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: Orders Refund Of ₹83.41 Lakh
In a significant ruling reinforcing the in , the on directed the to refund ₹83.41 lakh in deducted from . Justice Jasmeet Singh held that a bank cannot impose charges that are not specifically provided for in the loan agreement, and that without the borrower's express consent is impermissible.
The judgment strikes at the heart of a common banking practice — the imposition of based on or website updates, often without explicit mention in the loan documentation. The Court’s observations reaffirm the basic principle of contract law that there must be a on all material terms.
The Dispute: A Sudden Hike in Interest Rate
Campari Exports, a medium enterprise covered under the , had availed a of ₹54.54 crore from SBI following an Arrangement Letter dated . The letter contained the material terms governing the loan. The facility was subsequently renewed on and again on .
The trouble began when SBI abruptly increased the interest rate from 8.75% per annum to 17.25% per annum. Faced with this steep hike, the company decided to prematurely close the loan account. It communicated its intention through multiple emails and requested the release of property documents.
SBI complied with the closure but deducted approximately ₹98.43 lakh towards . After the company amended its petition, the disputed amount stood at ₹83.41 lakh (excluding GST). The company contended that no such charge was ever agreed upon in any of the .
SBI’s Defense: Reliance on an Internal Circular
SBI defended the deduction by relying on its circular dated , which prescribed a of 2% of the prepaid amount. The bank argued that the company was bound by the terms and conditions of the loan documents, including any modifications and other charges notified by the bank from time to time on its official website. In essence, SBI claimed that the borrower had implicitly consented to future changes by accepting the loan.
Court’s Reasoning: The
Justice Jasmeet Singh scrutinised the and found that none of them — neither the original nor the renewals — contained any provision for . The Court observed:
“It is a that its terms and conditions must be clear and unambiguous and, that both the parties fully understand them before signing. Without this, there can be no true meeting of the minds and therefore, no valid contract.”
The Court further noted that SBI’s circular dated , which sought to impose the 2% charge, was effective only from — well after the last on . Even assuming the bank could levy such charges without notifying the borrower in writing, the circular could not apply retrospectively to a that had already been renewed.
“Even assuming that the respondent No. 1 could levy the aforesaid without notifying the other contracting party about the same clearly in writing, the same does not apply to the petitioner as the said circular dated 24.02.2023 is effective from 01.04.2023 i.e. after the date of last .”
Unilateral Alteration Not Binding
The Court categorically held that the after the contract was concluded constituted an . Such an alteration cannot bind the borrower unless the borrower specifically agrees to the changed terms. Merely permitting SBI to notify additional charges through its website or other media does not amount to incorporation into the contract.
“The , subsequently, is in the nature of altering the terms and conditions of the initial contract.”
The bench added that allowing a bank to unilaterally modify a contract through would undermine the very foundation of .
Distinguishing Precedent
SBI sought to rely on the ’s decision in , where were upheld. However, Justice Singh distinguished that case on two grounds: first, the in Krupanidhi were expressly contained in the agreement itself; and second, the relevant circular there was notified before the agreement was executed. Here, neither condition was satisfied.
Implications for
The judgment has significant implications for the banking and financial services sector. It sends a clear message that lenders cannot rely on or to levy charges not agreed upon at the time of contracting. Borrowers — especially MSMEs — often sign without the ability to negotiate. The ruling reinforces the need for in all contractual terms.
Legal practitioners handling banking disputes may find this decision useful when challenging by financial institutions. It also underscores the importance of documenting every charge in the loan agreement itself, rather than relying on general references to bank policies.
Conclusion
The directed SBI to refund ₹83.41 lakh to Campari Exports within four weeks. The order is a reminder that banks, despite their regulatory powers, cannot unilaterally impose financial burdens on borrowers without explicit contractual authority. As the Court observed, a contract without clear terms is no contract at all.
The case was argued by Advocates and for the petitioner, and by Advocates , , , , , CGSC, , and for the respondents.
