M. YOGAM NAIDU Vs. BANK OF BARODA

JUDGEMENT

(1.) The petitioner herein seeks a writ of Mandamus declaring the action of the respondent No.1 Bank in demanding prepayment charges of Rs.52,47,315.00 towards Term Loan Account No.18090600003130, vide letter, dtd. 8/4/2021, for release of mortgaged property as illegal, arbitrary, violative of RBI Circulars, dtd. 7/5/2014 and 2/8/2019, and consequently direct the respondent No.1 Bank to repay the same with interest @ 14% per annum to the petitioner.

(2.) Heard Sri N.Vijay, learned counsel for the petitioner, Sri Srinivas Chitturu, learned counsel for respondent Nos.1 and 2 and perused the record.

(3.) Learned counsel for the petitioner vehemently contended that demanding prepayment charges for closure of term loan and return of documents to the petitioner is illegal and arbitrary. As per the RBI Circulars, dtd. 7/5/2014 and 2/8/2019, none of the scheduled commercial banks shall charge foreclosure charges/prepayment penalties on any 'floating rate term loan' sanctioned for the purpose other than business, to individual borrowers, with or without co- obligant(s). The petitioner is an 'individual borrower' and the loan sanctioned to him is 'floating rate term loan' and not a business loan. Hence, the RBI Circulars, dtd. 7/5/2014 and 2/8/2019, squarely applies to the case of the petitioner. Further, the respondent Bank issued letter, dtd. 24/3/2021, specifically mentioning the foreclosure amount and accepted the demand draft of Axis Bank on 6/4/2021 for an amount of Rs.6,19,15,215.14 ps towards liquidation of dues pertaining to the subject term loan. There is no mention of prepayment charges in the said letter, dtd. 24/3/2021. Hence, the respondent Bank is estopped from demanding prepayment charges and their alleged right of levying prepayment charges is deemed to be waived. Further, the subject term loan sanctioned to the petitioner has been taken over by the Axis Bank. Prepayment charges are not applicable to the loans 'taken over' by another bank. The word 'prepayment' comes into picture when the loan is closed. In the instant case, the loan obtained by the petitioner is not 'closed', but taken over by another bank and hence, it is deemed that the loan still subsists. When final settlement is reached between the petitioner and the respondent Bank without misrepresentation, fraud, or coercion and money is accepted by the respondent bank towards full and final settlement, it is not open to the respondent Bank to make any further claim/demand against the petitioner. Further, there cannot be two types of calculation of service charges in respect of the same loan, i.e., 'system calculation' and 'manual calculation', which would amount to unfair or restrictive trade practice and ultimately prayed to direct the respondent Bank to repay the prepayment charges of Rs.52,47,315.00 to the petitioner with interest @ 14% per annum.