Dismissed

M/S.Kukumina Constructionsp Ltd,Bbsr v. Icici Bank Ltd,Bbsr

Orissa HC7 Sept 2017WP(C)/9327/2016

Case brief

AI extract

What is this about?

Single judge dismissed a writ petition challenging a Section 13(2) notice issued by a bank via its advocate and the subsequent response regarding floating interest rates. The court found the notice valid and the interest levy justified per the loan agreement.

What did the court decide?

The writ petition was dismissed for being devoid of merits. Petitioners were informed they could approach the bank for further clarification.

This writ petition has been filed challenging the notice dated 29.02.2016 (Annexure-1) , issued by the opposite parties-Bank under Section 13(2) of the SARFAESI Act and the subseque nt response/reply of the Bank dated 17.5.2016 (Annexure 1/A), under which the representation o f the petitioners with regard to the demand raised by the Bank has been rejected. Learned counsel for the petitioners submits that the notice issued by the opposite par ties-Bank under Section 13(2) of the SARFAESI Act is not valid and in accordance with law, as the same has been issued not by the Bank but by its Advocate. It is further submitted that the letter issued by the Bank dated 17.5.2016 (Annexure 1/A) rejecting the representation of the petitioners with regard to the levy of floating rate of interest is not proper and justified i n as much as, the same is in violation of the guidelines prescribed by the Reserve Bank of Ind ia.

Learned counsel for the opposite parties-Bank submits that the notice under Section 13 (2) of the SARFAESI Act has been issued by the Bank through its Advocate, to intimate the peti tioners with regard to the outstanding loan dues and therefore the same is in accordance with law. It is further submitted that the Bank in response to the representation of the petitioner s has clearly indicated by its letter dated 17.5.2016 (Annexure-1/A), with regard to the levy of floating rate of interest and explaining the detailed reasons for levy of the same in respe ct of the petitioners loan account.

From the notice dated 29.02.2016 (Annexure-1), we find that the same has been issued b y the Bank through its Advocate, under Section 13(2) of the SARFAESI Act, demanding payment of the outstanding loan dues, which cannot be faulted.

On a perusal of the letter of the Bank dated 17.5.2016 (Annexure 1/A), it is seen tha t the Bank has given a detailed response to the representation of the petitioner, indicating t he reasons for levying floating rate of interest to the petitioners loan account, the relevant portion of which reads as under:- With a view to ensure transparency, a benchmark rate FRR was introduced for determinin g the rate of interest ROI for floating rate loans as per Reserve Bank of India guidelines. Th is ensures that borrowers of such floating rate loans have a transparent rate which gets revie wed from time to time throughout the tenure of the loan. FRR is linked to ICICI Banks cost of funds and appropriate cost of operations for the relevant period, credit charge and margin. As cost of funds is one of the components of FRR, any change in cost of funds would therefore im pact all borrowers whose loans are linked to FRR. Please note that the spread between the FRR and the actual rate of interest (ROI) offered to the borrower is called as Margin. Any change in the ROI is on account of the changes in the FRR. The final rate offered to a borrower is a function of the benchmark rate and the margin associated with the loan. The margin remains con stant throughout the loan. The appropriation of instalments toward interest and principal woul d depend on the rate of interest applicable to you. Please note that there was no excess inter est levied to your loan accounts at any point of time.

2.4.1. Banks have the freedom to offer all categories of loans on fixed or floating rates, sub ject to conformity to their Asset-Liability Management (ALM) guidelines. The methodology of co mputing the floating rates should be objective, transparent and mutually acceptable to counter parties. The Base Rate could also serve as the reference benchmark rate for floating rate loa n products, apart from external market benchmark rates. The floating interest rate based on ex ternal benchmarks should, however, be equal to or above the Base Rate at the time of sanction or renewal. This methodology should be adopted for all new loans. In the case of existing loan s of longer/fixed tenure, banks should reset the floating rates according to the above method at the time of review or renewal of loan accounts, after obtaining the consent of the concerne d borrower/s.

For the reasons as aforesaid, we do not find any infirmity in the letter of the Bank d ated 17.5.2016 (Annexure-1/A), applying the floating rate of interest to the petitioners loan account, as per the terms and conditions of the loan agreement.

M/S.Kukumina Constructionsp Ltd,Bbsr v. Icici Bank Ltd,Bbsr

Case brief

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M/S.Kukumina Constructionsp Ltd,Bbsr v. Icici Bank Ltd,Bbsr

Case brief

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