- 1 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 27TH DAY OF FEBRUARY, 2025 PRESENT THE HON'BLE MR. JUSTICE ASHOK S. KINAGI AND THE HON'BLE MR. JUSTICE UMESH M ADIGA REGULAR FIRST APPEAL NO. 100134 OF 2020 (MON) BETWEEN: 1 . GENERAL MANAGER ORIENTAL BANK OF COMMERCE, CORPORATE OFFICE, NO.5, SECTOR-32, INSTITUTIONAL AREA, GURGAON, STATE HARYANA – 122001,REPRESENTED BY ITS GENERAL MANAGER. 2. ORIENTAL BANK OF COMMERCE KOLHAPUR (PUNJAB NATIONAL BANK) E-WARD, 1ST LANE SHAHUPURI, KOLHAPUR, STATE MAHARASHTRA PIN CODE-416003, REPRESENTED BY ITS SENIOR MANAGER (NOW THE APPELLANTS BANKS ARE AMALGAMATION INTO PUNJAB NATIONAL BANK SCHEME, 2020 BY GAZETTE NOTIFICATION DATED 04.03.2020) …APPELLANTS (BY SRI. RAGHVENDRA A. PUROHIT, ADVOCATE FOR SRI. V.A. BYATNAL, ADVOCATE) Digitally signed by V N BADIGER Location: HIGH COURT OF KARNATAKA Date: 2025.03.01 12:09:20 +0530 - 2 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 AND: HERMES DISTILLERY PRIVATE LIMITED A COMPANY REGISTERED UNDER COMPANIES ACT, REPRESENTED BY ITS MANAGING DIRECTOR, SHRI. AMIT S/O. PRABHAKAR KORE, AGE: 40 YEARS, OCC: BUSINESS, R/O: B.C. NO. 92, HIGH STREET, CAMP, BELAGAVI-590001. …RESPONDENTS (BY SRI. K.R. KOTHIWALE AND SRI. SANJAY S. KATAGERI, ADVOCATES) THIS RFA IS FILED UNDER ORDER 41 RULE 1 R/W. SECTION 96 OF THE CPC., PRAYING TO, SET ASIDE THE JUDGMENT AND DECREE PASSED BY THE SENIOR CIVIL JUDGE AND JMFC RAIBAG IN O.S.NO.07/2019 DATED 19.12.2019 AS NULL AND VOID IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 06.02.2025, THIS DAY, UMESH M ADIGA, J., PRONOUNCED THE FOLLOWING: CORAM: THE HON'BLE MR. JUSTICE ASHOK S. KINAGI AND THE HON'BLE MR. JUSTICE UMESH M ADIGA CAV JUDGMENT (PER: THE HON'BLE MR. JUSTICE UMESH M ADIGA) 1. This Appeal is filed by the defendants/appellants, challenging the judgment and decree dated 19.12.2019, - 3 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 passed in O.S.No.7/2019, by the learned Senior Civil Judge and JMFC, Raibag. 2. For the sake of convenience, the parties are referred to as per their ranking before the Trial Court. 3. The appellants were Defendants and the respondent was the plaintiff before the trial Court. 4. Brief facts of the case of both the parties before the trial Court are as under: 5. It is the contention of the plaintiff/respondent that plaintiff’s company applied loan of Rs.100 crores from the defendants as well as Bank of India which was a leading bank. Defendant bank agreed to sanction loan of Rs.45-00 crores. Accordingly, plaintiff’s company has deposited an amount of Rs.40,00,000/- in the bank of defendants. Defendants have deducted an amount of Rs.25,43,179/- towards processing charges and sanctioned loan of Rs.45-00 crores. The said deduction of Rs.25,43,179/- as processing fee was without any authorization or approval of the plaintiff’s company. - 4 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 6. It is further contended by the plaintiff that the defendants have not sanctioned loan amount and released the funds in time. They assured that they would release said funds within a month but they have taken longer period which was resulted in higher cost of construction. Therefore, plaintiff’s company did not avail the said loan. In spite of that defendants have deducted processing fees which is illegal. It is the further contention of the plaintiff that Managing Director of the plaintiff’s company personally approached the bank for refund of processing charges. Defendants orally agreed to re-consider it and pass orders but they did not refund the processing fees. 7. It is the further case of plaintiff that plaintiff’s company had issued a notice to the defendants during the month of September and October, 2015 and at last on 23.10.2017. Defendant bank did not respond to the said notice and they have not paid the amount deducted from the account of plaintiff’s company towards processing fees. Therefore, plaintiff was constrained to file the suit. With these reasons plaintiff prayed to decree the suit directing the - 5 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 defendants to pay an amount of Rs.25,43,179/- + Rs.12,98,263/- being interest at 14% p.a. from 08.05.2015 to 31.12.2018 and in all Rs.38,41,442/- with future interest at the rate of 14% p.a. from the date of the suit till it’s realization. 8. The trial Court issued summons to the defendants and defendants have appeared through their counsels and filed their written statement. The contention of the defendants are that they have not assured the plaintiff’s company that they would sanction the loan within a month from the date of loan application and they have informed the plaintiff’s company that loan would be sanctioned as per the guidelines and policy of the bank. The amount of loan would be disbursed subject to compliance of terms and conditions of sanction of loan and submission of requisite documents by the plaintiff. The defendants sanctioned loan amount of Rs.45-00 crores vide sanction letter 13.04.2015 and informed the same to the plaintiff. After sanctioning of the amount plaintiff refused to avail benefit of the said loan and - 6 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 plaintiff never informed the defendants about its intention to withdraw loan application till 13.04.2015. 9. It is the further contentions of the defendants that at the time of sanction of the loan, defendants informed the plaintiff about its right to deduct the processing charges from the account of plaintiff. Accordingly plaintiff has deposited an amount of Rs.40 Lakhs as processing charges payable to the defendants for sanction and disbursing of the loan amount. The defendants sanctioned the loan and deducted processing charges from the account of plaintiff. 