WP/43407/2022 of Sridhar Purekar Vs State Bank of India on 24 February 2026

ORDER:

Petitioner states that he availed home loan from respondent bank of Rs.7,72,OOO/-, which was disbursed. in three phases at the rate of Rs.2,57,500/- each; at the time of disbursement, respondent bank obtained six blank cheques towards securit5r in respect of loan Account No.3O363578633. It is stated, subsequenfly, petitioner noticed. various discrepancies at the time of issuance and utilization of cheques, which occurred due to the negligence of the staff of respondent bank in discharge of their duties. Petitioner is stated to have submitted ECS authorization authorizing salar5r deduction towards EMls, however, the bank failed to deduct the salary till February, 2O!2, i.e. for about four years from 2008 to 2012. Respondent bank ,lid not verify its records and did not issue any notice to petitioner during the said period. Upon noticing the same, petitioner approached respondent bank and brought to its notice the negligence in not d.educting the salary. Thereafter, respor:dent charged interest on the EMIs for the said period and added the same to the principal amount and commenced deduct:ion of salary from 20t2 onwards. It is asserted, there was no fault on his part and no interest ought to have been charged for the period from 2oo8 to 2012. As per the loan schedule, the tenure of loan was 162 months payable at Rs.9,431/- per month and the total loan liability was Rs.lS,2T,822l-, which would have been fully discharged by November,2o2l. However, petitiorrer paid total amount of Rs.l7,44,OS3/-, resulting in excess payment, yet respondent bank continued. to deduct EMIs insteaii of returning the excess amount.

1.1. Petitioner states that he approached respondent bank 'f,n several occasions and also submitted a written representation in April, 2o2r requesting rectification and refund of excerss amount, but none of the requests was considered. The staff o:[ the respondent bank contintied to visit petitioner,s house and collect EMIs. consequently, petitioner issued. legal notice rlated o4-o8-2o21 through counsel, narrating the entire facts and calling upon the bank to veri$z the loan account and refund the excess amount paid. Even after receipt of legal notice, the bank neither replied nor took any action. Thereafter, petitioner is stated to have filed Writ Petition No.86OL of 2022, which was disposed of on 2L-O2-2O22, directing respondent bank to examine petitioner?s representation dated April, 2O2L and legal notice dated O4-O8-2O21 and to pass orders in accordance with law within ten weeks from the date of receipt of a copy of the said order. Despite lapse of more than seven months, respondent neither passed any order nor responded, which necessitated to file Contempt Case No.1606 of 2A22, drrring the hearing of which, on |4-LO-2O22, respondent submitted that an order rejecting petitioner's representation had afreadV been passed on O3-10-2022, impugned in this Writ Petition and served on him.

1.2. According to petitioner, under the impugned order, respondent demanded payment of Rs.7,53,O53/- with interest at L6.35oh, whereas petitioner had already paid Rs.L7,44,033/' against the total loan liability of Rs.15,27,822f -, resulting in excess pa5rment of Rs.2,l6,2lLl- aTong with interest at 16.350/o per annum. Respondent rejected his representation without proper verification of records. The impugned. order refers to cancellation of flat allotted to petitioner by Rajeev Swagruha Corporation Limited and refirnd of Rs.15,7L,586f -, but they a continued to collect EMIs. It is stated, cancellation of allotment was done by oflicials of Rajeev swagruha corporation Limited., theref,cre, no violation of loan terms can be attributed. to him. when respondent had already collected the entire loan amount along with interest and also collected excess amount, the impugned order is arbitrary, vitiated and does'not stand judicial scrutilty.

1.3. Petitioner alleges that impugned order was issued with ;!rrl intention to evade refund of excess amount of Rs.2,16,2L1l- and that under the guise of the said order, respondent is now threatening recovery of Rs.7,s3,0s3/- with interest at L6.35yo, which is unreasonable and unwarranted. Hence, the Writ Petition.

