Kishore Babu T Vs the Bank of Baroda — Writ and Judicial Review | Karnataka HC (2026)

Kishore Babu T Vs the Bank of Baroda — Writ and Judicial Review | Karnataka HC (2026)

What the court decided

AI extract

Outcome

Petition disposed of with declarations: no quashing of the impugned communication and no refund directed; the second respondent is entitled to charge commercial rate of interest from 22.09.2025, but for any further period only after ascertaining all material data; it cannot rely on the impugned communication to charge commercial rate from the date of sanction or disbursement; any pre-closure application by the petitioner is to be considered by the Bank accordingly.

Issue for consideration

Whether the respondent bank could, by the impugned communication dated 22.09.2025, revise the interest on the petitioner's home loan to the commercial rate, i.e., convert the home loan into a commercial loan. +2 more

Court's answer

On perusal of the records, specifically the declaration dated 29.07.2017, the petitioner cannot take exception to the second respondent calling upon him to pay interest at the commercial rate if he has utilised the loan extended for construction of a residential building (a home) to build a commercial construction.

Ratio / Principle

The second respondent cannot, relying upon the impugned communication, assert that the petitioner will be liable to pay interest at the commercial rate from the date of sanction or disbursement, because firstly the communication does not state that, and secondly the date of construction, the date of assessment for commercial purposes and other details must first be examined before any demand.

Key takeaways

The second respondent is entitled to charge commercial rate of interest from 22.09.2025, but if it has to charge that rate for any period from 22.09.2025, it must be only after ascertaining all the material data such as the date of construction and the date of assessment for commercial purposes.ratio¶48
If the petitioner has filed any application for pre-closure of the loan, the Bank will also consider the same accordingly.obiter¶48

Detailed headnote1 paragraphs

Writ Petition (GM-RES) under Articles 226 and 227 of the Constitution of India - challenge to the Branch Manager, Bank of Baroda, Domaluru Branch's communication dated 22.09.2025 (Annexure-A) revising the interest on the petitioner's home loan of Rs.4.35 crores to the commercial rate with effect from 19.09.2025 and demanding accrued interest of Rs.86,87,297/- as current outstanding - the petitioner, while availing the housing loan, had by declaration dated 29.07.2017 undertaken that the property constructed would be used for residential purposes, failing which the bank could charge commercial rate of interest from the date of availment - HELD: (i) the petitioner cannot take exception to a demand for commercial rate of interest where the loan extended for construction of a residential building has been utilised to put up a commercial construction; (ii) however, the bank cannot, relying on the impugned communication, assert liability at commercial rate from the date of sanction or disbursement, since the communication does not state so and material particulars such as the date of construction and the date of assessment for commercial purposes must first be examined; (iii) the bank is entitled to charge commercial rate of interest from 22.09.2025, and for any further period only after ascertaining all the material data; (iv) if the petitioner has filed any application for pre-closure of the loan, the Bank will consider the same accordingly - petition disposed of.

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NC: 2026:KHC:4357 WP No. 32636 of 2025

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 27^TH DAY OF JANUARY, 2026

BEFORE

THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 32636 OF 2025 (GM-RES)

BETWEEN:

Digitally signed by SARITHA Location: HIGH COURT OF KARNATAKA

KISHORE BABU T S/O OF SRIRAMULU T, AGED ABOUT 50 YEARS, PERMANENT R/AT NO. 401, MALIBU PLAZA, GREEN GLEN LAYOUT, NEAR OM SHAKHTHI APARTMENT, BELLANDUR, BENGALURU SOUTH 560103. REPRESENTED BY POWER OF ATTORNEY HOLDER, SRIRAMULU T, S/O LATE VENKATASWAMY, AGED ABOUT 74 YEARS.

…PETITIONER

(BY SRI. KALYAN R., ADVOCATE)

AND:

THE BANK OF BARODA REGIONAL OFFICE, TRINITY CIRCLE, 4TH FLOOR, VIJAYA TOWERS, 41/2 MAHATMA

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GANDHI ROAD,

BENGALURU 560001.

