Dev Raj, Member:
1. This appeal is directed against the order dated 02.09.2013, 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.8,07,975.82/- taken from the Complainants. 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 45 days from the date of receipt of the certified copy, failing which, Opposite Party shall be liable to pay interest @9% p.a. on the decreed amount from the date of this order, till its realization, besides costs of litigation.?
2. In brief, the facts of the case, are that a site/plot underneath the commercial building bearing No.87, Sector 5, Mansa Devi Complex, Panchkula was initially allotted in favour of complainant No.1 by HUDA, which was subsequently re-allotted in favour of all the complainant s vide re-allotment letter dated 20.07.2009 (Annexure C-1). It was stated that to pay off a part of the sale price of the said plot, the complainants had obtained home loan of Rs.2,10,000/- from Reliance Capital Limited, which was subsequently taken over by IDBI Bank, on 30.5.2009 vide Annexure C-2. It was further stated that home loan was being regularly repaid to IDBI Bank. It was further stated that the Opposite Party “ IndiaBulls allured the complainants with an offer of home loan of Rs.3,00,00,000/-. It was further stated that the Opposite Party vide sanction letter dated 28.8.2010 (Annexure C-3) sanctioned home loan of Rs.3,00,00,000/-. 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 28.08.2010 (Annexure C-4). It was further stated that the complainants 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 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-5) was made to the State Bank of India to rehabilitate the said units. It was further stated that due to the aforesaid reasons, some installments cheques bounced and the complainants paid 06 installments of Rs.4,17,507/- each aggregating Rs.25,05,042/-. 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 11.4.2011 (Annexure C-6) informed that Rs.31,713,250.49 were due against the complainants against loan of Rs.3 crores. It was further stated that the Opposite Party illegally demanded foreclosure charges of Rs.16,15,951.64 i.e. @5.52% on outstanding principal of Rs.2,92,74,486.30 and other charges of Rs.2,15,596.14. It was further stated that on 27.4.2011 itself, the Opposite Party had reduced the above demand of foreclosure charges to Rs.8,07,975.83.
3. It was further stated that even the reduced demand of Rs.8,07,975.82 towards foreclosure charges and Rs.2,15,596.14 towards other charges aggregating Rs.10,23,571.96 was unjustified and illegal. It was further stated that the complainants sold the property to one Sh. Jitender Kumar Shangari and sale formalities were completed on 28.4.2011, as per sale agreement (Annexure C-9). It was further stated that out of the sale proceeds of the said property, the entire amount of Rs.3,10,81,714.63 including the foreclosure charges and other charges aggregating Rs.10,23,571.96 plus Rs.10,572, being interest for one day, was paid by the complainants to the Opposite Party (Annexure C-11). It was further stated that since the demand and coerced recovery of Rs.10,23,571.96 was unjust and illegal, notice dated 16.5.2011 was sent to the Opposite Party to refund the said amount alongwith 18% interest (Annexure C-12).
4. It was further stated that charging of prepayment/foreclosure charges of Rs.10,23,571.96 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 off from its own resources. It was further stated that at the instance of the Government, all the nationalized Banks have 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 a levy was unjustified.
5. It was further stated that the Opposite Party wrongfully recovered Rs.10,23,571.96 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.10,23,571.96 alongwith interest @18% per annum w.e.f 28.4.2011; pay Rs.5,00,000/- as compensation for physical harassment and mental agony besides Rs.1,00,,000/- as cost of litigation.
