ORAL JUDGMENT

1.Rule returnable forthwith. Learned advocate Mr. Vipulkumar M. Asodiya waives service of notice of rule on behalf of respondent no.1. Learned advocate Mr. Amar Bhatt waives service of notice of rule on behalf of respondent no.2.

2.Having regard to the controversy involved in the present case which lies in a very narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for final hearing.

3.By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs :

“(a) To issue necessary direction to Respondent No 1, to refund the pre payment charges of Rs. 10,06,246 levied by the bank to the petitioner herein being violative of norms and guidelines prescribed by the RBI.

(b) To pass such other and further orders as may be deem fit and proper.”

4.Brief facts of the case are that the petitioner availed financial assistance from respondent no.1 – Small Industrial Development Bank of India (For short “SIDBI”) of Rs. 300 lakhs being term loan and Rs. 150 lakhs being Cash Credit facilities as per the Letter of Intent dated 21st March, 2016.

4.1) It is the case of the petitioner that after obtaining loan, the installments were regularly paid. However, as the rate of interest of respondent no.1 – SIDBI was on the higher side than the Nationalised Bank, the petitioner as per letter dated 7th November, 2017, requested the respondent no.1 - SIDBI to lower the rate of interest to the prevailing rate of interest being charged which was refused by the respondent no.1 – SIDBI. The petitioner therefore, vide letter dated 28th March, 2018 requested to foreclose the loan and cash credit facility obtained by it.

4.2) The petitioner approached the Bank of Baroda for shifting the financial assistance availed by it from respondent no.1 – SIDBI.

4.3) Respondent no.1-SIDBI demanded Rs.3,92,50,797/ including Rs.10,06,245/- towards prepayment charges to issue No Due Certificate to the petitioner. In the letter dated 4th March, 2018 respondent no.1 - SIDBI specified Rs.8,29,245/- as penal interest for prepayment at the rate of 3% on term loan plus GST and Rs. 1,77,000/- towards penal interest for prepayment at the rate of 1% on working capital limit plus GST.

4.4) The petitioner objected to such levy of prepayment charges vide letter dated 8th May, 2018 on the ground that at the time of granting/sanctioning the loan, the respondent no.1 - SIDBI never informed about the levy of such prepayment charges. It was contended by the petitioner that demand made by respondent no.1-SIDBI was illegal, unauthorised, contrary to the circulars and clarifications issued by respondent no.2 – Reserve Bank of India (For short “RBI”).

4.5) The petitioner however was facing huge financial loss on account of higher rate of interest and therefore, it had no option but to pay prepayment charges under protest.

4.6) The petitioner again by letter dated 8th May, 2018 requested respondent no.1 - SIDBI to provide necessary circulars of RBI and details upon which prepayment charges were levied by respondent no.1 - SIDBI which was replied on 23rd May, 2018 by respondent no.1 - SIDBI intimating the petitioner that the objections of the petitioner were not acceptable.

4.7) The petitioner thereafter filed a complaint before the Banking Ombudsman on 15th June, 2018. The Banking Ombudsman however, did not take any action and therefore, the petitioner filed Special Civil Application No.6663/2019 before this Court. This Court by order dated 8th April, 2019 directed the Banking Ombudsman to decide the complaint made by the petitioner. Pursuant to the order passed by this Court, Banking Ombudsman by letter dated 6th August, 2019 replied that the complaint against respondent no.1- SIDBI is not maintainable as it is not covered under Banking Ombudsman Scheme (BOS), 2006. The petitioner has therefore, filed this petition with the aforesaid prayers.

5.Learned advocate Ms. Hetvi Sancheti for the peti