Date of Filing:16.01.2009<br /> Date of Order:31.07.2009<br /> <br /> <br /> <br /> BEFORE THE II ADDITIONAL DISTRICT CONSUMER DISPUTES REDRESSAL FORUM SESHADRIPURAM BANGALORE-20<br /> <br /> Dated: 31ST DAY OF JULY 2009<br /> PRESENT<br /> <br /> <br /> <br /> Sri S.S. NAGARALE, B.A, LL.B. (SPL.), President.<br /> Smt. D. LEELAVATHI, M.A.LL.B, Member.<br /> Sri BALAKRISHNA. V. MASALI, B.A, LL.B. (SPL.), Member.<br /> <br /> <br /> COMPLAINT NO: 149 OF 2009<br /> <br /> 1. Dr. Humayun Syed,<br /> S/o Shahjahan, <br /> Rep. by the mother and GPA holder<br /> Mrs. Asmath Unisa,<br /> W/o Shahjahan, R/o 79/1, <br /> Ramaya Reddy Layout,<br /> I Cross, Opp: State Bank of Mysore,<br /> Nandi durga Road, Benson Town,<br /> Bangalore-560 046.<br /> <br /> 2. De. Irfana Akhtar,<br /> D/o Shahjahan, R/o 79/1, <br /> Ramaya Reddy Layout,<br /> I Cross, Opp: State Bank of Mysore,<br /> Nandi durga Road, Benson Town,<br /> Bangalore-560 046. Complainants<br /> <br /> V/S<br /> State Bank of India,<br /> Richards Town Branch,<br /> Bangalore-560005,<br /> Rep. by the Chief Manager. Opposite Party<br /> <br /> <br /> ORDER<br /> By the President Sri. S.S. Nagarale<br /> <br /> This is a complaint filed u/Section 12 of the Consumer Protection Act, 1986.<br /> The complainants are the joint holders of the Housing Loan Accounts in opposite party Bank. Opposite party Bank sanctioned loan in favour of complainants. Complainants were regular in payment of loan. On 29/11/2008 they have pre-closed their respective loan accounts in one stroke. It is submitted by the complainant that instead of rewarding them the opposite party Bank has imposed pre payment penalty which is against RBI guidelines. Legal notice has been issued to the opposite party demanding payment of pre-closure charges. There was a deficiency in service on the part of the opposite party. The complainant demanded refund of pre closure payment of Rs.1,15,365/- with compensation of Rs.10,00,000/- for mental agony. Hence, the complaint.<br /> <br /> 2. Notice was issued to opposite party through RPAD. Notice was served. Opposite party put in appearance through Advocate and filed defence version. It is admitting that opposite party Bank had sanctioned loan of Rs.56,30,000/- on 16/04/2004. The complainants had agreed for pre-closure charges of 2% of the amount prepaid in excess of normal EMI. It is a normal banking Rules and Practice that pre-closure of the loan accounts would attract charges. Opposite party has revised policy regarding prepayment charges under certain circumstances in order to consider and extending the changed policy to the complainants. The Advocate of the opposite party write a letter dated 12/12/2008 seeking certain clarification. The complainants have resorted to filing this complaint. Opposite party is willing to consider the case of the complainants if they furnish information sought as per letter dated 12/12/2008. In view of this there is no deficiency of service on the part of the opposite party. <br /> 3. Affidavit evidences are filed. Arguments are heard. Perused the documents. In the light of the arguments advanced before us, the following points arise for my consideration.<br /> 1. Whether the opposite party Bank can be<br /> directed to refund the pre-closure charges of <br /> Rs.1,15,365?<br /> <br /> 2. Whether there was any deficiency in service on the part of the opposite party Bank?<br /> <br /> <br /> REASONS<br /> <br /> 4. All most all the facts are admitted in this case. There is absolutely no dispute that the complainants have obtained loan from the opposite party Bank in the year 2004 and they are regular in payment. The complainants have pre-closed their respective loan account in one stroke on 21/11/2008. The Bank collected Rs.1,15,365/- as pre-closure charges. The learned Advocate for the opposite party Bank referred to the agreement entered into between the parties and submitted that all payments in excess of EMI will attract a prepayment charge of 2% of the amount prepaid. The Clause 4 of the agreement further states that, this will not be applicable where the original repayment schedule envisages a bullet repayment at the time of retirement or other time during the repayment period. Relying on this clause the learned Advocate for the opposite party Bank submitted that the Bank was right in collecting pre-closure charges. The complainant has produced a letter of Advocate of the opposite party dated 12/12/2008 addressed to the Advocate of the complainant reads as under:-<br /> <br /> “Sir,<br /> Your letter dated 03.12.2008 addressed to AGM SBI Richards town, Bangalore, has been placed to my hands to reply for the same as follows:<br /> I understood from your letter that Dr. Irfana Akthar and Dr. Humayun Syed have pre-closed their loan account in one stroke.<br /> I also learnt that your client have not furnished sufficient documents to show that they have pre-closed their loan account out of their own earnings.<br /> Kinky advise your client to furnish required documents to satisfy my client that they have pre-closed their loan account of their own sources, which may enable my client to recommend for refund the eligible amount/charges levied for the pre-closure on of their loan account.