Kailasnadh N.M. v State Bank of Travancore and Canara Bank

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS** **MONDAY, THE 22ND DAY OF AUGUST 2016/31ST SRAVANA, 1938** **WP(C).No. 3416 of 2016 (B)** **-----------------------------------------** **PETITIONER(S) : --------------------------** **KAILASNADH N.M., S/O. MANOJ M.B., AGED 19 YEARS, NEDUMPURATH HOUSE, PALAKKAMOOLA, KARIYAMBADI P.O., WYNADU DISTRICT, PIN- 673 591.** **BY ADVS. SRI.JOHN JOSEPH(ROY) SRI.K.G.RADHAKRISHNAN** **RESPONDENT(S) :** **----------------------------** **1. THE STATE BANK OF TRAVANCORE, MEENANGADI BRANCH, VIA KALPATTA, WYNADU DISTRICT, PIN- 673 591, REPRESENTED BY ITS MANAGER.** **2. CANARA BANK OF INDIA, REPRESENTED BY MANAGER, LEAD DISTRICT OFFICE P.B.NO. 35, KALPATTA, WYNADU DISTRICT, PIN- 673 121.** **R1 BY SRI.T.SETHUMADHAVAN (SENIOR ADVOCATE) ADV. SRI.K.JAYESH MOHANKUMAR R2 BY ADV. SRI.P.GOPINATH MENON, S.C** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22-08-2016, ALONG WITH W.P(C).NO. 5014 OF 2016 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** Msd. ## **WP(C).No. 3416 of 2016 (B)** ## **-----------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS :** - **EXHIBIT P1: TRUE COPY OF THE APPROVAL ORDER OF THE INSTITUTE DATED 07.04.2015 OF THE AICTE TO THE INSTITUTE.** - **EXHIBIT P2: TRUE COPY OF THE AFFILIATION ORDER OF THE INSTITUTE DATED 15.05.2015 OF THE ANNA UNIVERSITY TO THE INSTITUTE.** - **EXHIBIT P3: TRUE COPY OF THE EXPENDITURE STATEMENT OF THE PETITIONER ISSUED FROM THE COLLEGE DATED 27.07.2015.** - **EXHIBIT P4: TRUE COPY OF THE ADMISSION CERTIFICATE OF PETITIONER.** - **EXHIBIT P5: A TRUE COPY OF THE R.B.I. CIRCULAR REF.NO.RPCD.PLNFS.BC. NO.83/06.12.05/2000-2001 DATED 28.04.2001 ALONG WITH THE MODEL EDUCATIONAL LOAN SCHEME.** - **EXHIBIT P6: TRUE COPY OF THE VOCATIONAL HIGHER SECONDARY EXAMINATION CERTIFICATE OF THE PETITIONER.** - **EXHIBIT P7: TRUE COPY OF THE LETTER DATED 02.03.2016 ISSUED BY THE 1ST RESPONDENT BANK.** - **EXHIBIT P8: TRUE COPY OF THE MODEL EDUCATIONAL LOAN SCHEME FOR PERSUING HIGHER EDUCATION IN INDIA AND ABROAD PUBLISHED BY THE INDIAN BANKS ASSOCIATION IN SEPTEMBER, 2012.** ## **RESPONDENT(S)' EXHIBITS :** ## **NIL** ## **//TRUE COPY//** ## **P.S.TO JUDGE.** Msd. ## ALEXANDER THOMAS, J. ================== W.P.(C).Nos.3416, 10801, 5014, 5307 & 6414 of 2016 ================== Dated this the 22[nd] day of August, 2016 ## J U D G M E N T ## W.P.(C).Nos.3416/2016 & 10801/2016: ## The prayers including the amended prayer in W.P.(C).No. 3416/2016 are as follows: - “(i) issue a Writ of Mandamus or any other writ order or direction commanding the 1[st] respondent to issue Loan application, to process it and Sanction the Education Loan to the petitioner in accordance with Ext.P-5 and the Circulars issued by the Reserve Bank of India and to disburse the educational loan to the petitioner, within a time frame as may be fixed by this Hon'ble Court. - (ii) issue a Writ of Mandamus or any other writ, order or direction commanding the 2[nd] respondent to ensure the implementation of Ext.P-5 by the 1[st] respondent-Bank. and/or - (iii) issue such other or direction as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case. - (iv) To issue a writ of certiorari or any other writ, quashing Exhibit P-7 dated 02.03.2016 issued by the 1[st] Respondent for the ends of justice.” ## The prayers in W.P.(C).No.10801/2016 are as follows: - “(i) issue a Writ of Mandamus or any other writ order or direction commanding the respondent to Sanction the Education Loan of Rs. 4 lakhs to the petitioner in accordance with Ext.P-6 and the Circulars issued by the Reserve Bank of India and to disburse the educational loan to the petitioner, within a time frame as may be fixed by this Hon'ble Court. W.P.(C).3416/16 etc. - : 2 :- - (ii) issue a Writ of Mandamus or any other writ, order or direction commanding the respondent to ensure the implementation of Ext.P-6 by the respondent-Bank. and/or - (iii) issue such other or direction as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case.” 2. The matters are in relation to the rejection or nonconsideration of the applications said to have been made by the respective petitioners to the respondent State Bank of Travancore in the matter of availing of education loan for prosecuting B.Tech. studies by the petitioners. 