State Consumer Disputes Redressal Commission
Standard Chartered Bank Ltd. vs Ashish Aggarwal & Anr. on 24 July, 2013
IN THE STATE COMMISSION : DELHI (Constituted under Section 9 clause (b)of the Consumer Protection Act, 1986 ) Date of Decision: 24.07.2013 Case No. FA-810/09 (Arising from the order dated 15.09.2009 passed in Complaint Case No. 160/2008 by the District Consumer Forum-II, Udyog Sadan, C-22 & 23 Institutional Area, Behind Qutub Hotel, New Delhi.) STANDARD CHARTERED BANK LTD - APPELLANT Sansad Marg, New Delhi Versus ASHISH AGGARWAL & MRS ALKA AGGARWAL - RESPONDENTS RZ-123A, Ahinsa Lane, Sadh Nagar, Palam Colony, New Delhi 110045. CORAM : S.A. SIDDIQUI - MEMBER (JUDICIAL) S.C. JAIN - MEMBER 1. Whether reporters of local newspapers be allowed to see the judgment? 2. To be referred to the Reporter or not? S.A. SIDDIQUI (ORAL) JUDGEMENT
1. Through Impugned Order dated 15.09.2009, Ld. District Consumer Disputes Redressal Forum-II, Udyog Sadan, C-22 & 23 Institutional Area, Behind Qutub Hotel, New Delhi-16, in Complaint Case No. 160/2008 directed the OP/appellant to refund Rs. 77,450.57p and Rs. 8,892.82p along with Rs. 30,000/- as compensation for mental pain and agony including the litigation charges within a period of 30 days. The OP/Appellant Standard Chartered Bank Ltd felt aggrieved and preferred this appeal.
2. Brief facts giving rise to the filing of this appeal are discussed below:
The Complainants/respondents, Sh. Ashish Aggarwal and his wife Mrs. Alka Aggarwal took a house loan of Rs. 48 Lacs from the OP/appellant on 3.5.2003 @ 8% floating rate of interest. The loan was to be repaid in 20 years by way of EMI of Rs. 40,150/- p.m. The EMI was paid regularly. On 19.02.2008, Principal outstanding amount was Rs. 16,83,036.99p.
From 1.4.2007, the OP/appellant arbitrarily changed the interest rate from 10.25% p.a to 11.25% without any intimation to the complainants/respondents and again with effect from 1.7.2007, the OP/appellant changed the rate of interest from 11.25% to 12.25% without any information to the complainants/respondents. In the meantime, the complainants/respondents learnt that PNB was charging lesser rate of interest i.e. 9% only.
The complainants/respondents, therefore, got their house loan transferred to PNB on 23.02.2008. However, the OP/appellant charged Rs. 77,450.57p as prepayment charges @ 2.81%, which was calculated on outstanding principal amount of Rs. 24,57,443.15p when the Principal outstanding amount was Rs. 16,83,036.99p only at the time of transfer of loan on 23.2.2008 to the PNB.
The OP/appellant also arbitrarily charged Rs. 8,892.82p on account of interest for the month of February 2008 whereas the cheque of Rs. 40.150/- EMI for the month of February 2008 had already been encashed by the OP/appellant. The complainants/respondents, therefore, claimed refund of Rs. 77,450.57p together with Rs. 8,892.82 along with compensation and litigation charges.
3. OP/Appellant filed written statement denying all the allegations. However, it was admitted that on 27.3.2003, a loan of Rs. 48 Lacs @ 8% p.a was sanctioned to the complainants/respondents. At the time of taking loan, the complainants/respondents had opted for variable rate of interest. The complainants/respondents executed a loan agreement on 21.4.2003. Since the complainants/respondents opted for a floating rate of interest on their aforesaid house loan, the same was viewed periodically as per banking industry wise practice. On the basis of the request made by the complainants/respondents, OP/appellant issued a letter giving details wherein it was shown that outstanding principal amount was Rs. 16,83,036.99. Since the complainants/respondents were closing their account, they were liable to pay pre-payment charges in accordance with the Loan Agreement. As per schedule of charges dated 1.4.2007, the pre-closer fee on home loan was to be calculated @ 2.81% including service tax. The complainants/respondents had an outstanding principal of Rs. 16,83,036.99 and the total of the amount paid within 180 days towards principal outstanding was Rs. 10,73,211/-, therefore, in total prepayment amount calculated on Rs. 24,57,443.15 @ 2.81 including service tax which comes to Rs. 77,450.57p.
