STATE CONSUMER DISPUTES REDRESSAL COMMISSION,

U.T., CHANDIGARH

1.           M/s Reliance Capital Limited through its Managing Director (Reliance Consumer Finance Division), having its registered office at Block ‘H’, 1^st Floor, Dhirubhai Ambani Knowledge City, Koparhairane, Navi Mumbai 400710.

2.           M/s Reliance Capital Limited (Reliance Consumer Finance Division) through its Branch Manager, having its Branch Office at SCO 309-310, 1^st Floor, Sector 35-B, Chandigarh 160022.

……Appellants/Opposite parties

V e r s u s

1.           Vikas Jain son of late Shri Amrit Lal Jain, aged about 52 years.

2.           Smt. Kanta Jain widow of Shri Amrit Lal Jain, aged about 72 years.

3.           Smt. Sushma Jain wife of Shri Vikas Jain, aged 47 years; and

4.           Ankit Jain son of Shri Vikash Jain, aged 22 years

All residents of House No.24, Sector 7, Panchkula.

5.           M/s Classic Centre through its Partner Shri Vikas Jain son of late Shri Amrit Lal Jain, SCO No.33, Sector 17-E, Chandigarh.

              ....Respondents/Complainants

Appeal under Section 15 of the Consumer Protection Act, 1986.

BEFORE:     JUSTICE SHAM SUNDER, PRESIDENT.

                   MRS. NEENA SANDHU, MEMBER.

Argued by: Sh. Sandeep Suri, Adv. for the appellants.

                   Sh. Vikas Jain, Adv. alongwith Sh. Neeraj Sobti, Adv. for the respondents.

PER  NEENA SANDHU, MEMBER

                    This appeal is directed against the order dated 20.12.2010, rendered by the learned District Consumer Disputes Redressal Forum-I, UT, Chandigarh (hereinafter referred to as the District Forum) vide which it allowed the complaint filed by the respondents/complainants in the following manner :-

“15.             In view of the above discussion, we are of the opinion that the present complaint be allowed. The same is accordingly allowed. The OPs are directed to pay/refund Rs.11,70,829.88 (say Rs.11,70,830/-) received by them as foreclosure charges.  They must also pay Rs.20,000/- as penalty and Rs.5,500/- as litigation expenses to the complainant.  This order be complied within thirty days from the date of receipt of copy of this order failing which the OPs would be liable to pay the entire decreed amount alongwith penal interest @ 12% per annum besides the cost of litigation from  the date of filing of the present complaint i.e. 27.1.2010 till the amount is actually received by the complainants.”

2.                     The facts, in brief, are that the complainants applied for the housing loan to the opposite parties. It was stated that the opposite parties sanctioned loan of Rs.2,37,00,000/- to the complainants, for the purchase of H.No.28, Sector 7, Panchkula.  The loan was granted on floating rate of interest of 11.90% per annum.  It was further stated that the loan was to be repaid in 204 equated monthly installments (EMIs).  It was agreed to between the parties that the opposite parties shall take over the vehicle loan of BMW Car, obtained by the complainants from ICICI Bank.  At the time of finalization of the loan, it was also agreed to between the parties, that the opposite parties would charge 2.35% less interest, than the prevailing PLR (Prime Landing Rate).  It was further agreed to that, in case of foreclosure of loan account, no foreclosure charges would be charged.  The complainants had issued post-dated and un-dated cheques, to the opposite parties against the said disbursed loan.  Thereafter, the complainants requested the opposite parties, many times, to take over the BMW Car loan and to increase the loan from Rs.2.37 Crores to Rs.3.00 Crores, and also reduce interest rate to 9.75% p.a., but they did not comply with their request. It was further stated that thereafter the complainants shifted their loan from the opposite parties, to AXIS Bank, which agreed to grant the same to them with interest @ 9.75% p.a.  The complainants, thereafter, requested the opposite parties to close the loan account, and release the conveyance deed of the plot.  It was further stated that on foreclosing the loan, the opposite parties illegally charged Rs.11,70,829/- as foreclosure charges @5% of the loan amount.  The complainants had to pay the foreclosure charges under compulsion.  The complainants then requested the opposite parties to refund this amount, since it had been illegally charged.  It was further stated that the aforesaid acts of the opposite parties amounted to deficiency, in rendering service, and indulgence into unfair trade practice.  When the grievance of the complainants was not redressed, left with no alternative, a complaint under Section 12 of the Consumer Protection Act, 1986 (hereinafter referred to as the Act) was filed.

