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Showing contexts for: prepayment charges in M/S. Sppl Hotels Pvt. Limited & Anr vs Allahabad Bank & Ors on 1 May, 2018Matching Fragments
Hearing concluded on : January 29, 2018 Judgment on : May 1, 2018 DEBANGSU BASAK, J.:-
The petitioners have assailed the imposition of prepayment charges upon the first petitioner prepaying the credit facilities.
Learned Senior Advocate appearing for the petitioners has submitted that, the first petitioner had enjoyed term loan facilities from the first respondent. Such credit facilities were governed by the terms and conditions of a sanction letter dated January 11, 2013. He has referred to the terms and conditions of such sanction letter, particularly, the clause relating to prepayment charges. He has submitted that, before the expiry of the time for reset of the interest, a second sanction letter was issued by the first respondent dated March 3, 2013. He has referred to the terms and conditions of the second sanction letter also. He has submitted that, on a true and proper construction of the terms and conditions of the two sanction letters, the first petitioner had repaid the credit facilities without prepayment charges being attracted. He has referred to the various correspondence exchanged between the parties in this regard, including the letters dated June 5, 2015, July 27, 2015 and August 14, 2015 of the first petitioner, and the response dated September 14, 2015 issued on behalf of the first respondent. He has submitted referring to 2015 Volume 4 Supreme Court Cases page 136 (Kailash Nath Associates v. Delhi Development Authority & Anr.) that, the first respondent has to suffer some loss to invoke the prepayment clause. He has submitted that, the first respondent did not suffer any loss. Even the affidavit-in-opposition of the first respondent, does not speak of any loss being suffered by the first respondent, at the behest of or by the conduct of the first petitioner. The first petitioner had substantial amount to its credit in the bank account with the first respondent. The first respondent had acted unilaterally, and without the support of law, in adjusting the prepayment charges from the credit balance, available in the bank account of the first petitioner, maintained with the first respondent. The claim of the first respondent not being quantified, and adjudicated by an appropriate authority, the first respondent was not entitled to adjust, any claim from out of the proceeds, of the bank account of the first petitioner, maintained with the first respondent. Therefore, he submits that, the first respondent be directed to reverse the amount deducted on account of prepayment charges.
Referring to the merits to the claim of the petitioners, learned Advocate for the respondents has submitted that, the first petitioner did not fulfil the requisite conditions of prepaying the loan, without the penal charges for prepayment being attracted. He has submitted that, both the sanction letters contemplate and impose a condition that, prepayment is possible without payment of additional interest being attracted, should such prepayment is made, in accordance with the terms of the sanction letters. Both the sanction letters allow the first petitioner, a window of opportunity, in prepaying the loan amount without the imposition of prepayment charges. He has referred to clause 17 of the sanction letter dated January 11, 2013 and has submitted that 90 days advance notice, from the date of prepayment has not been given by the first petitioner in terms of clause 17 of the sanction letter dated January 11, 2013. Clause 17 of the sanction letter dated January 11, 2013 requires a 90 days advance notice, from the date of prepayment and not from the date of reset. He has submitted that, the interpretation of the sanction letter dated January 11, 2013 given by the petitioners cannot be accepted. He has referred to the various correspondence exchanged between the parties and has submitted that, none of the letters issued by any of the parties can be construed to mean that, there was a 90 days advance notice for prepayment given by the petitioners, and the acceptance thereof by the bank. Consequently, it cannot be said that, the first petitioner had acted in terms of clause 17 of the first sanction letter allowing it to repay without prepayment charges. He has referred to the pleadings of the writ petitioners and has submitted that, the petitioners have contended that, they did not receive the second sanction letter dated March 3, 2015. He has submitted that, such a contention is misplaced. Moreover, the first petitioner, in view of such stand in the writ petition, cannot avail of the benefits of the terms and conditions of the second sanction letter dated March 3, 2015. The petitioners cannot claim any right flowing out of the second sanction letter dated March 3, 2015.
Referring to the correspondence exchanged between the parties, learned Advocate for the respondents has submitted that, the first petitioner was aware that, the request for reduction of the rate of interest, was not favourably considered by the bank. Notwithstanding such position, the first petitioner asked for the approximate amount due with the breakup of the details thereof to pay off the liability. The bank by the letter dated August 21, 2015 informed the first petitioner that, in the event the first petitioner wants to foreclose the account, prepayment charges at the rate of 2.05% of the outstanding loan amount would be realized. According to him, the first petitioner never contradicted this letter dated August 21, 2015 of the bank. He refers to paragraph 14 of the writ petition and has submitted that, the writ petitioners admit receipt of this letter on September 8, 2015. He has drawn the attention of the Court to the letter dated September 2, 2015 of the first petitioner and has submitted that, the same cannot be construed to be an answer to the letter dated August 21, 2015 of the bank as the same was received by the first petitioner on September 8, 2015. He has referred to the letters dated September 21, 2015 and September 22, 2015 of the first petitioner which deals with the prepayment and are silent about the prepayment charges. In these letters, the first petitioner never raised any objection with regard to the imposition of prepayment charges.
As noted above, the first petitioner enjoyed term loan facilities from the bank. There are two sanction letters dated January 11, 2013 and March 3, 2013. The petitioner claims not to have received the second sanction letter dated March 3, 2013. In the facts of the present case, a decision is not required on the point as to whether the first petitioner did receive the second sanction letter dated March 3, 2013 or not.
Clause 17 of the sanction letter dated January 11, 2013 deals with prepayment charges. The first petitioner in terms of the sanction letter dated January 11, 2013 has two options of payment of the credit facilities. One option is to pay the credit facilities in accordance with the agreed schedule. One should be mindful of the fact that, the credit facilities are terms loan facilities. The other option is to prepay the same. While exercising the option of prepayment, the first petitioner will incur a liability of prepayment charges, if it does not adhere to the terms and conditions of waiver of prepayment charges, contemplated under clause 17. Clause 17 of the sanction letter dated January 11, 2013 allows prepayment, without prepayment charges being attracted, on the first petitioner issuing a 90 days advance notice to do so, and prepays the amount, at the time of reset of interest. To my understanding, clause 17 contemplates a situation where, the first petitioner can prepay without any prepayment charges, if it evinces an intention to do so 90 days in advance and prepays the entire amount at the time of reset of the interest. Clause 12 of the sanction letter dated January 11, 2013 stipulates that, the account would be reviewed within one year or earlier at the discretion of the bank. The sanction letter dated January 11, 2013 provides for the rate of interest as also the period of reset. It stipulates that, the first reset would be on commercial operation date and annually thereafter. In the facts of the present case, the commercial operation date is September 1, 2014. The first reset would, therefore, be on September 1, 2014 and the subsequent reset of interest annually. However, in terms of clause 12, the bank at its discretion can make a reset prior to the expiry of one year from the commercial operation date. On a meaningful construction of the rate of interest clause and clauses 12 and 17 of the sanction letter dated January 11, 2013, it appears that, the first petitioner is entitled to repay the term loan facilities, without prepayment charges, should the first petitioner issue a prior notice of 90 days from the date of reset, and prepays the amount on the date of the reset. There must be an advance notice of at least 90 days prior to the date of reset.