Nizamudheen P. v Union of India & Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE V.G.ARUN** **FRIDAY, THE 6[TH] DAY OF JANUARY 2023 / 16TH POUSHA, 1944** **WP(C) NO. 40066 OF 2022** ## **PETITIONER/S:** NIZAMUDHEEN P AGED 24 YEARS S/O SHOUKHATH ALI, POOZHITHARA HOUSE, KODUVALLY, KOZHIKODE., PIN - 673572 BY ADVS. ASHIK K.MOHAMED ALI MUHAMMED RIFA P.M. ## **RESPONDENT/S:** 1 UNION OF INDIA REPRESENTED BY THE SECRETARY, MINISTRY OF EDUCATION, SHASTRI BHAVAN, DR. RAJENDRA PRASAD ROAD, NEW DELHI., PIN – 110001 2 THE RESERVE BANK OF INDIA MAIN BUILDING, SHAHID BHAGAT SINGH ROAD, MUMBAI-400001, REPRESENTED BY ITS GOVERNOR, PIN – 400001 3 THE DHANLAXMI BANK LTD. BAR COUNCIL BRANCH, KHCAA CHAMBER COMPLEX, NEAR HIGH COURT, ERNAKULAM, REPRESENTED BY ITS BRANCH MANAGER, PIN – 682031 4 THE GENERAL EDUCATION DEPARTMENT GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM, REPRESENTED BY ITS SECRETARY, PIN – 695001 5 ADDL.R5:NATIONAL CREDIT GUARANTEE TRUSTEE COMPANY LTD. BANDRA KURLA COMPLEX, BANDRA EAST MUMBAI, MAHARASHTRA, REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER. ADDL. R5 IS IMPLEADED AS PER ORDER DATED 21.12.2022 IN I.A. 1/2022 BY ADVS. ARAVIND BABU W.P.(C) No.40066 of 2022 **==> picture [16 x 8] intentionally omitted <==** ASHIK K.MOHAMED ALI C.K.KARUNAKARAN(K-36) REMIL REGI GEORGE(K/479/2022) ## **OTHER PRESENT:** GP P.S.APPU; DSGI S.MANU;CGC B. RAMACHANDRAN **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03.01.2023, THE COURT ON 06.01.2023 DELIVERED THE FOLLOWING:** W.P.(C) No.40066 of 2022 -3- ## **JUDGMENT** Dated this the 6[th] day of January, 2023 The petitioner, an Advocate by profession, intends to pursue his LLM in Intellectual Property at Bournemouth University in the United Kingdom. The tuition fee for the course is 14,500 pounds per year. The petitioner paid an initial fees of 300 pounds to the University and approached the third respondent for availing an educational loan under the Credit Guarantee Fund Scheme for educational loans issued by the Ministry of Human Resources Development (Department of Higher Education), Government of India. As there was no positive response from the third respondent, this writ petition is filed seeking the following reliefs; _“i) Call for the entire records of the facts narrated by the Petitioner in the Writ Petition._ W.P.(C) No.40066 of 2022 -4- _ii) Declare that the Petitioner is entitled to get an education loan for Rs. 7.49 lakhs under the Credit Guarantee Fund Scheme for Educational Loans issued by the Ministry of Human Resource Development (Department of Higher Education) from the 3rd Respondent Bank for his LL.M in Intellectual Property in Bournemouth University in the United Kingdom;_ _iii) Issue a writ of mandamus, any other writ or order, directing the 3rd Respondent Bank to sanction and disburse an education loan of Rs. 7.49 lakhs to the for his LL.M in Intellectual Property in Bournemouth University in the United Kingdom within a stipulated time as directed by this Honourable Court;_ _iv) Issue a writ of mandamus, any other writ or order, directing the 2nd Respondent to take steps to issue a Circular to check and control the non-disbursement of education loans under the Credit Guarantee Fund Scheme for Educational Loans issued by the Ministry of Human Resource Development (Department of Higher Education).”_ 2. Adv.Ashik K.Mohamed Ali, learned Counsel for the petitioner submitted that the petitioner is eligible for the loan as per the terms of Ext.P8 Scheme. The scheme casts a liability on ## W.P.(C) No.40066 of 2022 -5- the lending institution, here the third respondent, to evaluate and sanction the educational loan. As per the scheme, loans up to Rs.7.5 lakhs has to be sanctioned without insisting on collateral security. The petitioner having applied for a loan of Rs.7.49 lakhs, the third respondent was bound to sanction the same. It is now understood that the third respondent's reluctance to sanction loan is because of the lower credit score of the co-obligant. The credit score of the co-obligant cannot be a consideration for grant of educational loans, which position stands clarified by this Court as per Exts.P10 and P11 judgments. 3. Adv.C.K.Karunakaran, appearing for the third respondent, raised a preliminary objection as to the maintainability of the writ petition. It is contended that the third respondent is a scheduled bank and will not fall within the ambit of Article 12 of the Constitution of India. In W.P.(C) No.40066 of 2022 -6- support of this contention, reliance is placed on the decisions of the Apex Court in _**SBI v. Aravindra Electronics Pvt.Ltd [2022 SCC OnLine SC 1522], The Bijnor Urban Cooperative Bank Limited, Bijnor and others v. Meenal Agarwal and others [2021 SCC OnLine SC 1255]**_ and the Division Bench decision of this Court in _**Y. Sleebachan v State of Kerala [2020 (4) KLT OnLine 1024].