3. Both sides submit that the norms in relation to grant of education loan by the respondent State Bank of Travancore are covered by circular No.PSB/23/2012 dated 20.11.2012 issued by the State Bank of Travancore [which has been produced as Anx.R-1 (f) in connected W.P.(C).No.6414/2016]. Clause A dealing with IBA (Indian Bankers' Association) Model Education Loan Scheme (Modified) reads as follows: ## “A. IBA MODEL EDUCATION LOAN SCHEME (MODIFIED) ## 1.OBJECTIVES OF THE SCHEME The Educational Loan Scheme outlined below aims at providing financial support from the banking system to meritorious students for pursuing higher education in India and abroad. The main emphasis is that the meritorious student, though poor, is provided with an opportunity to pursue higher education with the financial support from the banking system with affordable terms and conditions. W.P.(C).3416/16 etc. - : 3 :- ## 2. ELIGIBILITY CRITERIA ## 2.1. Student eligibility . Should be an Indian National. . Should have secured admission to a higher education course in recognized institutions in India or Abroad through Entrance Test/Merit Based Selection process after completion of HSC (10 plus 2 or equivalent) _It would be in order for banks to consider a meritorious student (who qualifies for a seat under merit quota) eligible for loan under this scheme even if the student chooses to pursue a course under Management Quota seat in an institution for reasons of convenience (proximity) or choice of course._ . The entrance test conducted by Government/Approved Regulatory Bodies or Universities approved by UGC/AICTE may be reckoned for this purpose. . Entrance test or selection purely based on marks obtained in qualifying examination may not be the criterion for admission to some of the post graduate courses or research programmes. In such cases, we may take into consideration the reputation of the institution concerned and the employability of applicant on the completion of the course, for sanction of loans. As Education Loan is, henceforth, restricted to applicants securing admission through merit-based selection process only all stipulations regarding minimum marks stand withdrawn.” ## Clause B dealing with Model Education Loan Scheme for Loans ## under Management quota, reads as follows: “B. MODEL EDUCATION LOAN SCHEME FOR LOANS UNDER MANAGEMENT QUOTA ## 1. ELIGIBILITY i) Students securing admission to seats under Management Quota through entrance exams conducted by private self financing colleges in Kerala State. . Any admissions to courses outside the State of Kerala except admissions through common entrance test like CAT, MAT, GATE, IIT, All India Medical and Engineering Entrance tests, NIIT or any common entrance test conducted by Govt. of India/approved regulatory bodies. W.P.(C).3416/16 etc. - : 4 :- ii) Admissions secured to courses without any entrance exams. iii) A minimum of 60% Marks both for the qualifying examinations and qualifying subjects individually (viz. Physics, Chemistry and Mathematics for Engineering and Physics, Chemistry and Biology for Medical/Nursing) will be stipulated for granting Education Loan under Management Quota. ## 2. QUANTUM OF FINANCE: (i) Government/regulatory authority approved free structure applicable for respective States shall be considered for the courses. (ii) Reasonable expenses upto the maximum of Rs.3000 per month may be considered for hostel expenses apart from other eligible course expenses. 3. SECURITY (i) For loans upto Rs. 2.5 lakh - No security. Parent to be joint borrower. (ii) For loans between Rs. 2.5 lakh to Rs. 4 lakh - Third party guarantee having net worth to cover the loan amount or Equitable mortgage of landed property with sufficient value. (iii) For loans above Rs. 4 lakh - Equitable mortgage of landed property with sufficient value.” 4. Sri.John Joseph, learned counsel for the petitioners submits that both the petitioners have secured an aggregate of 60% marks in qualifying examinations and in the individual subjects concerned and they would be qualified to be considered for grant of education loans under Category B above in the management quota. 5. Heard Sri.John Joseph, learned counsel appearing for the writ petitioners and Sri.Jayesh Mohan Kumar, learned Standing Counsel appearing for the respondent State Bank of Travancore. W.P.