<br /> Sd/- (RAJESHWARI K.G) <br /> Advocate <br /> Bangalore<br /> Date: 12/12/2008 <br /> <br /> 5. By this letter, it is clear that an element of acceptance that the complainants are entitled for refund of the pre-closure charges. Even in the defence version the opposite party accepted the letter sent by the Advocate of opposite party. The opposite party has submitted in para-16 of the version that a policy has been revised regarding prepayment charges and the revised policy has come into effect after the complainant availed loan. It is also clearly admitted in the defence version that opposite party Bank is willing to consider the case of the complainant if they furnish information sought in letter dated 12/12/2008. In the said letter it has been asked to the complainants that the complainants have not produced sufficient documents to show that they have pre-closed loan account out of their earnings. This information sought by the Bank is wholly unwarranted and uncalled for in the present case. The Bank is not entitled or authorised to seek source of earnings or income from the complainants for pre closing the loan account. Therefore, the Bank could have refunded the pre-closure charges collected from the complainants under the revised policy. The opposite party Bank has not produced any RBI guidelines or regulations or Circular to show that the nationalized Bank like present opposite party Bank are entitled to collect pre-payment charges of 2% of the amount prepaid. In the absence of RBI guidelines or authorization or the directions, the opposite party Bank cannot recover or collect pre-closure charges. The agreement clause will not be bind on the complainant because it has no force of law. RBI is the controlling Bank. All the Banks have to work as per the guidelines of the RBI. The RBI has not authorised the opposite party Bank to collect pre-closure charges. If there were such guidelines or authorization of the RBI the opposite party Bank would have definitely produced the guidelines. But in this case admittedly the opposite party Bank has not produced RBI guidelines or Circulation. The learned Advocate for the complainant has relied upon a judgment of Hon’ble Karnataka State Commission. The unreported judgment of the State Commission dated 10/12/2008 in Complaint No.43/2008 has been produced. In that judgment the Hon’ble State Commission directed the Union Bank of India, Koramangala Branch to refund Rs.66,49,229/-, the pre-closure charges collected with interest at 12% p.a. The complainant counsel has also relied upon the judgment of Delhi State Consumer Disputes Redressal Commission in a case between State Bank of India V/s Usha Vaid reported in II(2008) CPJ 166 wherein the Hon’ble Commission has held as under:-<br /> “Consumer Protection Act, 1986 – Section 15 – Banking and Financial Services – Loan – Pre-payment charges – Loan taken from standard Chartered Bank, transferred to State Bank of India, again transferred to ICICI Bank as much lower rate of interest being charged by ICICI Bank – Pre-payment charges charged by State Bank of India – Complaint allowed by Forum – Refund of pre-payment charges directed – Compensation and cost awarded”. <br /> 6. In the said judgment it has been observed that Clause 4 of the agreement mentions that pre-payment charges of 2% shall be levied when the loan is pre-closed. In the said judgment the Hon’ble Commission at para-9 has held as under:-<br /> “No Bank or for that purpose finance companies can be allowed to indulge in restrictive trade practice by binding the consumer to go on availing loan even if rate of interest charged by the said bank is much higher than the other banks and any such clause which operates adversely to the consumer like Clause 4 has to be held as void and, therefore, not enforceable.” <br /> 7. So, by this judgment it is very clear that the clause 4 of the agreement authorizing the Bank to collect pre-closure charges was held to be void and not enforceable in law. So under these circumstances, even if there is a clause in the agreement, the present case also for payment of 2% as pre-closure of charges and the said clause is not enforceable in law. The judgment of Delhi Commission was challenged before the National Commission and it was confirmed. Thereafter, the State Bank of India had preferred SLP before the Hon’ble Supreme Court and the SLP was dismissed. The complainant has produced copy of the order passed by the Supreme Court in SLP obtained through internet. Taking in view of the matter the pre-closure charges collected by the opposite party Bank in this case is without any authority of law. Therefore, the opposite party Bank is bound to refund the said amount with interest. There are no logical reasons for collecting pre-closure charges. The complainants are entitled for refund of the pre-closure charges with interest. In the result, I proceed to pass the following:-<br /> ORDER<br /> 8. The complaint is allowed. The opposite party Bank is directed to refund Rs. 1,15,365/- to the complainant along with interest at 9% p.a on the said amount from 29/11/2008 (on the date of receiving the pre-closure charges by the opposite party Bank) till payment/realization. <br /> 9. The complainants are also entitled for Rs.2,000/- as cost of the present proceedings from the opposite party Bank. <br /> 10. Send the copy of this Order to both the parties free of costs immediately as per statutory requirement. <br /> 11. Pronounced in the Open Forum on this 31ST DAY OF JULY-2009. <br /> Order accordingly,<br /> <br /> <br /> PRESIDENT<br /> We concur the above findings.<br /> <br /> <br /> MEMBER MEMBER<br /> Rhr., <br /> <br />