ORDER

BY SRI.H.R.SRINIVAS, PRESIDENT.

1.      This is the Complaint filed by the Complainant under Section 12 of Consumer Protection Act 1986, against the Opposite Parties (herein referred in short as O.Ps) alleging the deficiency in service in recovering Rs.49,550.68 as prepayment charges/foreclosure charges on the balance of personal loan amount at 4% and refund of the same along with interest at 12% and Rs.2,00,000/- as damages for causing mental stress agony and financial loss, Rs.25,000/- towards cost of litigation expenses and other reliefs as the Forum deems fit under the circumstance.

2.      The brief facts of the case are that: the complainant availed loan of Rs.15,00,000/- for development of his house from OP No.2 and executed the agreement in that respect and the amount was disbursed on 31.01.2017. He was promptly paying the loan amount.  He wanted to close the loan account by paying the same much earlier to the time fixed.  After one year of the loan he wanted to pay the remaining balance to foreclose his personal loan.  To his shock and surprise he was charged 4% of the loan amount as foreclosure charges which was not informed to him either at the time of sanctioning the loan or subsequently. It was brought to his notice at the time of enquiry for foreclosure in the month of February 2018. He made several correspondences with the OP and OP did not respond.  To avoid payment of further interest, he paid a sum of Rs.12,38,767/- along with foreclosure charges of Rs.49,550.68 at the rate of 4%  on the above amount. Levying of foreclosure charges is contrary to law, illegal and with a mala-fide intention of extorting money from him.  It is against to the RBI Guide Lines as the RBI has laid down that there shall not be any prepayment of foreclosure charges against closure of the loan.  Hence the complaint.

3.      Upon the service of notice OP appeared before the forum and filed its version admitting the loan transaction and execution of the loan agreement and disbursal of the loan amount to the complainant.  It is further contended that the complainant agreed to pay the loan amount with interest at 11.5% to be paid in 60 monthly installments of Rs.32,989/- and the rate of interest is a fixed rate of interest.  The complainant has executed a contract and hence he is not a consumer under the Consumer Protection Act. The loan agreement contains the rate of interest or the amount to be paid for pre-closure charges.  The complainant is required to pay the EMI and in case want to pre-close the loan, has to pay the foreclosure charges.  Complainant opted and approached OP for pre-closure of the loan after paying 11 installments.  The complainant has agreed to all the terms and conditions of the loan agreement and also clause 6.13 and 9.2 of the loan agreement.  Further it has been brought to the notice of the complainant that in case he wanted to close the loan account after 12 EMI’s the percentage of foreclosure charges between 13 to 24 months is 4% on the principal outstanding and 3% between 25 to 36 months and so on.  Further the Supreme Court has held in Jayant Verma Vs. Union of India that u/s 21A of the Banking Regulation Act, rate of interest charged by banking companies not to be subject to scrutiny by courts under the Usurious Loans Act, 1918 and denied that they brought to the notice of the complainant regarding levying of foreclosure charges at the time of closing the loan. 

4. RBI Regulations are clear that schedule commercial banks (excluding regional rural banks) have freedom to fix charges as per their board approved policy subject to general instructions regarding levy of charges by banks.  In the master circular on consumer services in banks issued by RBI at clause 6.4 levy of foreclose charges/pre-payment penalty on floating rate term loans banks will not be permitted to charge foreclosure charges/prepayment penalties on all floating rates term loans sanctioned to individual borrowers.  Hence charging foreclosure charges on the loans availed under floating rate of interest by individuals is barred and since in this case the loan availed by the complainant is under fixed rate of interest the complainant is not entitled for the said concession.  Hence they have recovered 49,550.68 towards pre-closure charges and hence there is no deficiency on their part in rendering the service and the complainant is not entitled for any of the reliefs claimed, and it is exorbitant, and prayed the Forum to dismiss the complaint.

5. In order to prove the case, both parties have filed their affidavit evidence and produced documents. Arguments Heard. The following points arise for our consideration:-

1. Whether there is deficiency in service on the part of OPs?

2. Whether the Complainant is entitled to the relief prayed for in the complaint?

6.      WE ANSWER:-

POINT NO.1 & 2: In the Negative.

                                For the following.

POINT No.1 & 2:-

7.  It is not in dispute that the complainant availed loan of Rs.15,00,000/- for constructing home and agreed to  pay 11.5% interest and the loan amount to be repaid in 60 monthly installment of Rs.32,989/-.  The loan agreement clearly shows that in case the complainant wants to repay the amount before the term that too after 12 months and within 24 months he has to pay 4% on the balance as foreclosure charges.  Different rates are mentioned as pre-payment charges/foreclosure charges depending on the period.  The complainant has not at all placed any materials to show that the loan obtained by him is on floating rate of interest.

8.  On the other hand OP has produced the Reserve Bank of India notification DBR No.Leg.BC.21/09.07.006/2015-16  dated 1^st July 2015 referring to the Master Circular issued by it in the same number dated 1^st July 2014 wherein at 6.3.3 clause the Dual Rate/Special Rate home loans are to be considered as interest on the loan at floating rate and at clause 6.4 it is mentioned that banks will not be permitted to charge foreclosure charges/pre payment penalties on all floating rate term loans sanctioned to individuals.

9. When this is taken into consideration and in the absence of the complainant proving before the Forum that the loan availed by him is on the floating rate of interest and in view of the RBI circular referred to above, we are of the opinion that charging of pre-closure charges or/foreclosure charges by OP and recovering Rs.49,550.68 in that respect do not amounts to deficiency in service and further the same was brought to the notice of the complainant when the loan was disbursed to him while he executing the agreement in that respect itself and hence  we answer POINT NO.1 IN THE NEGATIVE.

10. In view of the above the complainant is not entitled for any of the reliefs claimed in the complaint and answer POINT NO.2 ALSO IN THE NEGATIVE and proceed to pass the following:-
6698606.  

1. Complaint is dismissed.  Parties to bear the cost.
2. Send a copy of this order to both parties free of cost.

Note: You are hereby directed to take back the extra copies of the Complaints/version, documents and records filed by you within one month from the date of receipt of this order failing which the same will be destroyed as per the C.P. Act and Rules thereon.

(Dictated to the Stenographer over the computer, typed corrected and then pronounced by us in the Open Forum on this 19^th AUGUST 2019).

MEMBER PRESIDENT

ANNEXURES

1. Witness examined on behalf of the Complainant/s by way of affidavit:

Copies of Documents produced on behalf of Complainant/s:

Doc.No.1: Copy of the Personal Loan Agreement.

Doc.No.2: Copy of the YES Bank Welcome Letter.

Doc.No.3: Copy of Repayment Schedule.

Doc.No.4: Copy of email dated 12.02.2018.

Doc.No.5: Copy of Foreclosure/Closure Simulation Report.

2. Witness examined on behalf of the Opposite party/s by way of affidavit:

RW-1: Sri Pramod.S, Senior Manager of OPs.

Copies of Documents produced on behalf of Opposite Party/s

Ex.R1: Copy of the Power of Attorney

Ex.R2: Copy of Loan Agreement

MEMBER                        PRESIDENT