**_ 4. On merits, it is contended that the decision to grant or refuse a loan falls within the commercial wisdom of the bank and cannot therefore be the subject matter of judicial review. The petitioner had applied for the loan with his parents as co-applicants. As is the usual practice, the bank verified the CIBIL report of the applicant and co-applicants. The report revealed serious defaults in the advances availed by the petitioner and his parents from other financial institutions. The CIBIL report of W.P.(C) No.40066 of 2022 -7- the petitioner also revealed significant defaults in repayment of even small advances availed by him. Even as per Ext.P8 scheme, the bank is bound to sanction educational loan only to eligible borrowers. The term 'eligible borrower' has been defined at Clause 5(iii) as new or existing borrower with Indian Nationality who meets eligibility criteria prescribed under "IBA Model Educational Loan Scheme for pursuing Higher Education in India and Abroad". Parents/guardians will be the co-borrowers/joint borrowers. In case of a married person, joint borrower can be either spouse or the parent(s)/parents-in-law. 'Guarantor' is defined as per Clause 5(vii) to mean a person acceptable to the bank, who guarantees to repay the education loan, in the event of failure of the borrower to repay. As per Clause 10(i), the lending institution has to evaluate and sanction educational loan in accordance with the IBA model Educational Loan W.P.(C) No.40066 of 2022 -8- Scheme for pursuing higher studies in India abroad and conduct the accounts of the borrowers with normal banking prudence and due diligence. It is contended that Exts.P10 and P11 judgments were rendered in the case of nationalised banks, whereas the third respondent is only a scheduled bank. 5. In reply to the contention regarding maintainability, Counsel for the petitioner argued that,nk, it functions on the strength of licence issued under Section 22 of the Banking Regulation Act, 1949. The bank has to function within the parameters set out in the Banking Regulation Act and the Reserve Bank of India Act, 1934. The Central Bank having formulated Ext.P8 scheme, which envisages grant of educational loan to persons like the petitioner, the third respondent is exercising a public function while granting educational loans. Moreover, education falls within the priority sector. Hence, banks W.P.(C) No.40066 of 2022 -9- cannot contend that sanction of educational loan is within the domain of its commercial wisdom. 6. The legal position that the writ petitions are not maintainable against scheduled banks, is settled by the decision in _**Federal Bank Ltd v. Sagar Thomas [(2003) 10 SCC**_ _**733]**_ , the contextually relevant portion of which is extracted hereunder; _“32. Merely because Reserve Bank of India lays the banking policy in the interest of the banking system or in the interest of monetary stability or sound economic growth having due regard to the interests of the depositors etc. as provided under Section 5(c)(a) of the Banking Regulation Act does not mean that the private companies carrying on the business or commercial activity of banking, discharge any public function or public duty. These are all regulatory measures applicable to those carrying on commercial activity in banking and these companies are to act according to these provisions failing which certain consequences follow as indicated in the Act itself. As to the provision regarding acquisition of a banking company by the Government, it may be pointed out_ W.P.(C) No.40066 of 2022 -10- _that any private property can be acquired by the Government in public interest. It is now a judicially accepted norm that private interest has to give way to the public interest. If a private property is acquired in public interest it does not mean that the party whose property is acquired is performing or discharging any function or duty of public character though it would be so for the acquiring authority._ _33. For the discussion held above, in our view, a private company carrying on banking business as a scheduled bank, cannot be termed as an institution or a company carrying on any statutory or public duty. A private body or a person may be amenable to writ jurisdiction only where it may become necessary to compel such body or association to enforce any statutory obligations or such obligations of public nature casting positive obligation upon it. We don't find such conditions are fulfilled in respect of a private company carrying on a commercial activity of banking. Merely regulatory provisions to ensure such activity carried on by private bodies work within a discipline, do not confer any such status upon the company nor put any such obligation upon it which may be enforced through issue of a writ under Article 226 of the Constitution. Present is a case of disciplinary action being taken against its employee by the_ W.P.