Delhi District Court
Through Its Authorized Signatory Col. ... vs Standard Chartered Bank on 31 July, 2020
IN THE COURT OF SHRI SANJEEV KUMAR-II, ADDITIONAL DISTRICT
JUDGE-04, SOUTH DISTRICT, SAKET COURTS, NEW DELHI.
CS DJ/207886/2016
M/s. Chitra Utsav Video Private Limited
Through its Authorized Signatory Col. D.P. Khanna ,
Registered Office at D-41, South Extension-II,
New Delhi-110049.
...... Plaintiff
Versus
Standard Chartered Bank
At : 7A, DLF Building, DLF Cyber City,
Gurugram-122022, Haryana ......Defendant
Date of institution of the suit : 20.08.2015
Date reserved for judgment : 29.06.2020
Date of pronouncement of judgment : 31.07.2020
CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 1
JUDGMENT
PLAINT
1. The brief factual matrix of the case as stated in the plaint is that the plaintiff M/s. Chitra Utsav Video Private Limited is a Private Limited Company duly incorporated under the provisions of the Companies Act with its registered office at D-41, South Extension Part-II, New Delhi, Col. D.P. Khanna is an authorized signatory who has been duly authorized to sign, institute, file and prosecute the present suit against the defendant. The Col. D.P. Khanna has been authorized vide Board Resolution dated 26.05.2015 to file the present suit and he is also conversant with the facts of the case.
2. The plaintiff company is engaged in the business of film producing & recording including video software generating facilities and is the owner of the multi storey building situated at Institutional Plot No. 84, Sector-32, Gurugram, Haryana 112, 54 s. ft. of area and is worth Rs.6023 lacs which has been leased out of M/s. Amway Enterprises India Private Limited, Reckitt Benckiser Limited and M/s. Kohinoor Specialty Foods India Private Limited on lease. The plaintiff company had borrowed substantial amount from M/s. Syndicate Bank and is repaying the said loan amount to them and the substantial part of the loan amount stands repaid by the plaintiff company to the Syndicate Bank and only CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 2 part of the amount remains to be paid. The plaintiff company had already approached the Syndicate Bank for providing more finance on the said property on the fresh terms and conditions and while the loan facility talks were going on the defendant bank somehow approached the plaintiff company and offered to give loan of Rs. 270 million against the property at the competitive rates than that of Syndicate Bank. The plaintiff company had informed the defendant that they are already trying to get the sanction from their existing bank that is Syndicate Bank where they had still some balance outstanding the previous loan but the defendant bank assured that they would be able to meet the requirements of the funds at the most lucrative and better rates than that of other bankers.
3. Vide Letter dated 23.05.2012 the defendant banker gave the offer vide indicative term sheet stating that they can process the proposal of offering the facility of lease rental discounting term loan amounting to Rs. 270 million and further gave the terms and conditions for consideration. In terms of the said terms and conditions the defendant principally agreed to open to current account of the plaintiff whereby the account no. 1 being escrow account for collecting rentals and current account no. 2 being normal business account. The lessees in the building shall directly release some of money recoverable CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 3 from the lease rental in the account no. 1 and the plaintiff will not withdraw the same and on the contrary the loan EMI shall be withdraw from the said account and excess amount shall be transferred to account no. 2. It was further mentioned the PDC dated at intervals of six months for the entire of the facility with the cheque amount being the value of the six EMIs and one undated security cheque of principal balance. The loan against the rental agreement shall be executed by the lessor borrower and the LTV of the property to be at 60% including all the existing and proposed facilities on the property. The defendant will take over the existing debt of Syndicate Bank on the property and for top up amount borrower to provide the details regarding the end use of funds. The interest rates was agreed to Base Rate + 3.00% p.a. (variable), processing fee 1.00% of total facilities sanctioned plus applicable service tax and the said fees to be paid at the time of the issuance of the indicative term sheet and the period of the loan was fixed up to 108 months.
4. With the above-said terms and conditions, the plaintiff was lured to have the loan facility from the defendant bank. During the course of the meeting for sanctioning of the lease rental discounting facility and advancing a loan of Rs.270 million, the plaintiff was asked to give the mobilization fees deposit for terms loan proposal in the name of defendant amounting to CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 4 Rs.16,50,000/- and the said amount was paid by the plaintiff to the defendant vide cheque no. 792889 drawn on Oriental Bank of Commerce dated 23.05.2012 for Rs.13,50,000/- and another amount of Rs.3,00,000/- were got deposited in the month of May 2013 total amounting to Rs. 16,50,000/-. While taking the mobilization fee, it was agreed that this mobilization fee is to be adjusted final fee at the time of sanction of facility and it was further agreed that in case the defendant does not approve the transaction than this fees may be refunded after deducting the bank actual expenses incurred on the property valuation, legal opinion and any other relevant direct expenses attached to the appraisal of the proposal. After the receipt of the amount of Rs. 16,50,000/- the defendant vide their letter dated 20.07.2012 forwarded the terms and conditions of the agreement and in the said letter. The plaintiff has absolute discretion to agree with the acceptance of the facility on a later date however, the facilities will lapse on the closure of business after 30 banking days. The letter dated 20.07.2012 contained "stated as subject to our right in our absolute discretion to agree to your acceptance of the facilities on a later date, the offer of the facilities will lapse on close of business on the date falling 30 banking days after the date of the facility letter unless we have received your acceptance of the facilities by then".
CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 5
5. On the perusal of the offer letters of the defendant dated 13.07.2012 and 20.07.2012, it transpired that DSRA was fixed for Rs.1,36,01,655/- and the same was required to be maintained in the form of lien marked FDR with the bank. With the further stipulation that this FDR to be created prior to any disbursement of any amount beyond the BT amount or 45 days whichever is earlier. The plaintiff vide their e-mail dated 26.07.2012 and 31.07.2012 showed their deed concern to the defendant bank on the new requirement of creation of a DSRA of Rs.136.00 lacs to Rs. 2414 lacs (Rs. 2550 lacs less Rs.136 lacs) now. After a clarification was sought by the plaintiff to know as to when this amount of Rs. 136 lacs will be released that the plaintiff was informed in writing that it will remain with the bank for the entire duration of the loan. This was in no way acceptable to the plaintiff and the defendant were asked to re-consider and clarify the amount of loan to be disbursed as the loan facility total amount was agreed to be for Rs. 25,50,00,000/- as per e-mail dated 13.07.2012 containing the terms and conditions of LRD facility to the plaintiff. The plaintiff vide their e-mail dated 18.08.2012 conveyed to the defendant bank serious objections concerning calculation of interest, wherein while the payment of monthly EMI is planned to be paid into escrow account of the defendant bank intends to take into account only on the designated date i.e. 18th of the month. Consequently the plaintiff shall continue to pay interest till 18th on the CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 6 older principal amount while rental collection is available with the bank, but is not adjusted nor any interest paid on the same. Thus, the bank holds a flot of the EMI equivalent amount for minimum of 11 days at the cost of the borrower.
