Bank can't recover EMI on undisbursed loan, rules Forum

Rejecting an argument by SBI that it was not at fault in recovering monthly instalments on "disbursed" housing loan, the Dispute Redressal Forum here has asked the bank to refund the entire EMI charged unduly for 20 months from a policeman and directed it to pay him Rs 50,000 as compensation for deficient services.
In their order, issued last week Forum President M Y Mankar and members Madhuri Vishwarupe and ND Kadam directed the bank to make the payment to complainant Rajendra Sadashiv Pardesi, within the next 40 days or else pay interest on the sum at 6 per cent p.A. Till its realisation.

The new panel has adopted an innovative system by which it directs both the complainant and the respondent to file an affidavit before a specified date as regards the compliance of the Forum order which tracks the pendency in the compliance which was not happening earlier.
In his complaint, the policeman told the Forum that the bank had sanctioned him a housing loan and issued a cheque for Rs 5,61,000 on July 23, 2007 which he handed over to ACP (Police Welfare) on July 25, 2007.
After the issue of the cheque, the bank began recovering the EMI amount of Rs 7,672 from September 01, 2007 till March 2009 after which he was informed by the Police Welfare Authority that the loan amount was not received.

On enquiry, the complainant came to know that the cheque of Rs 5,61,000 handed over by him to the Police Welfare Authority, was not presented for collection till 31/3/2009 and hence, on request of the complainant a fresh cheque was issued to him in April, 2009, the Forum was informed.

Even though the loan amount was not actually disbursed to the complainant till March 2009, the recovery of the housing loan principal and interest at the rate of 10 per cent was made by the bank.
This was in breach of the loan agreement condition that interest is to be charged on the outstanding amount of the disbursed housing loan. Since the loan was not actually paid to the complainant, the recovery of principal amount and interest was not proper.

Hence the complainant filed a complaint claiming refund of principal amount, interest recovered, compensation and cost of the complaint, aggregating to Rs 2,28000.
In their order, the Forum said it was the duty of the complainant's welfare authority to deposit the said cheque for collection, which they appear to have not done.