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
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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
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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
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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
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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
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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
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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
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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
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