6. The plaintiff vide their e-mail dated 18.08.2012 sought that the re-set of interest rate after first year, re-set shall be in terms of any changes in the base rate only i.e. it shall remain base rate + 3% and not change to base rate + 4% and or any such change. In fact the plaintiff also suggested that in case it is account performance is found to be good by the bank it should consider lowering +3% to say 2.5% etc. subject to mutual understanding and agreement. In order to vindicate the issue raised the defendant sent the e-mail dated 13.08.2012 stating that the number of incongruities/doubts/incomplete documents still existed with them and thus they could not reach to the final conclusion of the transaction pertaining to the offered loan, and thus, under the said grab the defendant made no efforts to clarify the objections raised by the plaintiff while the defendant continued to give verbal commitments of granting loan on the competitive rates. The defendant vide their e-mail dated 29.08.2012 stated that the loan amount is ready for disbursement but the same is struck off due to non-availability of letter from existing Syndicate Bank CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 7 and further stated that any further delay would have negative impact on the terms and conditions of the facilities. But the defendant still ignored to give the clear cut clarifications on the issues raised by the plaintiff about the rate of interest to be charged and loan amount to be disbursed. The defendant bank sent several e-mails to the plaintiff and in response the plaintiff vide e-mail dated 10.09.2012 has already highlighted that despite most of the documentation have been done the transaction was not concluded since what was committed by the defendant bank with regard to the rate of interest reduction to sub 12.50% and waiver of processing fee was not translated into a binding sanctioned letter or an amended agreement and request was made to refund the paid amount. The defendant vide their letter dated 12.09.2012 refused to refund the amount on false and frivolous grounds and further threatened to cancel the sanction letter.
7. In terms of the defendant bank without responding to the plaintiff with hold the action of sanctioning of the loan amount of Rs.270 million to the defendant and also did not made any correspondence with the plaintiff and put the transaction with the plaintiff on the silent mode. The defendant failed to sanction the loan facility to the plaintiff within stipulated period and further did not respond to the letters, e-mails of the plaintiff with resulted into CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 8 substantial financial said back to the plaintiff and the plaintiff had to again approach their Syndicate banker and had to get the loan facility sanction from them on their terms and conditions as the loan was required for the commercial purposes. The plaintiff after obtaining the loan facility from the Syndicate Bank requested the defendant vide their letter dated 02.04.2014 and 26.12.2014 to refund back the mobilization fees of Rs.16,50,000/- since it was agreed by the defendant that in case the defendant did not approve the transaction the mobilization fees shall be refunded. The defendant despite the receipt of the letter dated 02.04.2014 and 26.12.2014 did not refund the mobilization amount of Rs.16,50,000/- till date. The plaintiff also gave a notice dated 05.05.2015 to the defendant whereby the defendant was asked to refund the mobilization fees of Rs.16,50,000/- with interest @ 18% per annum but despite the receipt of the notice, the defendants failed to refund the amount hence the suit.
WRITTEN STATEMENT 8 The defendant has stated in its written statement that the plaintiff company approached to the defendant bank to avail a term loan facility in the form of Lease Rental Discounting Facility for a sum of Rs.270 million in the year 2012. Accordingly, the defendant bank issued the Indicative Term-Sheet dated 23.05.2012 to the Plaintiff which contained terms and conditions that were CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 9 applicable and based upon which the Plaintiff was to avail the credit facilities. Besides terms and conditions which was clearly provided in the Indicative Term Sheet that the Plaintiff was liable to pay 1% as processing fee of the total sanctioned credit facilities plus applicable service tax. This amount was payable at the time of issuance of the Indicative Term Sheet.
9. Consequent to the issuance of the Indicative Term Sheet, the Plaintiff paid a processing fee of Rs. 13.50 lakhs to the Defendant vide cheque dated 23.05.2012. Consequent to the deposit of the said fee, the Defendant started the process of considering the financial credibility of the Plaintiff. The Indicative Term Sheet was not to be considered as final sanction and was subject to the Defendant conducting its risk due diligence and obtaining necessary internal credit approvals.
10. After considering the financial credibility of the Plaintiff Company, the Defendant Bank issued a Sanction Letter which was termed as Facility Letter dated 20.07.2012 to the extent of Rs. 255 million. The said Facility Letter was duly signed and accepted by the Plaintiff Company on the 08.08.2012. As per the said Facility Letter dated 20.07.2012 , the Plaintiff apart from other various CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 10 conditions was also required to pay 1% processing fee plus applicable service tax on the said amount i.e. Rs. 25,50,000/- plus applicable service tax.
11. On account of sanction of the credit facilities of Rs. 255 million, the Plaintiff became liable to pay an amount of Rs. 25,50,000/- plus applicable service tax. As aforesaid, out of this, the Plaintiff had earlier paid an amount of Rs.13.50 lakhs and thereafter another amount of Rs. 3.00 lakhs was paid through its other group company, namely, Saurer Embroidery Systems Pvt. Ltd. Thus, in all, an amount of Rs. 16.50 lakhs was paid by the Plaintiff. Out of this Rs. 16.50 lakhs, an amount of Rs. 1,81,505.00 was towards service and the net amount which was realized by the Defendant was Rs. 14,68,494.13.
12. Despite, the fact that Plaintiff paid less amount towards processing fee, the Defendant Bank out of good gesture and assurance from the Plaintiff Company for payment of remaining processing fee processed the Plaintiff request for availing the facilities to the tune of Rs. 255 million, subject to fulfilment of the various other terms and conditions mentioned in the Facility Letter dated 20.07.2012. After placing the said Facility Letter before Board of Directors of the Plaintiff Company who after being fully satisfied with the terms and conditions mentioned in the said Letter passed the resolution dated CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 11 7.08.2012 to accept the same. Accordingly, as stated above, the said Facility Letter was duly signed and accepted by the Plaintiff Company. Processing fee (1%) which was required to be paid by the Plaintiff Company was non- refundable fee and the same is duly mentioned in the Clause 5 of the Facility Letter. The said fee was payable at time of acceptance of Facility Letter.
13. Once the parties entered into an agreement, the terms and conditions of the agreement constitute a binding contract and any party cannot avoid the same. The Defendant Bank requested the Plaintiff to pay a remainder of the processing fee pursuant to which the Plaintiff issued a cheque for the same. However, the Plaintiff requested the Defendant not to honour the said cheque, therefore, the Defendant Bank did not process the same in view of the Plaintiff request and long term relationship. As a part of disbursement process Plaintiff company was required to open current accounts with Defendant bank. Accordingly, the Plaintiff Company issued a cheque of Rs. 1 Lac for opening the said current account. The said cheque was dishonoured upon presentment.
14. The disbursement of the loan facility was subject to the Plaintiff providing entire set of documents as well as compliance with various agreed terms and conditions as detailed in the facility letter. Those documents were CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 12 not provided and therefore, the Defendant Bank through various emails requested the Plaintiff Company to provide the same. However, despite repeated requests and reminders sent by the Defendant Bank, the Plaintiff Company failed to provide the desired documents to the Defendant Bank, thus the Defendant could not disburse the loan amount to the Plaintiff.