In the counter filed by the respond.ent bank, it is stated, the competent authorit5r passed the detailed impugned order substantiating the reasons and grounds for rejecting petitioner;s claims as being contrar5r to the unequivocal covenants and undertakings executed by petitioner under the Memor,andum of rerm Loan Agreement for Home Loan granted to public dated 13-05-2008. They place on record. the true factual position that petitioner had ad.mittedty availed home loan fla<:ility of Rs.8,15,ooo/- for purchase of a double bed room flat under Rajeev swagruha Housing Scheme at chandanagar, -,,.,--.,J .

Papireddynagar, Ranga Reddy District, admeasuring 685.50 square feet, bearing Lot No.793, allotted by the A.P. Housing Board uide letter No.E/EE/WD I 685.50 Sft. Flat/Chandanagar. In acknowledgment thereof, petitioner executed a Memorandum of Term Loan Agreement for Home Loan granted to public dated 13-O5-2008.

2. t. It is stated, the competent authorif, in paragraph 3 of the order impugned, observed that ECS mandate furnished by petitioner was not properly adhered. to by the Bank d.uring an intermittent period. On that limited issue, petitioner was held entitled to interest remission amounting to Rs.65,683/-. The said amount was refunded and adjgsted in the loan account towards the dues payable by petitioner. The calculation sheet reflecting the said adjustment was annexed as Annexure-A to the order communicated to petitioner. E:<cept to this limited extent, respondent denies the truth, validity and genuineness of the remaining allegations made by petitioner.

2.2. With respect to petitioner's contention that loan tenure was t62 months, EMI was Rs.9,431/-, EMI liability would have ended by November, 2021, and petitioner paid a total sum of Rs.17,44,033/- resulting in alleged excess payment, respondent states that the said contentions are contrary to the express covenants contained in Clause 2(b) of the Memorandum of Term Loan Agreement dated 13-05-2008. Under the said clause, interest is chargeable on floating rate basis irr accordance with the guidelines issued by the Resenre Bank of India. Respondent reproduces. th-e clause which provides that interest shall be applied at 2.5Vo below SBAR, rising or falling, at monthly rests calculated on daily balances, and Bank is entitled at any time to change the rate of interest at its sole discretion, even without change in SBAR. The borrower is deenred to have notices of such changes through display at the branch, publication in newspapers, or reflection in passbook or statements of account. It is stated, pursuant to the said clause and the RBI guidelines, including the Master Direction - Reserve Bank of India (Interest Rate of Advances) Directions, 2Ot6, interest was applied from time to time. tt is categorically denied that any excess amount was collected and stated that petitiorrer remains legally-bound to pay the outstanding amount reflected in the books of account.

2.3. It is stated, the action of charging interest is strictly in accordance with RBI guidelines and. the extant instructions of the Ba:rk cannot be faulted. It is asserted that Writ Petition is speculeLtive in nature and is liable to be rejected on this ground as well, Respondent refers to order dated 21-02-2022 inWrit Petition No.86OL of 2022 and submits that in compliance with the said directions issued therein, the competent authority passed the impugned order and communicated the same to petitioner along with Annexure-A-1 showing refund and adjustment of Rs.65,683/-, Annexure-A,2 detailing the calculation of interest after the loan account was treated as unsecured, and other material statements.

2.4. Respondent states that on examination of records, it was found that though loan was availed as a secured home loan in M"y, 2008, no securit5r existed in favour of Bank as on the date of impugned order. The loan documents and sanction teims cast a clear obligation on petitioner to create securit5r interest over the flat proposed to be acquired under the Rajiv Swagruha Housing Scheme at Chandandgs, Ranga Reddy District. Upon taking up the issue with Rajiv Swagruha Copporation Limited, they were informed that petitioner himself sought cancellation of allotment of flat and obtained refund of Rs.15,71,586/- from the Corporation which was paid uide Andhra Bank cheque No.OOOO04 dated 02'Ol-2O18 in favour of petitioner. Petitioner collected and encashed the said cheque directly without informing the Bank and without crediting the proceeds to the loan account, despite the fact that consideration originally paid to the Corporation was sourced from the Bank loan.

