Dev Raj, Member:
1. This appeal is directed against the order dated 04.09.2013, rendered by the District Consumer Disputes Redressal Forum-II, UT, Chandigarh (hereinafter to be called as the District Forum only) vide which it allowed the complaint filed by the respondents-complainants and directed the Appellant/Opposite Party as under:-
œ12. We accordingly allow this complaint and direct the Opposite Party to refund the foreclosure charges of Rs.4,79,807.54/- taken from the Complainants. This amount be returned along with interest @9% p.a. from the date it was taken, till it is refunded. The Opposite Party is also directed to pay a sum of Rs.10,000/- as costs of litigation to the complainants.
13. This order be complied with by the Opposite Party within 30 days from the date of receipt of its certified copy.?
2. In brief, the facts of the case, are that a site/plot underneath the commercial building bearing No.134, Sector 5, Mansa Devi Complex, Panchkula was allotted in favour of the complainants, vide allotment letter dated 17.11.2005 issued by HUDA followed by Deed of Conveyance dated 13.11.2009 (Annexure C-1). It was stated that to pay off a part of the sale price of the said plot, the complainants availed of home loan of Rs.2,24,25,000/- from ICICI Bank Ltd., against security of the aforesaid immovable property. It was further stated that being lured by the offer of the Opposite Party to sanction higher amount of loan, the complainants opted for the transfer of loan from ICICI Bank to the Opposite Party Finance Company. It was further stated that the Opposite Party vide sanction letter/loan agreement dated 30.5.2009 sanctioned home loan of Rs.2,12,00,000/-. It was further stated that the Opposite Party got signed several blank forms from the complainants and one such loan agreement was executed by them on 30.05.2009 (Annexure C-2). It was further stated that later on vide sanction letter dated 07.08.2010, the Opposite Party sanctioned another loan of Rs.63,00,000/- against Loan A/c No.RLLPCHA000161701 and, as such, it sanctioned two loans aggregating Rs.2,75,00,000/-. It was further stated that the complainant set up two industrial ventures i.e. one at IGC, Phase II Samba, JandK in the name of M/s JandK Aluminium Company and the other at Village Haryoli, Tehsil Raipur Rani, District Panchkula in the name of M/s. Phoenix Transmission Products (P) Limited. It was further stated that to run these units, the complainants had obtained credit facilities from State Bank of India, Specialised Commercial Branch, Sector 17, Chandigarh. It was further stated that due to the reasons beyond control, the above units started incurring heavy losses and, ultimately, came to a grinding halt. It was further stated that a request vide letter dated 13.4.2011 (Annexure C-4) was made to State Bank of India to rehabilitate the said units. It was further stated that due to the aforesaid reasons, some installments cheques bounced and upto 24.5.2011, the complainants paid 23 installments of Rs.3,04,158/- each aggregating Rs.69,95,634/- in the first loan and 8 installments of Rs.93,521/- each aggregating Rs.7,48,168/-. (totaling Rs.69,95,634 + Rs.7,48,168 -= Rs.77,43,802). It was further stated that in all, the complainants had paid Rs.77,43,802/-. It was further stated that the complainants decided to sell the units and pay off the entire dues to the Opposite Party in one go. It was further stated that the Opposite Party vide letters dated 20.5.2011 (Annexures C-5 and C-6)) informed that a total Rs.2,00,16,121.79 qua first loan and Rs.65,25,502.15 qua second loan (totaling Rs.2,65,41,623.94) were due against the complainants. It was further stated against two loans totaling Rs.2,75,00,000/-, the complainants had already paid Rs.77,43,8092/-, which included repayment of loan amount as well as up-to-date interest. It was further stated that the Opposite Party illegally demanded forclosure charges of Rs.6,25,994.06 and Rs.3,33,621.02, totaling Rs.9,59,615.08. It was further stated that on 20.5.2011 itself, the Opposite Party had reduced the above demand by 50% and scaled it down to Rs.4,79,807.54. It was further stated that the complainants sold the property to one Sh. Sarbpal Singh son of Sh. Kirpal Singh for Rs.2,03,52,500/- and raising rest of the amount from other sources, paid Rs.2,60,61,815/- inclusive of Rs.4,79,807.54 to the Opposite Party on 24.05.2011. It was further stated that to complete the sale formalities, registered Sale Deed dated 22.6.2011 was made in favour of the said buyer (Annexure C-7). It was further stated that since the demand and coerced recovery of Rs.4,79,807.54 was unjust and illegal, notice dated 16.6.2011 was sent to the Opposite Party, to refund the said amount alongwith 18% interest (Annexure C-8).