15. The processing fee which was paid by the Plaintiff Company to the Defendant Bank was non-refundable. It is submitted that since the Plaintiff did not provide the requisite documents for disbursement of facilities amount, the Plaintiff now cannot claim the said amount from the Defendant Bank as the Plaintiff failed to adhere the terms and condition mentioned in the Facility Letter dated 20.07.2012. It is correct that the Defendant Bank issued the Indicative Term Sheet dated 23.05.2012, mentioning all the terms and conditions and the Defendant Bank is denying the terms and conditions which are not part of the Indicative Term Sheet. The Indicative Term Sheet be read for its correct interpretation and it is to be read with said Facility Letter.
16. The Plaintiff paid the processing fee to the Defendant Bank of Rs. 16,50,000/- out of total amounting to Rs. 25,50,000/-. The said processing fee was non-refundable. The Plaintiff wrongly used the word processing fee as CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 13 mobilization fee. It is denied that the mobilisation fee was to be adjusted against the final fee at the time of sanction of facility and the said fee was to be refunded after deducting the bank's actual expenses incurred on the property valuation, legal opinion and any other relevant direct expenses attached to the appraisal of the proposal. The Facility Letter dated 20.07.2012 clearly mentioned that the processing fee is non-refundable and the said Facility Letter was duly accepted by the Plaintiff by counter signing the same on 08/08/2012. Thus, there was no question of refund of the processing fee. An amount of Rs. 16.50 lakhs includes the amount of Rs. 1,81,505.87 paid towards service tax and was not the amount which came into the hands of the Defendant.
17. The suit is also barred by limitation. The Plaintiff admittedly stated that the cause of action for filing the present case arose on 23.05.2012 when the Defendant issued the Indicative Term Sheet, and thereafter the Plaintiff issued a cheque dated 23.05.2012 for a sum of Rs. 13,50,000/- towards part processing fee. It is not in dispute that the present suit is filed by the Plaintiff in the month of September 2015. Thus, the suit is time barred and liable to be dismissed.
CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 14 REPLICATION
18. In the Replication, the plaintiff has denied the contents of the Written Statement and has reiterated and reaffirmed the contents of the plaint. ISSUES
19. From the pleadings of the parties, the following issues were framed on 30.01.2017.
1. Whether the suit of the plaintiff is barred by limitation? OPD.
2. Whether the plaintiff failed to comply with the terms and conditions of the facility letter dated 20.07.2012 and did not provide the requisite documents for disbursement of facility amount? OPD.
3. Whether amount paid towards processing fee of plaintiff was not refundable? OPD.
4. Whether the plaintiff entitled for recovery of suit amount? OPP.
5. Whether the plaintiff is entitled to payment of interest, as prayed? OPP.
6. Relief.
CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 15 EVIDENCE
20. Plaintiff examined only witness as PW-1 and he is its Authorized Representative, Col. D.P. Khanna who tendered his evidence by way of affidavit Ex.PW1/A and reiterated and reaffirmed the contents of the plaint in his affidavit. He has relied upon following documents:
1. The certificate in corporation is Ex. CW-1/1.
2. The Board Resolution dated 26.05.2015 is Ex. CW-1/2.
3. The letter dated 23.05.2012 is Ex. CW-1/3.
4. The cheque bearing no. 792889 dated 23.05.2012 for a sum of Rs.
13,50,000/- is Ex. CW-1/4 (colly).
5. The receipt of the amount of Rs.16,50,000/- along with letter dated 20.07.2012 is Ex. CW-1/5 (colly).
6. The e-mails dated 26.07.2012 and 31.07.2012 are Ex. CW-1/6 and Ex. CW- 1/7.
7. The e-mail dated 13.07.2012 is Ex. CW-1/8.
8. The e-mail dated 18.08.2012 is Ex. CW-1/9.
9. The e-mail dated 13.08.2012 is Ex. CW-1/10.
10. The e-mail dated 29.08.2012 is Ex. CW-1/11.
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11. The e-mail dated 10.09.2012 is Ex. CW-1/12.
12. The letter dated 12.09.2012 is Ex. CW-1/13.
13. The letter dated 02.04.2014 is Ex. CW-1/14.
14. The letter dated 26.12.2014 is Ex. CW-1/15.
15. The notice dated 05.05.2015 is Ex. CW-1/16.
16. The postal receipt dated 05.05.2015 is Ex. CW-1/17 and
17. The Certificate under Section 65 B of the Indian Evidence Act is Ex. CW- 1/18.
21. In its defence, the defendant examined only one witness Sh. Lovish Sharma as DW-1 who tendered his evidence by way of affidavit Ex.DW1/A and reiterated and reaffirmed the contents of the written statement in his said evidence. He has relied upon following documents:
1. The Authority Letter dated 06.11.2019 is Ex. DW-1/1.
2. The Facility Letter dated 20.07.2012 is Ex. DW-1/2.
3. The Board Resolution dated 07.08.2012 is Ex. DW-1/3.
4. The e-mail sent by the defendant bank is Ex. DW-1/4 (colly).
CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 17 ARGUMENTS ON BEHALF OF THE PLAINTIFF
22. Mr. Shivam Goel, learned counsel appearing for the plaintiff has submitted that Issue Nos. 3 and 4 are interrelated. The Facility Letter:
20.07.2012 (CW-1/5) failed to metamorphose into loan agreement, as additional documents that were required by the defendant to be obtained from syndicate bank by plaintiff, could not be made available by the plaintiff to the defendant as syndicate bank was not fully cooperating. NOC from the previous bank (Syndicate Bank) for transfer of existing loan was not made available by the plaintiff to the defendant. Various other documents were asked for by the defendant to process the loan, but the same was not provided by the plaintiff [See: Ex. CW-1/ 10]. The loan was never sanctioned/ no disbursement of any amount was made by the defendant to the plaintiff. As per the FAIR PRACTICE CODE of the defendant-bank based on the directives of the RBI (as available on Defendant's website), all loans sanctioned are subject to completion of client due diligence, credit appraisal and verification procedures and the applications that do not meet the requisite criteria will be declined, and further, Quantum of processing would depend upon the type of collateral, nature and volume of documents involved, services required from external agencies etc. Both of the said two conditions did not stand fulfilled by the plaintiff and hence, the loan was never sanctioned and therefore, the same CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 18 was never disbursed by the defendant to the plaintiff. Thus, the defendant was never entitled to the amount received by it in the form of mobilization amount termed as so-called "processing fees" from the plaintiff vide cheque dated:
23.05.2012 (excluding the amount paid later amounting to Rs. 3,00,000/- in the year 2013 for the same purpose)
23. Mr. Shivam Goel after relying upon the Para numbers 23 and 24 of the Judgment passed in case of DLF v. Punjab National Bank, W.P. (C) No. 8520/ 2010, has further stated that it was held that any sum of money charged by the bank from the borrower as "liquidated demand" stipulated in the loan agreement, is in the nature of penalty and thus, it is the maximum permissible threshold, to claim which the bank has to justify/ prove what loss/ damage it suffered on account of inaction/ deficiency exhibited by the borrower. Judgment in case of In Re: Kuttadan Velayudhan, 2001 SCC OnLine Ker 14 has also been referred.
