Kerala High Court
Jacob C.M vs Reserve Bank Of India on 3 July, 2025
Author: N.Nagaresh
Bench: N.Nagaresh
2025:KER:48314
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
THURSDAY, THE 3RD DAY OF JULY 2025 / 12TH ASHADHA, 1947
WP(C) NO. 43178 OF 2024
PETITIONER:
JACOB C.M
AGED 84 YEARS
S/O. LATE C.C. MANI
CHETTIKUZHIYIL HOUSE,
POOTHRIKKA P.O., PUTHENCRUZ,
ERNAKULAM, PIN - 682308
BY ADVS.
SRI.SHEJI P.ABRAHAM
SHRI.ABRAHAM JOSEPH
RESPONDENTS:
1 RESERVE BANK OF INDIA
REPRESENTED BY THE CHIEF GENERAL MANAGER
CENTRAL OFFICE, MUMBAI
DEPARTMENT OF REGULATION, CENTRAL OFFICE,
WORLD TRADE CENTRE, CUFFE PARADE,
MUMBAI, PIN - 400005
2 RESERVE BANK OF INDIA
OFFICE OF THE BANKING OMBUDSMAN
CENTRAL OFFICE, MUMBAI
DEPARTMENT OF REGULATION, CENTRAL OFFICE,
WORLD TRADE CENTRE, CUFFE PARADE,
MUMBAI, PIN - 400005
2025:KER:48314
W.P.(C) No.43178/2024
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3 CHAIRMAN
THE SOUTH INDIAN BANK T.B. ROAD,
MISSION QUARTERS THRISSUR, PIN - 680001
4 SOUTH INDIAN BANK LTD
REPRESENTED BY ITS MANAGER,
THRIKKAKARA BRANCH, KAITHAPADATHU
MOIDEEN HAJI BUILDING, PIPELINE JUNCTION ,
THRIKKAKARA, COCHIN ERNAKULAM, PIN - 682021
BY ADVS.
SHRI.M.GOPIKRISHNAN NAMBIAR
SHRI.SUNIL SHANKER
SMT.VIDYA GANGADHARAN
SHRI.JERIN GEORGE
SHRI.K.JOHN MATHAI
SRI.JOSON MANAVALAN
SRI.KURYAN THOMAS
SHRI.PAULOSE C. ABRAHAM
SHRI.RAJA KANNAN
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 01.07.2025, THE COURT ON 03.07.2025
DELIVERED THE FOLLOWING:
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W.P.(C) No.43178/2024
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N. NAGARESH, J.
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W.P.(C) No.43178 of 2024
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Dated this the 3rd day of July, 2025
JUDGMENT
~~~~~~~~~ The petitioner, who has availed a loan of ₹45 lakhs under Kisan Cash Credit (KCC) for cultivation, from the 4th respondent-Bank, is before this Court seeking to quash Ext.P6 and to direct the 4th respondent to return the documents mortgaged by the petitioner for availing the KCC loan without insisting any additional payments.
2. The petitioner states that he availed ₹45 lakhs as KCC mortgaging his property. The petitioner had to pay interest at the rate of 12.5%. The loan was taken in the year 2016. The petitioner closed the loan account paying the 2025:KER:48314 W.P.(C) No.43178/2024 :4: entire outstanding amount in the year 2024. The 4th respondent required payment of processing fee in addition to the principal outstanding and interest, which was also paid by the petitioner. When the petitioner required to return the title deeds mortgaged for availing the loan, the 4th respondent- Bank demanded ₹1,80,000/- as 4% interest for pre-closure of the loan.
3. The petitioner states that neither Ext.P2 loan sanction letter nor Ext.P3 renewal agreement provided for levying pre-closure charges for KCC loan. When the Bank insisted for payment of pre-closure amount, the petitioner filed a complaint before the office of RBI Ombudsman. The RBI Ombudsman rejected the complaint holding that the charges levied by the Bank is considered as valid.
4. The petitioner states that Ext.P6 order of the Ombudsman is illegal and arbitrary. The demand for foreclosure amount is contrary to the loan sanction letter and loan revival letter. It is against Exts.P7 and P8 guidelines 2025:KER:48314 W.P.(C) No.43178/2024 :5: issued by the RBI.
5. Respondents 3 and 4 resisted the writ petition filing counter affidavit. The 4th respondent stated that the petitioner on 27.06.2024 remitted ₹2,07,836/- towards the KCC facility and requested for closure of the same. The petitioner was fully aware of his liability to pay pre-closure charges. The Bank demanded ₹1,80,000/- + 18% GST in the loan account towards pre-closure charges. The petitioner requested for reversal of the said pre-closure charges. The Bank as per Ext.P5 letter dated 14.08.2024 informed the petitioner that pre-closure charges is applicable since the limit had been closed before the expiry date of the loan.
6. The annual processing fee of ₹53,100/- was debited from the account on 23.06.2024. The processing fee clause is charged annually at the time of annual review, and is liable to be paid as per Ext.P3 sanction letter, signed and accepted by the petitioner. The validity period of the subject credit facility was due for expiry only on 22.06.2026 and any 2025:KER:48314 W.P.(C) No.43178/2024 :6: closure of the account made before the expiry of the validity period shall attract the provisions of pre-closure. As per Clause 9 of the Sanction Communication dated 23.06.2021, the closure of account was made in violation of the contractual obligations mutually agreed between the parties and hence the same shall be treated as premature closure of account attracting pre-closure charges.
