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2022 Supreme(Online)(Mad) 60733
TAMIL NADU STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI
Not Mentioned, Not Mentioned
Unsuccessful Complainants – Appellant
Versus
Opposite Party – Respondent
First Appeal | C.C. No.127 of 2014
The applicability of RBI Circulars to NBFCs versus banks, maintaining that loan agreements enforceable before regulatory changes govern pre-closure charges.
Headnote:(A) Consumer Protection Act, 1986 - Sections relevant to deficiency in service - Collection of pre-closure charges by Non-Banking Finance Companies (NBFCs) - Opposite Party's right to charge in accordance with loan agreement upheld, while prior RBI Circular concerning banks was not applicable - Loan terms were agreed upon by complainants, making invocation of RBI directives inappropriate. (Paras 1, 4, 8, 9)
(B) The court noted the disagreement over the applicability of RBI guidelines and the conduct of the parties under the loan agreement, emphasizing established contractual obligations without any assertive violation of service standards by the Opposite Party.
Facts of the case:
The complainants sought refund of pre-closure charges from the Opposite Party, claiming the charges were contrary to RBI directives following their intention to transfer their loan. The Opposite Party asserted its right under the loan agreement, leading to the dismissal of the complaint by the District Forum.
Findings of Court:
The complaint was dismissed as the court upheld the Opposite Party's adherence to the Loan Agreement, finding no deficiency in service or fraudulent conduct.
Issues: The applicability of RBI Circulars on foreclosure charges by NBFCs versus Banks, and whether the terms of the Loan Agreement adequately supported the collection of prepayment penalties.
Ratio Decidendi: The court ruled that the loan agreement terms prevailed, with the relevant RBI Circulars being inapplicable to the respondent due to its status as an NBFC, reiterating that the complainants were bound by their agreement without having raised issues at the time of payment.
Result: Appeal dismissed.
| Table of Content |
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| 1. the complainants applied for a loan and were charged foreclosure fees. (Para 1 , 2) |
| 2. the opposite party, as an nbfc, claims no deficiency of service as per loan terms. (Para 3) |
| 3. the applicability of rbi circulars and the interpretation of loan agreements are contested. (Para 4 , 5) |
| 4. the court concludes no regulatory prohibition was applicable at the time of charges. (Para 6 , 7 , 8) |
| 5. the appeal is dismissed, affirming no merit exists based on provided arguments. (Para 9) |
1. The unsuccessful complainants have come up with this First Appeal, as against the Order dated 5.01.2018, passed by the DCDRF, Chennai - North, in C.C. No.127 of 2014, in and by which, the complaint filed by them, seeking refund of pre - closure charges collected by the respondent / Opposite Party at the time of pre - closure of the loan, has been dismissed on the ground that the respondent / Opposite Party has not committed any deficiency in service in collecting the said charges.
2. The case of the appellants / complainants, as projected in the complaint filed before the District Forum, in brief, runs thus:
On 28.7.2011, vide Application No.132384, the complainants applied for Home Equity Loan with the Opposite Party, which sanctioned a loan of Rs. 40 lakh with floating rate of 14% interest per annum, for which, the house property of the complainants was mortgaged as collateral security. From the complainants, the Opposite Party collected Rs.77,210 towards administrative charges / service tax / education cess. Even before disbursal of the loan, the Opposite Party recovered two EMIs on 12.7.2011 and 13.8.2011, thereby causing interest - loss of Rs. 24,000. Repayment of the loan was through Equated Monthly Installments (EMI) of Rs. 62,107, from 5.9.2011 to 5.8.2021, for 120 months. One of the conditions stipulated in the Loan Sanction Letter, dated 28.7.2011, regarding pre - closure of the loan is that 2% of the amount shall be prepaid if the payment is through own funds and 4%, if paid via balance transfer of the loan to any other financier. Pre - closure is not permitted within six months from the date of agreement and, for any pre - closure after six months, the Opposite Party would charge the amount as mentioned above in the sanction letter.
While so, on 29.4.2014, the complainants expressed their intention to transfer the loan to Deutsche Bank, whereupon, the Opposite Party directed them to pay the foreclosure charges and the complainants paid Rs. 1,62,705 towards the same, for which, Receipt No.12599189 , dated 29.4.2014, was issued.
Demand and collection of the above sum towards foreclosure charges is contrary to the Circular issued by the Reserve Bank of India (RBI) vide, Circular DBOD No. DIR.BC.107/13.03.00/2011-12, dated 5.6.2012, prescribing that the Banks will not be permitted to charge fore - closure charge on home loans on floating interest rate basis with immediate effect. In the year 2014, the RBI further modified the Circular by abolishing the levy of foreclosure charges. As such, the charge levied towards prepayment as contained in the Loan Sanction Letter is rendered void and not enforceable.
Hence, the complainants sought the District Forum to direct the Opposite Party to pay Rs. 1,62,705 that was collected towards fore - closure charges, Rs. 10 lakh as compensation for mental agony and Rs. 25,000 towards costs of the complaint.
3. The respondent / Opposite Party resisted the same by filing a written version, wherein, among other things, it is stated as follows:
The Opposite Party is not a Bank, rather, it is a Non Banking Finance Company (in short NBFC) and hence, the complainants cannot invoke the circulars issued by the RBI in respect of Banks, as against the Opposite Party. The complaint is based on a misconception / misrepresentation that the RBI had prohibited collection of foreclosure / pre payment charges by reference to Circulars applicable to Banks, whereas, no such Circular applicable to NBFCs was in force on th