3.                     The opposite parties, in their reply, admitted the factual matrix of the case.  It was stated that the loan granted to the complainants was on floating rate of interest and as per the loan agreement, in case of cancellation of loan, within one year, the opposite parties could claim foreclosure charges, from the complainants/loanees.  It was further stated that there was no agreement, between them, and the complainants, to take over the auto loan as alleged by them (complainants).  It was further stated that that as per the loan agreements, floating rate of interest and the PLR were to be decided by the lender.  It was further stated that as per sanction letter, the PLR of the opposite party was 14.25%. Hence the complainants were required to pay interest at 11.90% p.a. which was 2.35% less than the PLR as per the terms of the agreement. Since the complainants got the loan account closed within 12 months from the date of sanction of the loan, the foreclosure charges, were charged, accordingly.  It was further stated that the complainants were not entitled to any relief against them.  The remaining averments were denied, being wrong.

4.                     The parties led evidence, in support of their case. 

5.                     After hearing the Counsel for the parties, and, on going through the evidence and record, the District Forum allowed the complaint, as stated, in the opening para of this order.

6.                     Feeling aggrieved, the instant appeal has been filed by the appellants/opposite parties.

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

8.                     It was submitted by the Counsel for the appellants/opposite parties that from the Mortgage loan Agreement (Annexure C-1), which was executed, between the parties, it was evident that, in the event of payment of loan, before the expiry of normal duration thereof, the borrowers were liable to pay prepayment charges. It was further submitted that since the complainants made a request for premature payment of loan before the expiry of normal duration thereof, the opposite parties demanded foreclosure charges of Rs.11,70,829.88 @ 5% at o/s principal, on the ground of closing the account, before the scheduled payment time.  He further submitted that the terms “prepayment charges” and “foreclosure charges” are one and the same and interchangeable.  In this regard, the Counsel for the appellants relied upon the information sought vide query No.589/2008-09, and answer given  to the same on 7.10.2008, by the RBI, in the question answer form, downloaded, from the internet, which reads as under :-

It was thus submitted that the order passed by the learned District Forum is unsustainable, in the eyes of law, and the same needs to be set aside.

9.                     On the other hand, the Counsel for the respondents, supported the order of the District Forum, being legal and valid.  It was submitted that the appellants were not entitled to charge “foreclosure” charges, as there was no mention of this word, in the agreement and they were only entitled to get prepayment charges. 

10.               After going through the above extracted information, supplied by the RBI, it becomes abundantly clear that the bank can charge money, in the name of foreclosure charges, in case of prepayment of personal loan, if it is being repaid in 14^th month when the entire loan is payable in 36 months.  Prepayment of loan means payment of loan, before the expiry of normal duration thereof.  The terms “prepayment charges” and “foreclosure charges” are interchangeable and one and the same thing.  It is evident from page 28 of the District Forum file, forming part of the loan agreement, executed between the parties, duly signed by the complainants, that prepayment charges for the first year would be charged @ 5%.  It was at this rate that the prepayment/ foreclosure charges were charged, by the appellants, when the complainants pre-closed their loan account, in the first year. 