24. Mr. Shivam Goel has further submitted that the processing fee is in the nature of "commitment charges" and the same is to be paid when all the documents collected from the borrower by the bank are verified by the bank and on the strength of those documents loan is advanced/ sanctioned to the CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 19 borrower by the bank. But in the present case the processing fee was charged by the bank without even collecting the entire chain of documents from the borrower, thus, the question of verification of those documents does not arise in the first place; hence, no loan was ever sanctioned by the bank to the borrower and bank therefore cannot unjustly enrich itself at the expense of the borrower, by charging loan processing fee from the borrower in contravention of Section 73 and 74 of the Indian Contract Act, 1872. Since, the loan was never processed for the want of documents, the issue of disbursement does not arise in the first place. The defendant always failed to resolve the queries put forth by the plaintiff and hence, transaction failed even before the loan amount could be processed. The transaction being a 'commercial transaction', the plaintiff is claiming the rate of interest, at the rate of 18% per annum.
25. Mr. Shivam Goel has further submitted that the amount of mobilization advance was paid in two tranches that is on 23.05.2012 (Ex. CW-1/4) and followed by payment of Rs. 3,00,000/- in May, 2013. And the suit was filed on 20.08.2015. Thus, the suit is filed within the period of limitation. Even otherwise, the plaintiff had been always insisting on the refund of the mobilization advance and had been writing emails to the defendant, which CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 20 have always been acknowledged by the defendant from time to time, the last emails from the defendant to the plaintiff asking for the balance amount of mobilization advance/ processing fee were email dated: 29.08.2012 (Ex. CW- 1/11) and 12.09.2012 (Ex. CW-1/13). Thus, the present suit does not suffer from latches.
ARGUMENTS ON BEHALF OF THE DEFENDANT
26. Per contra Mr. Amol Sharma learned counsel appearing for defendant has submitted that in Para no. 20 of the plaint, the Plaintiff claims that the cause of action was firstly arose on 23.05.2012, when the Defendant approached the Plaintiff to meet their financial loan requirement and it also arose when the Plaintiff paid amount of Rs. 16.50 lacs. Admittedly, the present suit was filed in August 2015, which is much later than the accrual of first cause of action and also after the three years of making the first payment of Rs.13.50 Lacs for which the present suit is being filed. Thus, the suit filed by the Plaintiff is beyond limitation.
27. Mr. Amol Sharma has further submitted that the credit facility, which was to be disbursed to the Plaintiff Company, was to be in accordance with the sanction letter dated 20.07.2012 (Ex.D2). The Plaintiff was required to provide CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 21 various documents in terms of clause 'conditions precedent' mentioned in letter dated 20.07.2012. However, the Plaintiff despite repeated communications/requests by the Defendant did not provide some of the documents. One of such communication, i.e. email dated 12.09.2012, which is exhibited as Ex.D4 clearly records that "You have not submitted us the final statement of outstanding balance from your existing bankers and few other pre-disbursement conditions." By reading of the above it is clear that the Plaintiff despite the contractual obligations as well as the requests made by the Defendant did not provide such requisite/pre-condition documents for availing the facility. The sanction letter dated 20.07.2012 was duly executed/ accepted by the Plaintiff Company in the meeting of the Board of Directors. The extract of the Board Resolution dated 07.08.2012 is exhibited as Ex.D3. Thus, the Plaintiff was required to follow the terms and conditions of the sanction letter dated 20.07.2012, which clearly provides that for disbursal, the documents which are mentioned in the clause 'conditions precedent' were required to be submitted to the Bank.
28. Mr. Amol Sharma has further submitted that nowhere the word 'mobilization fee' is used in any of the financial documents. As per the Indicative Term Sheet as well as Sanction Letter dated 20.07.2012, the Plaintiff CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 22 was required to pay the 1% processing fee plus applicable service tax. The Indicative Term Sheet was later on superseded by the duly accepted Sanction Letter dated 20.07.2012, which mentions the processing fee is non-refundable. Except the part payment of processing fee, there is no other amount, which was paid by the Plaintiff so therefore, there is no question of there being any other mobilization fee as claimed by the Plaintiff. So, the terms governing the same has to be looked into. In the cross-examination of the Plaintiff, the specific questions were asked to the witness to show any document whereby the Bank agreed to refund the processing fee/mobilization fee to the Plaintiff Company. The witness could not point out any such written communication. Thus, it is crystal clear that the processing fee was non-refundable in terms of the contract between the parties.
29. Mr. Amol Sharma has further submitted that the relationship between the parties are to be governed with the terms and conditions of the sanction letter dated 20.07.2012, which is duly exhibited and admitted document. In terms of the said sanction letter, the Plaintiff was required to provide various documents, which were pre-condition for the disbursement of the loan. The records and the evidence would reveal that the Plaintiff failed to provide the said requisite documents and accordingly, the loan could not be disbursed. The CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 23 sanction letter also provides that the processing fee, which is paid at the time of accepting the Sanction Letter, was not refundable. Therefore, the Plaintiff is bound by the terms of the contract and cannot claim refund of the same.
30. Mr. Amol Sharma has further submitted that the Plaintiff has failed to prove that the Defendant is liable to refund the processing fee. Vide mail dated 26.07.2012 which was issued after issuance of Sanction Letter has also categorically mentioned that processing fee is non- refundable. Further, vide mail dated 12.09.2012, Ex.D4 (Colly), the Defendant has also requested the Plaintiff to pay the remaining processing fee as by that time, out of Rs.28,65,180/- only Rs.13.50 Lacs was paid. Thereafter, the Plaintiff paid another amount of Rs.3.00 Lacs in May, 2013 through its group company. This email further records that the Plaintiff had also not submitted the requisite documents. This all shows that the Plaintiff was aware of the fact that for availing the credit facility/ disbursal of a loan, the Plaintiff was not only required to submit the requisite documents but was also required to pay the remaining processing fee in terms of the sanction letter. The Plaintiff after accepting the Sanction Letter, further negotiated with their existing Banker for better terms which is unfair on the part of the Plaintiff. The contract was reduced to in writing and therefore, in view of Sections 91 and 92 of the Indian CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 24 Evidence Act, 1872, oral agreement should be excluded. Sections 73 and 74 of the Indian Contract Act are also not applicable because no penalty was prescribed for breach of contract. The Plaintiff is not entitled for any relief and the present suit is liable to be dismissed. In terms of the Commercial Court Act, the Defendant is also entitled for the cost for defending the frivolous suit filed by the Plaintiff, which is contrary to the terms and conditions of the agreement/contract between the parties. He relied upon para no. 6 of judgment passed by Supreme Court in case of Bharathi Knitting Company v. DHL Worldwide Express Courier Division of Airfreight Ltd., (1996) 4 SCC 704 in support his contention.