50% of applicable processing charges was deducted as per guidelines/policy of the bank. Plaintiff has written the letter regarding canceling of sanction of loan only after lapse of considerable period of time, after the sanction of the loan. The said deduction of processing fee is as per policy of the Bank. 10. It is further contended that the defendants have not given any sort of assurance to the plaintiff regarding refund of processing charges. Since loan application was processed and amount was sanctioned, the - 7 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 plaintiff is liable to pay 50% of the actual processing charges. Question of refund of the same does not arise. It is further contended that the policy, rule and regulations pertains to each bank are different. Merely lead bank has refunded certain portion of processing fees cannot be reason to compel defendants to refund deducted processing charges. With these reasons defendants prayed to dismiss the suit. 11. The trial Court on the basis of rival contentions of the parties, framed the following issues: ISSUES 1. Whether the plaintiff proves that, as per the request of the defendants, the plaintiff has deposited Rs.40-00 lakhs to avail the loan, the defendants were not sanctioned the loan, thereby the plaintiff ask to the defendants to cancel the loan and prayed for refund Rs.40-00 lakhs, which was deposited on 08.05.2015? 2. Whether the defendants prove that, the suit of the plaintiff is barred by limitation? 3. Whether the defendants prove that, the court fee paid by the plaintiff is not sufficient? 4. Whether the plaintiff is entitled relief as prayed for? - 8 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 5. What judgment or decree? 12. To prove its case, plaintiff examined one witness as P.W.1 and got marked 3 documents as per Ex.Ps.1 to 3. The defendants examined DWs.1 and 2. The trial Court after hearing both the parties and appreciating the pleading and evidence on record, answered issue Nos.1 and 4 in the affirmative, issue Nos.2 and 3 in the negative and decreed the suit and directed the defendants to pay an amount of Rs.25,00,000/- within 30 days. If they failed to do so, then defendants are liable to pay future interest at the rate of 14% p.a. from the date of decree till its realization. Same is challenged by the appellants/defendants. The trial Court has not granted all the relief prayed in the plaint. Plaintiff has not filed cross objection or cross appeal challenging the said findings. 13. We have heard the arguments of learned counsel appearing for both the parties. - 9 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 14. Learned counsel for the appellants/defendants submits that plaintiff has not produced any documents or any agreement to show that in the event if the company did not avail the sanction of loan by the bank, then whatever processing fee collected by the bank shall be refunded to the plaintiff. Plaintiff has not produced any iota of evidence or agreement to prove that company had a right to recover the entire amount of processing fees in case sanctioned loan is not availed. The learned trial Judge has not considered these facts. Appellants have produced agreement and contended before the trial Court that irrespective of availment of loan, once loan application is processed and amount is sanctioned, the bank is entitled to recover processing fees. Company has produced true copy of letter of sanction dated 13.04.2015. Of course, it is not marked but it is an undisputed document. The said document itself reveals that “applicable of upfront fee and other charges are to be recovered as per the bank schedule of charges.” As per the said agreement, plaintiff was liable to pay the said amount of processing charges. Accordingly - 10 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 Rs.25,43,179/- was debited from the account of plaintiff maintained in the bank. Plaintiff cannot make grievance about the same and it is not entitled for refund of said amount. The trial Court has not considered these facts properly and erroneously decreed the suit. 15. Appellant has further submitted that plaintiff did not avail loan sanctioned by the bank, even without intimating the bank. Plaintiff’s company has not produced any material to show that defendants assured plaintiff that bank would sanction loan and release the amount within a month. Plaintiff is a public limited company and defendant is a commercial bank established by the Government. Any agreement entered into between them shall be in writing. Plaintiff has not produced any letter of assurance given by the bank that it would sanction the loan within a period of 30 days as contended. Therefore just to get back the legal fees payable to defendants, a story was created by the plaintiff that defendants assured that they would process and sanction loan of Rs.45-00 crores within a month and they failed to do so. The said contention is not proved by plaintiff. - 11 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 Hence findings of learned trial Judge is erroneous and interference by this Court is required. With these reasons prayed to dismiss suit by allowing the appeal with costs. 