(C).3416/16 etc. - : 5 :- 6. The abovesaid provisions contained in the above said Master Circular on education loans issued by the State Bank of Travancore as per circular No.PSB/23/2012 dated 20.11.2012 have been considered by a Division Bench ruling of this Court in the case in Arya v. Reserve Bank of India [W.P.(C).Nos.17271, 17272, 17313 & 20420 of 2015, judgment dated 13.10.2015] reported in 2015 (4) KLT 478. The aforestated eligibility criteria under Part A of that scheme has been considered by the Division Bench in para 16 of the said reported ruling, the relevant part of which reads as follows: "16........ A Master Circular dated 20.11.2012 [a copy of which was produced as Ext.R2(f)] has been issued by the S.B.T., which Scheme is applicable for the purpose of present Writ Petitions. The said Circular contains two Schemes, namely; (A) I.B.A. Model Education Loan Scheme (Modified) and (B) Model Education Loan Scheme for Loans under Management Quota (Non-I.B.A. Scheme) (Modified). Under category 'A', 'Eligibility Criteria' is prescribed as under :- ## “2. ELIGIBILITY CRITERIA ## 2.1 Student eligibility * Should be an Indian National * Should have secured admission to a higher education course in recognized institutions in India or Abroad through Entrance Test/Merit Based Selection process after completion of H.S.C. (10 plus 2 or equivalent). It would be in order for banks to consider a meritorious student (who qualifies for a seat under merit quota) eligible for loan under this scheme even if the student chooses to pursue a course under Management Quota seat in an institution for reasons of convenience (proximity) or choice of course. The entrance test conducted by Government/Approved Regulatory Bodies or Universities approved by U.G.C./A.I.C.T.E may be reckoned W.P.(C).3416/16 etc. - : 6 :- for this purpose. * Entrance test or selection purely based on marks obtained in qualifying examination may not be the criterion for admission to some of the post graduate courses or research programmes. In such cases, we may take into consideration the reputation of the institution concerned and the employability of applicant on the completion of the course, for sanction of loans. * As Education Loan is, henceforth, restricted to applicants securing admission through merit based selection process only all stipulations regarding minimum marks stand withdrawn.” Para 17 of the said Division Bench ruling has dealt with category B of the aforequoted provisions for Model Education Loan Scheme for Loans under the Management Quota, which reads as follows: "17. Now, we refer to 'Model Education Loan Scheme for Loans under Management Quota', which was prescribed as category 'B', in which, 'Eligibility' was described as under :- ## “1. ELIGIBILITY (i) Students securing admission to seats under Management Quota through entrance exams conducted by private self financing colleges in Kerala State. * Any admissions to courses outside the State of Kerala except admissions through common entrance test like C.A.T., M.A.T., GATE, IIT, All India Medical and Engineering Entrance tests, NI.I.T. or any common entrance test conducted by Govt. of India/approved regulatory bodies. (ii) Admissions secured to courses without any entrance exams. (iii) A minimum of 60% Marks both for the qualifying examinations and qualifying subjects individually (viz., Physics, Chemistry and Mathematics for Engineering and Physics, Chemistry and Biology for Medical/Nursing) will be stipulated for granting Education Loan under Management Quota.” Category 'B' is applicable for admission under the Management Quota. It is stated that admissions to courses outside the State of Kerala were treated to be admissions under Management Quota except admissions through common entrance test like C.A.T., W.P.(C).3416/16 etc. - : 7 :- ## M.A.T., GATE, I.I.T., All India Medical and Engineering Entrance Test, NIIT or any common entrance test conducted by Govt. of " India/approved regulatory bodies. 7. The Division Bench in para 24 of the Arya's case supra has dealt with Division Bench ruling of the Madras High Court in A.Kasinathan v. Branch Manager, Canara Bank [Laws (Mad) 2012- ## 4-52], which reads as follows: "24. The prescription of 60% marks in the qualifying examination and qualifying subjects although has been challenged in W.P.