THE BRANCH MANAGER BANK OF BARODA, DOMALURU BRANCH, HOUSE NO. 208, FIRST FLOOR, 5TH CROSS, 1ST MAIN, DOMALURU LAYOUT, BENGALURU 560071.

…RESPONDENTS

(BY SRI. T P MUTHANNA, ADVOCATE)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED COMMUNICATION / NOTICE DATED 22/09/2025 ISSUED BY THE 2ND RESPONDENT BANK AS PER ANNEXURE-A TO THE WRIT PETITION AND FURTHER ISSUE WRIT OF MANDAMUS OR ANY OTHER WRIT BY DECLARING THAT THE RESPONDENT BANK CANNOT CONVERT THE HOME LOAN IN TO A COMMERCIAL LOAN AND FURTHER DIRECT THE RESPONDENT BANK TO REFUND THE EXCESS AMOUNT COLLECTED PURSUANT TO THE IMPUGNED NOTICE DATED 22/09/2025.

THIS PETITION, COMING ON FOR FINAL HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD

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ORAL ORDER

The petitioner has applied for a home loan with the second respondent, and the petitioner is admitted to home loan of Rs.4.35 Crores. The petitioner is aggrieved by the Communication dated 22.09.2025, and the second respondent has caused this Communication informing the petitioner that rate of interest has been revised and marked as commercial rate of interest with effect from 19.09.2025 and he must pay accrued interest in a sum of Rs.86,87,297/- as current outstanding.

This Court, on 17.11.2025, has stayed the operation of this Communication calling upon the learned counsel for the respondents to place on record agreement or notification or the like which empowers the Bank to charge the commercial rate of interest. However, Mr. T. P. Muthanna, the learned counsel for the respondents, invites this Court's attention to the declaration dated 29.07.2017 filed by

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the petitioner and the others. This declaration in its material part reads as under:

"We hereby declare that the property being constructed by us with the housing loan from Vijaya Bank will be utilized for residential purpose, if it is found that it is utilized for commercial purpose the bank is free to charge commercial rate of interest from the date of availment.

We hereby undertake that construction of house will be completed within the stipulated period after taking necessary plan approval from the government authorities. Also, we are aware either if we close the loan for site purchase before construction of house building or not completed the construction within the stipulated period Bank will charge commercial rate of interest from the date of availment of loan as per Bank's rule. The completion certificate will be submitted to the Bank on completion of house construction. We authorize the bank to collect the original sale deed, other property related documents from the seller after execution of sale deed."

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Mr. T. P. Muthanna submits that the

petitioner cannot dispute that he has availed a home loan but he has put up a commercial construction which is today assessed by the Local Authority for commercial use and that in terms of the assurance and the different loan documents, the respondents are entitled to levy commercial rate of interest lest the respondents be in violation of the RBI Guidelines. The learned counsel also submits that this Court must dispose of the petition observing that the second respondent is entitled to commercial rate of interest not just from 22.09.2025 but also from the date of sanction viz ., 29.07.2017 or disbursement.

This Court, on perusal of the records, more specifically the declaration as aforesaid, is of the view that the petitioner cannot take any exception with the second respondent calling upon him to pay interest at the commercial rate of interest if he has utilised the loan extended for construction of a

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residential building [ a home ] to build a commercial construction. However, the second respondent cannot, relying upon the impugned Communication, assert that the petitioner will be liable to pay interest at the commercial rate of interest from the date of sanction or disbursement because firstly, the Communication does not state that, secondly, the date of construction, the date of assessment for commercial purposes and the other details will have to be examined before there could be any demand.

As such, the petition stands disposed of observing that the second respondent will be entitled to charge commercial rate of interest from 22.09.2025, but if it has to charge rate of interest at that rate for any period of time from 22.09.2025, it must be only after ascertaining all the material data such as the above. It is needless to observe that if the petitioner has filed any application for pre-closure of

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the loan, the Bank will also consider the same

accordingly.

Sd/(B M SHYAM PRASAD) JUDGE

RB