3. It was further stated that charging of upfront/process fee of Rs.1,65,450/-, prepayment/foreclosure charges of Rs.4,79,807.54 and demand of hefty sum towards interest, on the part of lenders surely tantamounted to undue enrichment. It was further stated that the Government as well as Reserve Bank of India were averse to the very idea of such a charge. It was further stated that in October, 2010, National Housing Bank, a subsidiary of Reserve Bank of India had directed Housing Finance Companies (HFCs) not to levy any penalty in the event of foreclosure of housing loans, if the borrower pays of from its own resources. It was further stated that, at the instance of the Government, all the nationalized Banks stopped levying such charges. It was further stated that the matter was also raised before the Competent Commission of India, which after thorough investigation, concluded that such levy was unjustified.
4. It was further stated that the Opposite Party wrongfully recovered Rs.4,79,807.54 as foreclosure chargers and, as such, they were liable to refund the said amount alongwith interest @18% per annum. It was further stated that the aforesaid acts of the Opposite Party amounted to deficiency in rendering service and indulgence into unfair trade practice. When the grievance of the complainant, was not redressed, left with no alternative, a complaint under Section 12 of the Consumer Protection Act, 1986 (hereinafter to be called as the œAct? only), was filed seeking directions to the Opposite Party to refund Rs.4,79,807.54 alongwith interest @18% per annum w.e.f 24.5.2011; pay Rs.5,00,000/- as compensation for physical harassment and mental agony besides Rs.1,00,,000/- as cost of litigation.
5. Opposite Party, in its written version, took up a preliminary objection that any dispute pertaining to the loan agreement was to be referred to arbitration in terms of Clause 17 of the loan agreement. On merits it was stated that the Opposite Parties have now merged with Reliance Capital Limited, which is a non finance company duly incorporated under the provisions of the Companies Act, 1956. It was further stated that in the year 2009, the complainants approached the Opposite Party for taking a home loan, and pursuant to that, terms and conditions of the loan documents, were duly executed between the parties, vide agreement dated 30.5.2009. It was further stated that complainant No.1 was the borrower while complainant No.2 to 4, were the co-borrowers. It was further stated that home loan of Rs.2,12,00,000/- was disbursed vide loan account No.RLHLCHA000128977, which was to be repaid in 120 monthly installments of Rs.3,04,158/- each. It was further stated that the complainants were granted another loan of Rs.63,00,000/- vide loan account No.RLLPCHA000161701, which was to be repaid in 108 monthly installments of Rs.93,520/- each. It was further stated that loan agreement dated 7.8.2009 for the second loan was also executed between the parties. It was further stated that the foreclosure/prepayment charges charged from the complainant, were totally in consonance with the loan agreements and now the complainant could not back out of these terms and conditions. It was further stated that as per the terms and conditions of the loan agreements, Rs.9,59,615/- i.e. (Rs.6,25,994 + Rs.3,33,621) were the foreclosure/prepayment charges, but since the complainants were in financial hardship, the said amount was reduced to Rs.4,79,807/- by giving a rebate of 50% on prepayment/foreclosure charges. It was denied that the complainants were made to sign blank documents. It was further stated that the complainants signed all the documents with open eyes and after going through the details of the loan agreements. It was further stated that in Hatsum Agro Products Vs. Industrial Development Bank of India, the Madras High Court, upheld the levy of foreclosure/prepayment charges by the Bank. It was denied that the foreclosure charges of Rs.4,79,807/- were wrongfully recovered from the complainants and, therefore, they were not entitled to the refund of the same. It was further stated that neither there was any deficiency, in rendering service, on the part of the Opposite Party, nor did it indulge into unfair trade practice. The remaining averments, were denied, being wrong.
