Foreclosure charges can be imposed on business loans as they fall outside the RBI's prohibitive circulars for home loans; acceptance of contract terms binds the debtor.

ORDER:

SUNIL BENIWAL, J.

1. This writ petition has been filed by the petitioners with the following prayer :-

“It is, therefore, most humbly and respectfully prayed that the instant writ petition may kindly be allowed and the impugned award dated 16.01.2024 (Annexure-4) passed by the learned Permanent Lok Adalat, Bikaner (Rajasthan), in Application no.123/2022 may kindly be quashed and set- aside and the application filed by the applicant/respondent under section 22(C)(1) of The Legal Services Authorities Act, 1987 (Annexure-2) may kindly be rejected as such.

Any other appropriate order which this Hon’ble Court deems proper and just in favour of the petitioner may kindly be passed.”

2. The facts, in nutshell, as narrated in the present writ petition, are that the petitioner-Bank herein provided loan amounting to Rs.60 lacs on 31.01.2019 to the respondent. An application was submitted by the respondent for foreclosure of the loan account. The respondent repaid the entire loan amount, however, since the payment was made prior to the stipulated timeline, the petitioner-Bank levied pre-payment charges including interest and penalties. Being aggrieved by the pre-payment charges amounting to Rs.2,09,543/-, the respondent filed a claim petition before the learned Permanent Lok Adalat seeking refund of the amount, which has been charged by the petitioner-Bank upon pre-payment of the loan. The said claim petition was allowed vide award dated 16.01.2024.

2.1 Being aggrieved by the award dated 16.01.2024, the petitioners preferred the present writ petition.

3. Learned counsel appearing for the petitioner-Bank submitted that the Permanent Lok Adalat has passed the impugned award and accepted the claim of the respondent in violation of the circular dated 02.08.2019 (Annex.6) bearing No.DBR Dir. BC. No.08/13/03/00/2019-20. While elaborating his submissions, learned counsel for the petitioners submitted that the said circular has been issued in furtherance of the earlier circular, whereby it was prohibited to charge foreclosure charges / pre-payment penalties on home loans / all floating rate term loans sanctioned to individual borrowers.

3.1 It is submitted that the business loans are excluded from the purview of the above circular and therefore, the bank has rightly levied foreclosure charges and pre-payment penalties. The respondent took credit facilities for the purpose of business, hence, no relaxation could be granted for pre-payment charges. The Permanent Lok Adalat has given an incorrect interpretation of the said circular.

3.2 It is further submitted that the petitioner-bank charged foreclosure charges / pre-payment penalties, which is a part of the sanction letter. The respondent has voluntarily accepted the terms of the credit facility and he had acquiesced to the pre-deposit penalties / charges while depositing the due amount prematurely. The sanction letter was signed by the respondent and therefore, he is bound to abide by the terms and conditions of the sanction letter.

3.3 Based on the above submissions, it is contended that the present writ petition is required to be allowed and the award passed by the Permanent Lok Adalat is required to be quashed and set-aside.

4. Per contra, learned counsel for the respondent submitted that the loan was obtained in the month of January, 2019 and soon after the business was started, the pandemic COVID-19 came and created an unprecedented situation, which resulted in huge financial loss and forced the respondent to take immediate action to discontinue the bank facility and repay the entire loan amount so as to protect himself from further financial losses. In t