(C) No.20420 of 2015, but no substantial grounds have been raised to treat it as arbitrary, perverse or illegal. In this context, the learned counsel for the Bank has rightly placed reliance on the Division Bench judgment of Madras High Court reported in A.Kasinathan v. Branch Manager, Canara Bank, Town Hall Road, Madurai (Laws (Mad)-2012-4-52). In the said case, revised guidelines of Educational Loan Scheme-2011 of Indian Banks Association (I.B.A.) imposing restriction of 60% marks for considering educational loan in case of students who secured admission under “Management Quota” was under challenge. The Madras High Court held that there is no inherent right to educational loan, which is referred in paragraph 10 of the said case, which is to the following effect :- _“10. No inherent right to educational loan :- From the Scheme of Art.21A of the Constitution, it is the primary obligation of the State to provide free and compulsory education to all children of the age of 6-14 years and in the recent judgment dated 12.4.2012, the Supreme Court upheld the constitutional validity of right of children to free and compulsory education under Right to Education Act, 2009 which provides for free and compulsory education to children between age of 6 and 14 years and mandates government/aided/non-minority and unaided schools to reserve 25% of the students for these children. There is no such fundamental right to higher education. Of course, under Art.41, the State, shall within its economic capacity and development, make effective provision for securing the right to education. In terms of Art.21A and Art.41, while there is a right to education, there is no inherent right to educational loans._ _Principles of lending loans:- The essence of Banking business is receiving money on current account for deposit from the public, repayable on payment by cheque, draft or otherwise and lending or investing the same. Only from out of the interest that is earned the banks will have to pay the salary to their staff, pay interest to their depositors and transact bank's business, maintain the Bank and meet other expenses._ W.P.(C).3416/16 etc. - : 8 :- _Banks should follow the well known principles of sound lending. (i) safety - the foremost principle of sound lending is to ensure the safety of the funds lent. While lending money, the Banks must carefully consider the chance of its being repaid by the borrower along with interest; and (ii) Profitability - Commercial Banks are profit-earning institutions; and nationalized banks are no exception to this. They must employ their funds profitably so as to earn sufficient income out of which the banker is to pay interest to the depositors, salaries to the staff and to meet various other establishment expenses and distribute dividends to the shareholders. The rates of interest charged by bankers primarily depend on the directives issued by the Reserve Bank of India.”_ The Division Bench further held that there is nothing wrong in the banks stipulating any restriction for the students who secured admission under Management Quota. The Division Bench, repelling the challenge, laid down in paragraphs 12 and 14 of the said judgment as follows :- _**“12.** As is well known, while lending loan, the main concern of the Bank is safeguarding the amount which was sanctioned and advanced and chance of getting the money back with interest. In order to ensure prompt repayment of the educational loan, Bank is emphasizing the future prospects of the students, employment potential. For getting jobs/employment in different parts of the country/abroad, one of the criteria is academic performance and there is nothing wrong for the Banks in stipulating 60% marks for the students who secured admission under “Management Quota”._ _In a competitive and dynamic global environment, everywhere where better standards are expected from private sector to Government employment, merit plays a key role. Like in other loans, Bank's main concern is that the educational loan amount advanced to students is repaid with interest within the stipulated period. Employability potential and merit are very relevant for which academic performance of the students is very much relevant. While so, there is nothing wrong in the Banks in insisting upon the merits i.e., students securing admission under Management quota and for grant of educational loans, ought to have secured 60% marks._ _Re-contention - Discrimination of students opting for “Management Quota”:- The learned counsel for the petitioners contended that in single window system of admission, all the students get admission_ W.P.