FINDINGS ISSUEWISE
31. ISSUE No.1- Whether the suit of the plaintiff is barred by limitation? OPD The onus to prove this issue was upon the defendant. As per the plaintiff, cause of action for filing the suit firstly arose on 23.05.2012 when the defendant approached the plaintiff and offered the loan facility; it also arose on subsequent dates as mentioned in the plaint and further arose when the defendant vide e-mail dated 29.08.2012 and 12.09.2012 threatened the plaintiff for cancellation of sanction loan facility letter; it also arose further CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 25 when the defendant failed to sanction the loan and further when the plaintiff requested the defendant vide letters dated 02.04.2014 and 26.04.2014 and legal notice dated 05.05.2014 to refund the processing fees.
32. I do not agree with the submission of learned counsel for the defendant that the present suit is barred by limitation because it was filed in August 2015, which is much later than the accrual of first cause of action and also after the three years of making the first payment of Rs.13.50 Lacs. Cause of action for filing the suit is to be reckoned from the cause of action arose firstly but from the cause of action arose lastly. It is case of the defendant itself inter alia that the defendant bank issued a Sanction Letter which was termed as Facility Letter dated 20.07.2012 to the extent of Rs. 255 million and as per the said Facility Letter, the Plaintiff apart from other various conditions was also required to pay 1% processing fee plus applicable service tax on the said amount i.e. Rs. 25,50,000/- plus applicable service tax, out of this, the Plaintiff had earlier paid an amount of Rs.13.50 lakhs and thereafter another amount of Rs. 3.00 lakhs was paid through its other group company, namely, Saurer Embroidery Systems Pvt. Ltd. ; after placing the said Facility Letter before Board of Directors of the Plaintiff Company who after being fully satisfied with the terms and conditions mentioned in the said Letter passed the resolution CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 26 dated 7.08.2012 to accept the same. Hence, the defendant itself stated that it issued a Sanction Letter/ Facility Letter dated 20.07.2012 to the plaintiff and same was accepted by the resolution dated 07.08.2012 of board of directors of the plaintiff company. By this sanction letter, plaintiff was required to pay 1% processing fee. It is also accepted by the defendant that the Plaintiff had earlier paid an amount of Rs.13.50 lakhs and thereafter another amount of Rs. 3.00 lakhs was paid through its other group company, namely, Saurer Embroidery Systems Pvt. Ltd. towards process fee. Dates of these two payment have not been mentioned by the defendant. But plaintiff specifically mentioned that mobilisation fees was paid by the plaintiff to the defendant vide cheque no. 792889 drawn on Oriental Bank of Commerce dated 23.05.2012 for Rs.13,50,000/- and another amount of Rs.3,00,000/- were got deposited in the month of May 2013 total amounting to Rs. 16,50,000/-. Hence, Rs 3,00,000/ were got deposited by the plaintiff on 23.0 5.2013. Plaintiff sent e-mail dated 18.08.2012 Ex. CW-1/9 to the defendant about calculation of interest and the defendant sent e-mail Ex. CW-1/11 about readiness of disbursement of facility but non availability of the letters from the existing bank. Plaintiff also sent e-mail dated 10.09.2012 Ex. CW-12 to defendant and then defendant sent e-mail dated 12.09.2012 Ex.CW-13/Ex.D-4 to plaintiff and refused to refund the amount threatened to cancel the CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 27 sanction letter. It is also admitted by the defendant through its written arguments that Rs. 3,00,000/- towards processing fees was paid by the plaintiff in the month of May, 2013. Present suit was filed on 20/21 August, 2015 and therefore it was filed within three years of limitation period. Hence, this issue is decided in favour of the plaintiff and against the defendant.
33. ISSUE No. 2- Whether the plaintiff failed to comply with the terms and conditions of the Facility Letter dated 20.07.2012 and did not provide the requisite documents for disbursement of facility amount? OPD Onus to prove this issue was upon the defendant. The plaintiff's witness (PW-1) has deposed that the defendant vide their e-mail dated 29.08.2012 (Ex.CW-1/11)stated that the loan amount is ready for disbursement but the same is struck off due to non-availability of letter from existing Syndicate Bank and further stated that any further delay would have negative impact on the terms and conditions of the facilities; that the defendant bank sent several e-mails to the plaintiff and in response the plaintiff vide e-mail dated 10.09.2012 (Ex.CW-1/12) has already highlighted that despite most of the documentation have been done the transaction was not concluded since what was committed by the defendant bank with regard to the rate of interest reduction to sub 12.50% and waiver of processing fee CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 28 was not translated into a binding sanctioned letter or an amended agreement and request was made to refund the paid amount; that the defendant vide their letter dated 12.09.2012 (Ex. CW-1/13) refused to refund the amount on false and frivolous grounds and further threatened to cancel the sanction letter. When a question was put to the PW-1 in cross-examination that "I put it to you that you did not provide the pre-condition document which were required for the purpose of availing the credit facilities. Therefore ------------.", he replied that "No the documents were not provided. (Vol. It was in the knowledge of the defendant and they went ahead in getting the plaintiff company's signature while the process was still on to procure those documents from another bank and the deal had not been finalized nor there was any indication of disbursement of loan amount )."
34. Questions were put to PW-1 in his cross-examination. Following are said some questions and its answers :-
"Q.I put it to you that you did not provide the pre-condition document which were required for the purpose of availing the credit facilities. Therefore the amount paid towards the processing fee , which was non-refundable can not be claimed by the plaintiff company?
CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 29 Ans. No the documents were not provided. (Vol. It was in the knowledge of the defendant and they went ahead in getting the plaintiff company's signature while the process was still on to procure those documents from another bank and the deal had not been finalized nor there was any indication of disbursement of loan amount )."
"Q. Is it correct that you have not submitted the final statement of outstanding balance from your banker which was a condition precedent for disbursement of credit facilities?
Ans. Yes it is correct that plaintiff company has not supplied any statement of outstanding balance as condition precedent for disbursement of credit facilities. (Vol. It was on the knowledge of defendant that plaintiff is in the process of getting the document. All documents was supposed to be completed before getting the signature of the plaintiff company on the sanction letter.)"
35. In view of above, I am of the view that the plaintiff failed to comply with the terms and conditions of the Facility Letter dated 20.07.2012 and did not provide the requisite documents for disbursement of facility amount. Hence, this issue is decided in favour of the defendant.
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36. ISSUE No. 3- Whether amount paid towards processing fee of plaintiff was not refundable? OPD And ISSUE No. 4- Whether the plaintiff entitled for recovery of suit amount? OPP These both issues will be decided together. Following facts are admitted/not disputed between the parties:-
(i) The plaintiff earlier borrowed substantial amount from M/s Syndicate Bank and part of the amount remains to be paid by the plaintiff.
(ii) The plaintiff and the defendant negotiated in the year of 2012 and defendant was ready to provide term loan facility in the form of Lease Rental Discounting Facility for a sum of Rs. 270 million.
(iii) The defendant issued the Indicative Term Sheet dated 23.05.2012 (Mark CW-1/4) to the plaintiff.
(iv) The plaintiff paid Rs. 16,50,000/- to the plaintiff bank, out of which, Rs. 13,50,000/- was paid vide cheque no. 792889 drawn on Oriental Bank of Commerce dated 23.05.2012 [Mark CW-1/4 (colly)] and Rs.
3,00,000/- were paid later on in the month of May, 2013.
