A bank cannot impose subsequently notified foreclosure charges absent the borrower’s contractual agreement.

The petitioners challenged SBI’s deduction of ₹83,41,632 as foreclosure charges when petitioner No. 1, an MSME, closed its loan facility.

The facility had been renewed by arrangement letters dated 18 February 2022, 20 December 2022 and 24 March 2023; none expressly provided for foreclosure charges.

SBI relied on a circular dated 24 February 2023, effective from 1 April 2023, and on contractual language referring to other charges notified on its website from time to time.

The petitioners sought a refund under Article 226.

Whether SBI could levy foreclosure charges under a circular that took effect after the last renewal of the loan facility, where the arrangement letters did not expressly provide for those charges.

Whether a general clause permitting charges notified on the bank’s website from time to time bound the petitioners to subsequently introduced foreclosure charges without their specific agreement.

The Court applied the principles of contract formation and variation: contractual terms must be clear and unambiguous, and a subsequent alteration cannot bind a contracting party without that party’s specific agreement.

It considered Union of India v. Krupanidhi Education Trust, (2021) 18 SCC 318, for the proposition that a concluded loan agreement incorporating pre-payment charges binds the parties; the Court distinguished that decision because the charges there were included in the agreement and the relevant circular pre-dated it.

Article 226 was the procedural basis for the petition.

The arrangement letters contained no specific provision for foreclosure charges, and the circular relied on by SBI became effective on 1 April 2023—after the final renewal on 24 March 2023.

The general reference to charges notified from time to time did not, in the Court’s view, incorporate the later charge into the parties’ contract or amount to the petitioners’ specific agreement to an alteration of its terms.

The cited Supreme Court decision did not assist SBI because, unlike in that case, the charge and applicable circular were not part of, or in force before, the relevant agreement.

The Ombudsman’s decision concerned deficiency of service, not contractual alteration, and did not resolve the issue before the Court.

The Court directed SBI to refund ₹83,41,632 to the petitioners within four weeks of uploading the order.

If SBI failed to do so, the amount would carry interest at 9% per annum.