(C).3416/16 etc. - : 9 :- _and students opt for “Management Quota” for various reasons either because it is nearer to their residence and availability of courses of their choice” and while so, it is an undesirable attitude form the Banks to discriminate between Management and Government quota._ _**14.** On behalf of the writ petitioners, it was then contended that while Government is trying for inclusive growth in the field of education, such moves in fixing marks as 60% for those students, who secured admission, under “Management Quota” will discriminate the students on quota. It was further contended that State and Nationalised banks should strive for equal opportunity both for securing admission in Government colleges and those who are admitted under “Management Quota” through single window system._ _Management Quota :- Management quota refers to the number of seats in educational institutions other than government institutions, which is being offered by the management to the students on the basis other than merit. The admission to the management quota seats will be in the hands of the management where students are selected by the management through criteria set out by them. The students admitted under management quota will not be selected based on the performance in the entrance examinations or marks they have scored in the qualifying Examination. So the capacity of such students to secure jobs as other meritorious students are much less and as well as the probability of landing a good job is also less. This will impact the repaying capacity of the students admitted under management quota._ _As per the Revised Guidelines, for grant of educational loans to students, who have secured admission, under “Management Quota” can be considered only if students have secured 60% marks in the Board Examination. Such stipulation of 60% marks is with an objective keeping merit as the criteria and assessment of potentials of salary a student will get on completion of course. It is stated that non-performing assets in educational loans are mounting. It was further stated that inasmuch as 6% of the outstanding loans to the Banks are the educational loans. In the present day context, employability of a person depends upon various factors, one of which is certainly academic performance. When the students have secured admission to the management quota through the_ W.P.(C).3416/16 etc. - : 10 :- _criterion set out by the Management, the capacity of such students to secure jobs are much less. Loan given to such students could turn bad as their employment potential is less. It is in this context I.B.A. stipulated 60% marks. So far as the Bank is concerned, Bank should never overlook the safety principle while advancing the loans or investment of its surplus funds.”_ We fully endorse the view taken by the Division Bench of Madras High Court in the aforesaid case." The Division Bench of this Court in Arya's case supra in para 24 has also held that their Lordships fully endorsed the aforequoted view taken by the Division Bench of the Madras High Court in Kasinathan's case supra. 8. Ultimately, the Division Bench in Arya's case supra has held that so long as the admission secured by the applicants/students are not on the basis of the performance and selection through competitive examinations conducted at the behest of the approved statutory regulatory bodies concerned, the admission of such candidates has only to be treated under the aforequoted category B, that is under management quota and as per the requirements clause 1(iii) a minimum of 60% marks both for qualifying examinations and qualifying subjects individually is required to be passed by the candidates. (This can be seen from a reading of para 22 of the decision in Arya's case supra). W.P.(C).3416/16 etc. - : 11 :- 9. From a reading of Ext.P-7 order, which is impugned in W.P.(C).No. 3416/2016, it is seen that the principles laid down in Arya's case have not been fully adverted to by the respondent authorities concerned. Moreover, one of the grounds for rejection mentioned in Ext.P-7 therein is that the fee structure furnished for the course, ie Rs. 6.48 lakhs is very much on the higher side, whereas it is the case of the petitioners that they are seeking only total educational loan of Rs. 4 lakhs and it is pointed out by the petitioners that they do not seek loan amount above Rs.4 lakhs and that they would endeavour to find out alternate source of funding for the remaining part of the expenses and fees to be paid to the college concerned. 