Facts
The Respondent (Plaintiff) sought a Lease Rental Discounting facility of Rs. 270 million from the Appellant Bank.
Source reference: p. 2On 23.05.2012, an Indicative Term Sheet was issued, and the Respondent paid Rs. 13,50,000/- via a covering letter describing it as a "Mobilisation Fee" refundable if the loan was not approved.
Source reference: p. 3Subsequently, the Bank issued a formal Facility Letter on 20.07.2012 sanctioning Rs. 255 million, which stipulated in Clause 5 that the 1% Processing Fee was "non-refundable".
Source reference: p. 4, 7The Respondent accepted and signed this Facility Letter on 08.08.2012 following a Board Resolution.
Source reference: p. 4, 12However, the loan was never disbursed because the Respondent failed to provide required "No Dues Certificates" from its previous lender (Syndicate Bank), which were conditions precedent.
Source reference: p. 8, 13The Respondent sued for recovery of the fees paid (totaling Rs. 16,50,000/-). The Trial Court decreed the suit in favor of the Respondent, holding the fee refundable based on RBI circulars. The Bank appealed.
Source reference: p. 10-11Issues
1. Whether the Respondent, having admittedly accepted the Facility Letter dated 20.07.2012, is bound by the non-refundability clause therein despite the earlier "Mobilisation Fee" letter.
Source reference: p. 132. Whether the Respondent can claim a refund of the Processing Fee despite its own failure to comply with the Conditions Precedent for disbursement.
Source reference: p. 13Law Applied
The Court applied Sections 91 and 92 of the Indian Evidence Act, 1872, which exclude oral evidence or extrinsic material from contradicting or varying the terms of a written contract.
Source reference: p. 16Established that parties are bound by the terms of a signed contract as per Bharathi Knitting Company v. DHL Worldwide Express (1996) 4 SCC 704.
Source reference: p. 11, 16Affirmed that a written document is the final repository of the parties' intentions as per Roop Kumar v. Mohan Thedani (2003) 6 SCC 595.
Source reference: p. 16The Court also invoked the legal maxim commodum ex injuria sua nemo habere debet, meaning a party cannot take advantage of its own wrong/breach.
Source reference: p. 21Reasoning
The Court reasoned that the Facility Letter dated 20.07.2012 constituted the final binding contract between the parties.
Source reference: p. 18Although the Respondent pointed to an earlier letter from May 2012 suggesting the fee was refundable, that document was never legally proved and, regardless, was superseded by the signed Facility Letter.
Source reference: p. 17Since the Respondent signed the Facility Letter on 08.08.2012 with full knowledge of the non-refundable nature of the 1% fee, it was bound by that term.
Source reference: p. 14Furthermore, the Court found that the Bank had performed its obligations (appraisal and sanction), and the failure to disburse the loan was exclusively due to the Respondent’s failure to provide documents from Syndicate Bank.
Source reference: p. 21The Court distinguished RBI Circulars used by the Trial Court, noting they mandate disclosure for rejections of applications, whereas here the application was accepted and the fees were clearly disclosed as non-refundable.
Source reference: p. 22-23Holding
The Court answered both issues in favor of the Appellant Bank. It held that Clause 5 of the Facility Letter made the Processing Fee non-refundable and that the Respondent’s breach of conditions precedent barred it from seeking a refund.
The High Court set aside the Trial Court's Judgment and Decree dated 31.07.2020 and dismissed the Respondent’s suit.
Source reference: p. 24Original Court PDF
Standard Chartered BankvsChitra Utsav Video Private Limited
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