A sole proprietorship is not a separate legal entity from its owner and is treated as an individual for legal purposes, affecting the applicability of foreclosure charges.

JUDGMENT

Mr. Vinod S. Bhardwaj, J. (Oral)

Challenge in the present petition is to the award dated 04.04.2016 whereby the application filed by the petitioner-sole proprietorship under section 22(C) of the Legal Services Authorities Act, 1987 has been dismissed by the Permanent Lok Adalat (Public Utility Services), Panipat, Camp Court at Sonipat.

2. Briefly the facts are that the petitioner filed application before the Permanent Lok Adalat (Public Utility Services), Panipat, Camp Court at Sonipat, averring that it had obtained loan of Rs.1,25,15,959/- on interest @ 13% per annum against property vide sanction letter dated 31.01.2013 to be prepaid in 144 instalments of Rs.1,72,037/- each. It was also averred that despite an assurance that there will be no processing or foreclosure charges, an amount of Rs.1,75,776/- was levied against processing charges. Further, the petitioner was forced to adjust the balance loan on 04.08.2014 and an amount of Rs.6,73,797.79 was deducted towards foreclosure charge, in violation of law. The petitioner claimed return of the said amount along with interest @ 24% per annum and compensation for mental and physical harassment.

3. The respondent filed its reply before the Permanent Lok Adalat (Public Utility Services) raising various objections including that a Hindu Undivided Family had obtained the loan against an equitable mortgage. The fee/charges have been rightly deducted as per the terms & conditions of the loan agreement and the petitioner is not entitled to any refund. On failure of conciliatory proceedings, adjudication was undertaken under section 22C(8) of the Legal Services Authorities Act, 1987. On consideration of evidence, the Permanent Lok Adalat (Public Utility Services) dismissed the application by recording as under:-

"7. After hearing the arguments of the ld. counsel for the parties and going through the documents placed on the file by both the sides, It is clear that though the applicant, in its application, has also challenged the recovery of process charges of Rs.1,75,776/- by the respondents. But at the time of arguments, the ld. counsel for the applicant had stated at the bar that he did not press the point that the process fee has been wrongly charged from the borrowers. This has been rightly done by the ld. counsel for the applicant as all the borrowers had admitted to pay Rs.1,75,776/- the process fee as applicable which is also clear from loan sanction letter (copy annexure R2). So, in view of this position, it is held that the aforesaid amount has been rightly charged from the applicant and its co-borrowers.

8. The contention of the ld. counsel for the applicant that the amount of Rs. 6,73,797.79 charged from the applicant towards foreclosure/pre-payment charges was wrong, is devoid of any force. Regarding pre-payment, article 1 (j) of annexure R3 lays down that "pre-payment" means premature re-payment(whether in part or in full) as per the terms and conditions laid down by IHFL (India bulls Housing Finance Limited) in that behalf and in force at the time of pre-payment. Article2.9 of this document further lays down as under:

"Pre-payment of the loan: That IHFL may in its sole and absolute discretion and subject to such terms and conditions as IHFL, may prescribe and also upon the payment of pre-payment charge which has been mutually decided and are specified in the applicable schedule on the amount so prepaid, permit pre-payment/acceleration in payment of EMIS at the request of the borrower's subject to that no pre-payment shall be made within the number of months (as mentioned in the schedule) of the commencement of the EMIS. The borrower's further agrees that IHFL may specify from time to time, the minimum amount of pre-payment/amounts payable on account of acceleration of EMIS."

The schedule attached to annexure R3 shows that the pre-payment charges shall be levied at 5% during the initial 2 years from the date of first disbursal and 3% thereafter on the principal outstan