A sole proprietorship and its owner are legally indistinct, making RBI's prohibition on foreclosure charges applicable to sole proprietors under floating rate loans.

JUDGMENT

Vinod S. Bhardwaj, J. (Oral)

Challenge in the present petition is to the Award dated 14.06.2019 passed by Permanent Lok Adalat (Public Utility Services), Ludhiana, whereby the application moved by the petitioner under Section 22C(8) of the Legal Services Authorities Act, 1987 has been dismissed.

2. Learned counsel for the petitioner contends that the petitioner is the sole proprietor of M/s Narang Handloom and in April 2014, the petitioner-applicant availed loan of Rs. 50,00,000/- vide account No.HLAPLUD0010- 8621. The petitioner-applicant had thereafter availed another loan of Rs. 26,26,747/- from respondent-non-banking finance company vide loan account No.HLAPLUD00181385. Thereafter, The terms and conditions of the said loan agreement were settled between the parties at the time of disbursement of the said loan. The applicant-petitioner started repayment of the said loan in equated installments. However, in the year 2016, another bank agreed to take over both the loans, whereupon the petitioner asked the respondent-non-banking finance company to calculate the total outstanding amount due towards the petitioner. However, while conveying the total outstanding amount, the respondent-non-banking finance company added Rs. 85,669.14/- and Rs. 4,00,367.77/- respectively towards the foreclosure charges. Despite objecting to the said charges as being in conflict with the guidelines/circulars issued by the Reserve Bank of India from time to time, the petitioner deposited the same under the exigent circumstances. Request for refund of the said amount thereafter was made, but to no avail. A legal notice dated 10.01.2018 was also served upon the respondents, but finding no response, the abovesaid application No.212 dated 11.06.2018 was preferred before the Permanent Lok Adalat (Public Utility Services), Ludhiana. A prayer was thus made for refund of the amount of Rs. 1,86,036.91/- to the applicant alongwith interest w.e.f. 08.07.2016 till the amount in question was realized.

3. On notice, the respondent filed its reply wherein while contending that M/s Narang Handloom is a proprietorship firm, the factual aspects noticed above were not denied. It is, however, contended that the foreclosure charges of Rs. 1,86,036.91/- were recovered in view of Clauses 4.3 and 2.9 of the loan agreement, which empowered the respondent to recover the foreclosure charges at the rate of 5% during the initial two years from the date of disbursement and @ 3% thereafter, on the outstanding principal amount. Hence, the charges were levelled legally and were recoverable on account of foreclosure/prepayment of loan account in view of the circulars issued by the National Housing Bank on 14.08.2014 and 22.07.2016.

4. As the conciliation proceedings conducted under 22-C (4) to (7) of the Legal Services Authorities Act, 1987 failed to yield any result, adjudication in terms of 22-C(8) of the Legal Services Authorities Act, 1987 was undertaken by the respondent-Permanent Lok Adalat (Public Utility Services), Ludhiana.

5. On consideration of the respective submissions and the evidence led by the parties, the application filed by the petitioner was dismissed by placing reliance on the clarification/circulars issued by the National Housing Bank. Hence, the writ petition has been filed.

6. Counsel for the petitione