P KRISHNA REDDY vs YAGNESH UPADHYAY

-OFTEN we are coming across complaints relating to forfeiture of "service Charges" by financial institutions taking advantage of unreasonable clause in contracts despite non-release of loan amount for one or the other reason. In case loan is in crores of rupees the service charges itself would be a substantial sum. Therefore, forfeiture of service charges is nothing but unjust enrichment by financial institutions. The loanees will have no option but to accept unreasonable terms if they are badly in need of loan. In fairness the financial institutions should charge reasonable service charges commensurate with the charges involved in processing loan papers instead of blindly charging some percentage and they should refund a portion of the service charges to the loanee if loan is not released after deducting the actual charges. In the case on hand service charges to the tune of Rs. 3,00,000 has been forfeited.

THE complainants have filed this complaint seeking for direction to the opposite parties (for short, "o. Ps. ") to pay Rs. 13,86,630 with interest at 24% per annum from the date of the complaint till the date of realisation. The case of the complainants is that they have paid a sum of Rs. 3,00,000 to O. P. 1, who is the proprietor of M/s. Surya Finance as he promised to advance loan of rupees one crore to the complainant. On the request of the complainants a loan of rupees one crore was sanctioned by the O. Ps. as per letter dated 24. 2. 2000, which is marked as Exhibit ''c-3''. But the grievance of the complainants is that even though the complainants have satisfied all the requirements for release of the loan, the loan amount was not released. Therefore, the complainants have filed this complaint seeking for a direction as stated above.

The O. Ps. have filed their version. In their version they have contended that the complaint is not maintainable under the Consumer Protection Act since the loan sought for by the complainants was for a "commercial Purpose". The further case of the O. Ps. is that the Firm "surya Finance" has not been made a party and they are only the proprietor and representatives of the said firm who have been made parties and that the O. Ps. being the proprietor and representatives act only as agents between the borrower and creditor. The further case of the O. Ps. is that even though the loan was sanctioned, the complainants did not fulfil the conditions for grant of loan and hence the loan was not released. Therefore, the O. Ps. contend that there is no "deficiency in service" on their part.

BOTH the parties have filed affidavit by way of evidence and also produced documents in support of their case. The documents so produced were marked as Exhibits. On the rival pleadings of the parties, the following points arise for consideration : (i) Whether the complaint filed by the complainants is main-tainable in law? (ii) Whether the complainants are entitled for refund of the amount from the O. Ps. ? point No. 1 :

THE complainants made a request to the O. Ps. are sanction of loan of rupees one crore. The complainants did not disclose the purpose for which the loan was required. On the request made by the complainants, the O. Ps. sanctioned the loan. Once the O. Ps. sanctioned the loan, their duty was to release the loan amount to the complainants, if the complainants were to satisfy the conditions as mentioned in the letter of sanction of loan. If the complainants were to establish that they have fulfilled the conditions and despite the same the O. Ps. did not release the amount, then it amounts to "deficiency in service" on the part of the O. Ps. Therefore, the complaint filed by the complainants is maintainable in law. Point No. 2 : It is not in dispute that the complainants have paid Rs. 3,00,000 to the O. Ps. on three occasions. A sum of Rs. 25,000 was paid by a Demand Draft on 23. 1. 2000, Rs. 75,000 was paid in cash on 24. 2. 2000 and Rs. 2,00,000 was paid by a Demand Draft on 22. 3. 2000. As far as the amounts paid by the complainants by Demand Drafts are concerned, the same are not disputed. The amount paid by cash is also not disputed because the complainants have produced the receipt issued by M/s. Surya Finance acknowledging receipt of Rs. 75,000. The said receipt is marked as Exhibit ''c-14''. Therefore, the complainants have established that they have paid a sum of Rs. 3,00,000 to M/s. Surya Finance of which O. P. 1 is the Proprietor and O. Ps. 2 and 3 are the representatives. The case of the O. Ps. is that since the complainants failed to provide two solvent sureties, the loan amount was not released. But, according to the complainants, they have offered two immovable properties one situated in Wilson Garden in Bangalore and the other in Kudlu village in Sarjapur Hobli of Anekal taluk in Bangalore district, as security and the valuation of both the properties as per the valuation reports exceed rupees three crores. The said valuation reports are produced as Exhibits ''c-17'' and ''c-18'', respectively. After the receipt of the said valuation reports, the O. Ps. called upon the complainants to produce Encumbrance Certificates in respect of the properties. The complainants also produced the Encumbrance Certificates to establish that the properties offered as security were free from all encumbrances. But, in spite of production of Encumbrance Certificates, the O. Ps. did not release the loan amount. The very fact that the O. Ps. called upon the complainants to produce the Encumbrance Certificates itself discloses that the O. Ps. wanted to accept the immovable properties as security in place of two solvent guarantors. Therefore, we are of the view that non-releasing of loan amount by the O. Ps. in favour of the complainants amounts to "deficiency in service". Consequently, in our view, the O. Ps. are required to refund the amount collected by them towards "service Charges" to the complainant. The case of O. Ps. is that O. P. 1 is only an agent or middleman and whatever that has been paid by the complainants is only by way of commission and, therefore, the same is not refundable. But in support of this submission the O. Ps. have not produced any agreement under which the complainants agreed to pay any amount by way of commission. Exhibit C-3 which is a loan sanction letter dated 24. 2. 2000 issued to the complainants discloses that M/s. Surya Finance agreed to sanction the loan. O. P. 1 is the proprietor of the said Surya Finance and O. Ps. 2 and 3 are its representatives. In the absence of any contract between the parties regarding payment of commission, the O. Ps. are not justified in retaining amount paid by the complainants towards service charges, when they have not rendered any service. Therefore, we are of the view that the O. Ps. are liable to refund the amount jointly and severally.

THE complainants have paid the amount of Rs. 3,00,000 to the O. Ps. on three different dates and the last payment was made on 22. 3. 2000. The O. Ps. have enjoyed the benefit arising out of the said amount by utilising the same. Therefore, the O. Ps. are liable to pay interest on the said amount of Rs. 3,00,000. So far as the other amounts claimed by the complainants under different heads are concerned, the complainants have not produced any acceptable evidence in support of their claim. Therefore, we hold that the complainants are not entitled for any relief other than the refund of Rs. 3,00,000 with interest.

IN the result, we pass the following Order : (1) The complaint is allowed in part. (2) The O. Ps. are directed to pay jointly and severally a sum of Rs. 3,00,000 (Rupees three lakh only) to the complainants with interest at 12% per annum from the respective dates of payment till realisation. (3) The O. Ps. are also directed to pay Rs. 10,000 to the complainants towards the costs of these proceedings.

Complaint allowed in part.