7. The petitioner has agitated the subject matter before the 1st respondent by filing Complaint No.N202425015004454. During the pendency of the complaint, the contents of the Bank's response were forwarded to the complainant/petitioner, but no response was received from the complainant. The 2 nd respondent as per Ext.P6 has rightly rejected the complaint of the petitioner on merits, finding that there is no deficiency in service.
8. I have heard the learned counsel for the petitioner and the respective learned Standing Counsel appearing for the respondents.
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9. The petitioner availed ₹45 lakhs under KCC in the year 2016. The petitioner paid the entire outstanding amount along with interest in order to close the loan before the expiry of loan tenure. The 4th respondent demanded processing fee which was paid by the petitioner. Thereafter, the 4th respondent demanded 4% interest for pre-closure of the loan. The petitioner thereupon approached the Ombudsman. The Ombudsman passed Ext.P6 order holding that the loan was obtained for business purpose, which is not classified under MSE and hence the charges levied by the Bank is considered as valid. The Ombudsman held that there is no deficiency on the part of the Bank.
10. The petitioner submits that the demand for pre-closure amount is against the RBI Circulars which mandates that the total fees and charges applicable on various types of loans to individual borrower should be disclosed at the time of processing of loan as well as displayed on the website of Banks for transparency and 2025:KER:48314 W.P.(C) No.43178/2024 :8: comparability and to facilitate informed decision-making by customers. The petitioner would submit that the pre-closure payment was not made known to the petitioner in advance.
11. Though the petitioner would describe KCC as a loan, it is evident that the advance made is in the form of Cash Credit. Ext.P2 is the loan sanctioning letter and Ext.P3 is the letter intimating renewal of credit facilities. Ext.P3 would indicate that the Bank had made known to the petitioner that when a Cash Credit facility is taken over by other Banks, 4% of balance outstanding will have to be paid. Ext.P3 would also indicate that when payment/closure is made by own funds, 4% of balance outstanding has to be paid as pre-payment penalty / pre-closure charges. Therefore, the contention of the petitioner that the requirement was not made known to the petitioner cannot be accepted.
12. The counsel for the petitioner relied on the judgment of this Court in Cochin Frozen Foods v. Banking 2025:KER:48314 W.P.(C) No.43178/2024 :9: Ombudsman (Maharashtra and Goa) [2024 (3) KLT 1] and contended that being a quasi-judicial authority, the Ombudsman has to state the reason for his conclusion at least briefly and the complainant, who is eagerly waiting for resolution of his grievance, shall be in a position to understand why his complaint has been rejected. In Ext.P6 order, the Ombudsman has clearly stated as follows:
The complaint was regarding levy of pre- closure and processing charges. The RE (South Indian Bank) responded that the complainant had availed a KC limit in the year 2016, which is valid till 22.06.2026. Regarding the pre-closure of loan, charges were levied as per the pre-closure clause mentioned in the loan sanction letter. The contents of the bank's response were forwarded to the complainant, however no response was received within the given timeline. It is observed that the loan was availed by the individual for the business purpose, which is not classified under MSE and hence, the charges levied by the bank is considered as valid. After carefully examining the submissions made and the supporting documents submitted both by the RE and the complainant, it was concluded that there is no deficiency on part of the RE.
I am of the view that the above findings will satisfy the requirement laid down by this Court in the judgment in Cochin Frozen Foods (supra).
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13. In the circumstances of the case, I do not find any illegality in the demand of pre-closure charges made by the Bank or in Ext.P6 decision of the Ombudsman.
The writ petition is therefore without any merit and is dismissed.
Sd/-
N. NAGARESH, JUDGE aks/01.07.2025 2025:KER:48314 W.P.(C) No.43178/2024 : 11 : APPENDIX OF WP(C) 43178/2024 PETITIONER'S EXHIBITS Exhibit P1 COPY OF THE LAND TAX RECEIPT DTD 30.4.2024 OF THE PROPERTY MORTGAGED Exhibit P2 COPY OF THE LOAN SANCTIONING LETTER DTD 22.2.2016 WITH TERMS AND CONDITIONS ISSUED BY THE 4TH RESPONDENT BANK Exhibit P3 COPY OF THE REVIVAL LETTER RECEIVED BY THE PETITIONER FROM THE 4TH RESPONDENT BANK DTD 23.6.2021 Exhibit P4 COPY OF THE WRITTEN REQUEST DTD 10.10.24 SUBMITTED BY THE PETITIONER BEFORE THE 4TH RESPONDENT Exhibit P5 COPY OF THE LETTER DTD 14.8.2024 RECEIVED BY THE PETITIONER FROM THE 4TH RESPONDENT Exhibit P6 COPY OF THE ORDER DTD.30.11.2024 RECEIVED BY THE PETITIONER BY MAIN Exhibit P7 COPY OF THE CIRCULAR ISSUED BY THE RESERVE BANK OF INDIA DTD 22.1.2015 Exhibit P8 COPY OF GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA TO ALL BANKING INSTITUTIONS DTD 15.4.2024 RESPONDENT'S EXHIBITS Exhibit R4(a) True copy of the sanction order dated 17.12.2015 issued by the Regional Office to the Branch Exhibit R4(b) True copy of the sanction order dated 23.6.2021 issued by the retail banking department of the Bank to Branch Exhibit R1 (a) True copy of the Reserve Bank-
Integrated Ombudsman Scheme, 2021