11.                  Not only this, in Hotel Vrinda Prakash Vs Karnatka State Financial Corporation (AIR 2007Kant 187) relied  upon by the Counsel for the appellants, the principle of law, laid down, was to the effect, that the Financial Corporation had authority to charge premium for prepayment/foreclosure of the loan account, on the outstanding loan balance.  In Hatsun Agro Products Chennai Vs Industrial Development Bank of India Chennai, (C.S No.513 of 2001 decided on 14.10.2009 by the Madras High Court, relied upon by the Counsel for the appellants, the plaintiff was charged Rs.51,42,895/- as prepayment charges/premium, before foreclosing   the loan. The demand was challenged as illegal.  The Hon’ble High Court, held that the prepayment charges, for foreclosing the loan, were legally charged, by the defendant, and, ultimately, dismissed the suit.  The principle of law, laid down, in these cases, is fully applicable, to the facts of the instant case. Under these circumstances, the District Forum, while allowing the complaint, erred in holding that “prepayment charges” and “foreclosure charges” are two separate terms and are not interchangeable.  Hence, neither there was any deficiency, in rendering service, on the part of the Opposite Parties, nor did they indulge into unfair trade practice, on this count.  The order of the District Forum, thus, being illegal, is liable to be set aside.

12.                  For the reasons recorded above, the present appeal is accepted, with no order as to costs, and the impugned order passed by the learned District Forum is set aside. 

13.                  Copies of this order be sent to the parties free of charge.

Pronounced.

16.05.2012

Sd/-

[JUSTICE SHAM SUNDER]

PRESIDENT

Sd/-

[NEENA SANDHU]

MEMBER

hg

STATE COMMISSION

(First Appeal No.50 of 2011)

Argued by: Sh. Sandeep Suri, Adv. for the applicants/appellants.

                   Sh. Vikas Jain, Adv. alongwith Sh. Neeraj Sobti, Adv. for the respondents.

Dated, 16 May 2012

ORDER

1.           Alongwith the appeal the applicants/appellants moved an application for condonation of delay of 49 days, in filing the appeal, stating therein, that the original copy alongwith the DD was misplaced in the office of the counsel, as the same was inadvertently put in another file, and could be traced only, on 16.3.2011.  It was further stated that the delay was bonafide.

2.           The respondents contested the application, by filing reply to the same.  It was stated that the applicants/appellants did not disclose the date on which copy of the order was received by them, as also the date on which copy of the same was supplied to the Counsel for filing the appeal.  It was further stated that, no record of the case, in which the file of the present appeal was put, had been annexed. It was further stated that the applicants/appellants failed to explain the day to day delay.  It was further stated that the delay, in filing the appeal, was deliberate and intentional and, thus, the same could not be condoned.

3.           We have heard the Counsel for the parties on the application as also in the main appeal.

4.           After giving our thoughtful consideration, to the rival contentions, advanced by the Counsel for the parties, we are of the considered opinion, that the application deserves to be accepted, for the reasons, to be recorded hereinafter. As per the provisions of the Consumer Protection Act, 1986, the appeal was required to be filed within thirty days, from the date of receipt of a certified copy of the order, passed by the District Forum, but the present appeal was filed after a delay of 49 days.  However, it is settled principle of law, that every lis should be decided, on merits, than by resorting to hyper-technicalities. The procedure is, in the ultimate, the handmaid of justice, meant to advance the cause thereof, than to thwart the same.   When the procedural wrangles, and the substantial justice, are pitted against each other, then the latter will prevail over the former. The application is duly supported by an affidavit of Sh. Subhash Kumar, Clerk, in the office of Counsel for the applicants/appellants, which discloses sufficient cause, for the condonation of delay. There was, thus, no intentional or willful delay, in filing the appeal, on the part of applicants/appellants.  Otherwise also, the applicants/appellants are not going to gain anything, by filing the appeal, at a belated stage. Finding sufficient cause, the delay, in filing the appeal, requires to be condoned.  

5.           For the reasons recorded above, the application for the condonation of delay, in filing the appeal, is accepted. The delay is condoned.

6.           The appeal is admitted. 

7.           Vide our detailed order of the even date, recorded separately, this appeal has been accepted, with no order as to costs, and the order of the District Forum is set aside, as per details therein.