IN THE CONSUMER DISPUTES REDRESSAL FORUM, APPUZHA

Monday the 19^th day of March, 2018.

Filed on 06/10/2017

Present

1. Smt. Elizabeth George, President
2. Sri. Antony Xavier (Member)      
3. Smt. Jasmine.D. (Member)         

    in

  C.C.No.271/2017

between

Complainant:-                                                   Opposite Party:-

   Dr. Jose Joseph                                       1.      The Manager

   S/o Joseph                                                                  INDIA BULLS,

   Prop: JJ Hospital                                                   Housing Finance Ltd,                                    

   Residing at Maliyekal-                                          TC 11/36-2, Sai Krishna Building,

   Kochuputhanpurayil,                                       PMG Junction, Pattom,

   Krishnapuram,                                                  Thiruvananthapuram.

   Kayamkulam,                                                       (By Adv.Madhu Radhakrishnan)

   Alappuzha.

   (By Adv.P.C. Giji )                                                              

O R D E R

SMT. ELIZABETH GEORGE (PRESIDENT)

          The case of the complainant is as follows:-

The complainant is the sole proprietor of J.J. Hospital, Kayamkulam.  He has availed a Housing finance of Rs.75 Lakhs from the opposite party under loan account Number HLAPTVD00184885 on 29-03-2014 agreeing to repay the loan with interest at floating rate of 13.5% at the time of availing the loan PA till repayment in full.  The complainant has been regularly repaying the loan installments without fail from the date of availing till 05-12-2016 on which date the complainant closed the loan account by paying Rs.72,62,575.48/- which according to the opposite party, was the entire amount due and payable by the complainant to the opposite party  in this transaction along with interest and all other charges.  Subsequent to the closing of the account, the complainant realized that the 3% foreclosure charge of Rs.2,10,078.84/- (Rupees two lakh ten thousand seventy eight and eighty four paisa only) collected by the opposite party in the loan account was in violation of the Reserve Bank regulations and as such the complainant demanded for the repayment of the money.  But the opposite party was giving lame excuses and baseless reasons for not paying the amount and was illegally with holding the money collected by them.  They claim that it is collected as foreclosure charges for which they are legally entitled to from their customers.   Alleging deficiency in service on the part of the opposite party the complaint is filed.

2.   The version of the opposite party is as follows:-

      The complaint is not maintainable.  The Proprietary concern M/s J.J. Hospital as the principal borrower and the complainant and his wife Leela Jose as the co-borrowers has availed a loan from the opposite party and the loan was sanctioned on 27-3-2014.  The complainant had foreclosed the loan with the opposite party.   It is true that the National Housing Bank as per circular no. NHB(ND)/DRS/Policy Circular No. 63/2014-15, directed all the Housing Finance Companies not to charge foreclosure charges / prepayment penalties on all floating rate term loans sanctioned to “individual borrowers” with immediate effect.  The same created a lot of confusion and the NHB again issued a circular dated 22-7-2016 no. NHB(ND)DRS/Misc.   Circular No. 17/2015-16 which clarifies the issue.    Hence the opposite party is legally permitted to collect the foreclosure charges when the borrower / co-borrower is not an individual.  M/s J.J. Hospital which is the proprietary firm of the complainant is the 1^st applicant of the loan transaction and hence it is excluded from the purview of circular No. RBI/2014-15/121 DNBS (PD). CC.No.399/03. 10.42/2014-15.    The said position has been orally communicated to the complainant.  The complainant is not entitled to any of the reliefs claimed in the complaint.  

3.   The complainant produced four documents marked as Exts. A1 to A4. The opposite party produced two documents marked as Exts. B1 and B2.

4.  The points for consideration are:- 

          1)   Whether the complaint is maintainable?

          2)  Whether there is any deficiency in service on the part of the opposite party?

          3)   If so the reliefs and costs?