6. The Parties led evidence, in support of their case.
7. After hearing the Counsel for the contesting parties, and, on going through the evidence and record of the case, the District Forum, allowed the complaint, as stated above, in the opening para of the instant order.
8. Feeling aggrieved, the instant appeal, has been filed by the Appellant/Opposite Party.
9. We have heard the Counsel for the parties, and have gone through the evidence and record of the case, carefully.
10. The Counsel for the appellant/Opposite Party submitted that, as per the loan agreement (Annexure C-2), the loan could be prepaid alongwith foreclosure charges. It was further submitted that M/s JandK Aluminium Company was one of the borrowers and on account of its non-impleadment, the complaint was bad for non-joinder of necessary parties. It was further submitted that sanction letter (Annexure C-3) mentioned that type of loan was loan against property, commercial enhancement. As per Annexures C-5 and C-6, 50% foreclosure charges were waived off. It was further submitted that the agreement for loan was dated 30.05.2009 and the complainants closed the loan by paying the amount on 24.05.2011. It was further submitted that the Policy of National Housing Bank dated 19.10.2011 came into operation after the drawl of loan/closing of loan account, by the respondents/complainants and was, therefore, not applicable. It was further submitted that terms housing and home are different. It was further submitted that since the loan was for commercial purpose, the same did not come under the definition of housing project and the complaint was not maintainable. It was further submitted that, as per the guidelines of the Reserve Bank of India, the loan obtained for housing projects did not fall under the category of home loans, and was, therefore, not exempted from payment of pre-payment charges.
11. The Counsel for the respondents/complainants, submitted that as was evident from Annexure C-1, the property was SCO for which land was acquired in the year 1989 for raising housing project. It was further submitted that the Opposite Party did not take any objection that this was not a home loan, and rather in Para No.3 of its reply, stated that the respondents/complainants had taken home loan. It was further submitted that the housing finance companies could not charge prepayment levy or penalty on pre-closure of housing loans in view of the Policy dated 19.10.2011 of National Housing Bank. It was further submitted that as per Annexure-2, the terms Home and House are synonyms. The respondents/complainants paid the loan amount after selling property. It was further submitted that as per Annexure AA-1, it was mentioned œPrepayment charges would be NIL for Home loans in case the loan is closed through own source of fund.? The Counsel for the respondents/complainants placed reliance on the judgment titled as œState Bank of India Vs. Usha Vaid and Anr?, First Ap[peal No.07/130 decided by State Consumer Disputes Redressal Commission, New Delhi on 27.04.2007, against which Revision Petition filed before the National Commission was decided on 26.07.2007 and subsequently, S.L.P (Civil) No.16345/2007 filed before the Honble Supreme Court was dismissed on 19.09.2008.
12. The first question, that arises for consideration, is, as to whether, the complainant fell within the definition of a consumer or not? The appellant/Opposite Party has specifically stated in the grounds of appeal that the loan was availed of by the respondents/complainants for purchase of commercial property and the District Forum failed to consider the said issue. It is settled principle of law, that the Consumer Fora, at any stage of the proceedings, is duty bound to decide of its own, the legal questions, as to whether, the complainant fell within the definition of a consumer; whether it had territorial and pecuniary jurisdiction to entertain and decide the complaint; whether the complaint involved the consumer dispute; and whether the consumer complaint was maintainable. The respondents/complainants obtained two loans of Rs.2.12 crore and Rs.63 lacs, for commercial purpose i.e. for their business and utilized the same for the said purpose. The loan facility was taken by the respondents/complainants for commercial purpose i.e. for business to earn huge profits. For proper decision of this question, the provisions of Section 2(1)(d) and Section 2(I)(o), defining the consumer and service respectively are extracted as under ;
œ(d) "Consumer" means any person who, -
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised or under any system of deferred payment when such use is made with the approval of such person but does not include a person who obtains such goods for resale or for any commercial purpose; or
(ii)[hires or avails of] any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other then the person who [hires or avails of] the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person [but does not include a person who avails of such services for any commercial purpose]; Added by Act 62 of 2002 w.e.f. 15.03.2003.