16. Learned counsel for the respondent/ plaintiff supports the impugned judgment. He submits that bank did not sanction the loan and disburse the amount of sanctioned loan within 30 days as assured to the plaintiff. Due to delay in sanction of loan, project cost for establishment of company was escalated. Therefore, plaintiff was unable to commence its business. When the plaintiff’s company did not avail loan facility sanctioned by the bank, it was not liable to pay processing fees and deduction of the processing fees from the account of plaintiff’s company by the bank is illegal. Therefore, plaintiff has every right to recover the said amount. 17. It is further contended by the learned counsel for the respondent/plaintiff that even lead bank which sanctioned the loan along with that defendant bank, agreed to refund processing fees. When such is a fact, defendant bank is also liable to refund the same. These facts - 12 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 were considered by the learned trial Judge and rightly decreed suit and it does not call for any interference by this Court. With these reasons prayed to dismiss the appeal. 18. From the rival contentions of the parties, the following points emerge for our determination: (i) Whether the learned trial Judge erred in holding that plaintiff’s company has right to recover processing fees in view of delay in sanctioning of loan and disburse said amount of loan? (ii) Whether the learned trial judge erred in directing defendants to refund processing fees recovered from plaintiff’s company? (iii) Whether finding of the learned trial Judge needs interference by this Court? 19. Our answers to the point Nos.1 to 3 are in the affirmative for the following reasons: 20. Point Nos.1 and 3 are interconnected therefore, they are discussed together: - 13 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 To decree the suit, burden is on plaintiff to prove that there is an agreement under which both parties agreed that within a month from the submission of loan application to defendant bank, it would process the same, sanction the amount and disburse the amount expeditiously so as to accommodate the plaintiff to establish its company. Except self serving statement of PW.1 plaintiff has not produced any iota of evidence to prove the said contention. As rightly submitted by learned counsel for the appellants, both plaintiff and defendants are not individuals; plaintiff is a private limited company and defendant is commercial bank established by the Government of India. Any agreement between them must be in writing. There cannot be oral agreement between Manager of the bank as well as Managing Director of the company. The Managing Director of the company cannot enter into such an agreement without approval of concerned authority of the bank and even the company cannot orally enter such an agreement with the bank. It is not in dispute that defendant bank sent sanction letter of term loan of Rs.45-00 crores vide letter dated - 14 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 13.04.2015. It is also not the case of plaintiff that before sanction of loan, plaintiff has reputed the contract and intimated the bank not to process loan application. As per pleading and evidence of PW.1, due to considerable delay of sanctioning the loan, project cost of plaintiff’s unit was increased considerably and plaintiff could not maintain commitment made to various suppliers, therefore on account of technical problem, the plaintiff informed the defendant No.2 that loan was not sanctioned within one month as promised and it was of no use to avail the said loan facility and accordingly asked to cancel the sanction. The said request was made by plaintiff’s company only after sanction letter. Therefore, even if plaintiff cancelled the contract, it is liable to pay miscellaneous charges of processing fees for sanction of loan. 21. Defendants in written statement denied contention of plaintiff that it would sanction loan within a month and it has also stated that as per terms of agreement, plaintiff deposited Rs.40-00 lakh as processing charges to be paid to defendants for sanction and disbursing of loan. The - 15 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 said processing charges of 50% of applicable charges has been deducted as per guidelines policy of the bank. It is also contended that plaintiff has exchanged letters, regarding canceling of loan, was only after lapse of considerable period of time after sanction of the loan. In view of these reasons, the bank cannot refund processing fees. To rebut the said contention the plaintiff has not produced any material. 22. The learned trial Judge has not properly framed issue No.1 and it is not the case of anybody that defendant bank did not sanction the loan. It is the case of both the parties that loan was sanctioned but according to contention of the plaintiff, it was after delay of 7 months from the date of application given for sanction of loan. Since it is an undisputed fact question of framing of issue on this admitted fact was not necessary. 23. In view of above discussion, deducting the amount from the account of plaintiff towards processing fees by the bank, is proper and in accordance with the terms of agreement. The undisputed agreement is placed on record by the plaintiff. It was not marked. It clearly indicates that - 16 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 there is a clause in the said agreement that “plaintiff’s company is liable for processing charges.” The plaintiff which has cancelled the contract after sanction, cannot compel the bank for refund of processing charges. It is not the case of plaintiff that defendant bank did not sanction the loan. On the contrary plaintiff did not avail the loan sanctioned by the defendant bank. The contract was terminated due to default of the plaintiff. In such a case plaintiff cannot seek for refund of process fee. If such a relief is granted in favor of the plaintiff, then it would be injustice to defendants. 