Delhi District Court
M/S Gold Plus Glass Industry Limited vs Ms Jammu Kashmir Bank Ltd on 26 May, 2025
17 YEARS OLD MATTER
IN THE COURT OF Ms. MONIKA SAROHA:
DISTRICT JUDGE-05: WEST:
TIS HAZARI COURTS: DELHI
CIV DJ/610475/16
CNR No. DLWTO1-000075-2008
IN THE MATTER OF:-
M/s Gold Plus Glass Industry Limited
Corporate Office:
G-192, Prashant Vihar
Delhi-110085
Through it's duly constituted Special Power
of Attorney Holder
Sh. Aishwarya Mohan Gahrana appointed herein
vide Resolution passed by the Board of Directors
Dated 15.02.2008. .....Plaintiff
Vs.
M/s Jammu & Kashmir Bank Limited
17, Lajpat Nagar-IV
New Delhi-110024
(Through its Chairman & Managing Director)
...... Defendant
Date of institution :-21.04.2008
Order Reserved On:-15.05.2025
Date of Decision:-26.05.2025
Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.1 of 30
SUIT FOR RECOVERY FOR AN AMOUNT OF RS.
17,92,846/- (RUPEES SEVENTEEN LAKHS NINETY TWO
THOUSAND EIGHT HUNDRED FORTY SIX ONLY)
JUDGMENT
INTRODUCTION Before proceeding to the merits of the present suit, it is imperative to note that this commercial dispute has remained pending before this Court for a protracted period of 17 years. While issues to be decided in this matter were settled within a few months of it filing, the trial unfortunately dragged on due to repeated adjournments, the filing of miscellaneous applications, the frequent change of counsels by the plaintiff and other miscellaneous reasons. Such inordinate delays in the adjudication of commercial matters, while undeniably complex, tend to erode the confidence of stakeholders and impede the growth of the economy. The expeditious resolution of commercial disputes is not merely a procedural expectation but a vital necessity for ensuring certainty in business transactions and fostering a conducive economic environment. Furthermore, it cannot be ignored that both parties-one of which is a government bank-must have incurred substantial expenses in Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.2 of 30 prosecuting and defending this litigation over these many years. This prolonged contest not only imposed a significant financial burden on the parties but also exemplifies the broader malaise of delayed commercial justice which inevitably has adverse repercussions on the economy at large.
This suit was instituted seventeen years ago by a for- profit incorporated company, namely Gold Plus Plus Industry Limited, against The Jammu and Kashmir Bank Ltd. The plaintiff seeks to recover a sum of Rs.17,92,846/- which it have paid to the defendant bank as processing fee/ upfront charges.
1. CASE OF THE PLAINTIFF 1.1 The case set up by the plaintiff is that it wanted to establish a float glass manufacturing project at Roorkee, in the district of Haridwar, Uttaranchal, with an estimated project cost of approximately Rs. 330 crores. The project was to be financed partly through the plaintiff's internal resources and partly by way of external borrowings arranged through a consortium of banks comprising Indian Bank as the lead banker and the defendant as one of the consortium member. The consortium had agreed to extend financial assistance to the tune of Rs. 220 crores to the plaintiff for its project.
Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.3 of 30 1.2 In order to secure the aforesaid funding, the plaintiff offered collateral in the form of 200 bighas of leasehold land and 125 bighas of freehold land. However, the defendant bank raised an objection with respect to the adequacy of the leasehold land as security. It expressed reservation on the ground that the 200 bighas of leasehold land, being held under a 99-year lease from the government and not owned outright by the plaintiff, would not constitute sufficient security.
1.3 Accordingly, the consortium of banks requested the plaintiff to procure a No Objection Certificate ( NOC) from the concerned government department, waiving the restriction clause under the lease agreement. This was to enable the member banks of the consortium to effect sale of the leasehold land in the event of any future default by the plaintiff. A period of three months was granted to the plaintiff for obtaining the said NOC.
1.4 In the interim, the plaintiff was in urgent need of funds to continue with the implementation of the project. Consequently, in May 2007 (upon the plaintiff's request) the consortium resolved Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.4 of 30 to sanction an interim disbursement of Rs. 40 crores to it. For the purposes of securing this interim funding, the plaintiff offered an alternative set of securities, which included 275 bighas of freehold land, a pledge of 100% of the company's shares, and an undertaking to obtain the NOC for the leasehold land measuring 200 bighas. Based on this enhanced security package, all the members of the consortium including the defendant bank agreed to release their share of the interim amount of Rs. 40 crores. When this interim disbursement was allowed, the defendant bank also modified its original terms of sanction of loan and granted approval for the following modifications in the original sanction of 11.04.2007 as conveyed by it to the lead banker vide letter dated 25.07.2007-
(i) Creation of EM on 275 bighas of private land and submission of NOC in respect of government land of 200 bighas within 3 months. After creation of equitable mortgage in respect of government land 150 bighas of land will be released to the company to raise resources of at least Rs.32.00 crore as part of promoters contribution.
(ii) The pledge of shares will be reduced to 30% of share holding after receipt of NOC from State Government in respect of Government allotted land.
(iii) The company to bring in 100% equity of Rs.43.00 crore before the next Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.5 of 30 disbursement alongwith other terms and conditions of sanction by Banks including obtention of requisite statutory approvals. Company to give written undertaking to this effect.
(iv) The company to bring in unsecured loans of Rs.36.00 crore as per the projections for further progress of the project since banks will make the next disbursement only after receipt of NOC from the Government for creating of EM with transferable rights in favour of the consortium banks as mentioned.
1.5 In the consortium meeting held on 15.09.2007, the plaintiff informed that so far it has not been able to secure the NOC from the government. Then it was collectively resolved that the member banks would approach their respective sanctioning authorities to seek modifications in the terms of the loan approvals, in light of the fresh mortgageable securities offered by the plaintiff at the time of seeking interim disbursement of Rs. 40 crores. Pursuant to this resolution, all member banks (except the defendant bank) obtained the requisite modified sanctions regarding waiver of the NOC consortium and reaffirmed their commitment to extend financial assistance to the plaintiff.
1.6 Contrarily, the concerned sanctioning authority of the Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.6 of 30 defendant bank did not agree to give up the requirement of obtaining NOC with respect to the leasehold land so, it unilaterally chose to withdraw from the consortium and declined to disburse the sanctioned loan. This abrupt and unexpected decision of the defendant bank came as a complete shock to the plaintiff company.
1.7 However in this suit, the act of non-disbursal of the loan is not what has been challenged or what is in dispute. The principal grievance of the plaintiff which lead to the filing of this suit is that, on 23.07.2007, it had paid an amount of Rs.16,85,400/- to the defendant bank by cheque as 'upfront processing charges' and although the defendant bank had assured the plaintiff that the said amount was towards processing of the loan and would be refunded in the event the loan was not ultimately disbursed, however later they refused to return the said upfront processing charges even though the loan was never disbursed.
1.8 In its endeavour to seek refund of the upfront charges, the plaintiff addressed several requests and reminders to the Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.7 of 30 defendant bank, calling upon it to furnish details of the expenses and charges purportedly incurred by the bank against the said fee. However, the defendant bank failed to provide any such particulars or justification.
1.9 Left with no alternative, the plaintiff was constrained to seek legal recourse. A legal notice dated 30.01.2008 was accordingly issued by the plaintiff to the defendant bank through registered post, demanding refund of the upfront charges along with applicable interest. Despite due service of the said notice, the defendant did not return the upfront processing fee. Instead, it sent a reply to the legal notice, categorically denying any liability towards the plaintiff and stating unequivocally that it had no intention of refunding the upfront charges. The plaintiff has now instituted the present suit seeking recovery of the said upfront amount.
2. DEFENCE OF THE DEFENDANT 2.1 In its written statement, the defendant has categorically denied any liability towards the plaintiff and has refuted the claim that any amount is recoverable from it. It is admitted that Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.8 of 30 the plaintiff had approached the defendant bank for availing credit facilities as part of a consortium arrangement involving other financial institutions and that the defendant bank had sanctioned the loan on certain terms.
2.2 The principal defence advanced by the defendant is that although it had, in principle, agreed to sanction credit facilities to the plaintiff, such sanction was expressly made subject to the condition that the plaintiff would procure a No Objection Certificate (NOC) from the concerned authority in respect of the leasehold land proposed to be offered as security by it. However, despite lapse of sufficient time, the plaintiff failed to obtain the said NOC from the government. In these circumstances, the defendant contends that it was left with no option but to withhold final disbursement of the loan, for the defendant did not comply with the terms of sanction.
2.3 The defendant further asserts that it had duly processed the plaintiff's loan request, deploying its professional expertise, manpower, time, and resources in evaluating the proposal. It is case of the defendant that after completing its internal due Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.9 of 30 diligence, the defendant issued a formal sanction letter for the term loan on 11.04.2007 and later even modified the terms to some extent but always maintained the term regarding providing of NOC with respect to the leasehold land the plaintiff offered as security.
2.4 According to the defendant, there was no breach of contractual obligation on its part. On the contrary, it is alleged that the plaintiff failed to furnish the requisite security as per the terms earlier agreed by it. Consequently, the defendant contends that there is no justification or legal basis for the plaintiff's demand for refund of the upfront processing fee.
2.5 According to the defendant, once the loan application of the plaintiff had been duly processed and the credit facility was sanctioned, the processing fee became payable and stood earned by the bank. The defendant specifically denied having ever assured the plaintiff that the upfront charges would be refunded in the event the loan was not ultimately disbursed.
2.6 It is further contended by the defendant that it had never Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.10 of 30 given an unconditional commitment to grant the loan to the plaintiff. It maintains that it was bound by the conditions stipulated in its sanction letter of 11.04.2007 and by the modified sanction as reflected in its order dated 25.07.2007, both of which expressly required the plaintiff to furnish a valid No Objection Certificate (NOC) from the competent government authority in respect of the leasehold land intended to be mortgaged in favour of the bank.
2.7 While the defendant acknowledges that its representatives did participate in the various meetings convened by the consortium of bankers, it firmly asserts that at no point did it consent to accept the alternative securities proposed by the plaintiff without the NOC of the government. According to the defendant, it had consistently conveyed to the plaintiff that only upon approval by the competent sanctioning authority could any modification in the terms of the security or sanction be considered and since the said authority did not approve any further revised security arrangement (except what is recorded in the letter dated 25.07.2007) the defendant claims to have duly communicated to the plaintiff, by way of a letter dated Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.11 of 30 14.11.2007, that its request for modification stood declined, and consequently, the bank would not be in a position to proceed with disbursement of any funds.
2.8 In view of the aforesaid defence, the defendant has categorically denied any liability to the plaintiff and has asserted that it is under no obligation to refund the upfront charges or the processing fee paid by the plaintiff.
3. REPLICATION 3.1 In its replication, the plaintiff denied the averments made in the written statement and reiterated the assertions and claims set forth in the plaint
4. ISSUES 4.1 After the pleadings were complete, the following issues were framed by my Ld. predecessor on 27.01.2009:
1. Whether plaintiff is entitled to decree for recovery of Rs.
17,92,846 or any other amount? OPP
2. Whether plaintiff is entitled to interest at the rate of 18% per annum or any other rate of interest and for what Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.12 of 30 period?OPP
3. Relief.
The matter was then listed for plaintiff's evidence.
5. PLAINTIFF'S EVIDENCE In support of its case, the plaintiff examined only one witness.
5.1 The plaintiff company examined Sh. Suresh Antil, Accounts Officer, who appeared as PW-1. He tendered his evidence by way of affidavit (Ex. PW1/A), wherein he reiterated the contents of the plaint. He relied upon the following documents:-
1. Ex. PW1/1 - Board Resolution dated 12.06.2014 passed by the plaintiff company in favour of the witness.
2. Ex. PW1/2 - Memorandum and Articles of Association of the plaintiff company.
3. Ex. PW1/3 - Sanction Letter dated 11.04.2007 issued by defendant Bank regarding grant of term loan facility of Rs. 30 crores to the plaintiff Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.13 of 30 company. (This document was also exhibited by DW1 in his evidence as Ex DW1/2)
4. Ex. PW1/4 - Letter dated 25.07.2007 issued by defendant Bank regarding proposed grant of Rs. 40 crores to the plaintiff company.
5. Ex. PW1/7- Letter dated 14.11.2007 issued by the plaintiff regarding update on disbursement.
6. Ex. PW1/8 - Letters dated 29.12.2007 and 14.11.2007 issued by defendant Bank to the plaintiff regarding refund of upfront fee.
7. Ex. PW1/9 - Legal notice dated 30.01.2008 sent by the plaintiff to the defendant bank.
8. Mark A - Minutes of Meetings of the Consortium dated 15.09.2007 and 20.09.2007.
9. Mark B - Minutes of Meeting of the Consortium dated 05.10.2007.
10.Mark C - Reply dated 23.02.2008 issued by the defendant bank in response to the plaintiff's legal notice.
This witness was cross-examined at length by learned counsel for the defendant.
Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.14 of 30 5.2 No other witness was examined by the plaintiff and upon it's request, the evidence was closed on 09.08.2016. The matter was thereafter fixed for the defendant's evidence.
6. DEFENDANT'S EVIDENCE In its defence, the defendant bank examined two witnesses.
6.1 The first witness examined was Mohammad Ayob Khan, Assistant Vice President and General Power of Attorney (GPA) holder of the defendant bank. He appeared as DW-1 and tendered his affidavit in evidence as Ex. DW1/A, wherein he reiterated the contents of the written statement. He relied upon the following documents:
1. Ex. DW1/1 - GPA executed by the defendant bank in favour of this witness.
2. Ex.DW1/2 - Certified copy of the sanction letter dated 11.04.2007 issued by the Corporate Head Office of the defendant bank (This document was also exhibited by PW1 in his evidence as Ex PW1/3) Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.15 of 30
3. Ex. DW1/3 - Letter dated 11.04.2007 sent by the plaintiff to the defendant bank.
4. Ex. DW1/4 - Letter dated 16.04.2007 sent by the plaintiff to the defendant bank.
This witness was duly cross-examined by learned counsel for the plaintiff.
6.2 The second witness examined was Sh. Rakesh Kaw. He appeared as DW-2 and tendered his affidavit in evidence as Ex. DW2/A, wherein he reiterated the contents of the written statement. He relied upon the documents which were already exhibited in the testimony of other witnesses who had deposed before him. He deposed that the sanction letter dated 11.04.2007 bears his signature at Point A. This witness was cross examined by Ld. Counsel for the plaintiff.
6.3 No other witness was examined by the defendant and upon it's request, the evidence was closed on 09.08.2017. Thereafter the matter was fixed for final arguments.
Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.16 of 30
7. ARGUMENTS 7.1 Final arguments were heard on 22.04.2025 & 29.04.2025. The Court considered all pleadings, evidence, and objections raised during examination-in-chief and cross-examination of witnesses.
ISSUE WISE FINDINGS:
8. ISSUE No.1 Whether plaintiff is entitled to decree for recovery of Rs.17,92,846/- or any other document?OPP 8.1 The entire dispute in this suit pertains to refund of processing fee/ one time upfront charge levied by the defendant bank. It is thus important to discuss in brief what such processing fee/upfront charge is. There is no specific standalone definition of processing fee /upfront charge in the Indian Banking Law, under the RBI Act or the Banking Regulation Act. This concept has not been defined in the Indian law. Neither of the counsels in this suit brought on record any statue defining this concept. The concept of processing fee and upfront charge is only indirectly recognized and regulated in India through RBI guidelines, consumer protection and Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.17 of 30 contractual frame work.
8.2 In the context of banking, a "processing fee" is a one- time charge levied by banks and financial institutions to cover the administrative costs incurred while processing a loan application. It is essentially a service charge that the bank imposes for evaluating, verifying and sanctioning a loan, including the paperwork, background checks, and creditworthiness assessments. This processing fee may differ depending upon the type of loan, the loan amount and the policies of the lender. It can be a fixed amount or a percentage of the loan amount and this upfront charge is distinct from the interest charged on the loan.
8.3 The entire controversy in this suit will be determined keeping in mind the purpose of upfront charge and the above discussed concept of processing fee.
8.4 From the pleadings of the parties and the evidence adduced by them, it is evident that the loan was sanctioned by the defendant bank subject to the plaintiff providing certain Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.18 of 30 primary and collateral securities as mentioned in the sanction letter dated 11.04.2007 (Ex PW1/3 / Ex DW1/2). It is also an admitted fact that some of the terms of this original sanction letter were modified by the defendant bank as is clear from Ex PW1/4. However, from the original sanction letter as well as the modified terms of sanction it is crystal clear that defendant bank always sanctioned the loan subject to the plaintiff providing NOC in respect of leasehold land/ Government land which he was offering as security. This condition of providing NOC was never waived off by the defendant bank. The terms of the sanction letter and of the modified sanction letter, being in writing clearly spell out the required security, leaving no room for any oral or collateral understanding.
8.5 Appreciation of the entire evidence confirms that the defendant bank never changed the terms regarding providing of NOC and however the plaintiff never secured the NOC from the government. This failure of the plaintiff to secure NOC is clear from the Minutes of Meeting placed on record by the plaintiff itself. It was owing to this failure, that the defendant bank did not proceed with disbursement of the loan. Failure to furnish Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.19 of 30 the agreed security amounts to a clear default on the part of the plaintiff. The defendant bank, having processed the loan application and sanctioned the facility in accordance with the stipulated requirements, cannot be held responsible for non disbursement of the loan and it cannot be deprived of its processing fee.
8.6 The record shows that the processing fee was paid by the plaintiff in July 2007, nearly three months after acceptance of the sanction letter by the plaintiff. Notably, the processing fee was neither demanded nor paid prior to the sanctioning of the loan. Rather the plaintiff voluntarily remitted the processing fee after perusing, accepting and signing the sanction letter. This sanction letter clearly mentions in bold, on its first page, the upfront fee to be paid by the plaintiff. Thus when the plaintiff accepted the sanction letter it was well aware of the upfront fee to be paid by it. This term of payment of upfront fee was not hidden by the defendant bank and neither it was inserted discretely and at any later stage. Thus payment of upfront fee was a written term of the agreement between the parties which was accepted by the plaintiff when it accepted the sanction Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.20 of 30 letter and continued dealing/interacting with the defendant bank. The claim of the plaintiff that it was orally agreed between the parties that the upfront charges would be adjusted against the loan or refunded in the event of non-disbursement is wholly untenable. In the face of a written sanction letter, duly signed and accepted, any alleged oral agreement stands negated. If the plaintiff was not satisfied with the terms of the loan sanction, it could have rejected the sanction letter, but it did not and therefore, it has to comply with the terms of the same which include payment of upfront charges.
8.7 There is no merit in the argument of the plaintiff that the interim disbursement of Rs. 40 crores by the consortium in May 2007 without the leasehold land as security implied a waiver of the final security condition. A perusal of the minutes of meetings dated 15.09.2007 and 04.10.2007 (filed on record by the plaintiff itself) shows that the defendant bank never agreed to any unconditional alteration of the security requirements especially with respect to the NOC condition. Instead, the defendant merely stated in the meetings it would try to secure necessary sanctions for the proposed changes, conveying that the said Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.21 of 30 sanction was not yet received. The letter dated 14.11.2007 ( Ex PW1/7) also shows that the plaintiff was still requesting an amendment to the sanction at that stage, confirming that no waiver of the NOC requirement was granted. The opening lines of this letter are quoted below:
"Please refer to our request for amendment in the sanction and various discussions held in the consortium meetings dated 15.09.2007 and 04.10.2007 on the same. It is about two months that we have been waiting for your disbursement and response to our request while other five consortium banks have already disbursed their share of loan."
(emphasis supplied) These wordings make it clear that from April 2007 till November 2007 only discussions were being held between plaintiff and the defendant with the plaintiff requesting the defendant to modify the terms of sanction and the defendant conveying to the plaintiff that it will make efforts for obtaining the modified sanctions from the sanctioning authority. However at no stage did the defendant misled the plaintiff and it never gave any sanction to the plaintiff waiving the requirement of a NOC.
Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.22 of 30 8.8 During the course of arguments, Ld. counsel for the plaintiff argued that by not returning the processing fee, the defendant bank acted in violation of RBI guidelines regarding processing fees. Ld. Counsel drew attention of this court to the 'Guidelines on fair practice course for lenders issued by the RBI' on 06.03.2007. On the basis of these guidelines it was argued that the defendant bank was bound to refund the upfront charges/ processing fees. These guidelines have been carefully perused. The emphasis placed on these guidelines does not advance the plaintiff's case in any manner.
8.9 It must be noted here that these guidelines merely prescribe broad principles for transparency and disclosure and they do not in themselves create an absolute obligation to refund processing fees in the absence of breach of contract by the bank. The guidelines issued on 06.03.2007 as relied upon by the plaintiff, only state that with a view to achieving greater transparency, RBI had directed banks that all 'loan applications' should be comprehensive and should include information about the fees/charges payable for processing the loan application and should also include information about the amount of such fees Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.23 of 30 refundable, in the case of non acceptance of application. However in this case, the loan application or its non acceptance is not under challenge. The loan application was indeed accepted and that is why the sanction was granted. Further, the terms of the loan application are not even on record and neither of the parties referred to the loan application in this case at any stage. These guidelines talk regarding the mentioning of refund of process fee in the case of 'non-acceptance of loan applications' whereas in the present case the loan application of the plaintiff was accepted and loan was sanctioned. For this reason, these guidelines do not advance case of the plaintiff. Therefore these guidelines cannot be evoked in the facts of the present case where no dispute arose regarding the loan application and the loan was duly sanctioned.
8.10 These RBI guidelines can also be seen from another perspective. These are only guidelines by RBI, violation of which by the bank (if established) may lead to action against the bank under The Banking Regulation Act or under other applicable laws. However, these guidelines, even if found applicable, do not anywhere state that even if they are violated, Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.24 of 30 the bank will have to return the upfront charges or the processing fee charged by it.
8.11 During the course of the arguments, Ld. Counsel for the plaintiff relied upon the following orders and judgments passed by the Hon'ble Higher Courts:
1. Sardar Associates and Others v. Punjab and Sind Bank:
MANU/SC/1351/2009
2. M/s Dhevaki Diagnostics Pvt. Ltd. v. State Bank of India W.P (M.D) No.11488 of 2010 & M.P (MD) No.1 of 2010 decided on 15.03.2017.
3. Punjab National Bank v. Gangavaram Port Ltd : MANU/AP/0324/2017
4. Delta Fabrics Pvt. Ltd. v. Industrial Development Bank of India and Others: MANU/WB/0231/2006: 2006 (4) CHN 594.
5. State Bank of India v. M/s Premier Bar Pvt. Ltd. , 2016 SCC Online Calcutta 5404 8.12 However, none of these abovementioned judgments are of any help to the plaintiff. In Sardar Associates (supra), it has been held that a banking company is bound to follow RBI Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.25 of 30 guidelines. There can be and there is no disagreement with the said position. However, this decision does not state that any violation of such RBI guidelines mandates refund of processing fees. Further in the case at hand no violation of any RBI guidelines in the loan application has been agitated by the plaintiff. The plaintiff has not utter a word about the deficiency, if any, in the loan application form and after its loan application form was accepted, sanction letter was also issued and even interim disbursement has been availed by the plaintiff.
Therefore, as already discussed in the preceding paragraphs, the RBI guidelines pertaining to disclosures in the loan application are not at all applicable to the present facts.
8.13 Coming now to the law as laid down in Dhevki Diagnostics (supra). The facts of this case are clearly distinguishable from that of Dhevki judgment. In M/s Dhevki Diagnostics while the borrower had applied for a loan of Rs.8.75 crore, the bank did not sanction the same and instead sanctioned only Rs.6.80 crore which sanction was outrightly rejected by the borrower. For this reason in the said case, the defendant bank was found liable to refund the processing fee.
Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.26 of 30 However in the present case the defendant bank had agreed to sanction the exact amount as required by the plaintiff, which sanction was accepted by the plaintiff and he paid the upfront charges three months after accepting the sanction letter and after holding several meetings with the defendant bank.
8.14 In Punjab National Bank (supra), the Hon'ble Court held that the processing fees is non-refundable in cases of borrower default, which default is obvious in the present case as already discussed above [The default being non production of NOC with respect to leasehold land].
8.15 In Delta Fabrics (supra), it was categorically held that the borrower is not entitled to refund of processing fees when the bank was willing to grant the loan and it was the borrower who failed to comply with the sanction terms. This decision therefore supports the defendant's case and does not help the plaintiff.
8.16 In State Bank of India (supra), the refund was allowed only because the borrower outrightly rejected the terms of the Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.27 of 30 sanction. However in the present case, the plaintiff accepted the terms of the sanction letter in writing and there was no rejection of the sanction letter because of which the defendant bank continued putting further time and effort to ensure that the loan is disbursed thereby incurring further expenses. Thus in a case like present one where the defendant bank attended several consortium meetings after the plaintiff accepted the sanction letter, it cannot be said that the defendant bank is not even entitled to the processing fee. Thus, none of the judgments cited by the plaintiff assist its case.
8.17 In view of the above discussion on the facts of this case, the plaintiff has failed to establish that it was entitled to a refund of processing fees as per the original written sanction letter which was duly accepted by the plaintiff. The defendant bank, having processed the loan application and undertaken significant efforts, is entitled to retain the processing fee as per the original written terms. The plaintiff has therefore failed to prove its entitlement to a refund of the upfront charges or processing fees paid to the defendant bank.
In view of the discussion above, it is held that the Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.28 of 30 plaintiff is not entitled to return of upfront charges as prayed for. This issue is thus decided in favour of the defendant and against the plaintiff.
9. ISSUE No. 2Whether plaintiff is entitled to interest @ 18% p.a or any other rate of interest and for what period? OPP 9.1 In view of the findings on Issue No. 1 given above, the plaintiff is not found entitled to any interest. Accordingly, this issue is decided in favour of the defendants and against the plaintiff.
10. RELIEF 10.1 In view of the findings on issues no.1 & 2, the plaintiff is not found entitled to any relief.
10.2 The suit is accordingly dismissed. Parties to bear their own cost. Original documents, if any, be returned to the concerned parties, as per rules.
Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.29 of 30
11. CONCLUSION 11.1 In conclusion, while this Court has now adjudicated the substantive issues raised in this case, it remains acutely aware of the adverse impact that prolonged commercial disputes can have on the economy and the litigants themselves. This 17-year journey highlights the need for streamlining judicial processes, ensuring minimal adjournments, and fostering professional diligence by all stakeholders involved. Both parties, particularly the public sector bank, have undoubtedly borne significant financial and logistical burdens during the pendency of this suit. It is earnestly hoped that lessons will be drawn from this experience to prevent similar delays in the future, so that commercial confidence is fortified and economic progress remains unimpeded.
12. Decree sheet be prepared accordingly. File be consigned to record room after completion of necessary formalities.
Announced in the open MONIKA by MONIKA
SAROHA
Digitally signed
Court on 26.05.2025 SAROHA Date: 2025.05.29
16:53:26 +0530
[MONIKA SAROHA]
DISTRICT JUDGE-05
(WEST)/THC/26.05.2025
Civ DJ 610475/16 M/s Gold Plus Glass Industry Ltd.Vs. M/s Jammu & Kashmir Bank Ltd. page no.30 of 30