Since the complainants/respondents had opted for variable rate of interest as reflected in the loan application form, the variable rates were viewed periodically and charged accordingly. On the request of the complainants/respondents, OP/appellant issued a letter dated 19.02.2008 for closer of the account of the complainants/respondents wherein prepayment charges were levied in accordance with clause 2.8 of the Loan agreement and also as per schedule of the charges.
The prepayment were levied on Rs, 24,57,443.15p, therefore, there was no deficiency of service on the part of the OP/appellant nor any unfair trade practice was adopted in the recovery of the said amount. The complaint, therefore, deserves to be dismissed.
4. The parties led evidence in support of their cases.
5. Ld. DCDRF-II, Udyog Sadan, C-22 & 23 Institutional Area, Behind Qutub Hotel, New Delhi-16, upon consideration of all facts, circumstances and evidence on record passed the impugned order dated 15.09.2009, which was challenged in the present appeal by the OP inter-alia on following main grounds besides others:
(a)That the impugned order dated 15.09.2009 was bad in law in as much as the parties were governed by a written contract of the agreement and were duty bound in consonance with the contract. The parties cannot act de hors to the terms of the contract. The main grievance of the complainants/respondents was that instead of charging of Rs. 16,83,036.99, the bank charged prepayment on much higher amount i.e. Rs. 24,57,443.15p, therefore, Ld. District Forum committing illegality in directing the refund of amount charged towards prepayment charges.
(b)That Ld. District Forum has failed to appreciate that if a customer intends to transfer its loan from one bank to another, it can come within the ambit of prepayment as it would be the case of takeover. If an account is opened in a bank, it cannot be transferred to another bank without first closing the account. It is normal accounting practice that the account is required to be closed before it is actually transferred and once the account is closed prior to its terms, irrespective of the fact that whether it is transferred or takeover, prepayment charges would be levied in terms of the contract
(c) That the Ld. District Forum erred in holding that it was deemed to be case of take over and cannot fall within the ambit of prepayment of loan.
(d)That it is a well known practice in the banking industry that as and when a customer opts for closing the loan prior to its term, the customer is supposed to pay prepayment charges. The housing loan was for a period of 20 years and accordingly the bank had calculated the equated monthly installments (EMI). The respondents/complainants opted to close the loan after 5 years and therefore, appellant/OP was justified in claiming the prepayment charges in terms of the contract.
6. The respondents/complainants filed reply. It is stated therein that since the PNB was charging lesser rate of interest (@9%only), the respondents/complainants got his loan account transferred to the PNB on 23.2.2008 but the appellant/OP Bank arbitrarily charged Rs. 77,450.57p as prepayment @ 2.81%, which was calculated on outstanding principal amount of Rs. 24,57,443.15p, when the principal outstanding amount was Rs. 16,83,036.99p at the time of transfer of loan to PNB on 23.2.2008. Not only this, the appellant/OP Bank also arbitrarily charged Rs. 8,892.82p on account of interest in the month of Feb 2008 whereas the cheque of Rs. 40,150/- EMI for the month of Feb. 2008 had already been encashed by the appellant/OP Bank on 19.2.2008. It was, therefore, maintained that the respondents/complainants gave a request letter on 19.2.2008 for pre-closer of the loan. On the basis of the letter, the OP/appellant Bank issued a letter of outstanding principal amount of Rs. 16,83,036.99p in the account of respondents/complainants for prepayment charges @ 2.81% levied in accordance with the loan agreement. It was further maintained that the allegation of the OP/appellant that complainants/respondents made 3 part payments towards the principal outstanding within 180 days. In fact respondents/complainants made payment of Rs. 18 Lacs on 18.09.2007 but the OP/appellant had credited only Rs. 2,99,326/- in place of Rs. 3 Lacs, as OP/appellant had arbitrarily deducted Rs. 674/- on account of prepayment fees, which was unjustified and illegal. When the respondents/complainants protested, OP/appellant credited Rs. 674/- on 10.10.2007. The respondents/complainants emphatically maintained that transfer of loan amount cannot come within the ambit of terminology of prepayment as it has to be deemed as a case of take over and the appeal deserves to be dismissed with cost.
7. We have heard Sh. Dev Mani Bansal, Counsel for the Appellant and Sh. G.L. Aggarwal, AR for the Respondents and perused the material on record.
8. The issue before us is whether Appellant/OP Bank was justified in charging prepayment amount and was not deficient in its services.
9. Ld. Counsel for the appellant/OP argued that when you were a customer intends to transfer a loan from a bank to another, it comes within the ambit of prepayment as per agreement. It is normal accounting practice that the account is required to be closed before it is actually transferred and once the account is closed prior to its term, prepayment is to be charged irrespective whether it is a case of transfer or takeover. The prepayment charges would be levied in terms of contract. He relied upon the rulings of the NCDRC, New Delhi in Revision Petition No. 3855 of 2011 Standard Chartered Bank Vs. Kishan Lal Juneja decided on 12.4.2013.