24. DW.1 and 2 in their evidence have narrated procedures they have followed for sanction of loan and deduction of processing fees. In their cross-examination, nothing was brought out to discard their evidence. Plaintiff has issued notices to defendants requesting them to reimburse the processing fees. It is true that the bank did not respond to the said notice. But more silence does not mean that defendant agreed to refund the amount of processing fees. There are no such legal presumptions in the law. DW.1 and 2 have stated that plaintiff even did not - 17 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 furnish required documents and executed the agreement. Therefore, the amount was not disbursed. These facts were not denied in the cross examination of DWs.1 and 2. In view of all these reasons, plaintiff is miserably failed to prove and establish that there was an agreement between plaintiff and defendant bank to process the loan application and sanction and disburse the amount within a month and therefore, defendant bank is not entitled to deduct processing fees. Defendants are not defaulters or it has not violated agreement. But plaintiff is defaulter. It applied for loan. Knowing the conditions, deposited Rs.40,00,000/- towards processing charge in its account with a permission to withdraw the same by the bank. After processing of the loan application and sanction of loan without justifiable reasons cancelled the same. Hence it is liable to pay required charges/fees. 25. The learned trial Judge has not appreciated pleadings and evidence of both the parties properly. It appears that the learned trial Judge mistook that loan itself was not sanctioned in favor of the plaintiff by defendant bank - 18 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 and bank has defaulted in disbursing the amount to plaintiff. In view of the said mistake, the trial Judge came to wrong conclusion. 26. Learned counsel for the appellants during the course of argument relied on letter given by the Bank of India dated 7-11-2015. It is pertinent to note that this is a Regular First Appeal. If any party intends to produce a document, they cannot submit such a document across the table and there are procedures to produce additional evidence before the Court, and no such procedures are followed. On that ground, the said document cannot be considered. Moreover, it is repeatedly stated in the said letter by the Bank of India that “as an exceptional case/very special case, the bank has agreed to refund portion of processing fees.” Relevant portion of said letter reads as under: 6. At your above request and considering the esteemed relations of the bank with your group, refund of Rs.68.00 lacs out of Rs.80.00 lacs (net of service tax) of PPC/TEV/Lead Bank charges has - 19 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 been approved by the competent authority on 10.07.2015 as a very special case. 7. As per Bank's policy guidelines, in case of new proposals 50% of processing charges is taken as upfront and in case the proposals are not considered/sanctioned, then 50% of the upfront processing charges taken is refunded. In case, the loan is not availed by the borrower after sanction of the limits, no charges are refunded. 8. Branch vide their letter dated 14.07.2015 had advised you for accepting the refund of Rs.68.00 lacs which has still not been accepted. Hence, the refund of charges has still not been credited to your CD account with the Branch. 9. We reiterate that refund of Rs.68.00 lacs has been given as a very special case. Kindly be also informed that your present request vide letter dated 19.10.2015 has been examined in detail by the Bank and that the Bank is not in a - 20 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 position to accede to your present request. 27. Contention of the respondent that since the Bank of India which was the leading bank agreed to refund processing charges which cannot be a ground to decree the suit. Moreover, in the said case also entire processing charges were not refunded. 28. Learned counsel for the appellants has relied on the following judgments: i) Civil Appeal No.1720/2020, Bank of India V/s. M/s.Brindavan Agro Industries Pvt. Ltd., ii) 2006 (4) CHN 594, Delta Fabrics Pvt. Ltd & another V/s. Industrial Development Bank of India. In both the cases, the Hon’ble Apex Court held that bank cannot be directed to refund processing charges when once bank sanctioned the loan. Principle of law laid down in the above judgments applicable to facts of present case. 29. In view of the above discussions, we answer the point Nos.1 to 3 in the affirmative. Accordingly we proceed to pass the following: - 21 - NC: 2025:KHC-D:3959-DB RFA No. 100134 of 2020 ORDER The appeal is allowed. The judgment and decree dated 19.12.2019, passed in O.S.No.7/2019, by the learned Senior Civil Judge and JMFC, Raibag is set aside. Consequently suit of the plaintiff is dismissed. The office is directed to send back the trial Court records along with copy of the judgment. The office is directed to draw decree accordingly. In view of disposal of the appeal, pending IA’s if any do not survive for consideration and accordingly IA’s stand dismissed. Sd/- (ASHOK S. KINAGI) JUDGE Sd/- (UMESH M ADIGA) JUDGE VB List No.: 1 Sl No.: 3