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Judgment
5 paragraphs · 617 words-WHEN a borrowpre-closes a loan, the Financial Institution should be happy and in principle give him some Rebate because the Financial Institution could lend the said amount to somebody else and earn interest. But the Financial Institutions have been charging 2% of the loan amount as pre-closing charges even if the loan is closed before the agreed period. This is very unjust.
THE appellants/complainants had borrowed loan of Rs. 7,22,84,441 from the respondent/opposite parties (for short, "o. Ps. ") agreeing to re-pay the loan with interest. But due to certain reasons, the complainants approached the Karnataka Bank to advance loan for the purpose of discharging the loan borrowed by them from the O. Ps. Accordingly, the Karnataka Bank discharged the loan for and on behalf of the complainants with the O. Ps. But the O. Ps. have recovered a sum of Rs. 14,47,000 from the account of the complainants towards pre-closure charges. This, according to the complainants, is a "deficiency in Service" on the part of the O. Ps. The learned Counsel for the complainants submitted that there is no agreement under which the complainants agreed to pay the pre-closure charges and, therefore, recovering Rs. 14,47,000 from the account of the complainants is illegal and, accordingly, they have prayed for a direction to the O. Ps. to refund the said amount.
In order to ascertain whether there is any such agreement under which the O. Ps. could collect the pre-closure charges, we called upon the O. Ps. to produce agreement by our order dated 12. 9. 2007 and adjourned the case to today. But today the O. Ps. have not produced any such agreement. From this it is clear that there is no agreement under which the complainants had agreed to pay 2% of the loan amount as pre-closure charges to the O. Ps. , in the event if they were to discharge the loan before the agreed period. Therefore, in our view, the District Forum was not right in dismissing the complaint.
THE National Commission is also of the view that the Financial Institutions which advance loan should not collect any pre-closure charges if the loan is discharged by the borrower before the agreed period. Hence, we hold that the O. Ps. are liable to refund Rs. 14,47,000 to the complainants with interest. Accordingly, we pass the following Order: (1) The appeal is allowed. The impugned order is set aside. (2) The complaint filed by the complainants before the District Forum is allowed with a direction to the O. Ps. to refund Rs. 14,47,000 to the complainants with interest at 6% per annum from the date of filing the complainant before the District Forum till realisation. (3) Parties to bear their own costs.
BEFORE parting with this case, we express that we are coming across several cases where the Financial Institutions are charging certain charges in the form of ''service Charges'', ''pre-closure charges'', etc. , without rendering any service even in cases where loan is not sanctioned for some reason and where loan is pre-closed. Instead of charging interest on pro rata basis the Financial Institutions are charging interest on the entire loan amount. This is unjust enrichment. In some cases the Financial Institutions have contended that they have charged interest in such cases as per the guidelines issued by the Reserve Bank of India. We hope the Government of Karanataka will take up the matter with the Government of India/reserve Bank of India and pursuade the Reserve Bank of India to issue suitabe directions to the Financial Institutions in this behalf. Office is directed to send a copy of this order to the Chief Secretary to Government of Karnataka. Appeal allowed.