6. Opposite Party, in its written version, took up a preliminary objection that the dispute between the parties was in the nature of a suit for rendition of accounts, which was not covered under the purview of the Act. On merits, it was stated that it was agreed to between the parties that, in case, the complainants wished to close the loan prior to the period of loan, they shall pay prepayment charges of 5% (plus applicable tax) on the amount prepaid in the last one year. It was further stated that the charges were payable on repayment in case the loan was to be closed in full. It was further stated that charging of prepayment charges was a necessity in the finance industry. It was further stated that the Opposite Party does not have any funds of its own and borrows funds from other resources. It was further stated that the foreclosure/prepayment charges were levied to compensate the loss caused on account of early repayment. It was further stated that the issue as regards charging of prepayment charges came before the Competition Commission of India and the said Tribunal upheld the rights of the financer to be entitled to foreclosure/prepayment charges. It was further stated that the pre-EMI cheque No.176785 for Rs.1,94,907/- bounced on 6.10.2010 and the PLR differential amount of EMIs for November 2010 and December 2010 was Rs.12,443.22 and Rs.12,385.22 respectively, totaling Rs.2,19,736/-. It was further stated that thus net amount of other charges came to be Rs.2,15,596.14 i.e. (Rs.2,19,736.14 minus Rs.4,140 as less excess EMI amount received in 5 EMIs @Rs.828/- per month). It was further stated that the complainants were liable to pay the late payment charges. It was further stated that on the basis of email Annexure C-7, and repeated representations of the complainants, the foreclosure/prepayment charges were reduced from 5.52% to 2.76%, which the complainants agreed to pay. It was further stated that the amount was charged as per the terms and conditions of the agreement entered into between the parties which were binding upon them. 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.
7. The Parties led evidence, in support of their case.
8. 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.
9. Feeling aggrieved, the instant appeal, has been filed by the Appellant/Opposite Party.
10. We have heard the Counsel for the parties and have gone through the evidence and record of the case, carefully.
11. The Counsel for the appellant/Opposite Party submitted that, as per the loan agreement (Annexure C-4), 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 as per the loan agreement (Annexure C-4), the type of loan was loan against property, and, the same was to purchase a commercial property. It was submitted that as per Annexure C-8, foreclosure charges were reduced from 5.52% to 2.76%. It was further submitted that the agreement for loan was dated 28.08.2010 and the complainants closed the loan by paying the amount on 28.04.2011. 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 housing and home are different terms. It was further submitted that the loan was non-home-loan for commercial purpose and since the same did not come under the definition of housing project, the complaint was not maintainable. It was further submitted that, as per the guidelines of the Reserve Bank of India, the loan obtained did not fall under the category of home loans, and was, therefore, not exempted from payment of pre-payment charges.
12. The Counsel for the respondents/complainants, submitted that as was evident from Annexure C-1, the property was Shop-cum-Office for which land was acquired during 1989 for raising housing project. It was further submitted that the terms Home and House are synonyms. The respondents/complainants paid the loan amount after selling property. It was further submitted that the housing finance companies could not charge prepayment charges or penalty on pre-closure of housing loans in view of the Policy dated 19.10.2011 of the National Housing Bank. The Counsel for the respondents/complainants placed reliance on the judgment titled as œState Bank of India Vs. Usha Vaid and Anr?, First Appeal 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.
13. 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 the purchase of commercial property viz. SCO 134, Sector 5, Mansa Devi Complex, Panchkula and the type of loan was loan against 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 (Fora) 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 loan of Rs.3 crores, 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.?
14. 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 loan, in the sum of Rs.3 crore, for commercial purpose. Copy of the application for loan, placed on record, vide Annexure X indicates that the type of property is shown as commercial. The loan agreement (Annexure C-4) was signed by all the respondents/complainants for M/s Jand K Aluminum 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.
15. 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 specific objection that the dispute between the parties was in the nature of a suit for rendition of accounts, which was not covered under the purview of the Act. 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 objection raised by the appellant/Opposite Party, 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.
16. The next question, which falls for consideration, is, as to whether, the loan secured by the respondents/Opposite Parties was exempted or not from payment of prepayment charges. As already discussed above, copy of the application for loan, placed on record, vide Annexure X indicates that the type of property is shown as commercial by the complainants themselves. The loan agreement (Annexure C-4) was signed by all the respondents/complainants for M/s Jand K Aluminum Company. In Schedule-1 of Annexure C-4, the name of the Company/Firm is indicated as M/s. JandK Alluminium Company and it also clearly states that part prepayment fees and foreclosure charges shall be 5% + service tax of amount prepaid. The District Forum in its order has clearly held that the document regarding foreclosure charges is duly signed by the parties. The appellant/Opposite Party has charged the prepayment charges of Rs.8,07,975.82, which is 2.76% of the outstanding amount as a concession to the respondents/complainants. The District Forum held that as per Policy dated 19.10.2011 of the National Housing Bank regarding prepayment penalty on pre-closure of housing loans, Housing Finance Companies should not charge prepayment levy/penalty on pre-closure of housing loans. Clause 4.3 of the loan agreement deals with prepayment charges, which is extracted hereunder:
œ4.3 PRE-PAYMENT OF THE LOAN:
4.3.1 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 prepayment 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 prepayment shall be made within the number of months(as mentioned in the Schedule 1) of the commencement of the EMI. The Borrower/s further agrees that IHFL may specify, from time to time, the minimum amount of prepayment/amounts payable on account of acceleration of EMIs.