[Explanation. For the purposes of this sub-clause "commercial purpose" does not include use by a consumer of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood, by means of self-employment;]
Section 2(1)(o) defines service as under:-
(o) "service" means service of any description which is made available to potential 16[users and includes, but not limited to, the provision of] facilities in connection with banking, Financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, 17[housing construction] entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.?
13. According to Section 2(1)(d)(i) of the Act, the consumer does not include a person who obtains such goods for resale or for any commercial purpose. Section 2(1)(d)(ii), which was amended by Act 62 of 2002 w.e.f. 15.03.2003, clearly lays down that the person who hires or avails of the services for consideration, for any commercial purpose, shall not qualify, as a consumer. In the instant case, the respondents/ complainants, availed of the services of the appellant/Opposite Party, by obtaining loans, in the sum of Rs.2.12 crore and Rs.63 lacs, for commercial purpose. It is also clearly evident from Schedule appended to the loan agreement (Annexure C-2) that the loan was for commercial purchase (purpose). As per the in-principle sanction (Annexure C-3), the loan was against property for commercial enhancement. The schedule appended to the loan agreement, and in-principle sanction, have been signed by the respondents/complainants for M/s. JandK Aluminium Company. When the loan obtained was for commercial purpose, the transaction was clearly commercial in nature. In other words, they took loans for furthering their business, to generate huge profits, and, as such, they did not fall within the definition of a consumer. In Economic Transport Organization Vs.Charan Spinning Mills (P) Ltd., and Anr., I (2010) CPJ 4 (SC), a five Judges Bench, of the Honble Apex Court, also held that, after the amendment of Section 2(d) of the Act w.e.f.15.03.2003, the services of the carriers, if had been availed of, for any commercial purpose, then the person availing of the services will not be a consumer. In Birla Technologies Ltd. Vs Neutral Glass and Allied Industries Ltd. 2011 (I) SCC 525 and Sanjay D.Ghodawat Vs R.R.B. Energy Ltd. IV(2010) CPJ178(NC), a case decided by a full Bench of the Honble National Commission, similar principle of law was laid down. In Shushma Goel Vs Punjab National Bank, 2011 CPJ 270(NC), the complaint related to the operation of bank account, maintained by a commercial entity, for commercial purpose. It was held that the complainant did not fall within the definition of a consumer. Since, the services of the appellant/Opposite Party, in the instant case, were availed of, by the respondents/complainants, for commercial purpose, for earning huge profits, they did not fall within the ambit of a consumer, and, as such, the complaint was not maintainable.
14. The next question, which arises for consideration, is, as to whether, the complaint under Section 12 of the Consumer Protection Act, was maintainable or not before the District Forum, on account of the arbitration Clause No.17 of the terms and conditions of Loan Agreement (Annexure C-2). With a view to appreciate the controversy, in its proper perspective, reference to Section 3 of the Act is made, which reads as under;
œ3.Act not in derogation of any other law.”
The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.?Section 3 of the Act, is worded in widest terms, and leaves no manner of doubt, that the provisions of the Act, shall be, in addition to, and not in derogation of any other law, for the time being, in force. The mere existence of an arbitration clause, in the document, aforesaid, would not oust the jurisdiction of the Consumer Fora, in view of the provisions of Section 3 of the Act. Similar principle of law, was laid down, in Fair Engg. Pvt. Ltd. and another Vs N.K.Modi (1996)6 SCC385 and C.C.I Chambers Coop. Housing Society Ltd. Vs Development Credit Bank Ltd. (2003) 7 SCC233. In this view of the matter, the submission of the Counsel for the Appellant/Opposite Party, being devoid of merit, must fail, and the same stands rejected.