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(v) The defendant issued a Sanction Letter/Facility Letter dated 20.07.2012 (Ex. D-2/Mark CW-1/5) to the extent of Rs. 255 million to the plaintiff.
(vi) DW-1 has has admitted in his cross-examination that e-mails sent by the plaintiff company are received by the defendant bank. Various admitted e-mails are following:-
(a) e-mail dated 26.07.2012 (Ex. CW-1/6)
(b) e-mail dated 31.07.2012 (Ex. CW-1/7)
(c) e-mail dated 13.07.2012 (Ex. CW-1/8)
(d) e-mail dated 18.08.2012 (Ex. CW-1/9)
(e) e-mail dated 13.08.2012 (Ex. CW-1/10)
(f) e-mail dated 29.08.2012 (Ex. CW-1/11)
(g) e-mail dated 10.09.2012 (Ex. CW-1/12)
(vii) Letter/e-mail dated 12.09.2012 (Ex. CW-1/13) of the defendant issued to the plaintiff which has been marked as Ex.D-4 also.
(viii) The terms of the Sanction Letter/Facility Letter was discussed in the Board Meeting of the plaintiff and Board Resolution dated 07.08.2012 (Ex. DW-1/3) was passed by the plaintiff company and the terms of the credit facility being availed from the defendant was discussed and agreed upon. Said Facility Letter was accepted by the plaintiff on 08.08.2012.
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37. In respect of this issue, case of plaintiff is that during the course of the meeting for sanctioning of the Lease Rental Discounting Facility and advancing a loan of Rs.270 million, the plaintiff was asked by the defendant to give the mobilization fee deposit for terms loan proposal in the name of defendant amounting to Rs.16,50,000/-, and the said amount was paid by the plaintiff to the defendant vide cheque no. 792889 drawn on Oriental Bank of Commerce dated 23.05.2012 for Rs.13,50,000/- and another amount of Rs.3,00,000/- were got deposited in the month of May 2013, total amounting to Rs. 16,50,000/-. It is further stand of the plaintiff that while taking the mobilization fee, it was agreed that this mobilization fee is to be adjusted in final fee at the time of sanction of facility and it was further agreed that in case the defendant does not approve the transaction than this fees may be refunded after deducting the bank actual expenses incurred on the property valuation, legal opinion and any other relevant direct expenses attached to the appraisal of the proposal as mentioned in plaintiff's Letter dated 23.05.2012 (Ex. CW-1/4)
38. In written submission of the Plaintiff, it is mentioned in this regard that in terms of the said Indicative Term Sheet, the plaintiff was asked to pay process fee which was 1% of the total loan facility to be sanctioned (plus CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 33 service tax) by the defendant. Accordingly, the plaintiff vide their letter dated:
23.05.2012- Ex. CW-1/4, gave a cheque of Rs. 13.50 Lacs as mobilization fee, with the condition that the said amount will be adjusted towards the final processing fee of sanctioned facility, and in case the defendant does not approve the transaction, the amount will be refunded subject to deduction of actual expenses. Defendant never objected to this arrangement. The plaintiff subsequently also paid additional amount of Rs- 3,00,000/- for the same purpose, and this fact has been admitted by the Defendant Bank in its Written Statement.
39. In this regard, the stand of the defendant is that besides terms and conditions which were clearly provided in the Indicative Term Sheet, the Plaintiff was liable to pay 1% as processing fee of the total sanctioned credit facilities plus applicable service tax and this amount was payable at the time of issuance of the Indicative Term Sheet; that the Defendant Bank issued a Sanction Letter/Facility Letter dated 20.07.2012 to the extent of Rs. 255 million and same was duly signed and accepted by the Plaintiff Company on the 08.08.2012; that as per the said Facility Letter, the Plaintiff apart from other various conditions was also required to pay 1% processing fee plus applicable service tax; that on account of sanction of the credit facilities of Rs. CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 34 255 million, the Plaintiff became liable to pay an amount of Rs. 25,50,000/- plus applicable service tax but the Plaintiff had earlier paid an amount of Rs.13.50 lakhs vide cheque dated 23.05.2012 and thereafter another amount of Rs. 3.00 lakhs was paid through its other group company, namely, Saurer Embroidery Systems Pvt. Ltd.; that in all, an amount of Rs. 16.50 lakhs was paid by the Plaintiff; that out of this Rs. 16.50 lakhs, an amount of Rs. 1,81,505.00 was towards service tax and the net amount which was realized by the Defendant was Rs. 14,68,494.13; that after placing the said Facility Letter before Board of Directors of the Plaintiff Company who after being fully satisfied with the terms and conditions mentioned in the said Letter passed the resolution dated 7.08.2012 to accept the same and hence, the said Facility Letter was duly signed and accepted by the Plaintiff Company; that processing fee (1%) which was required to be paid by the Plaintiff Company was non- refundable and the same is duly mentioned in the Clause 5 of the Facility Letter; that said fee was payable at time of acceptance of Facility Letter.
40. It is correct that in both the documents i.e. Indicative Term Sheet dated 23.05.2012 (Mark CW-1/4) and Sanction Letter/Facility Letter dated 20.07.2012 (Ex. D-2/Mark CW-1/5), it is mentioned that processing fee (1% of the total facility sanctioned plus applicable service tax) would be paid by the CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 35 plaintiff to the defendant. But different occasion is mentioned in these documents for the payment of the said processing fee. As per the Indicative Term Sheet, it was to be paid at the time of its (Indicative Term Sheet) issuance, but as per the Facility Letter, it was to be paid upfront on its (Facility Letter) acceptance. Further, one more important fact emerged from these both documents is that Facility Letter finds mention about the Clause of non- refundable of the processing fee (Clause -5 ) but Indicative Term Sheet does not find mention about the Clause of refundable or non-refundable of said fee. Therefore, these two aspects regarding processing fees (the occasion when it was to paid and refundable or non-refundable clause) are not same in these both the documents.
41. From the Indicative Term Sheet and Facility Letter, it is clear that they both find mention term "processing fee". There is no dispute between the parties about its percentage. It was 1%. Insofar as term "mobilizing fees" is concerned, in neither of said both the documents (Indicative Term Sheet and Facility Letter), term like "mobilizing fee" is mentioned. But plaintiff has placed a letter dated 23.05.2012 (Mark CW-1/4) wherein it is mentioned that amount of Rs. 13,50,000/- through cheque had been paid by the plaintiff to the defendant towards mobilization fee; that as discussed and agreed this CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 36 mobilization fee is adjustable in the final fee at the time of sanction of the facility; In case SCB does not approve the transaction, this fee may be refunded after deducting bank's actual expenses incurred on property valuation, legal opinion and other relevant direct expenses attached to the appraisal of the proposal. This letter was filed along with the suit but nothing is mentioned in this regard in the written statement. Mark CW-1/4 has been put upon this document at the time of evidence of PW-1 but no question about this document has been asked on behalf of the defendant in cross-examination. Even no suggestion had been given to PW-1 on behalf of the defendant that no such document/letter (Mark CW-1/4) had been issued by the plaintiff to the defendant at the time of payment of Rs. 13,50,000/- and same is forged and fabricated.
