Read this in conjunction with earlier proceedings of this Court dated 24.07.2017 (Yesterday).
2 For the sake of convenience and clarity, earlier proceedings of this court dated 24.7.2017 is extracted herein-below :
Mr.S.Packiaraj, learned counsel is present on behalf of the petitioner. Ms.R.Divya, learned counsel on record for all the three respondents (along with her Senior Mr.M.V.Chandran) present in Court, submits that they have given change of vakalat to their client way back in 2015 itself and returned all the papers to the client.
The Registry is directed to verify if any new counsel has entered appearance on behalf of the respondents and if yes, print their names. If no new counsel has entered appearance, Registry is directed to print the names of the three respondents with addresses.
Post the matter tomorrow (25.7.2017). 3 Today, after verification, as per the aforesaid proceedings / order dated 24.7.2017, Registry has printed the names of all the three respondents in the cause list. Names of all three respondents were called out thrice. None responded. Writ petition is of the year 2004 (27.9.2004 to be precise) and the same has been pending in this Court for well over 12 years now. Common counter has been filed by all three respondents and pleadings are complete. Therefore, I proceeded to hear Mrs.Hema Sampath, learned Senior Counsel leading Mr.S.Packiaraj, learned counsel on record for the writ petitioner.
4 In the writ affidavit, it is averred that the writ petitioner Trust was formed with the object of providing good education to poor people residing in semi urban and rural areas in Namakkal District. It is also the case of the writ petitioner Trust that it is running a Higher Secondary School at Rasipuram in the name of SRV Higher Secondary School since 1996 and that the students strength is 3000.
5 The writ petitioner Trust would go on to aver that with the objective of improving infrastructure facilities, the trust approached the second respondent Bank for a term loan of Rs.3 Crores for construction of school and hostel buildings, as also for purchase of furniture and laboratory equipments. The second respondent Bank also sanctioned the term loan of Rs.3 Crores on 31.10.2002 stipulating interest rate of 13.5% per annum.
6 However, the petitioner Trust was in need of further funds and therefore, the petitioner Trust approached the third respondent (another Branch of the same Bank). To be noted, respondent No.2 is Salem Gugai Branch of Canara Bank. Respondent No.3 is Rasipuram Branch of the same Canara Bank. When the petitioner Trust approached the third respondent for further funds by way of a term loan of Rs.2 Crores for construction of additional school and hostel buildings, the same was also sanctioned on 31.7.2003 stipulating an interest rate of 13.25% per annum.
7 It is the case of the petitioner Trust that they were making repeated requests to respondent Nos.2 and 3 to reduce the rate of interest as all financial institutions had reduced their lending rates. This is from August 2003. However, respondent Nos.2 and 3 did not respond.
8 Therefore, the petitioner Trust approached another nationalized Bank, namely, State Bank of India (Rasipuram Branch), which agreed to take over the loan accounts from respondent Nos.2 and 3 and agreed to charge only 10% per annum interest.
9 Therefore, the petitioner Trust passed a resolution on 15.12.2003 for switching over the aforesaid two loan accounts from respondent Nos.2 and 3 to the above said State Bank of India, Rasipuram Branch (hereinafter referred to as 'SBI' for brevity).
10 When the petitioner Trust approached respondent Nos.2 and 3 for switch over, respondent Nos.2 and 3 stated that there will be a pre-closure penalty of 2% on the outstanding loan amount because the writ petitioner Trust is moving its loan accounts to another bank. However, considering the financial dynamics, the petitioner Trust paid the amount without prejudice to their rights and contentions and switched over. The petitioner Trust had to get back the original title deeds for switch over and according to writ petitioner Trust, this is another reason which impelled it to pay without prejudice to its' rights and contentions.
11 It is the specific case of the writ petitioner Trust that there is no provision / covenant whatsoever for pre-closure penalty much less pre-closure penalty of 2% in the loan agreements with the 2nd and 3rd respondents.
12 To be noted, the loan account of the writ petitioner Trust with the second respondent Bank is Account No.06 and the loan account of the writ petitioner Trust with the third respondent bank is Account No.2145. These two loan accounts are hereinafter referred to as the 'first loan account' and 'second loan account' respectively.
13 In the first loan account (with the second respondent bank), it is the case of the petitioner Trust that they had to unnecessarily make payment of Rs.5,91,565.00, the details of which is given below :
14 With regard to the second loan account (with the third respondent Bank), it is the case of the writ petitioner Trust that they had to unnecessarily and without any basis make payment of a total sum of Rs.4,01,544.00 towards pre payment charges (pre-closure penalty) at the rate of 2% on outstanding loan amount.
