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6. The impugned stipulation, which reads, "Pre-payment charges:

4% on the outstanding in respect of loan shifted to other banks plus applicable GST", is assailed by the petitioner on the ground that the guidelines issued under Section 21 and Section 35-A of the Banking Regulation Act and Section 9 and 10 of the MSMED Act prohibits levy of any foreclosure charges/ prepayment charges in respect of Term Loans granted to Micro Small and Medium Enterprises on floating interest rate basis. Reliance is also placed by the learned senior counsel for the petitioner on RBI Circular No. RBI/FIDE/2017-18/56 dated 24- 07-2017 whereby the RBI has prohibited the levy of foreclosure charges/ prepayment penalty in case of MSMEs. It is submitted that the said notification is statutory in nature having been issued by the RBI in exercise of its powers under Section 21 and 35-A of the Banking Regulations Act. Strong reliance is placed on para 5.3 of the Circular dealing with Banking Codes and Standard Board of India [„BCSBI‟] to submit that RBI has set up an autonomous institution in the name of BCSBI in association with the Indian Banks‟ Association for promoting good and fair banking practices. Para 5.3 clearly stipulates that the member banks of the Indian Banks‟ Association shall not levy pre-
payment charges on floating interest rate loans. It is argued that the J&K Bank is not honoring its commitment made to the BCSBI and is illegally and arbitrarily demanding pre-payment charges at the rate of 4% on the shifting of the loan from it to the YES Bank Mumbai.

7. Per contra, the stand of the respondent-bank, as is disclosed by it in its reply affidavit, is that the loans were sanctioned in favour of the petitioner in the year 2022 and were never called in question by the petitioner rather the petitioner accepted all the terms and conditions stipulated in the sanction orders and took the benefit of credit facility extended by the respondent-bank. The petitioner is, therefore, estopped by his conduct to challenge one of the stipulations in the sanction orders, which are now not to the liking of the petitioner. A clear stand is taken by the respondent-bank that, when the petitioner-company availed the credit facility from the respondent-bank, it was not registered under the MSMED Act. The loans were extended in the year 2022 whereas the UDYAM registration was granted to the petitioner only on 25-07-2023. It is submitted by the respondent-bank that the case of the petitioner is covered neither by the Master Circular issued by the RBI nor the Code of Banking Commitments towards the Micro and Small Enterprises, as is claimed by the petitioner. The benefit of the Circulars, the Banking Code and the commitment of the Bank made to BCSBI is not available to the petitioner which availed the loan facility as a trading entrepreneur and was, at the relevant time, not registered as a „Small Enterprise‟ under the MSMED Act.

13. The plea of the learned senior counsel, that petitioner too is covered by the Master Circular issued by the RBI in the year 2015, is thus without any substance.

14. Next comes the plea of the petitioner based upon Para 5.3 of the Reserve Bank of India [Lending to Micro, Small & Medium Enterprises (MSME) Sector]-Directions, 2017 ["directions of 2017"]. It is true that in terms of Para 5.3, the BCSBI, in collaboration with the Indian Banks‟ Association (IBA), the RBI and members Banks have evolved the „Code of Bank‟s Commitment to Micro and Small Enterprises‟ [ "the Code"]. The objective of the Code is to promote good banking practices, setting minimum standards for the adherents, increasing transparency and achieving higher operating standards etc. and the Code of Banks commitment to Micro and Small Enterprises issued in August, 2015 contains the commitment of the Bank to the Micro, Small and Medium Enterprises borrowers that, it will not charge or levy any pre-payment penalty on floating interest rate loans extended to such entities. Clause (h) of para 5.3 of the Code provides as under:-