10. In W.P.(C).No. 6414/2016 it is the case of the respondent State Bank of Travancore that no proper application was ever submitted by the petitioner therein for consideration of grant of education loan. In W.P.(C).No. 10801/2016 the case of the respondent State Bank of Travancore is that the petitioner therein had not submitted proper application for consideration of grant of education loan whereas it is asserted by the petitioner that she had approached the respondent Bank authorities several times and the W.P.(C).3416/16 etc. - : 12 :- Bank authorities have even declined to issue an application form for consideration of education loan, etc. 11. In the light of these aspects, it is ordered that the matter requires serious reconsideration at the hand of the competent authority of the respondent State Bank of Travancore in the light of the legal principles laid down by the Division Bench of this Court in Arya v. Reserve Bank of India reported in 2015(4) KLT 478. The respondent State Bank of Travancore will ensure that proper application forms for grant of education loans are supplied to the petitioners or their authorised representatives or parents, etc. In order to facilitate fresh consideration of the matter, the impugned Ext.P-7 order in W.P.(C).No. 3416/2016 stands set aside. In the light of these aspects, the following orders are issued: - i) The respondent State Bank of Travancore will issue application forms to the petitioners and will also send necessary communications to them enlisting the documents and materials that are to be forwarded by the petitioners for consideration of their claim for grant of education loan and this shall be done within one week from the date of receipt of a certified copy of this judgment. - ii). Upon on receiving the abovesaid communications as directed above, the petitioners will submit the necessary application form along with all requisite documents and materials to the competent authority of the respondent bank and thereupon the respondent W.P.(C).3416/16 etc. - : 13 :- bank will process those applications and if they require any further clarifications or documents from the petitioners, that may also be communicated to the petitioners, upon which the petitioners shall produce such necessary materials/ documents etc. - iii) After duly processing the application form of the petitioners, the competent authority of the respondent bank will take a decision in the light of the legal principles laid down by this Court in Arya's case supra , within six weeks from the date of production of all necessary details by the petitioners. The decision in that regard shall be communicated to the petitioners by registered speed post. With these observations and directions, the abovecaptioned Writ Petitions (Civil) stand finally disposed of. ## W.P.(C).Nos.6414/2016, 5014/2016 & 5307/2016: As already noted in the judgment in W.P.(C).No. 3416/2016 and connected case, the Division Bench of this Court in Arya v. Reserve Bank of India reported in 2015(4) KLT 478 has held that so long as the admissions secured by the candidates/students concerned are not on the basis of performance in the competitive examinations test conducted by Government/Approved Regulatory Bodies, their admissions can only be said to be one made under the management quota and that as per the norms approved on behalf of the Indian Bankers' Association, a minimum of 60% marks both in W.P.(C).3416/16 etc. - : 14 :- the competitive examinations and qualifying subjects individually is required to be passed by the candidates. It is pointed out by the respective Advocates concerned for the respective banks in these cases that none of the writ petitioners herein has secured with 60% marks in the qualifying examination and qualifying subjects individually as required in the above said norms and that therefore they are ineligible to be considered for the grant of education loan even in the management quota. The fact regarding the nonacquisition of the minimum marks as indicated above is not rebutted by any of the petitioners. Accordingly W.P.(C).No. 6414/ 2016, 5014/2016 and 5307/2016 stand dismissed. However, there will be no order as to costs. sdk+ Sd/ALEXANDER THOMAS, JUDGE ///True Copy/// P.S. to Judge