HC directs PNB to release Rs 1,000 cr securities to DLF

While directing the bank to release the securities, the court also quashed the pre-payment demand. It also slapped a cost of Rs 20,000 on the bank for indulging in such activity.

"The attempt of the bank in not releasing securities worth Rs 1,000 crore while its claim against DLF is of Rs 20 crore only, is nothing but an arm twisting practice adopted by loan sharks to compel it to give in to the demand for pre-payment charges," Justice Rajiv Sahai Endlaw said.

"The demand of the bank for pre-payment on the loan is found to be without any basis and is quashed. The bank is also directed to return to DLF the security placed by it with the bank within six weeks, the loan which already stands re-paid," he said.

The judgement came on a petition filed by DLF last year, challenging the bank's demand of Rs 20 crore as pre-payment penalty.

The infrastructure giant had contended that though the entire loan amount of Rs 1,000 crore had been repaid with interest, the PSU bank was illegally withholding the securities worth over Rs 1,000 crore for alleged default in payment of pre-payment charges of Rs 20 crore.

It contended that the claim for pre-payment charges is violative of the Fair Practices Code notified by the bank itself requiring pre-payment charges to be notified at the stage of application for processing of loan itself.

The court agreed to the contentions and noted that the bank failed to produce any clause in the loan agreement proving for pre-payment charges.

"As far as the agreement between the parties is concerned, the same makes no reference whatsoever to pre-payment," the court noted in its judgment.

"The bank as a 'State' has to be a model litigant. It is not expected to take technical pleas encouraging litigation. The banking activity in the country was nationalised to curb such malpractices and nationalised banks cannot be permitted to continue behaving as loan sharks," the court said.

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