42. It is correct that plaintiff was liable to pay 1% processing fee because same is mentioned in both the documents (Indicative Term Sheet and Facility Letter) and plaintiff has also accepted the said fact but questions are as to when it was required to be paid and as to whether it was refundable or non- refundable. In Indicative term Sheet, nothing has been mentioned about its refundable or non-refundable but in Facility Letter it was mentioned that it is non-refundable. But said Rs. 13,50,000/- towards processing/mobilization fee CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 37 through cheque was paid by the plaintiff to the defendant on 23.05.2012 and this is the date when Indicative Term Sheet was issued by the defendant to the plaintiff wherein nothing has been mentioned about its refundable or non- refundable. It is correct that in Facility Letter, non-refundable clause of processing fee was mentioned but said Rs. 13,50,000/- were actually paid by the plaintiff prior to this Facility Letter and at the time of issuance of Indicative Term Sheet.
43. It is also admitted position that said Facility Letter was accepted by the plaintiff on 08.08.2012. But in this regard I find force in submission of learned counsel for the plaintiff that for conclusion of the contract mere signing of contract is not enough, and there has to be execution of the contract. In this regard the judgment passed in In re: Kuttadan Velayudhan (Supra) can be referred wherein it was observed that to sign means to affix the signature but when it comes to the signing of a written instrument, it implies more than the act of affixing a signature; that it implies more than the clerical act of writing the name; that the intention of the person signing is important; mere putting of signature cannot be said to be execution of the document; that ordinarily, signature merely means putting one's name or any other mark to identify a person making the mark but when a word 'signature' is attributed with regard CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 38 to the written document, which creates obligation on the person signing it, it can only mean signing the document after the document prepared and completed. It is also important to note at this juncture that after issue of the Facility Letter, plaintiff sent several e-mails (Ex. CW-1/6, CW-1/7 and CW-1/9) to the defendant about its grievances/concern of the additional conditions of DSRA and a major flaw in the repayment of monthly instalment, wherein while the payment was to be received by the defendant by 7th of each calendar month but was to be credited by defendant only on 18th of that month, thereby making plaintiff to pay extra interest by 11 days for 108 months but these grievances could not be addressed effectively by the defendant.
44. The Reserve Bank of India issued Guidelines on Fair Practice Code for Lenders vide Circulars DBOD. Leg. No. BC. 104/09.07.007/2002-03, Dated May 5, 2003; RBI/2006-2007/280, DBOD.No.Leg.BC.65/09.07.005/2006-07, Dated March 6, 2007 and RBI/2014-15/422, DBR.Leg.No.BC.64/09.07.005/2014-15, Dated January 22, 2015. These circulars are affixed/mentioned in next pages. CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 39 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 40 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 41 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 42 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 43 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 44 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 45 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 46 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 47 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 48 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 49
45. In above mentioned Guidelines on Fair Practice Code for Lenders dated 05.03.2003, it is provided in guidelines numbers 2(i)(a), 2(iii) and 3 that Loan application forms in respect of priority sector advances up to Rs. 2.00 lakhs should be comprehensive and it should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in case of non acceptance of application, pre-payment options and any other matter which affects the interest of the borrower, so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower; that lenders should ensure timely disbursement of loans sanctioned in conformity with the terms and conditions governing such sanction and lenders should give notice of any change in the terms and conditions including interest rates, service charges etc. Lenders should also ensure that changes in interest rates and charges are effected only prospectively; that Fair Practice Code based on the guidelines outlined in the paragraph 2 should be put in place in respect of all lending prospectively, but not later than 01 August 2003 and banks and financial institutions will have the freedom of drafting the Fair Practice Code, enhancing the scope of the guidelines but in no way sacrificing the spirit underlying the above guidelines. CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 50
46. Further, by RBI Guidelines dated 06.03.2007, instructions mentioned in Para 2 (i)(a) of Guidelines dated 05.05.2003 will be applicable to all loan applications in respect of all categories of loans irrespective of the amount of loan sought by the borrower. Further, by RBI Guidelines dated 22.01.2015, banks were directed that the total fees and charges applicable on various types of loans to individual borrower should be disclosed at the time of processing of loan as well as displayed on the website of banks for transparency and comparability and to facilitate informed decision making by customers; that banks should provide a clear, concise, one page key fact statement/fact sheet, as per prescribed format in Annex, to all individual borrowers at every stage of the loan processing as well as in case of any change in any terms and conditions. It is correct that Guidelines dated 22.01.2015 came into force with effect from 01.04.2015 but it is also correct that present suit was filed in the month of August 2015 i.e. after coming into force said guidelines on 01.04.2015.
47. It is also pertinent to mention here that Fair Practice Code of the defendant bank has been filed by the plaintiff and learned counsel for plaintiff has referred Fair Practice Code not only at the time of his oral submissions but in his written submissions also but learned counsel for the defendant has CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 51 neither addressed his oral arguments about Fair Practice Code nor mentioned about it in his written submissions.
48. These guidelines had created right in favour of the plaintiff that Loan application form should be comprehensive and it should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in case of non acceptance of application and any other matter which affects the interest of the borrower, so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower; that lenders should give notice of any change in the terms and conditions including interest rates, service charges etc. It is clearly mentioned in Guidelines that the application form should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in case of non acceptance of application. Hence, it is clear that processing fees should be non-refundable in case of non acceptance of application. In the present case it is admitted position that processing fee/mobilisation fee of Rs. 16,50,000/- was paid by the plaintiff to the defendant and same was not refunded even rejection of loan/credit facility application and non-disbursement of loan/credit facility amount. CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 52
49. Hon'ble Delhi High Court in case of DLF Limited v. Punjab National Bank, W.P.(C) 8520/2010 decided on 27.05.2011 , referred the guidelines of the RBI and the Fair Practices Code and following observed in para numbers 17, 18, 21 and 23:-
" 17. The RBI vide its guidelines dated 25th November, 2008 did provide that loan application forms in respect of all categories of loans should include information about fees/charges, if any, payable inter alia for prepayment options and any other matter which affects the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other banks can be made and an informed decision can be taken by the borrower. It also declared that levying such charges subsequently without disclosing the same is an unfair practice. Similarly, the guidelines of 12th November, 2010 reiterated the necessity for disclosure of all charges including of pre-payment options.
18. It thus cannot be said that there is no public law element in the present case. The question involved certainly entails compliance/noncompliance by the respondent Bank of the RBI guidelines and the writ petition is thus found to be maintainable. In terms of the RBI guidelines, a right is created in the petitioner as borrower from the Bank and the petitioner by present petition is found to be resisting a claim of the Bank, which according to the petitioner is in violation by CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 53 the Bank of the said guidelines. The Apex Court, in Sardar Associates (supra), held a writ petition to be maintainable in such circumstances.
