I have taken a housing loan from PNB along wtih my Wife and HUF.
As per RBI rules " Bank are not be permitted to charge foreclosure charges/ pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect "
But the bank has levied a pre payment foreclosure charge on my housing loan saying that one of the co-borrower is HUF.
So is HUF an individual or a firm ????
Asked 2 years ago in Property Law from Jaipur, Rajasthan
HUF is a joint family consists of all persons lineally descended from a common ancestor. Hence, HUF is a group of members of the same family.
2) The "father", or the "senior member" of the family called "Kartha", ordinarily manages the property belonging to Joint Family. Hence, the status of HUF cannot be termed as person.
3) Supreme Court has held that HUF is an association of persons is "not a person" within the meaning of expression in the Partnership act
1) HUF being in the capacity of a trust , if no individual member like a Manager entered into as party to the loan would be legally treated as not an individual.However considering that the HUF was only one of the parties the bank ought to have given a concession.
2) Let me quote for your benefit:"In the case reported as (1967) 66 ITR 613 (SC) Ram Laxman Sugar Mills v,Commissioner of Income-Tax, U.P. & Ors. the Hon’ble Supreme Court has categorically held that it is open to the manager of a joint Hindu Family as representing the family to agree to become a partner with another person. The partnership agreement in that case is between the manager and the other person and by the partnership agreement no members of family, except the manager acquires a right or interest in the partnership. The junior members of the family may make a claim against the manager for treating the income or profits received from the partnership as a joint family asset, but they cannot claim to exercise the rights of partners nor be liable as partners. - See more at: http://taxguru.in/corporate-law/huf-cannot-be-a-partner-in-firm-but-it-is-competent-to-the-manager-or-karta-acting-on-behalf-of-the-huf-to-enter-into-a-valid-partnership."
"The Honble Supreme Court observed that a firm is a compendious way of describing the individuals constituting the firm. An HUF directly or indirectly cannot become a partner of a firm because the firm is an association of individuals. Even if a person nominated by the HUF joins a partnership, the partnership will be between the nominated person and the other partners of the firm. It further observed that if a karta or any other member of the HUF joins a partnership, he can do so only as an individual. His rights and obligations vis-à-vis other partners are determined by the Partnership Act and not by Hindu Law. Whatever may be the relationship between an HUF and its nominee partner, in a partnership, neither the HUF nor any member of the HUF can claim to be a partner or connected with the partnership through a nominee. - See more at: http://taxguru.in/corporate-law/huf-cannot-be-a-partner-in-firm-but-it-is-competent-to-the-manager-or-karta-acting-on-behalf-of-the-huf-to-enter-into-a-valid-partnership."
HUF is neither an individual nr a firm but it is a joint family consists of all persons lineally descended from a common ancestor.
If the HUF co-borrower availed loan in individual capacity then the levy of charges on foreclosure of loan is not legally maintainable, you can give a protest letter and ask for refund failing which the bank may be dragged into consumer forum for redressing your grievances.
HUF is an association of persons is "not a person" .It is a body consisting of persons lineally descended from a common ancestor and include their wives and unmarried daughters, who are living together, joint in food, estate .If the income arises on account of the personal exertions of the karta or any other member and not on investment of HUF funds, such income would generally be regarded as the individual income of the karta or the member.
A Hindu undivided family consists of the common ancestor and all his lineal male descendants upto any generation together with the wife/wives (or widows) and unmarried daughters of the common ancestor and of the lineal male descendants. HUF is not a fictional entity. It can be seen being a family of a group of natural persons. There is no dispute that the said family can reside in the house, which belongs to the Hindu Undivided Family.
1. HUF is nether a Firm nor an individual. It is an undivided family consisting of multiple numbers of members,
2.Bank is can not levy any foreclosure charge in the instant case as per RBI Guidelines.