2.5. Respondent asserts that in terms of the loan covenants, the Bank had charged not only over the asset proposed to be acquired but also over any refunded proceeds arising therefrom. Therefore, the refunded amount of Rs.15,i21,586/- was legitimately payable to the Bank. Petitioner, with ntala fide intention, collected and utilized the refunded amount without disclosure to the Bank, amounting to wilful breach of loan covenants and acts tantamounting to criminal misapp,repriation and cheating of the Bank.U In view of the above ,:onduct, respondent was constrained to treat the loan account as an unsecllred advance with effect from Janua4r, 2Ol8 and to charge interest at the O.D. rate in accordance with RBI guidelines and the extant instructions of the Bank. Until such time, loan was charged at a concessional rate on the assumption of availability of security and because it was a priority sector loan. After the account became unsecured, the application of O.D. interest was justified. Detailed statements in this regard were forwarded to petitioner along with the impugrred order.

2.6. Respondent states that since the loan account remainr:d unpaid, it was classified as a Non-Performing Asset on 22-O9-i|O22. Upoo recalculation of interest on the basis of the unsecured loan, it was communicated that an amount of

Rs.3,L2,3o6/- was due and payable under the unsecured roan from 2ola onwards. They refers to clause 2tkl of the Memorandum of rerm Loan Agreement, under which petitioner undertook not to sell, assign, mortgage, or qtherwise encumber the asset acquired through Bank funds without prior permission so long as the borrower remained indebted to Bank. Petitioner violated the said covenant, exposing himself to criminal action and action under the RBI Master Directions on Fraud, 2OL6. He was therefore, informed that Rs.7,53,00O/- was due and payable along with interest at L6.3s%per annum (clean o.D. interest) with monthly rests and other incidental charges.

3. Petitioner filed reply almost reiterating the writ averments. It is stated, respondent Bank itself admitted that ECS mandate furnished by petitioner was not properly adhered to, which establishes that ECS was inoperative due to the fault of the Bank, hence, adjustment of interest of about Rs.65,6gO/- is stated to be arbitrary and attributable solely to the negligence of respondent Bank. It is further stated that, petitioner paid Rs.17,44,O33/- in total, resulting in excess pa5rment of Rs-2, L6,2rL / -. Th.e contention of respondent Bank that interest is chargeable on a floating rate basis is denied and stated to be contrar5r to the agreed loan terms.

li ,; : i

3.1. Petitioner states that cancellation of flat was effecteC by Rajeev Swagruha Housing Scheme authorities and not due to any default on his part. He further denies the claim of cha:rging O.D. interest and contends that declaration of loan accourrt as T.[PA' on 22-09-2022 is illegal, as no notice was issued under the SARFAESI Act prior to such declaration.

4. Heard Ms. Saleha Begum, learned counsel for petitio:eer.

5. M/s Pearl Law Associates, learned Standing Counsel for respondent bank argues that Writ Petition is not mainteLinable under Article 226 of the Constitution as the issues raised pertain to contractual obligations and involve disputed questions of fact arising out of a loan agreement. It is contended that ',r'rit jurisdiction cannot be invoked for adjudication of private contractual disputes or for interpretation and enforct:ment of contractual terms. He places reliance on the judgmr:nt of the Honble Supreme Court in Rc;'asthorn State Indusl|rial Deaelopment and Inuestnlent CotTtoratiort- o. Diamo,nd. & @m Deaelopment Cot'Ttoration Limited.t, wherein it was categorically held that contractual disputes cannot ordinarily be agitated und.er writ jurisdiction and that enforcr:ment of contractual terms must be relegated to civil ' lzors; i scc 470

:.'"-.-=J tl remedies or arbitration, if provided. They also relies on the judgments in Bareillg Development Authoritg a- Aiai Pal Singh2, State of U.P. a. Bridge & Roof Co. (India) Ltd..s and Kerala State Etectricitg Board o. Kurien E, Kollathi4+.

5. 1. Learned Standing Counsel submits that discretionary and equitable nature of writ jurisdiction requires existence of a clear legal right and a corresponding statutory or public duw, which is absent in the present case. It is asserted that a writ of mandamus cannot be'issued to create rights or enforce purely contractual obligations. The Bank submits that the writ petition does not disclose any violation of statutory duff, public law element, or arbitrariness walTanting exercise of writ jurisdiction, and therefore the petition is liable to be dismissed on the ground of maintainability alone.

