Gopa Kumara Panicker P. v. State Bank of India

W.P.(C) No.40934 of 2017 1 **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE V.G.ARUN** **WEDNESDAY,THE 20TH DAY OF FEBRUARY 2019 / 1ST PHALGUNA, 1940** ## **WP(C).No. 40934 of 2017** ## **PETITIONER:** **GOPA KUMARA PANICKER P. AGED 62 YEARS** **CHILANKA, PERUNNA P.O., CHANGANACHERRY, KOTTAYAM DISTRICT.** **BY ADV. SRI.M.P.MADHAVANKUTTY** ## **RESPONDENTS:** - **1 GENERAL MANAGER, NET WORK I, STATE BANK OF INDIA, LOCAL HEAD OFFICE, POOJAPPURA, THIRUVANANTHAPURAM-695012.** - **2 DEPUTY GENERAL MANAGER ADMINISTRATIVE OFFICE, STATE BANK OF INDIA, KADAPPAKKADA, KOLLAM-691001.** - **3 REGIONAL MANAGER REGIONAL BUSINESS OFFICE, STATE BANK OF INDIA, PATHANAMTHITTA-689545.** - **4 CHIEF MANAGER, STATE BANK OF INDIA, PANDALAM BRANCH, PANDALAM, PATHANAMTHITTA DISTRICT-689501.** **BY ADVS. SRI.SANTHOSH MATHEW, SC, STATE BANK OF TRAVANCORE** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25.01.2019, THE COURT ON 20.2.2019 DELIVERED THE FOLLOWING:** W.P.(C) No.40934 of 2017 2 ## **V.G.ARUN, J.** ----------------------------------------------W.P.(C) No.40934 of 2017 ----------------------------------------------Dated this the 20[th] day of February, 2019 ## **JUDGMENT** The petitioner, while employed with the State Bank of Travancore(now State Bank of India), had availed housing loan to the tune of Rs.5,00,000/- on 25.7.2006. The loan was sanctioned for the purpose of purchasing a studio apartment in an apartment project by name Misty Hills Project at Munnar. As per the terms of the loan agreement, the interest payable was fixed at the rate of 9.25% per annum. According to the petitioner, the housing project came to a standstill due to the eviction process at Munnar, initiated by the Government. Since the project could not be completed the loan transaction pertaining to the entire unit, consisting of 52 borrowers, became NPA. At the demand of the borrowers and considering the peculiar circumstances under which the repayment was defaulted, the bank agreed for waiver of interest to the tune of 75%, with respect to W.P.(C) No.40934 of 2017 3 the NPA accounts. The grievance of the petitioner is that since the repayment towards his loan account was being effected by deduction from his salary, there was no default and for that reason the interest concession granted to the other borrowers was not extended to the petitioner. The petitioner admits that on 30.10.2011, his loan was converted to staff housing loan and the rate of interest was thereupon reduced to 6% p.a. It is submitted that though repeated representations were made by the petitioner and recommendations made by the petitioner's superior officers, there was no positive response from the bank. Therefore, the petitioner had earlier approached this court by filing WP(C) No.22433 of 2017 seeking a direction to the 1[st] respondent to grant waiver of interest on his loan by 75%. That Writ Petition was disposed of under Ext P5 judgment directing the 1[st] respondent to consider the petitioner's representations and the recommendations thereon within a period of two months. On the basis of the direction, the 1[st] respondent issued Ext P6 order rejecting the petitioner's representation, holding that as per the extant instructions of the bank, there is no provision for granting any interest concession in the loan account of the W.P.(C) No.40934 of 2017 4 petitioner, which is regular. This Writ Petition has been filed seeking to quash Ext P6 and for the issue of a writ of mandamus directing the respondents to grant waiver of interest to the petitioner from 31.7.2006 onwards, as has been granted to the NPA account holders. 2. A statement has been filed on behalf of the respondents refuting the averments in the Writ Petition and _inter alia_ contending as follows:- The transaction with the petitioner is on the basis of an agreement and therefore, the petitioner is estopped from claiming any change in the terms of that contract. The petitioner's account being regular, the concession granted to the NPA account holders cannot be extended to the petitioner. Out of 74 flats in the project, the bank had financed 54 apartments of which 53 accounts became irregular. Only 6 out of the 54 accounts were given interest concession of 75%, since those accounts had become NPA and recovery measures initiated against those borrowers did not fructify. Therefore, the concession was granted for facilitating early recovery and closure of the accounts. The bank being an instrumentality of State dealing in public money, it cannot grant concessions, deviating from the W.P.(C) No.40934 of 2017 5 prescribed procedure and practice. 