21. Thus, from the language of the Loan Agreement and other documents before this Court, it cannot be said that the respondent Bank had at the time of granting the loan informed the petitioner that it could not pre-pay the loan before 30 months or that if it so pre-paid the loan it will be liable for charges therefor as are now being claimed and which are impugned in this petition. The action of the respondent Bank is definitely in violation of the guidelines of RBI and owing thereto it cannot be said that the petitioner had taken an informed decision qua pre-payment charges; the impugned demand thus also becomes an unfair practice on the part of the respondent Bank, again in the teeth of RBI guidelines. I have enquired from the senior counsel for the respondent Bank whether notwithstanding the written Loan Agreement, there was any clause therein also incorporating therein the general terms and conditions stated to be disclosed on the website or making any other general practice averred of the Bank of levying pre-payment charges. None has been shown. The respondent Bank without such incorporation of the general practices and website terms in the Agreement cannot be permitted to rely on the same. The writ petition would thus be maintainable.
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23. It is again not as if pre-payment is a taboo. According to the respondent Bank also, pre-payment is possible on payment of charges/penalty therefor. The parties in the present case chose not to provide for the compensation/penalty payable for breach on account of pre-payment. Even if such compensation/penalty is stipulated in the Loan Agreement, the same under Section 74 of the Indian Contract Act r/w the dicta of the Constitution Bench in Fateh Chand Vs. Balkishan Dass AIR 1963 SC 1405 is only the maximum extent of penalty/compensation payable for such breach. The respondent Bank would still be liable to prove before the appropriate fora the loss suffered by it by such breach and would be entitled to only such compensation to the extent of loss shown. Unless such compensation is determined, the respondent Bank could not have and has not disclosed any right, to unilaterally debit the account of the petitioner or to threaten the petitioner with downgrading of its account or with reporting it as a default to the agency concerned. The entire loan amount having already been received by the respondent Bank, the respondent Bank is not entitled to withhold valuable security furnished for re-payment especially when the amount claimed by it is a miniscule i.e. 2% only of the loan amount for which security was taken."
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50. Hon'ble Delhi High Court in another case of M/S Athena Energy Ventures PVT. LTD. v. Andhra Bank, W.P.(C) 3527/2014 decided on 30.05.2019, referred the guidelines of the RBI and the Fair Practices Code. The relevant para are reproduced :--
" 14. The first and foremost issue to be considered is whether the Bank was obliged to disclose the charges to the petitioner at the time of acceding to the request for providing non-fund based assistance. The Reserve Bank of India (RBI), by a Circular dated 25.11.2008, has advised all banks that the loan application forms in respect of all categories of loans should be comprehensive and should include information about the fees/charges payable by the borrower. The relevant extract of the said Guidelines, which were a part of the Fair Practices Code for Lenders, is set out below:-
"Please refer to our Circular DBOD.No.Leg.BC.65 /09.07.005/2006-07 dated March 6, 2007 wherein banks / FIs were advised that loan application forms in respect of all categories of loans irrespective of the amount of loan sought by the borrower should be comprehensive. It should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in the case of non acceptance of application, pre-payment options and any other matter which affects the interest of the borrower, so that a CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 56 meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower.
2. It has come to our notice that some banks levy in addition to a processing fee, certain charges which are not initially disclosed to the borrower. It may be mentioned that levying such charges subsequently without disclosing the same to the borrower is an unfair practice.
3. Banks / FIs are therefore advised to ensure that all information relating to charges / fees for processing are invariably disclosed in the loan application forms. Further, the banks must inform 'all-in cost' to the customer to enable him to compare the rates charged with other sources of finance.
15. Subsequently, by a circular dated 10.12.2008, RBI had clearly stated that levy of charges, which were not initially disclosed to the borrower, would constitute unfair practices. Paragraph 2 of the said Letter is set out below:- "2. It has come to our notice that some banks levy in addition to a processing fee, certain charges which are not initially disclosed to the borrower. It may be mentioned that levying such charges subsequently without disclosing the same to the borrower is an unfair practice."
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16. In DLF Limited (supra), the Coordinate Bench of this Court had examined the question of levy of pre-payment charges and not initially disclosing the same and had held that the banks would not be entitled to levy such charges. This Court is of the view that the said decision would be equally applicable in the facts of this case notwithstanding that the petitioner has not borrowed any amount from the Bank. The extension of a non-fund-based facility is also a form of financial assistance, albeit, non-fund based. It is also relevant to note that the parties had entered into a Composite Agreement in terms of which the petitioner would be obliged to repay the amount of the Bank Guarantee in the event that the same was encashed.
17. The decision in DLF Limited (supra) rested on the principle that a person, who is visited with any charges for a facility, should be aware of the same at the time of availing the facility and not at the time of discharging the same. This is a principle of fair play and fair practice, which the banks are obliged to follow. It would make little difference whether the facilities extended by the banks are fund based or non-fund based."
51. Hon'ble Supreme Court in the case of ICICI Bank v. Shanti Devi Sharma & Others [Criminal Appeal arising out of SLP (Crl.) No. 4935 of 2006 decided on CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 58 15.05.2008] also referred the RBI Guidelines on Fair Practices Code for Lenders dated 05.05.2003 and the Guidelines released on dated 24.04.2008 and reminded the banks and other financial institutions that we live in a civilized country and are governed by the rule of law.
52. Hence, in view of above discussion, I am of the considered view that processing fees was refundable if credit facility/loan is not disbursed/granted to the plaintiff by the defendant and it is admitted position that same was not granted/disbursed. And because loan application was rejected and loan was not disbursed to the plaintiff by the defendant and hence the plaintiff is entitled for recovery of suit amount. The stand of the defendant is also that out of Rs. 16,50,000/-, an amount of Rs. 1,81,505.00 was towards service tax and the net amount which was realized by the Defendant was Rs. 14,68,494.13 but same has not been proved because no witness from concerned service tax department has been examined and further no receipt about payment of the service tax has been filed and proved. Accordingly, issue numbers 3 and 4 are decided in favour of the plaintiff and against the defendant.
53. ISSUE No.5- Whether the plaintiff is entitled to payment of interest, as prayed? OPP CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 59 As plaintiff is entitled for suit amount, hence, keeping in view the facts and circumstances of the case, I am of the view that the plaintiff is entitled for pendente lite interest at the rate of 9% per annum from the date of the suit till the date of the decree, and future interest at the rate of 6% per annum from the date of the decree to the date of payment. Accordingly, this issue is decided in favour of the plaintiff and against the defendant.
54. ISSUE No.6 - RELIEF In view of my findings on issues, suit is decreed for the sum of Rs. 16,50,000/-(Rupees Sixteen Lacs and Fifty Thousands only) in favour of the plaintiff and against the defendant along with pendente lite interest at the rate of 9% per annum from the date of the suit till the date of the decree, and future interest at the rate of 6% per annum from the date of the decree to the date of payment. Costs of the suit is also awarded in favour of the plaintiff. Decree sheet be prepared accordingly.
File be consigned to the Record Room.
Announced via video conferencing,
Dated: 31.07.2020
(SANJEEV KUMAR-II)
SANJEEV Digitally signed by
SANJEEV KUMAR
Additional District Judge-04
KUMAR Date: 2020.07.31
14:06:50 +0530 South District, Saket Courts, New Delhi
CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 60 CS DJ/207886/2016 M/S Chitra Utsav Video PVT. LTD. v. Standard Chartered Bank Page 61