4.3.2 That in the event of IHFL permitting the Borrower/s for prepayment/acceleration, the repayment schedule for the loan shall be amended/altered by IHFL for giving effect to such prepayment/acceleration, and such amended/altered repayment schedule shall be binding upon the Borrower/s. That in such an eventuality the Borrower/s undertakes and agrees to execute such document(s) as IHFL may require, in case if any amount is prepaid by the Borrower/s, the same shall be adjusted first towards the prepayment charges, interest, incidental charges, additional interest, PEMI, EMI outstanding, EMI of current month and balance towards the principal amount of the Loan. The interest and any other charges etc. would be leviable till the end of the month in which the prepayment has been made. In the event of prepayment, the amortization schedule shall be effective from first day of the subsequent month. IHFL at its sole discretion may permit swap of the post-dated cheques or any other repayment/payment mode for re-scheduling of EMI only if such minimum amount, as may be decided by IHFL from time to time is prepaid.
4.3.3 The Borrower/s declares that the pre-payment charges have been mutually agreed between the parties, and the Borrower/s further understands and agrees that the pre-payment charges are towards pre-determined liquidated damages which would be suffered/incurred by IHFL and the Borrower/s shall at no point of time challenge and/or object to the levy of the same. Further, the pre-payment charges shall also be payable in case IHFL recalls the Loan for any reason whatsoever.?
15. In Schedule 1 to the agreement aforesaid, (Page 53), the foreclosure charges were mentioned as œ5% + S.T of amount prepaid?. Thus the demand of prepayment charges to the tune of Rs.16,16,951.64 (reduced to Rs.8,07,975.82) was in accordance with the terms of the loan agreement, as discussed above. The purpose of loan, as indicated in the Home Loan Application Form (Annexure X) was commercial and, therefore, the exemption applicable for housing loan did not apply to such loans.
16. Even if, it is assumed, for the sake of arguments that the purpose of loan was housing, the respondents/complainants are not entitled to exemption/non-payment, as the exemption as per the policy of the National Housing Bank was to come into effect from the date of issuance of guidelines vide letter dated 19.10.2011. In Para 6 at pages 6 and 7 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.?
17. Clearly, the guidelines of the 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 agreement was signed on 28.08.2010, much earlier to the above Policy, and, therefore, the policy aforesaid was not applicable. Not only this, even the loans stood pre-closed in April,2011, before the new Policy.
18. 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.
19. 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 because the loan obtained was not a housing loan and secondly, the aforesaid exemption was w.e.f. 26.06.2012. The prepayment charges to the tune of Rs.16,16,951.64 (reduced to Rs.8,07,975.82) at O/S Principal were clearly payable, in terms of the agreement, more so, when as per Annexure X, type of loan is mentioned as commercial. The respondents/complainants paid such charges without raising any objection.
20. The additional evidence regarding copy of the Map and Dictionary meaning of Housing, in view of the discussion aforesaid, is of no help to the respondents/complainants.
21. 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.
22. The facts of the case titled as State Bank of India Vs. Usha Vaid and Anr. (supra), are distinguishable, in as much 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.
23. 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 was either deficient in rendering service or indulged into unfair trade practice.
24. No other point, was urged, by the Counsel for the parties.
25. 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.
26. 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.
27. Certified Copies of this order be sent to the parties, free of charge.
28. The file be consigned to Record Room, after completion.