15. The next question, which falls for consideration, is, as to whether, the Opposite Party was right in charging the foreclosure charges of 4,79,807/- on pre-payment of the loan amounts or not? There is hardly any dispute that, at the time of granting the loan, loan agreement dated 30.5.2009 (Annexure C-1) in respect of loan of Rs.2.12 crores was executed between the parties and all the complainants appended their signatures thereon and also on the in-principle sanction letter dated 07.08.2009 (Annexures C-3). Clause 2.9 of the loan agreement (Annexure C-2) deals with prepayment charges, which is extracted hereunder:
œ2.9 PRE-PAYMENT OF THE LOAN:
a) The Lender may in its sole discretion and on sum terms as to pre-payment fees etc., as it may prescribe, permit pre-payment/acceleration of EMIs or pre-payment at the request of the Borrower subject that the Lender may , specify from time to time, the minimum amount of pre-payment/amounts payable on account of acceleration of EMIs. If permitted by the Lender, Borrower shall give prior written notice of his intention to prepay the full amount of Loan and pay to the Lender such pre-payment charges mentioned in the schedule attached hereto, subject to change by the Lender from time to time.
b) The borrower agrees that no pre-payment shall be made during the first 6 (six) months from the Effective Date or till the Loan is fully disbursed, whichever is later. If the Borrower pre-pays only a part of the amount payable by the borrower to the Lender, the Lender shall be entitled to adjust the amount pre-paid against the amount payable by the Borrower in such manner as the Lender thinks fit. Save and except as mentioned above, the Borrower shall not be entitled to make any pre-payment. Notwithstanding the above, if the borrower pays the amount to the Lender before the due dare, Lender shall be entitled to appropriate the same in such manner as it deems fit. And the Lender will give the Borrower credit for the same only on due date and not before.
c) In the event the Lender permits any pre-payment, the Repayment schedule shall be altered by the Lender at the request of the Borrower and the Borrower agrees to adhere to the altered pre-payment schedule.?
16. In the Schedule to the agreement aforesaid, (Page129), the relevant details incorporated are given hereunder:
| Loan Amount | Rs.2,12,00000-00 |
| Date of disbursal of each tranche | 31.05.09 |
| Purpose of Loan | Commercial Purchase Loan |
| Rate of Interest: | 12% floating p.a. floating monthly reducing |
| Pre-payment charges | 5% 6-12months, 3%12-24months, 2% thereafter |
| Part pre-payment charges: | 5%6-12months, 3%12-24months, 2% thereafter |
œForeclosure charges: Foreclosure allowed only after six months from the date of disbursement and charges will be 5% + service tax within 12 months of Disbursement, 3% + service tax after 12 months but upto 24 months, from disbursement date and 2% + Service Tax thereafter.
18. Thus the demand of prepayment charges to the tune of Rs.6,25,994.06 and Rs.3,33,621.02 aggregating Rs.9,59,615.03 was in accordance with the terms of the loan agreements, as discussed above. However, the appellant/Opposite Party reduced the aforesaid charges to 50% i.e. Rs.4,79,807.54 P. The purpose of loan as indicated in the schedule/sanction was commercial and, therefore, the exemption applicable for housing loan did not apply to such loans.
19. Even if, it is assumed, for the sake of arguments that the purpose of loan was housing, the respondents/complainants were not entitled to exemption , as the exemption as per the policy of National Housing Board was to come into effect from the date of issuance of guidelines vide letter dated 19.10.2011. In para 8 of its order, the District Forum while referring to Policy dated October 19,2011, of the National Housing Bank (wholly owned by Reserve Bank of India) held that œaccording to the said policy, it has been decided that hereafter housing finance companies should not charge pre-payment levy or penalty on pre-closure of housing loans under the following situations: (a) Where the housing loan is on floating interest rate basis (pre-closed through any source), (b) Where the housing loan is on fixed interest rate basis and the loan is pre-closed by the borrowers out of their own sources.?
20. Clearly, the guidelines of National Housing Bank were to come into force prospectively i.e. after the issuance of Policy dated 19.10.2011. In the instant case, the loan agreements were signed on 30.05.2009 and 7.8.2010, much earlier to the above Policy, and, therefore, the policy aforesaid was not applicable. Not only this, even the loans stood pre-closed in May,2011, before the new Policy.