15 The aforesaid two add to Rs.9,43,109.00. Claiming this amount, this writ petition has been filed.
16 The second respondent has filed a counter affidavit dated 30.11.2013. A perusal of the counter affidavit reveals that this is a common counter affidavit on behalf of the other two respondents also and it has been set out in paragraph 1 of the counter affidavit, wherein the deponent would aver that I am filing the Counter Affidavit on behalf of the 2nd Respondent and also on behalf of Respondents 1 and 3. 17 From a perusal of the above said counter affidavit dated 30.11.2013, it is clear that there are no disputed facts.
18 The main points that arises for consideration are whether there is any provision / covenant at all in the loan agreements with the writ petitioner Trust and the Banks, i.e., respondent Nos.2 and 3 for levying a pre-closure penalty of 2% on outstanding loan amount on the date of switching over. Equally, whether the respondent Bank was justified in levying Demand Draft (D.D) commission for all transactions over the period of time, i.e., from 31.10.2002 to 23.3.2004.
19 As there are no disputed facts and as the respondent Bank, a nationalized Bank, is an instrumentality of the State within the meaning of
Article 12 of the Constitution of India, there is no difficulty in entertaining the instant writ petition, particularly in the light of the nature of the prayer. I have to necessarily say this as a faint attempt has been made to say that the petitioner Trust ought to have filed a civil suit before a competent court to recover any amount due to it.
20 Along with the counter affidavit, the respondent Bank has also filed a typed set of papers dated 30.11.2013, which contains two pages of the objectives of Credit Policy of Bank dated 29.6.2005. Page Nos.7 and 53 of the said Policy of the Bank alone have been photocopied and enclosed.
21 From a perusal of the counter affidavit and the aforesaid typed set, it is clear that the respondent Bank attempts to pitch itself with clause 2(iv) of the said policy, which reads as follows :
iv) For pre-closure of the loan by the borrower not involving the transfer of accounts to other banks / FIs, no penalty need be levied. 22 It is very obvious that this is only an internal policy of the bank. This cannot be put against the writ petitioner Trust at least for two reasons. One reason is that the writ petitioner Trust has not been put on notice and this has not been incorporated in the loan agreements between the writ petitioner Trust and the Bank. The second reason is that such internal policy decisions of the Bank have no legal sanctity qua enforcement against a borrower who has no notice of the same, particularly when it costs a financial burden on the borrower.
23 With regard to commission charges for DD qua first loan account (with the second respondent Bank), for the period from 31.10.2002 to 23.03.2004, no tenable explanation much less an acceptable explanation has been set out in the counter affidavit. There is nothing to show that a sudden departure of this kind is warranted. It is obvious that respondent Nos.2 and 3 bank (two branches of the same Bank) have done so because of the decision the writ petitioner Trust decided to switch over the two loan accounts to another Bank.
24 With regard to first loan account with the (second respondent Bank), besides the pre-closure penalty of 2% on outstanding loan amount and commission for DD for the period set out supra, additional interest in a sum of Rs.4,036.00 and a sum of Rs.35,461.00 under the caption 'pending upfront fee' have also been collected.
25 All these stifle and scuttle the freedom of a citizen to choose a banker of his choice. By imposing penalty etc., a borrower cannot be dissuaded from making an informed choice qua his banker.
26 Owing to all that have been stated supra, I have no hesitation in coming to the conclusion that the prayer of the writ petitioner Trust needs to be acceded to.
27 Prayer is acceded to.
28 Respondents are directed to pay a sum of Rs.9,43,109.00 (Rupees nine lakhs fourty three thousand one hundred and nine only) together with interest at the rate of 10% per annum from 23.3.2004 till the date of actual payment.
29 Respondents shall make the above payment within four weeks from the date of receipt of the certified copy of this order.
30 The first loan account is with the second respondent bank (Canara bank, Gugai Branch, Salem) and therefore Respondent No.2 shall pay a sum of Rs.5,91,565.00 with interest as aforesaid. The second loan account is with the third respondent Branch of the same bank (Rasipuram Branch) and therefore, Respondent No.3 shall pay a sum of Rs.4,01,544.00 with interest as aforesaid. Respondent No.1 is the General Manager of the Canara Bank, Circle Office, Chennai. As stated supra, respondent Nos.2 and 3 are two different branches of the same bank. Therefore, Respondent No.1 is directed to ensure that the aforesaid payments are made by Respondent Nos.2 and 3 within the above mentioned time frame.
31 This writ petition is allowed on the above terms. No costs.
25.07.2017 Index : Yes/No vvk To
1.The General Manager, Canara Bank, Circle Office, Chennai-2.
2.The Branch Manager, Canara Bank, Gugai Branch, Salem.
3.The Branch Manager, Canara Bank, Rasipuram, Namakkal District.
M.Sundar, J.
vvk W.P.No.27678 of 2004 25.07.2017