The Dehi High Court has ruled that a bank’s general ‘further charges notified on website’ clause cannot unilaterally alter a concluded loan agreement, and a circular effective after the last renewal cannot bind the borrower to foreclosure charges. Essentially, the Court held that a bank’s general clause reserving the right to notify ‘further charges’ on its website cannot be used to impose foreclosure charges not contained in the executed Arrangement Letter, especially when the circular takes effect after the last renewal. Accordingly, SBI was directed to refund Rs. 83.41 lakhs within four weeks of the order, failing which the amount would carry interest at 9% per annum.
The Court pointed out that a bank’s circular prescribing pre-payment charges, which expressly came into effect from April 01, 2023, cannot be applied to a loan facility that was last renewed on March 24, 2023, even if the circular was uploaded on the bank’s website before the renewal date. The Court reiterated that for a contract to be valid, its terms must be clear, unambiguous, and understood by both parties; absent a true meeting of minds, unilateral imposition of new charges is impermissible.
A Single Judge Bench of Justice Jasmeet Singh observed that the Arrangement Letters did not contain any specific provision for foreclosure charges. The Circular on which SBI sought to rely, itself stated that it was effective only from April 01, 2023, which was after the last renewal of the loan facility on March 24, 2023. On the date of the last renewal, the Circular, even though uploaded on SBI’s official website, was yet to take effect.
The Court further noted that the judgment in Union of India vs. Krupanidhi Education Trust (2021) 18 SCC 318] was distinguishable because, in that case, the pre-closure charges of 2% were contained both in the agreement and in the circular, and the circular had been notified before the date of the agreement between the parties. The Ombudsman order did not assist SBI either, as it dealt with deficiency of service and not with the alteration of contractual terms.
The Court also noted that the extant policy on the basis of which SBI sought to justify the deduction for transferring the loan facility was neither annexed nor brought to the notice of the Court during arguments.
Briefly, Campari Exports Pvt Ltd., a Medium Enterprise registered under the MSMED Act, 2006, was granted a loan facility of Rs. 54.54 crores by the State Bank of India (SBI) under an Arrangement Letter, which was subsequently renewed twice. The petitioner was compelled to prematurely close the loan account after SBI unilaterally hiked the loan interest rate from 8.75% to 17.25% per annum. The petitioner, through its Director and Authorised Representative, requested closure of the credit card facilities and release of the property documents via emails.
The SBI deducted foreclosure charges of Rs. 98.43 lakhs, which after amendment of the petition stood at Rs. 83.41 lakhs (excluding GST), and the petitioner challenged this deduction. SBI defended the deduction by relying on its Circular dated Feb 24, 2023, which prescribed pre-payment charges equivalent to 2% of the prepaid amount, and on Clause 10 and Point 12 of Annexure-C of the Arrangement Letter dated March 24, 2023, which referred to ‘further other charges as notified by the bank from time to time on its official website and other media’.
