charged Rs.74,210/- from the Complainants. The foreclosure charges of 2% were to be applicable. Once the loan documents were received the Complainants requested the Opposite Party to clarify their terms as regards the foreclosure/ pre-closure charges in case the complaints wished to exercise the said option as the documents supplied were silent on this aspect. Vide letter dated 31.7.2010 the Opposite Party clarified that the pre-closure fees/ charges would be @2% on the loan limit [Annexure C-2].

          After availing the loan, the Complainants regularly remitted the monthly installment without default. However, in March, 2011, the Opposite Party sent a letter dated 17.03.2011 to the Complainants levying an annual charge of Rs.1,32,002.10/- starting 28.03.2011 [Annexure C-3]. On receiving the said letter, the Complainants expressed anguish over the levy of the annual charge and expressed to the Opposite Party that there was no mention of any such levy at the time of sanctioning of the loan or in the original contract. The Complainants also expressed the desire to transfer the loan to another Bank. Correspondence was exchanged between the parties regarding the annual charge. Meanwhile, the Opposite Party revised the margin i.e. the different between the variable rate of interest and base rate from 3.56% to 4.76% with effect from 01.04.2011 [Annexure C-6]. The Complainants took up the matter with the Opposite Party regarding levying of the unjustified charges unilaterally. The Complainants brought to the notice of the Opposite Party that at the time of disbursement of loan margin was to remain static and only base rate could vary. In reply Opposite Party offered a waiver of .50% in the annual fee for a year. Eventually, not satisfied with the services being provided, as well as the unprofessional behavior of the Opposite Party, the Complainants requested for foreclosure of the loan vide e-mail dated 04.07.2011 [Annexure C-9]. In response, the Complainants received a letter dated 24.08.2011 wherein it was stated that the pre-payment charges would be levied @2.21% [Annexure C-10]. Eventually, when the Opposite Party kept on delaying the matter on one pretext or the other, the Complainant vide letter dated 14.03.2012 [Annexure C-11] requested the Opposite Party again to foreclose the loan. The Opposite Party now charged foreclosure charges @ of 4.41% instead of 2.21%. The Complainants have thus filed the present complaint alleging deficiency in service and unfair trade practice by the Opposite Party. The Complainants have prayed for refund of Rs.7,78,687.80/- levied beyond the scope of loan agreement, besides compensation and costs of litigation.         

2.          Notice of the complaint was sent to Opposite Party seeking its version of the case.

3.          Opposite Party in reply has admitted the sanction of loan to the Complainants for 1,40,00,000.00/- with interest of 10.51% (variable) p.a. and tenure of 156 months (copy of the application form and the sanction letter Annexure 1). As the Opposite Party had to undertake certain verification prior to the in-principal sanction of home loans, the loan processing fee of Rs.74,210/- paid by the Complainants was adjusted towards certain minimum costs incurred by the Opposite Party for completion of documentation and verification, prior to sanction of loan. The pre-closure of 4% was applicable to the LARP Home Saver account. Opposite Party has denied that the pre-closure charges had been offered at 2%. Opposite Party has relied on clause 8 of the sanction letter in which the pre-closure fee has been given as 4% on the loan limit. Opposite Party has stated that it has not issued Annexure C-2 regarding offer of 2% pre-closure charges. Also, as per the terms of the agreement, the Opposite Party had the authority to make any changes in the tariff, as deemed fit. Opposite Party has submitted that the customer has authenticated by affixing his signature in the sanction letter and the agreement that he will abide to the changes effected by the Bank from time to time (Sanction letter Annexure 1 and Agreement Annexure 3 of Opposite Party). Interest rates and fees and costs are revised periodically. The Bank notifies the borrower of changes to the interest rate. Any variation of the interest rate results in change in the term of the loan facility, the EMI or the number of the EMIs. In accordance to the terms & conditions of the agreement the Opposite Party has the legal and contractual right to introduce or amend any applicable fees, costs and charges. Opposite Party has also contended that there was no mention in the sanction letter that margin as well as base rate was fixed. The Opposite Party has been communicating verbally with the Complainants on many occasions with reference to interest rate and annual fee applicable. A waiver in fee had been provided to the Complainants on the basis of their relationship with the Bank. Also, on receipt of foreclosure request, it was found that there was a shortfall in the account for Rs.40,273.46/-. Hence the Opposite Party was unable to close the loan account. After receipt of all dues from the Complainants as well as pre-closure penalty, the loan was foreclosed on 27.03.2012 and documents were delivered to the Complainants on 29.03.2012 as per the time lime mentioned. Denying other allegations of the Complainants about the excess levies, Opposite Party has prayed for dismissal of the complaint.      