5.  It is an admitted fact that the complainant had taken a loan of Rs.75 lakhs from the opposite party on 27/3/2014 and complainant had forclosed the loan on 5/12/2016.  According to the complainant opposite party collected 3% foreclosure charge in the loan account and it was in violation of the Reserve Bank Rules and regulation.   In order to substantiate this allegation complainant produced the RBI circular dated on 14/7/2014 and it was marked as Ext. A1.  In Ext.A1 it is stated as follows:-

` 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’.  According to the opposite party the National Housing Bank as per the circular dated 22/7/2016 legally permitted to collect the foreclosure charge when the borrower is not an individual.   The said circular is produced and marked as Exts.B2.  In Ext.B2 it is stated as follows:-

`Further, the issue relating to applicability of the aforesaid Circulars to a Sole Proprietorship Concern/Firm or an HUF, as a borrower/co-borrower has also been examined in the light of complaints / representation received by us. We clarify that the intent and spirit of the circular is to protect the interest of the individual borrowers. Therefore, a Sole Proprietorship Concern/Firm or an HUF, as borrower or co-borrower will not be treated as an individual borrower for the purpose of these circulars’.   So the point to be considered is whether the RBI circular is binding to the complainant.  The National Housing Bank is a subsidiary of the RBI constituted under the National Housing Bank Act, 1987 by the circular No.63/2014-15 directed all the Housing Finance Companies not to charge foreclosure charges / prepayment penalties on all floating rate term loans sanctioned to `individual borrowers’ with immediate effect. But later they issued another circular as a clarification and stated that Sole Proprietorship concerned will not be treated as individual borrowers.  The guideline issued by the RBI is for individual loan.  In the instant case according to the complainant he is a sole proprietor of J.J. Hospital.   According to the opposite party, the proprietary concern M/s JJ Hospital is the principal borrower and the complainant and his wife are co-borrowers. In decision reported in 2014 , C.P.R (4) page 222 Hon’ble National Commission laid down that an individual proprietor can run business for his own and his family benefits or he can run his livelihood by transacting any  business and his status  as a consumer does not stand clouded.   Hon’ble High Court of Kerala in a decision Commissioner of Income Tax Vs.  K.V.Muhammed Zakir reported in 2017 ICO 737 laid down that “partnership is different from partners” and both can be taxed though partnership firm is not a legal entity.  But coming to the Proprietorship concern, there is no identity to proprietorship concern leave the proprietor and the assessee is always the proprietor in such case.  In other words they given to any assess separate proprietor and Proprietorship Concern.  In the instant case complainant is sole proprietor of JJ Hospital and loan was taken in an individual capacity therefore RBI circular No. 2014-15/121 dated 14-7-2014 is applicable.  In view of the above discussion, we are of the opinion that the opposite party has no right to charge foreclosure amount to the complainant and by doing so they committed deficiency in service.

In the result the complaint is allowed.  The opposite party is directed to refund the amount of Rs.2, 10,078.84/-  (Rupees two lakhs ten thousand seventy eight and eighty four only) with 8% interest from 5-12-2016 till realization. The opposite party is further directed to pay an amount of Rs.2000/- (Two thousand only) towards costs of this proceedings. Since the primary relief is allowed no order as to compensation.  The order shall be complied within one month from the date of receipt of this order.   

            Dictated to the Confidential Assistant transcribed by her corrected by me and pronounced in open Forum on this the 19^th   day of March, 2018.

                                                                   Sd/- Smt. Elizabeth George (President) :

                                                                   Sd/- Sri. Antony Xavier (Member) :     

                                                                   Sd/- Smt. Jasmine. D. (Member) :          

Appendix:-

Evidence of the complainant:-

Ext.A1        -    Copy of circular

Ext.A2        -    Registered letter and postal receipt

Ext.A3        -    Acknowledgement card

Ext.A4        -    Letter, dtd 08/12/2016

Evidence of the opposite party:- 

Ext.B1        -    Copy of the terms and conditions of Indiabulls Housing Finance Ltd.

Ext.B2        -    Copy of circular No. 17/2015-16, dtd on 22-07-2016

//True copy//

By Order

                                                                                                           Senior Superintendent

To

          Complainant/Opposite parties/SF

Typed by: Sa/-

Compared by: