National Consumer Disputes Redressal
Karnataka State Financial Corporation vs Mrs. Sheela S. Kotecha on 16 September, 2009
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI REVISION PETITION NO. 488 OF 2005 (From the order dated 19.01.2005 in Appeal No. 773/2003 of the State Commission, KARNATAKA) KARNATAKA STATE FINANCIAL CORPORATION Petitioner(s) 330/50, 3rd Floor Bunts Hostel Road Mangalore D.K. Karnanata Vs. MRS. SHEELA S. KOTECHA ... Respondent(s) Proprietrix M/s. Kotecha Hall Salmara, Puttur D.K. Karnataka BEFORE: HONBLE MR. JUSTICE B.N.P. SINGH, PRESIDING MEMBER HON'BLE MR. S.K. NAIK, MEMBER For the Petitioner: MS. NAZNEEN AHMED, ADVOCATE For the Respondent: MR. V.N. RAGHUPATHY, ADVOCATE Dated 16th September, 2009 ORDER
PER JUSTICE B.N.P.SINGH Shorn of details Mrs. Sheela S. Kotecha, the respondent availed loan of Rs. 65,00,000/- from petitioner Corporation to establish an industry.
The loan was payable with interest in 24 quarterly installments commencing from 10.08.1998. The respondent allegedly, had been punctual in making payment of the installments. However, in January, 2001 the petitioner offered a reduction of 1% interest on loan of Rs. 15,00,000/- availed by the respondent with a condition to pay Rs. 5,008/- towards premium which was accordingly paid on 09.01.2001. However, subsequently, it came to her notice that the interest charged by opposite party was exorbitant, compared to other banks which lured her to get financed on reduced rate of interest. She moved petitioner Corporation accordingly, for foreclosure of the loan and cleared all liabilities and liquidated entire loan on 14.02.2001. The petitioner Corporation, however, asked her to pay an additional amount of Rs.1,06,564/- as premium for foreclosure of the loan. Though protest was registered by her, she had to make payment as her account would not be closed without such payment. Notwithstanding payments made by her, she sought refund of the amount collected as premium, and it is how that the issue became debatable. She, having not got refund from the petitioner Corporation, filed a consumer complaint seeking direction to petitioner Corporation to pay Rs.1,11,554/- collected from her, along-with interest and compensation.
The complaint was resisted by the petitioner Corporation holding that collection of premium of Rs. 1,06,564/- for pre-closure of the loan account was well within the terms of loan sanction order and hence they did not acknowledge their liability to refund the sum in question. The District Forum, on evaluation of evidence and also regard being had to the pleadings of the parties, accepting claim, directed petitioner Corporation for refund of Rs. 1,11,554/- with interest thereon @ 18.5% p.a. from 14.02.2001. Compensation of Rs. 11,000/- was also awarded and failure to implement the direction, was to carry interest @ 18.5%.
Appeal preferred before State Commission was dismissed while modulating award to Rs.1,06,564/- from Rs. 1,11,554/-, that being the sum collected by petitioner Corporation, as premium for pre-closure of loan account.
Contentions raised before fora below are sought to be reiterated before us by petitioner Corporation holding that the Corporation has been established with the object of rendering financial assistance to the industrial concerns and the money advanced and lent by it to them are in the nature of public moneys collected by way of refund of loan from Industrial Development Bank of India and other Central Public Institutions and the Corporation has to deal with these funds on business principles, due regard being had to the interest of the industry, commerce and general principle. Our attention was drawn to clause XIV of Deed of Hypothecation which are in the following terms:-
The borrowers will not be at liberty to repay the outstanding principal sum in full or in part before the due date or dates prescribed for payment in these presents except with the prior approval in writing of the Corporation and subject to such terms and conditions as may be stipulated by the Corporation in this behalf as its sole discretion.
If these provisions made in the hypothecation deed were to be given credence, that did not permit petitioner Corporation for realization of premium for pre-closure of the loan account as what it seeks to import was only a sanction to be obtained by the loanee, in case he chose pre-closure of the loan account. There is no gain saying the fact that respondent had accordingly moved petitioner Corporation for foreclosure of the loan account.
The learned counsel for the petitioner Corporation also harps on the following stipulations made in the hypothecation deed which too, in our opinion, was not germane to the issue: -
borrowers shall pay to the Corporation, interest at such other rate fixed by the Corporation from time to time and intimate to the borrowers. On such intimation, the rate of interest payable by the borrower shall be the rate of interest so communicated effective from the date mentioned in the said communication, notice/letter to the borrower provided that in the event of an increase in the rate of interest, the borrower shall have the option to pre-pay to the Corporation forthwith, but not later than 30 days on receipt of such intimation, the entire outstanding of the loan together with all outstanding interest thereon.
Needless to emphasize that the stipulations made in the deed of hypothecation would be operative only in the event of revision in the rate of interest giving option to the borrower for foreclosure of the account.
The District Forum had also taken notice of Circular No. 695, dated 22.02.2000 which provides inter-alia for levy of foreclosure premium. We are afraid that the aforesaid Circular forms part either of the sanction order by which loan was sanctioned to the respondent or the hypothecation deed. When there has been a contract between the parties that being a bilateral action, both parties are bound by the terms and conditions as stipulated therein. As we have noticed, the circular in question does not form part of the hypothecation deed.
Even in sanction order, the respondent was not called upon to pay premium in the event of foreclosure of the loan account. Clause (a) of para (03) of the sanction letter too speaks only about revision in structure of the interest for which the Board of Directors were authorized. Learned counsel for petitioner would place reliance on Annexures P-10 & P-11 which shows that though Corporation had been permitting loanees to pre-pay the loan without charging premium for such foreclosure, now the Board of Directors of the Corporation had decided a foreclosure premium to be charged in certain cases. Though these documents were filed as additional documents by petitioner Corporation, we would not prefer to take notice of them, for two reasons.
Firstly, no permission of the Commission was ever obtained for filing additional documents for which the learned counsel for the respondent expresses her ignorance, and secondly, these documents were not before the lower fora to enable them to take notice of them and modulate their finding, if required.
The recourse taken to by petitioner Corporation in realization of the premium for foreclosure of the loan account was a punitive action discouraging the loanees repaying the loan amount early. We appreciate observations made by the District Forum that the object of public policy is to encourage loanees repaying liability of their loan shortly, instead of penalizing loanee for payment of premium for pre-closure of the loan account. The action resorted to by petitioner Corporation was not authorized either in terms of the sanction order or the deed of hypothecation. Both the fora below rightly answered the issue against petitioner Corporation for collection of premium in that account.
We, accordingly, dismiss the revision petition and affirm the finding of the State Commission with no order as to cost.
J (B.N.P. SINGH) PRESIDING MEMBER (S.K. NAIK) MEMBER Dd/16