Del HC | Levy of commission on unexpired term of bank guarantee held unsustainable where petitioner not informed about pre-payment charges

Delhi High Court: Vibhu Bhakru, J. allowed a writ petition filed against the action of Andhra Bank in debiting a sum of Rs 68.93 lakhs in the petitioner’s current account as commission charges for the unexpired period of a bank guarantee that was surrendered by the petitioner.

The petitioner, represented by Tarun Johri and Ankit Saini, claimed that the Bank had not informed them at the time of issuance of the bank guarantee that any such charges would be payable, and therefore, levy of such charges was illegal and contrary to guidelines issued by the Reserve Bank of India. The Bank, represented by P.B.A. Srinivasan, claimed that it was entitled to levy such charges.

The foremost question to be considered by the High Court was whether the Bank was obliged to disclose the charges to the petitioner at the time of according to the request of providing the guarantee. Referring to the relevant circulars issued by the RBI, and it’s earlier decision in DLF Ltd. v. Punjab National Bank, 2011 SCC OnLine Del 2465, noted that the RBI clearly stated that levy of charges, which were not initially disclosed to the borrower, would constitute an unfair practice. The Court reiterated the principal to be:

“a person, who is visited with any charges for a facility, should be aware of the same at the time of availing the facility and not at the time of discharging the same. This is a principle of fair play and fair practice, which the banks are obliged to follow. It would make little difference whether the facilities extended by the banks are fund based or non-fund based.” In such view of the matter, the charges levied by the Bank were held to be unsustainable and the Bank was directed to refund the same with an interest at the rate of 6 per cent per annum. [Athena Energy Ventures (P) Ltd. v. Andhra Bank, 2019 SCC OnLine Del 8854, decided on 30-05-2019]

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