HC raps nat’l bank for imposing fee on MSME unit for loan closure

Cuttack: In a strong pushback against restrictive lending practices, Orissa high court has ruled that “a bank cannot convert a borrower’s right to mobility into a chargeable commodity”, while quashing a 4% foreclosure fee imposed on an MSME borrower whose loan had already been taken over by another lender.The case concerns a private poultry unit in Berhampur, which had initially taken a Rs 1.80 crore term loan from a nationalised bank under the MSME scheme. Seeking better terms, the borrower later approached a private bank for takeover of the existing loan. After clearing all outstanding dues, the private bank formally took over the account on May 26, 2024.Despite all dues having been cleared, the nationalised bank slapped the borrower with a 4% foreclosure charge and refused to return the original title deeds, property papers and collateral securities unless the amount was paid. The petitioner told the court that repeated requests for waiver of charges and release of documents were ignored. On Aug 14, the MSME unit approached the HC with relevant documents.After examining them, Justice S K Panigrahi, in the Nov 29 verdict which was uploaded on Dec 4, observed that “no credible justification is shown for continuing retention” of the documents and termed the bank’s stance “arbitrary and violative of the petitioner’s proprietorial rights.”Accordingly, Justice Panigrahi held the borrower entitled to waiver of the foreclosure fee and directed bank officials to “forthwith release the MSME’s property documents along with all other allied documents without insisting on payment of such charges.” The judge also asked the bank to submit a compliance affidavit within a month.