4.          Parties were permitted to place their respective evidence on record, in support of their contentions.

5.          We have heard the learned counsel for the Complainant and learned proxy counsel for the Opposite Party and have perused the record, along with the written arguments filed on behalf of the Opposite Party. 

6.          It is given in Annexure C-1 dated July, 2010 (placed on record by the Complainants) and Annexure 1 dated 10.06.2010 (placed on record by the Opposite Party) that the loan amount is Rs.1,40,00,000/-, type of loan is residential, tenure is 156 months, interest type is 3 months variable, base rate is 7.25%, Margin is 3.26%, special offer is 10.51% p.a., monthly installment is INR 164,934/- and processing fee is Rs.77,210/-. Out of which Rs.3,000/- was already paid. Pre-closure fee has been given for home loan is 2.5% of outstanding while for loan against property is 4%. Also, part of Annexure 1 placed on record by the Opposite Party are the terms and conditions. The relevant ones applicable to the instant case are reproduced below: -

“8.   xxx         xxx         xxx         xxx         xxx

            Xxx         xxx         xxx         xxx

·            If you wish to pre-close your loan facility (Loan Against Property), you will need to pay pre-closure fee at the rate of 4% on the loan plus any amount that have been part pre-paid in the same calendar year which has not been charged.”

“15.  Variable Interest Rate – If the loan agreement states that variable interest rate applies to your loan, frequency of reviewing interest will be 3 months from the date of disbursement or previous revision whichever applicable.”

“18.  The margin between your variable rate of interest and base rate will be determined by factors such as credit grading of the customer, quality of the collateral risk profile of the industry/ sector, tenor premium, account behavior/ conduct, product level allocable costs etc. and changes in these factors may result in upward or downward revision of the margin.”

7.          The loan agreement dated 22.07.2010 has been placed on record by the Opposite Party at Annexure-3. As per the schedule attached to the loan agreement duly signed by the parties, the loan term is 156 months. Interest rate is 10.51% variable. Default rate i.e. increase in interest rate applicable in case of default is 27% p.a.. However, the charges applicable on pre-payment have not been mentioned anywhere in the loan agreement. The processing fee has been given as Rs.74,210/-.  

8.          Annexure 6 is a letter dated 24.08.2011, addressed to the Complainants, placed on record by the Opposite Party, wherein it has been given that pre-payment of loan would attract 4.41%. Annexure C-3 is the request for annual charge of Rs.1,32,002/- to be levied on 28.03.2011. This levy does not find mention in the loan agreement or the sanction letter. It is not understood as to why this charge has been levied.  As the rate of interest has been given to be variable in the sanction letter, as well as in the loan agreement the revision in interest rate as per the RBI norms is to be accepted by the Complainant.

9.          The allegations of the Complainant regarding change of margin are not substantiated by any cogent, convincing and reliable evidence.

          However, Annexure C-10, which is a letter, dated 24.08.2011, issued by the Opposite Party to the Complainants, 2.21% pre-payment charges have specifically been given. Annexure 6 which is also a letter dated 24.08.2011 addressed to the Complainants by the Opposite Party gives the pre payment charge as 4.41%. The other letters annexed by the Opposite Party dated 27.1.2012, 14.3.2012 and 20.3.2013 also make mention of pre-payment charge of 4.41%.  To our mind, once the agreement between the parties is on record, the agreement would supersede all other letters and correspondence, no changes can be levied on the Complainants beyond the levies provided therein. As already given above, there is no quantum or percentage of pre-closure mentioned in the agreement. Again there is no mention of any annual charges to be levied on the borrower. We do not appreciate why these charges are being levied. Initial amount of Rs.74,210/- was charged at the time of sanction of loan. Interest has already been changed. There is no reason to levy additional annual charges. No service is being provided.

10.        Hence, we are of the opinion that foreclosure charges of 4.41% levied by the Opposite Party on the Complainants at the time of foreclosure have been wrongly levied as they have not been provided in terms of the agreement placed on record by the Opposite Party. Also levy of annual charge of Rs.1,32,002/- is not part of the agreement and hence, to our mind, not leviable by the Opposite Party.

11.        This complaint is allowed accordingly. The Opposite Party is directed to refund the total amount of foreclosure charges taken from the Complainants, as well as the amount of Rs.1,32,002/- as annual charge.   The amount be refunded along with interest @9% p.a. from the date of receipt till the date of payment. Opposite Party will also pay Rs.10,000/- towards costs of litigation.

12.        This order be complied with by the opposite party within 45 days from the date of receipt of its certified copy, failing which the interest rate shall be read as 12% instead of @9% p.a.

13.        The certified copy of this order be sent to the parties free of charge, after which the file be consigned.

Announced

07^th June, 2013                            

Sd/-

(MADHU MUTNEJA)

PRESIDING MEMBER

Sd/-

(JASWINDER SINGH SIDHU)

MEMBER