Bank Loan Processing Fees and Consumer Rights: Supreme Court Ruling in Bank of India v. Brindavan Agro Industries

The case of Bank of India v. M/S Brindavan Agro Industries Pvt. Ltd. deals with a dispute over loan processing fees and the responsibilities of banks towards their customers. The Supreme Court examined whether a bank could deduct loan processing charges before sanctioning a loan and whether the consumer had the right to demand a refund.

The dispute arose when Brindavan Agro Industries sought a loan from Bank of India in 2011. The bank deducted Rs. 27.41 lakh as processing fees, but the loan was not sanctioned in time. The company later secured credit from other banks and demanded a refund of the deducted amount. The National Consumer Disputes Redressal Commission (NCDRC) ruled in favor of the company, ordering a refund with interest. The Bank of India appealed the decision before the Supreme Court.

Arguments by the Petitioner

The Bank of India argued that the processing fees were deducted as per banking norms and internal circulars. The bank cited:

“Processing charges are required to be recovered before the request for facilities is processed (50% in cases involving TEV study and 100% in others). These processing charges are not refundable even if the requested limits are not considered by the Bank.”

The bank also argued that Brindavan Agro Industries had revised its loan request multiple times, causing delays.

Arguments by the Respondent

Brindavan Agro Industries argued that the bank took an excessively long time to process the loan, forcing them to seek funding from other institutions. They contended:

“The bank debited the account without consent and knowledge. The Consumer suffered losses due to the delay in sanctioning the loan.”

They claimed that the processing fees should only be deducted after loan approval.

Supreme Court’s Analysis

The Supreme Court held that Brindavan Agro Industries was aware of the processing charges and had sought a 50% waiver. It observed:

“The processing charges had been debited by the Bank on 30th December, 2011, in terms of authority given by the Consumer.”

The Court noted that the bank’s internal policies allowed upfront deduction but directed the bank to refund Rs. 9.16 lakh as per its earlier commitment.

Final Verdict

The Supreme Court set aside the NCDRC and SCDRC orders but directed the bank to refund Rs. 9.16 lakh to Brindavan Agro Industries. This ruling clarifies banking policies regarding loan processing fees and consumer rights.

Petitioner Name: Bank of India.
Respondent Name: M/S Brindavan Agro Industries Pvt. Ltd..
Judgment By: Justice D.Y. Chandrachud, Justice Hemant Gupta.
Place Of Incident: Agra, Uttar Pradesh.
Judgment Date: 28-02-2020.

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