3. The learned counsel for the petitioner contended that loan was granted to 54 borrowers and the respondents having given the offer of interest waiver to 51 persons, the refusal to grant loan waiver to the petitioner for the reason that he was regular in repayment, amounts to arbitrariness and discrimination. According to the learned counsel, the loans were sanctioned for the Misty Hills Project and therefore, all the units in the project ought to be considered as a single unit and classified as NPA. It was contended that grant of privilege of loan waiver to defaulters and refusal to grant the same benefit to an account holder who was regular in repayment was illogical and immoral. It was also contended that in view of Ext P5 judgment, the respondents were bound to consider the petitioner's request on the basis of Ext P4 recommendation. 4. The learned counsel for the respondents contend that the Writ Petition itself is not maintainable, inasmuch as the loan sanctioned and disbursed to the petitioner was covered by a contract entered between the bank and borrower and that the petitioner cannot seek modification of the terms of that contract in a Writ Petition filed under W.P.(C) No.40934 of 2017 6 Article 226 of the Constitution of India. In support of his contention, the learned counsel placed reliance on the decision of the High Court of Madras in **R.Padma v Indian Oversees Bank (2017 SCC On Line Mad.19941)** . In that decision, a Division Bench of the Madras High Court after considering earlier decisions held as follows:- “ A loan is granted in terms of the contract, and grant of one time settlement or rescheduling of the loan amount is really a modification of the contract, which can only be done by mutual consent of the parties, vide Section 62 of the Contract Act, 1872. The court cannot alter the terms of contract”. 5. With respect to the argument that refusal to grant the petitioner, the benefit of loan waiver, granted to the defaulters, the learned counsel for the respondents contended that loan waiver was granted to the NPA account holders, keeping in view the best interest of the bank. That, rather than continuing the NPA as such, the bank deemed it appropriate to close the account after realising the maximum amount possible. That, as far as the loan account of the petitioner concerned, the instalments were being remitted regularly and therefore, there arose no question of considering the account as NPA and granting W.P.(C) No.40934 of 2017 7 the benefit of loan waiver. On the question of morality, the learned counsel points out that the Apex Court had considered a similar situation which had arisen pursuant to the enactment of the Special Bearer Bonds (Immunities and Exemptions) Act 1981. The constitutional validity of the Special Bearer Bonds Act was challenged on the ground that the Act makes an unreasonable classification between holders of black money and those having no such money and that under the Act a premium was being provided to persons having black money. The question was elaborately considered by the Apex Court in **R.K.Garg v Union of India & others (1981)4 SCC 675)** . Repelling the challenge, the Apex Court held as under:- “The petitioner's disputed the validity of this proposition and contended that the classification made by the Act is discriminatory in that it excludes persons with white money from taking advantage of the provisions of the Act by subscribing to or acquiring Special Bearer Bonds. But this contention is totally unfounded and we cannot accept the same. The validity of a classification has to be judged with reference to the object of the legislation and if that is done, there can be no doubt that classification was made by the Act is rational and intelligible and the operation of the provisions of the Act is rightly confined to persons in possession of black money.” W.P.(C) No.40934 of 2017 8 The Apex Court also repelled the challenge raised on the ground that the Act offends morality by according, immunities and exemptions, which are denied to honest tax payers, to dishonest assessees who have evaded payment of tax. It was held by the Apex Court as follows:- “It is necessary to remember that we are concerned here only with the constitutional validity of the Act and not with its morality. Of course, when we say this we do not wish to suggest that morality can in no case have relevance to the constitutional validity of a legislation. There may be cases where the provisions of a statue may be so reeking with immorality that the legislation can be readily condemned as arbitrary or irrational and hence violative of Article 14. But the test in every such case would be not whether the provisions of the statute offend against morality but whether they are arbitrary