5.2. According to learned Standing Counsel, Writ Petition suffers from non-joinder of necessary party. The impugned order has been passed by the Assistant General Manager, State Bank of India, RBo Banjara Hills, but the said Authority has not been impleaded. It is submitted, petitioner has not approached the Court with clean hands, has suppressed material facts, and has selectively placed documents 21rsse;2 scc 116 3 lrsso; 6scc22 n 1zooo1 6 scc 293

t2 on re(:ord to mislead the court. Reliance is placed on the judgm,:nt of the Honble Supreme Court in K.D. Shartna u. steel authoritg of rndia Limiteds, wherein it was held that petitioner, who suppresses material facts or inakes mislead.ing statements, is not entitled to equitable relief under Articles 32 or 226 of the Constitution.

5.3. l,earned Standing counsel submits that housing loan interest was charged at applicable rates from the date of sanction in May, 2oo8 till 01.01.201g. overdraft interest rate was charged only from 02.o1.2018, the date on which petitioner breachr:d the terms and conditions of loan agreement. petitioner has noi- pleaded anywhere in the writ affidavit that oD interest *.". acplied only from o2.0L 2018, and by suppressing Annexure-l and Annexure-2, has attempted to mislead this court into believing that oD interest was levied from the date of sanction.

5.4. Relevant clauses of the Memorandum of rerm Loan Agreem,:nt executed by petitioner were relied upon. clause 2(b) stipulates repayment of loan in EMIs of Rs.9,43L/- each along with interest. The agreement expressly provides that loan is on floating interest rate basis at 2.2szo below SBAR, subject to variation, and empowers the Bank to revise interest rates and ^i -:.:i 5lzooel l2 scc 481

l3 charge enhanced rates in case of default or irregularity. The agreement further authorises the Bank to charge penal interest and enhanced interest at its discretion in case of breach. Clause 2(k) prohibits sale, assignment, mortgage or encumbrance of the flat without prior permission of Bank, Clause 2(1) mandates creation of security by way of mortgage, and Clause 2(r) obligates the borrower to abide by the sanction letter, RBI rules, and governmental directions as amended from time to time. Clause 2(wl clearly states that borrower has understood all terms and conditions and agreed to abide by them, failing which the Bank has the right to recall the loan.

5.5. According to learned Standing Counsel, petitioner entered into the Agreement with fulI knowledge and consent and is therefore bound by the contractual terms and he has not challenged the validity of the Agreement or its clauses. Reliance is placed on Indian Bo;nk o. Blue Jaggers Estates Lt&6, wherein the Honble Supreme Court held that a borrower who has signed an Agreement with open eyes cannot subsequently challenge the agreed terms, including interest rates. Further reliance is placed on Raiesh Mongo o. Housing Deaelopmcnt Finance CorTroration Ltd.7 wherein it was held that a borrower, having executed the Agreement and availed the 6 (zoro)8 scc 129 7 lzoz+y s scc 299

I t4 loan, rlo.rrrrot subsequently dispute interest rates or seek refi.rnd after ;lcquiescence. Reliance is also placed on Eongkong & shanghai Banking corTtoration Ltd.. u. Au)az|, wherein it was treld that courts cannot rewrite contractual terms or scrutinize interest rates agreed between parties unless arbitrzLriness or mala fides are established. 5-6. on the issue of burden of proof, it is argued that as per pt:titioner, cancellation of allotment was done by Rajiv swagn-rha corporation Limited and that no fault can be attribu.ted to him. However, petitioner failed to fiLe the letter of cancelJation, which is a document in his possession. Non- produc:tion of such a material document warrants drawing of advers,: inference against him. Relian<:e is placed on the judgment of the Hon'ble Supreme court :.n s.P. chengalvaraga. Naidu a. Jagannathe, wherein it was held that suppression of vital documents amounts to playing fraud on the court and that a litigant who approaches the c,rurt with falsehood has no right to be heard. Though. the Branch Manager of Huma5run Nagar Branch approar:hed Rajiv swagruha corporation Limited seeking cancell:rtion letter, the same was not furnished as the Bank is not pri'4y to the said docurnent. It is further contended that 81zozs1s scc s2 e ltss+1l scc 1

-. -,1

irrespective of whether the cancellation was initiated by Corporation or petitioner, the same has no bearing on the core issue, namely, entitlement of the Bank to charge OD interest as per contractual terms.

