Gujarat High Court
Shree Abjibapa Education And ... vs State Bank Of India (Sbi) & on 16 July, 2015
Author: R.M.Chhaya
Bench: R.M.Chhaya
C/SCA/5948/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 5948 of 2015
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SHREE ABJIBAPA EDUCATION AND CHARITABLE TRUST....Petitioner(s)
Versus
STATE BANK OF INDIA (SBI) & 1....Respondent(s)
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Appearance:
MR AM PAREKH, ADVOCATE for the Petitioner(s) No. 1
MS DHARMISHTA RAVAL, ADVOCATE for the Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA
Date : 16/07/2015
ORAL ORDER
1. Heard Mr.A.M.Parekh, learned counsel for the petitionerTrust and Ms.Dharmishta Raval, learned counsel for respondent No.1 Bank. Though served, no one appears for respondent No.2.
2. By way of this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following relief(s): "(A) YOUR LORDSHIPS may be pleased to admit and allow the present petition.
(B) YOUR LORDSHIPS may be pleased to issue a writ or Mandamus or a writ in the nature of Mandamus or any other appropriate writ/s, order/s, and/or direction/s declaration that action the respondent No.1 Bank debit Rs.10,27.070.00 pre payment charge is illegal and contrary to the Notification dated 27.05.2014 and refund the said amounts to the petitioner forthwith.
(C) Pending admission, hearing and final disposal Page 1 of 8 C/SCA/5948/2015 ORDER of this petition, YOUR LORDSHIPS may be pleased to direct the respondent No.2 to take legal action against the respondent No.1 accordance with law as per the provision of the Indian Banking Law for the violating the circulars of the R.B. I dated 27.05.2014.
(D) ***".
3. The facts, which can be culled out from the record of the petition are as under: 3.1 The petitioner is public charitable trust and runs educational schools and colleges. The petitioner-Trust had taken a loan of Rs.10,27,070/ as terms loan through five different accounts from the years 2010 to 2014 from respondent No.1Bank.
3.2 It appears that the petitioner herein had obtained such terms loan, repayment schedule of which, was for 78, 81 and 84 months respectively. The petitionerTrust repaid all the loans on 09.09.2014 and "No Due Certificate" came to be issued by the Bank on 09.09.2014. The petitioner thereafter, issued Debit Advice of Rs.10,27,070/ towards prepayment penalty for loans and said Debit Advice came to be objected by the petitioner by filing a complaint before respondent No.2. It further appears that the petitioner relied upon the Circular dated 27.05.2014 and contended that levy of prepayment penalty is de hors the said Circular. Respondent Page 2 of 8 C/SCA/5948/2015 ORDER No.2 rejected the said complaint by order dated 19.01.2015. The petitioner as such by aggrieved by the Debit Note dated 11.09.2014 has filed this petition.
4. Learned counsel for respondent No.1 has filed its reply and has denied the contentions raised by the petitioner. Learned counsel for respondent No.1 has contended that as per the terms and conditions of the loan agreement between the petitioner and the respondentbank, prepayment charges, as applicable, is payable. It is also contended that the respondentBank had also levied commitment interest on the unavailed terms loan. However, at the request of the petitioner as an exceptional case, commitment interest waiver was obtained and the amount came to be refunded to the petitioner. It was also contended that the ombudsman also rejected the plea of the petitioner as no merits were found.
5. Learned counsel for the petitioner has raised the following contentions: (1) That the Bank has failed to discharge and follow the procedure as provided in Circular dated 27.05.2014.
(2) That the action of the respondentBank for levying prepayment charges is in violation of Page 3 of 8 C/SCA/5948/2015 ORDER Circular dated 27.05.2014.
(3) That the respondentBank had no authority to charge prepayment charges in view of Circular dated 27.05.2014.
(4) The petitioner has relied upon the judgment rendered by the Delhi High Court in the case of DLF Limited Vs. Punjab National Bank [180(2011) DLT 435].
(5) Respondent No.2 has not afforded any hearing before passing the order dated 19.01.2015.
(6) The action of the respondentBank is illegal and arbitrary against the provisions of R.B.I Guidelines.