and irrational having regard to all the facts and circumstances of the case. Immorality by itself is not a ground of constitutional challenge and it obviously cannot be, because morality is essentially a subjective value, except insofar as it may be reflected in any provision of the Constitution or may have crystallised into some well-accepted norm of social behaviour. Now there can be no doubt that under the provisions of the Act certain immunities and exemptions are granted with a view to inducing tax evaders to invest their undisclosed money in Special Bearer Bonds and to that extent they are given benefits and concessions which are denied to those who honestly pay their taxes. Those who are honest and who W.P.(C) No.40934 of 2017 9 observe the law are mulcted in paying the taxes legitimately due from them while those who have broken the law and evaded payment of taxes are allowed by the provisions of the Act to convert their black money into “white” without payment of any tax or penalty. The provisions of the Act may thus seem to be putting premium on dishonesty and they may, not, without some justification, be accused of being tinged with some immorality, but howsoever regrettable or unfortunate it may be, they had to be enacted by the legislature in order to bring out black money in the open and canalise it for productive purposes.” 6. As far as the contention based on Ext P4 judgment is concerned, the learned counsel for the respondents would submit that Ext P4 is only a draft letter which was neither signed nor recommended and forwarded by the DGM, Kottayam. It is submitted that no such recommendation is available in the records of the bank and therefore, the petitioner has apparently produced a false document. I find substantial force in the above contentions urged on behalf of the respondents. Moreover, the respondents had granted the benefit of loan waiver to the petitioner by reducing the rate of interest from 9.25% to 6%. The procedure for converting or treating an account W.P.(C) No.40934 of 2017 10 as NPA, prescribed by the Reserve Bank of India has, to be strictly followed by the banking institutions. Further, the respondents are to abide by the provisions of the fair practices code for lenders, as adopted by the bank and should also observe the guidelines issued by the Reserve Bank. The petitioner has no case that the respondents have deviated from the fair practices code for lenders adopted by the State Bank of India or any of the guidelines and instructions issued by the Reserve Bank with respect to declaration of accounts as NPA and grant of loan waiver to regular accounts. Even if the petitioner has such a grievance, his remedy is to approach the Ombudsman appointed under the Banking Ombudsman Scheme, 2006. As rightly contended by the learned counsel for the respondents, the attempt of the petitioner is to alter the terms of the contract entered into between the petitioner and the State Bank of India. This court will not, in exercise of the jurisdiction under Article 226, direct the bank to alter the terms of the contract and grant waiver of interest to the petitioner. The fact that such waiver has been granted to the defaulters will also not persuade this court to issue any direction in that regard. No valid reason has been stated to W.P.(C) No.40934 of 2017 11 quash Ext P6. Hence the petitioner is not entitled any of the reliefs sought in the Writ Petition. Consequently, the Writ Petition is dismissed. Sd/- **V.G.ARUN, JUDGE** cms W.P.(C) No.40934 of 2017 12 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF COMMUNICATION SENT TO ONE OF THE LOANEES BY THE 4TH RESPONDENT DATED 13-11-2014.** **EXHIBIT P2 TRUE COPY OF REPRESENTATION DATED 16-8-2016 SUBMITTED TO THE PREDECESSOR OF 4TH RESPONDENT.** - **EXHIBIT P3 TRUE COPY OF PROCEEDINGS DATED 27-12017 BEARING NO.AGM IV/K ISSUED BY CHIEF MANAGER, STATE BANK OF TRAVANCORE.** - **EXHIBIT P4 TRUE COPY OF RECOMMENDATION DATED 30-1-2017 BEARING NO.DGM/KTM FROM STATE BANK OF TRAVANCORE.** - **EXHIBIT P5 TRUE COPY OF THE JUDGMENT IN WP(C)NO.22433 OF 2017 DATED 24-82017.** **EXHIBIT P6 TRUE COPY OF ORDER DATED 8-11-2017 ISSUED BY THE FIRST RESPONDENT.** - **EXHIBIT P7 TRUE COPY OF OFFER LETTER GIVEN TO ONE THOMAS AUGUSTINE DATED 12-112014 BY THE 4TH RESPONDENT.** - **EXHIBIT P8 TRUE COPY OF OFFER LETTER GIVEN TO ONE THOMAS K.M. DATED 13-11-2014 BY THE 4TH RESPONDENT.** RESPONDENTS EXTS ANNEXURE R1(A): COPY OF SANCTIONED LETTER DTD 25.7.2006 ISSUED IN FAVOUR OF THE PETITIONER BY SBT, PANDALAM BRANCH. ANNEXURE R1(B): COPY OF THE SANCTIONED LETTER DTD 10.10.2011 BY WHICH THE HOUSING LOAN UNDER COMMERCIAL TERMS WAS CONVERTED TO INDIVIDUAL HOUSING LOAN SCHEME. /TRUE COPY/ P.S.TO JUDGE cms