6. Upon careful consideration of the pleadings, documents, and submissions, it is to be seen, the foundational facts relating to ECS lapse are not in dispute. Respondent Bank itself, in the impugned order, admitted that ECS mandate furnished by petitioner was not properly adhered to by them during an intermittent period and granted interest remission of Rs.65,683/-. Once respondent Bank admits its own failure in implementing ECS mandate, the entire period from 2O08 to February, 2Ol2 cannot be treated as default attributable to petitioner. Charging interest and capitalising the sarne for a period during which the Bank admittedly failed to act amounts to arbitrariness and violation of principles of fairness.

7. The contention of respondent Bank that loan was on floating rate basis and governed by RBI guidelines does not answer the core issue, namely, whether excess recovery was made despite full discharge of liability. Petitioner consistently asserted, with figures, that total payable amount was Rs.15,27,822/ - and he paid Rs.17,44,O33f -, in excess. Respondent Bank has not disputed the total amount paid, but i I I I I I [;l'

t6 sought to justify continued demand. by applyrng oD interest retrospectively after cancellation of allotment, without establisrhing any wilful defaurt on the part of petitioner

The plea of the Bank that petitioner breached covenarts by not depositing the refunded amount of Rs.15,7L,5861- cannot be accepted in the facts of this case. Responlent did not dispute that loan was serviced through sarary cleduction and that EMIs continued. to be collected even after cancellation. Respondent also did not issue any contemporaneous notice demanding immediate deposit of the refunde,l amount nor recalculated liability at that stage. The impugned order was passed only after initiation of contempt proceedings, which indicates lack of timely action and. applicat.on of mind. 9' Reliance placed by respondent Bank on maintairrability of writ petition is also misplaced. Though contractrral disputes ordinarily lie outside writ jurisdiction, where a'bitrariness, admitted negligence, excess recovery, and non-compliance with earlier judiciar directions are established., this court is not precluded from exercising jurisdiction under Article 2i>-6. The impugned order dated 03-ro-2022 was passed pursuant to the directions issued in writ petition No. g60l of 2022, therefore, is amenable to judicial review. .l

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10. It is also to be observed that loan accorrnt was declared as NPA on 22-09-2022 wlthout even issuing notice under the SARFAESI Act, though recovery of EMIs was made continuously and the amount was paid in excess, which further vitiates the action of the respondent Bank. Respondent failed to demonstrate compliance with statutory safeguards prior to classiffing the account as NPA. This Court is therefore, of the view that impugned order was passed on consideration of some facts and ignoring lapses on the part of Bank. Respondent seeks to justify excess recovery by belated application of OD interest, however, they fail to take into consideration the fact that petitioner had already paid more than the agreed loan liabilify. tl. action of respondent Bank is therefore, arbitrar5r, unreasonable and violative of Article 14 of the Constitution. I 1. The Writ Petition is therefore, allowed. The impugned order dated O3-|O-2O22 is set aside. Respondent Bank is directed to recalculate the loan account by excluding interest charged for the period from 2oo8 to Februaryr, 2oL2 attributable to ECS lapse, give full credit to the total amount of Rs.17,44,O331- paid by petitioner, and refund the excess amount of Rs.2,l6,2Lll- with applicable interest, within a reasonable time. No costs.

l8 L2. Consequently, the miscellaneous Applications, if any sha.ll stand closed. SD/. A.JAYASREE REGISTRAR //TRUE COPY// OFFICER .,. . ,l! t-.'-... To

1. The Chie,f General Manager, State Bank of lndia, Secunderabad. Division,

2. One CC to M/s. SALEHA BEGUM, Advocate

3. One CC':o M/s. PEARL LAW ASSOCIATES,

4. Two CD rlopies loPUcl Advocate loPUcI SA BS u i I I {\ HIGH COURT DATED i2,410212026

ORDER

WP.No.43407 of 2A22 ALLOWING THE W.P WITHOUT COSTS.

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