(C) No.40066 of 2022 -11- _appellant Bank. The respondent's service with the Bank stands terminated. The action of the Bank was challenged by the respondent by filing a writ petition under Article 226 of the Constitution of India. The respondent is not trying to enforce any statutory duty on the part of the Bank. That being the position, the appeal deserves to be allowed._ 7. This Court had occasion to consider the ## question in _**Unimoni Financial Services Ltd v IDBI**_ ## _**Bank Ltd [2020 SCC OnLine Ker 7347].**_ Therein, the writ petition was filed against IDBI Bank challenging the demand for processing fee and withholding of title deeds mortgaged with the bank. After elaborate consideration, it was held that providing of credit facility or loan on the strength of title deeds given as security cannot be said to be done in discharge of any public function, even cases involving Public Sector/ Banks, especially when it arises out of contractual transactions entered into between the parties and the bank. W.P.(C) No.40066 of 2022 -12- ## 8. In _**The Bijnor Urban Cooperative Bank**_ _**Limited**_ (supra) the question considered was whether a borrower could demand the benefit of One Time Settlement Scheme declared by the Bank. After elaborate consideration, the Apex Court came to the following conclusion; _“11. The sum and substance of the aforesaid discussion would be that no writ of mandamus can be issued by the High Court in exercise of powers Under Article 226 of the Constitution of India, directing a financial institution/bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS Scheme and the guidelines issued from time to time. If the bank/financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS Scheme. Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to_ -13- ## W.P.(C) No.40066 of 2022 _be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS Scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove.”_ In view of the above legal position, in spite of the assertive submissions of the learned Counsel for the petitioner that the writ petition is maintainable, education being a priority sector and grant of educational loan, a public function, I am compelled to hold otherwise. 9. That apart, the bank cannot be compelled to sanction the loan when the credit score of the petitioner/applicant itself is way below the required limit. The bank having obtained information that even the small advances availed by the petitioner is in default, this Court will not be justified in directing the bank to sanction the loan. Exts.P10 and P11 judgments will also not come to the petitioner's rescue ## W.P.(C) No.40066 of 2022 **==> picture [23 x 8] intentionally omitted <==** since the question decided therein was whether the Bank can refuse to sanction loans based on the low credit score of the co-obligants, whereas in case at hand, the credit score of the applicant himself is below the required limit. For the aforementioned reasons, the writ petition is dismissed. Sd/- **V.G.ARUN JUDGE** Scl/ W.P.(C) No.40066 of 2022 -15- ## **APPENDIX OF WP(C) 40066/2022** PETITIONER EXHIBITS |Exhibit P1|COPY OF THE PROVISIONAL CERTIFICATE| |---|---| ||DATED 01-04-2022 ISSUED BY MAHATMA| ||GANDHI UNIVERSITY IN THE NAME OF THE| ||PETITIONER.| |Exhibit P2|TRUE COPY OF THE OFFER LETTER DATED| ||28-06-2022 ISSUED BY BOURNEMOUTH| ||UNIVERSITY IN THE NAME OF THE| ||PETITIONER.| |Exhibit P3|TRUE COPY OF THE LETTER ISSUED BY| ||BOURNEMOUTH UNIVERSITY SHOWING THE| ||TUITION FEE.| |Exhibit P4|TRUE COPY OF THE DOCUMENT SHOWING| ||PAYMENT MADE BY THE PETITIONER TO| ||BOURNEMOUTH UNIVERSITY.| |Exhibit P5|TRUE COPY OF THE IELTS TEST REPORT| ||DATED 02-12-2022 IN THE NAME OF THE| ||PETITIONER.| |Exhibit P6|TRUE COPY OF THE LETTER DATED 05-12-| ||2022 ISSUED BY BOURNEMOUTH UNIVERSITY| ||TO THE PETITIONER.| |Exhibit P7|TRUE COPY OF THE EMAIL COMMUNICATION| ||DATED 05-12-2022 OF BOURNEMOUTH| ||UNIVERSITY TO THE PETITIONER.| |Exhibit P8|TRUE COPY OF THE CREDIT GUARANTEE FUND| ||SCHEME FOR EDUCATIONAL LOANS ISSUED BY| ||THE MINISTRY OF HUMAN RESOURCE| ||DEVELOPMENT (DEPARTMENT OF HIGHER| ||EDUCATION).| |Exhibit P9|TRUE COPY OF THE EMAIL COMMUNICATION| ||DATED 07-12-2022 ISSUED BY THE| ||PETITIONER TO THE 3RD RESPONDENT BANK.| |Exhibit P10|TRUE COPY OF THE JUDGMENT DATED 03-07-| ||2020 IN WP (C) NO. 10968 OF 2020 OF| ||THIS HONOURABLE COURT.| |Exhibit P11|TRUE COPY OF THE JUDGMENT DATED 15-01-| ||2021 IN WP (C) NO. 25336 OF 2020.| |Exhibit P12|TRUE COPY OF THE DOCUMENT SHOWING A| ||POST BY THE PRESS INFORMATION BUREAU| ||REGARDING EDUCATION LOANS.| -16- ## W.P.(C) No.40066 of 2022 Exhibit P13 true copy of the document showing the website of the National Credit Guarantee Trust Company Ltd. Exhibit P14 True copy of the list of 'Member Lending Institutions' as on 23-11-2022 published by the National Credit Guarantee Trust Company Ltd.