After failing to sanction and disburse a loan, the lender is not entitled to retain the processing fee charged, rules the national consumer disputes redressal commission (NCDRC), while directing Axis Bank Ltd to refund Rs4.96 lakh collected as processing fee with an interest of 9%pa (per annum) to the borrower.
In an
order earlier this month, the NCDRC bench of justice AP Sahi (president) and Dr Inder Jit Singh (member) said, "In the absence of any specific guidelines of Reserve Bank of India (RBI) or Axis Bank's own guidelines containing provisions relating to the processing fee not being refundable and the terms and conditions of the sanction in both the cases, being silent about the processing fee being non-refundable, and Axis Bank insisting on a letter or no objection certificate (NOC) from Union Bank of India (UBI) with respect to mortgage of the property without settling their dues, we are of the considered view that on account of failure to disburse the loan, Axis Bank is not entitled to retain the processing fee charged in both the cases."
The case is related to credit facilities sought by Shahjahanpur, Uttar Pradesh (UP)-based Sumitra DS Motors Pvt Ltd and Sumitra Sons from Axis Bank. On 27 August 2009, Axis Bank sanctioned a credit facility of Rs2 crore to Sumitra DS Motors and Rs2.5 crore, including cash credit of Rs1.5 crore and term loan of Rs1 crore to Sumitra Sons. Axis Bank charged a processing fee of 1% or Rs2 lakh from Sumitra DS Motors and Rs2.50 lakh from Sumitra Sons.
In one of its pre-disbursement conditions, Axis Bank asked the borrowers to obtain an NOC or letter from Union Bank of India from where Sumitra DS Motors and Sumitra Sons have availed some credit facilities based on mortgage of the same security. However, the borrowers could not obtain the requisite NOC or letter from the Union Bank of India. Due to this, Axis Bank did not disburse the sanctioned credit.
Sumitra DS Motors and Sumitra Sons then asked Axis Bank to refund the processing fee of Rs4.96 lakh. However, Axis Bank refused to refund the processing fees.
The borrowers then approached the Shahjahanpur district consumer disputes redressal forum, which, while allowing the complaint, directed Axis Bank to refund Rs4.96 lakh with 9% interest and pay compensation of Rs11,000 to Sumitra DS Motors and Sumitra Sons. Axis Bank's appeal was also dismissed by the UP state consumer disputes redressal commission.
Aggrieved by the orders of the district forum and state commission, Axis Bank approached NCDRC. It contended that "The lower fora failed to appreciate that Sumitra DS Motors and Sumitra Sons had applied for credit facilities and the same was granted by Axis Bank after putting its machinery like valuer, legal mechanism and other techno legal mechanism and hence the processing fee for sanction of loan and expenditure incurred in respect of the same was not refundable."
"The processing fee means the fee charged for expenditure in sanctioning the loan and there is no refusal by the Bank to disburse loan on its own and non-disbursement of loan due to inaction or non-compliance of terms by the borrowers cannot be attributed as deficiency of service," it added.
NCDRC observed that Axis Bank issued a sanction letter for the loan and credit facilities on 27 August 2009, and the processing fee was paid on 28 August 2009 by the borrowers through cheques. It says, "This led us to believe that no processing fee was charged by Axis Bank till the stage of the sanction and the same was possibly demanded after sanction and was to be deposited before disbursement. Hence, these were with respect to the services to be rendered towards disbursement of the credit facilities, which would include verification of various documents to be submitted by the respondents herein. As the sanctioned credit facilities could not be disbursed, Sumitra DS Motors and Sumitra Sons contend that no services were rendered by Axis Bank; hence the lender is not entitled to charge any processing fee."
Sumitra DS Motors and Sumitra Sons contended that Axis Bank had asked them to obtain an NOC or letter from Union Bank of India against the mortgage of the same properties. Without settlement of dues, Union Bank could not have issued NOC or letter and released their mortgage, the bench observed.
"The right course of action for Axis Bank could have been to obtain NOC from Union Bank of India for Axis Bank to disburse credit facility subject to settlement of their (UBI) dues from out of the disbursed credit facilities from Axis Bank," NCDRC says.
Considering the concurrent findings recorded by the district forum and the state commission, on appreciation of evidence on record, the bench held that on account of failure to disburse the loan, Axis Bank is not entitled to retain the processing fee charged in both cases.
(Revision Petition No1899 of 2013 Date: 16 October 2024)
