Explore the in-depth legal analysis conducted by the court in a case revolving around disputed bank charges in a loan application scenario. This summary focuses on the court’s examination of the applicable laws and regulations, shedding light on the interpretation and enforcement of terms and conditions in banking transactions. Stay tuned to uncover the complexities of this intriguing legal case.
Facts
- Consumer applied for a loan on 15 October, 2011.
- Consumer revised credit requirement on 6 December, 2011, and again on 17 December, 2011.
- Requirement for TEV study report in certain cases with fund-based limits above Rs. 500 lacs.
- Bank processed Consumer’s loan application following internal procedures.
- Consumer filed complaint under Consumer Protection Act in August 2013.
- SCDRC directed Bank to pay a sum with interest in July 2016.
- NCDRC appeal against the order was unsuccessful.
- Bank debited Consumer’s account for processing fees in December 2011.
- Final proposal for loan sanction submitted in January 2012.
- Consumer objected to processing fees deduction before loan sanction.
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Arguments
- The Consumer’s counsel argued that the Circular of the Bank dated April 20, 2005, was not brought to the attention of the Consumer.
- Due to the Circular not being communicated to the Consumer, the conditions stated in it would not be enforceable against the Consumer.
- Consumer had requested a 50% waiver of all charges and the Bank did not disagree to a 50% discount on processing and other charges.
- Bank should have charged only 1/4 of the TEV charges and PPC charges based on the concession sought by the Consumer.
- Consumer had changed loan demands multiple times but still requested to pay 50% processing and other charges.
- The total amount debited, including PPC and TEV study charges, was contested as being done without the Consumer’s consent.
- NCDRC held that services availed by the Consumer for cash credit limits do not disqualify them from being considered a ‘consumer’ under the Act.
- Bank agreed to refund a portion of TEV charges and waive off PPC charges, subject to certain conditions.
- Bank took a long time to sanction the loan, prompting the Consumer to seek credit from other banks.
- Based on the calculation, the Bank was directed to refund a specific amount to the Consumer and modify the interest rate.
- The reasoning provided by the NCDRC was deemed to be unsupported by the Bank’s proposal and Circular, relying instead on the opinion of the NCDRC.
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Analysis
- The Consumer revised the credit facilities requirements three times before the Bank sanctioned them in March 2012.
- The Bank retained 40% upfront fee to recover costs related to getting viability studies conducted.
- The Consumer requested a waiver of processing charges but was debited by the Bank based on prior authorization.
- The Bank agreed to refund a portion of the processing charges but the Consumer did not accept the proposal.
- Appraisal fees are separate from processing fees and are charged based on fund limits applied for.
- TEV charges amount to Rs.18,25,000 and processing charges are Rs.49,63,000 as mentioned in the sanction letter.
- The Consumer requested concessions on various charges in a letter dated October 15, 2011.
- The final proposal for sanction was submitted by the CPU to the Bank’s Head Office in January 2012.
- Appraisal fees are collected upfront based on fund limits applied for, with a partial refund if limits are not sanctioned for Bank’s reasons.
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Decision
- Bank directed to refund Rs.9.16 lakhs within two months.
- Cumulative amount of charges to be considered for concession.
- Orders of SCDRC and NCDRC set aside for patent illegality.
- Appeal allowed.
Case Title: BANK OF INDIA Vs. M/S BRINDAVAN AGRO INDUSTRIES PVT LTD (2020 INSC 232)
Case Number: C.A. No.-001720-001720 / 2020