10. On the other hand, Ld. Counsel for the respondents/complainants argued that the transfer of the loan amount cannot come within the ambit of terminology of prepayment as it has to be deemed as a case of take-over. The respondents/complainants relied upon the following rulings:
(a) State Bank of India Vs. Dr. Mrs. Usha Vaid & Ors Appeal No. 07/130 decided on 27.4.2007 by Honble Delhi State Commission.
(b) HDFC Bank Vs Surendra Kumar Arora, Appeal No. A-07/683 decided on 19.11.07 by Honble Delhi State Commission.
(c ) S. Krupanidhi Educational Trust Vs Union Bank of India III (2009) CPJ 82.
(d) Reserve Bank of India letter No. CSD.CO.RIA No. 2958/13.3.2002/2001-12 dated: 9.12.2011 (Press Release).
11. In Appeal No. 07/130, State Bank of India Vs Dr. Mrs. Usha Vaid & Ors, this Commission held that no Bank can be allowed to indulge in restrictive trade practice by binding the consumer to go on availing loan even the 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 is therefore not enforceable.
This finding of this Commission was upheld by Honble National Commission in Revision Petition No. 2466 of 2007 decided on 26.7.2007 with the following observations:
In our view, a consumers right to avail loan facility at lesser rate of interest should not be curtailed by certain clauses of alleged agreement between the parties.
Hence the petition was dismissed.
12. On the basis of the judicial opinion held by Honble State Commission and Honble National Commission, it can be safely said that Bank must not recover prepayment charges in floating rate loans.
Floating loan based on the interest rate risks from the Bank which are much better place to manage it to the borrowers and thus Banks only substitute interest rate risk with potential credit risk. The Bank will, however, be free to recover/charge appropriate prepayment penalties in the case of fixed rate loans.
13. The ruling of the Honble National Commission in Revision Petition No. 3855 of 2011 relied upon by the Appellant/OP is distinguishable on the facts and is not much helpful in the present controversy. In this case, the complainant decided to make pre-mature payment, OP agreed to the request of the complainant for pre-mature payment but demanded Rs. 2,52,574.53 as prepayment charges. The complainant ultimately lodged a complaint before the District Forum, which after hearing both the parties dismissed the complaint. The complainant went in appeal before the State Commission, which allowed the appeal. The matter went before the Honble National Commission in revision and revision petition was allowed and impugned order dated 13.10.2011 passed by Ld. State Commission was set aside and the order of the District Forum dismissing the complaint was affirmed. Noteworthy feature of this case is that it was not a case of take-over by another Bank and the Housing Loan was taken by the complainant, his son and daughter-in-law but the complaint was filed only by the complainant while his son and daughter-in-law have not been arrayed as complainants and in absence of them, complaint was not found maintainable for non-joinder of necessary parties. This was one of the grounds of the dismissal of the complaint.
12. In the present case, it is an admitted case of the parties that complainants/respondents got transferred the Home loan in question to the PNB on 23.02.2008 as PNB was charging @ 9% only. Any consumer availing such a loan always avails the service of those banks which charge lesser rate of interest. In such situations, the consumer could naturally make request for transfer of loan amount from previous bank to other bank charging lesser rate of interest.
Such a request of transfer cannot come within the ambit of terminology of prepayment as it is clearly deemed case of take-over and in case of take-over, the Banks should not recover prepayment charges in floating rate loans.
13. In view of the above facts, circumstances and legal position, we come to the conclusion that the impugned order dated 15.09.2009 passed in Complaint Case No. 160/2008 does not suffer from any illegality or irregularity and is liable to be maintained.
We also come to the conclusion that the payment of compensation to the tune of Rs. 30,000/-, which included cost of litigation, also is not unreasonable.
ORDER Accordingly, the appeal is found without force and is dismissed. The impugned order dated 15.09.2009 passed in Complaint Case No. 160/2008 is hereby confirmed.
14. A copy of this order as per the statutory requirements be forwarded to the parties free of charge and one copy be sent to the District Forum-II, Udyog Sadan, C-22 & 23 Institutional Area, Behind Qutub Hotel, New Delhi-16, to place it on record, thereafter the file be consigned to Record Room.
15. The FDR, if any, be returned to the appellant as per rules.
(S.A. SIDDIQUI) MEMBER (JUDICIAL) (S.C. JAIN) MEMBER rn