It was therefore, submitted by learned counsel for the petitioner that the petition requires consideration and this Court may pass appropriate order for refund of the amount to the petitioner.
6. Per contra, learned counsel for respondent No.2 relying upon the AffidavitinReply, supported the impugned communication. It was contended that there is an agreement between the petitionerTrust and the respondentBank, which inter alia provides that in the event of pre Page 4 of 8 C/SCA/5948/2015 ORDER payment charges as applicable, shall be payable in case of prepayment of term loan installments. In fact, the Circular dated 27.05.2014 does not apply to the terms loan of the Trust, but it applies to the Home Loans. It was further contended that the judgment relied upon by learned counsel for the petitioner in the case of DLF Limited (supra) is not applicable to the present case and therefore, the petition is meritless and the same deserves to be dismissed.
No other and further submissions are made by learned counsel for the respective parties.
7. Before riverting to the submissions made by learned counsel for the parties, it would be appropriate to quote the Circular dated 27.05.2014, which provides as under: "Levy of foreclosure charges/prepayment penalty on Floating Rate Term Loans Please refer to out circulars RPCD.CO.RCBD.BC.No.84/03.03.01/201112 dated June 15, 2012 addressed ti StCBs and CCBs and RPCD.CO.RRB.BC.No.85/03.05.033/201112 dated June 18, 2012 addressed to RRBs on 'Home Loans - Levy of Foreclosure Charges/Prepayment penalty'.
2. A reference is invited to part B of the First Bimonthly Monetary Policy Statement 201415 announced on April, 1, 2014 proposing certain measures for consumer protection. It was indicated that in the interest of their customers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Accordingly, it is advised that StCBs and CCBs will not be permitted to charge Page 5 of 8 C/SCA/5948/2015 ORDER foreclosure charges/prepayment penalties on all floating rate term loans sanctioned to "individual borrowers" with immediate effect."
Learned counsel for the petitioner has heavily relied upon the aforesaid Circular.
8. Similarly, the loan agreement between the petitioner and the respondentBank as covenant, which provides as under: "Prepayment charges, as applicable, shall be payable in case of prepayment of Term Loan Installments."
9. In light of the aforesaid covenant, the petitioner has specifically agreed that pre payment charges, as applicable, shall be payable in case of prepayment of Term Loan Installments. In light of the aforesaid covenant, the petitioner cannot be now permitted to contend that no prepayment penalty can be levied. Similarly, the Circular, which is relied upon by learned counsel for the petitioner, clearly provides that concession from prepayment penalty is given to "individual borrowers". The petitioner is admittedly is not an individual borrower, but is an institution duly registered under the Gujarat Public Trust Act, therefore, said circular will not be applicable in the case of present petitioner. Similarly, Hon'ble Delhi High Court was concerned with different issue under consideration before it. The factual Page 6 of 8 C/SCA/5948/2015 ORDER background in the said matter was totally different. In the matter before the Hon'ble Delhi High Court, the respondentBank in the loan agreement did not disclose any such prepayment charges and in addition to that, loan agreement did not contain the provisions of prepayment charges. It was also contended in the case before Hon'ble Delhi High Court that such prepayment charges need to be notified at the stage of application for processing of loan itself. In light of such facts, Hon'ble Delhi High Court had allowed the petition and quashed the action of the Bank of levy of prepayment charges.
10. In the case on hand, there is specific provision in the loan agreement itself and reliance placed for on the Circular, in opinion of this Court would apply only in the case of individual customer and borrower and that cannot be extended to borrower like the present petitioner, which is a Trust. The judgment of the Hon'ble Delhi High Court will not be applicable to the present case. It deserves to be noted that though the contention is raised by learned counsel for the petitioner as regards the order dated 19.01.2015 passed by the bank ombudsman, there is no challenge to the same and therefore, the same does not require any consideration by this Court.
Page 7 of 8 C/SCA/5948/2015 ORDER11. For the foregoing, the petition is meritless and deserves to be dismissed. Notice is discharged. No costs.
(R.M.CHHAYA, J.) Suchit Page 8 of 8