Delhi High Court Directs SBI To Refund ₹83.41 Lakh Foreclosure Charges To Campari Exports

The Delhi High Court on 15 September directed the State Bank of India (SBI) to refund Rs. 83.41 lakh deducted from the account of Campari Exports Private Limited towards foreclosure charges.

Justice Jasmeet Singh allowed a petition filed by Campari Exports challenging the deduction and held that SBI could not impose foreclosure charges that were not specifically provided for in the loan agreements. The Bench observed:

“It is a basic requirement of a valid contract that its terms and conditions must be clear and unambiguous and, that both the parties fully understand them before signing. Without this, there can be no true meeting of the minds and therefore, no valid contract.”

Campari Exports, a Medium Enterprise under the MSMED Act, 2006, had availed a loan facility of Rs. 54.54 crore from SBI pursuant to an Arrangement Letter dated 18 February 2022. The company stated that the Arrangement Letter contained the material terms and conditions governing the loan facility. It was subsequently renewed on 20 December 2022 and 24 March 2023.

The company stated that it was compelled to prematurely close the loan account after SBI increased the interest rate from 8.75% to 17.25% per annum. It thereafter sought closure of the credit facilities and release of the property documents, communicating the request to SBI through multiple emails.

Subsequently, the company challenged the foreclosure charges deducted by SBI. While the company had initially claimed Rs. 98.43 lakh, following amendment of the petition, the amount in dispute stood at Rs. 83.41 lakh, excluding GST.

SBI relied on its circular dated 24 February 2023, which prescribed pre-payment charges of 2% of the prepaid amount. It contended that the company was bound by the terms and conditions of the loan documents, including modifications and other charges notified by the bank from time to time on its official website.

The Court noted that the Arrangement Letters did not specifically provide for foreclosure charges. It also noted that the circular relied upon by SBI to impose the 2% charge was effective from 1 April 2023, whereas the last renewal of the loan facility was on 24 March 2023. It observed:

“Even assuming that the respondent No. 1 could levy the aforesaid foreclosure charges without notifying the other contracting party about the same clearly in writing, the same does not apply to the petitioner as the said circular dated 24.02.2023 is effective from 01.04.2023 i.e. after the date of last renewal.”

Further, Justice Singh added that “the imposition of foreclosure charges, subsequently, is in the nature of altering the terms and conditions of the initial contract.” He held that such an alteration could not become binding without the other contracting party specifically agreeing to the altered terms. Merely permitting SBI to notify additional charges through its website or other media, without incorporating those charges into the contract, would amount to an alteration of the original contract and could not bind the borrower.

The Bench also distinguished the Supreme Court's decision in Union of India v. Krupanidhi Education Trust, noting that the pre-closure charges in that case were contained in the agreement and the relevant circular had been notified before the agreement was executed.

Accordingly, the High Court directed SBI to refund Rs. 83.41 lakh to Campari Exports within four weeks.

For Petitioners: Advocates Rhythm Katyam and Pratyush Arora

For Respondents: Advocates Rajiv Kapur, Akshit Kapur, Riya Sood, Srishti Bansal, Amit Tiwari, CGSC, Ayushi Srivastava and Kushagra Malik