21. Para 4.1 of the Master Circular “ Finance for Housing Schemes “ UCBs dated July 2, 2012, being relevant is extracted below:
4.1 Maximum Loan Amount and Margins (i) UCBs based on their commercial judgement and other prudential business considerations, with the approval of their Board of Directors, are free to identify the eligible borrowers, decide margins and grant housing loans depending upon repaying capacity of the borrowers. (ii) The banks may grant housing loans up UCBs (all other UCBs which are not Tier I UCBs*) may extend individual housing loans up to a maximum of Rs.50.00 lakh per beneficiary of a dwelling unit subject to extant prudential exposure limits. (iii) With effect from October 31, 2011, Tier-I UCBs are permitted to extend individual housing loans upto a maximum of Rs.30 lakh per beneficiary of a dwelling unit and Tier II UCBs to extend individual housing loans up to a maximum of Rs.70.0 lakh per beneficiary of a dwelling unit subject to extant prudential exposure limits. As per para 4.2 B Foreclosure Charges/Prepayment Penalty. With effect from June 26, 2012 it has been decided that UCBs will not be permitted to charge foreclosure charges/prepayment penalties in home loans on floating interest rate basis.
22. Clearly, the master circular dated 2.7.2012 exempted prepayment charges in respect of housing loans up to maximum of Rs.70 Lacs per beneficiary in individual housing loans. In the instant case, the respondents/complainants did not fall in the above category, firstly because the loan obtained was not a housing loan and secondly, the aforesaid exemption was w.e.f. 26.06.2012. The District Forum also erred in relying upon letter dated 11.05.2011 (Annexure AA-1). This letter is only with regard to one loan against Account No.RL HL CHA000128977. When prepayment charges @3.31% i.e. Rs.6,25,994.06 at O/S Principal are clearly shown payable, stipulation that œPrepayment charges would be NIL for Home loans in case the loan is closed through own source of fund?, could not be read in isolation, more so, when as per Schedule to the loan agreement, type of loan is mentioned as commercial. The stipulation could have its effect only, in case, the loan fell under the category of Home loan. The respondents/complainants paid such charges without raising any objection.
23. The additional evidence regarding copy of Map, Dictionary meaning of Housing and receipt issued by the Appellant/Opposite Party, in view of discussion aforesaid, are of no help to the respondents/complainants. The receipt is on closure of account whereas the prepayment charges were charged as per the terms of the agreement.
24. In Hotel Vrinda Prakash Vs. Karnataka State Financial Corporation, AIR 2007 Kant 187, the principle of law, laid down, was that the Financial Corporation had authority to charge premium for prepayment/foreclosure of the loan account, on the outstanding loan balance. In C.S.No.513 of 2001-Hatsun Agro Products Chennai Vs. Industrial Development Bank of India, Chennai, decided on 14.10.2009, by the Madras High Court, the plaintiff was charged Rs.51,42,895/-, as prepayment charges/premium, before foreclosing the loan. The demand was challenged as illegal. The Hon`ble High Court held that the prepayment charges, before foreclosing the loan, were legally charged by the defendant, and, ultimately, dismissed the suit. The principle of law, laid down, in the aforesaid cases, is fully applicable to the instant case. Thus, in our considered opinion, the respondents/complainants were very much liable to pay the prepayment/foreclosure charges.
25. The facts of the case titled as State Bank of India Vs. Usha Vaid and Anr. (supra), are distinguishable, inasmuch as, initially in the loan agreement, there was a clause for charging prepayment charges, which was later on scored off. So, there was no agreement between the parties for payment of prepayment charges. No help, therefore, from the aforesaid case, can be drawn, by the respondents/complainants.
26. Since the appellant/Opposite Party, charged the prepayment charges as per the loan agreements, which was binding between the parties, by no stretch of imagination, it could be said that it (Opposite Party) was either deficient in rendering service or indulged into unfair trade practice.
27. No other point, was urged, by the Counsel for the parties.
28. In view of the above discussion, it is held that the District Forum, erred in allowing the complaint and order passed by it suffers from illegality and perversity, warranting the interference of this Commission.
29. For the reasons recorded above, the appeal is accepted, with no order as to costs. The order of the District Forum is set aside. Consequently, the complaint filed by the respondents/complainants, before the District Forum, is dismissed with no order as to costs.
30. Certified Copies of this order be sent to the parties, free of charge.
31. The file be consigned to Record Room, after completion.