NOORJAHAN.N.S. v. STATE BANK OF INDIA, The General Manager, SBI, Rasmeccc Kottarakkara; The Manager, SBI Anchal Branch; TAAN Union CIBIL Limited

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR** **TUESDAY, THE 03RD DAY OF DECEMBER 2019 / 12TH AGRAHAYANA, 1941** ## **WP(C).No.19248 OF 2019(E)** ## **PETITIONER:** **NOORJAHAN.N.S., AGED 20 YEARS D/O.NAJEEB KHAN, III YEAR B.D.S. COURSE STUDENT, NOORUL ISLAM COLLEGE OF DENTAL SCIENCE, NIMS MEDICITY, ARALUMMOODU P.O., THIRUVANANTHAPURAM-695 124, RESIDING AT SUMAYYA MANZIL, THADIKKAD P.O., VIA ANCHAL, KOLLAM DISTRICT.** ## **BY ADV. SRI.B.MOHANLAL** ## **RESPONDENTS:** **1 THE GENERAL MANAGER, STATE BANK OF INDIA, RASMECCC KOTTARAKKARA, LOTUS TOWER, KOTTARAKAKRA P.O., KOLLAM-691 506. 2 THE MANAGER, STATE BANK OF INDIA, ANCHAL BRANCH, ANCHAL P.O., KOLLAM-691 306. 3 ADDL.R3.THE TAAN UNION CIBIL LIMITED, ONE INDIA BULL CENTRE, TOWER 2A, 19TH FLOOR, SENAPATHY BAPAT MARG, ELPHINSTONE ROAD, MUMBAI - 400 013, REPRESENTED BY ITS MANAGING DIRECTOR.** **IS IMPLEADED AS PER ORDER DATED 01/10/2019 IN I.A.NO.1/2019 IN WP(C)192482/109. R3 BY ADV. SRI.C.AJITH KUMAR, SC BY ADV. SRI. JAWAJAR JOSE, SC** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 03.12.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C) No.19248 of 2019 ..2.. ## **W.P.(C) No.19248 of 2019 --------------------------------------** ## **JUDGMENT** The grievance of the petitioner in the writ petition concerns the decision of the State Bank of India (Bank) in declining the request of the petitioner for educational loan. 2. The petitioner is a third year BDS student in Noorul Islam College of Dental Science, Thiruvananthapuram. She belongs to Muslim community entitled to reservation under the category “Other Backward Community” (OBC). The petitioner secured admission for the 4½ years long BDS course through the centralized allotment process of the State Government in the academic year 2017-2018. The fee which the petitioner is bound to pay per year for the course in terms of the fixation made by the State Government is approximately Rs.3,50,000/-. As the family of the petitioner could not raise the funds required for payment of the entire fees, during 2017, the petitioner applied for an educational loan of Rs.7,40,000/- W.P.(C) No.19248 of 2019 ..3.. to the Bank. As per Ext.P5 communication, the petitioner was informed that she is entitled to a loan of Rs.7,47,784/- subject to completion of other formalities. The petitioner was, however, informed later by the Bank as per Ext.P6 communication that the Bank is unable to process and disburse the loan as the father of the petitioner, who is a coapplicant for the loan, does not have the requisite credit score. Ext.P6 is under challenge in this writ petition. 3. On 15.07.2019, when the matter was taken up, the learned Standing Counsel for the Bank sought time for instructions. Later, on 07.08.2019, this Court directed the Standing Counsel for the Bank to file a statement in the matter. Though the matter was listed on a few days thereafter, it was not taken up for want of time. On 26.11.2019, having noticed that the Bank has not filed statement as directed on 7.8.2019, this Court posted the matter specifically to 03.12.2019 with a direction to the Bank to file statement in the meanwhile. Despite all that, the Bank has not chosen to file any statement or counter affidavit in the matter. As such, the matter was finally heard. W.P.(C) No.19248 of 2019 ..4.. 4. The learned counsel for the petitioner pointed out that the father of the petitioner could not repay a few loans availed by him from the Bank as agreed and it is on account of the said reason that the Bank is taking the stand that he does not have the requisite credit score. It was also pointed out by the learned counsel that the liabilities in respect of all the loans availed by the father of the petitioner have now been liquidated by him in full. The contention raised by the learned counsel, therefore, was that the conduct of the Bank in refusing the loan applied for by the petitioner is arbitrary. The learned counsel placed reliance on the decision of the Madras High Court in W.P.(MD)No.7788 of 2018, in support of his contention. 5. The learned Standing Counsel for the Bank has not disputed the fact that the father of the petitioner has no liability in respect of any loans as of now. According to the learned Standing Counsel, the credit score of a person is determined having regard to the manner in which the loans availed by him have been repaid and the fact that the loan liability has been liquidated at some point of time does not W.P.(C) No.19248 of 2019 ..5.. affect the credit score of the person. It was also pointed out by the learned Standing Counsel that the credit score required for the loan involved for the co-applicant is 800 and above and the father of the petitioner does not have the said credit score. The learned Standing Counsel, placing reliance on the decision of this court in **Kasaragod Co-operative Educational Society Ltd. No.C.904 v. Registrar of Co-operative Societies (General), Tvm and Others,** 2016(3) KHC 630, has also contended that this court cannot interfere in a commercial decision of the present nature, in exercise of the power under Article 226 of the Constitution. 6. The circular issued by the Reserve Bank of India to all scheduled commercial Banks, bearing No RPCD.PLNFS.BC.NO.83/06.12.05/2000-01 dated 28.4.2001 indicates that having found that education is a matter of great importance for the development of human resources and empowerment of the country and having taken note of the fact that higher education is progressively moving into the domain of private sector and has become a very costly affair in the country in course of time and that there is a need for W.P.(C) No.19248 of 2019 ..6.. institutional funding in the area to ensure that no deserving student is denied the opportunity to pursue higher education for want of financial support, the Central Government has evolved a policy decision for the same and the circular aforesaid was issued in furtherance to the said policy decision of the Central Government. In terms of the said circular, the Reserve Bank of India has forwarded to all Banks a Model Educational Loan Scheme prepared by Indian Banks Association along with the modifications suggested by the Government of India for formulation of appropriate educational loan schemes and disbursal of educational loans on that basis. It is seen that it is in tune with the aforesaid policy declaration made by the Central Government that all Banks including the State Bank of India have formulated Educational Loan Schemes and are disbursing educational loans. It is, therefore, clear that the object of Educational Loan Schemes formulated by the Bank is to ensure that a meritorious student shall not be deprived of the opportunity to pursue higher education merely on the ground that he/she does not have resources for the same. The correctness of the stand taken by the Bank has to W.P.(C) No.19248 of 2019 ..7.. be examined in the aforesaid background. 7. The fact that the petitioner is entitled to the educational loan applied for by her in terms of the scheme formulated by the Bank is not in dispute. The fact that the Educational Loan Scheme of the Bank is one formulated in furtherance to the policy declaration made by the Central Government as referred to in paragraph 6 above is also not in dispute. As noted, the impediment pointed out by the Bank for disbursing the loan applied for by the petitioner is that her father who is to be the co-applicant for the loan, in terms of the scheme, does not have the requisite credit score for availing the loan. The pointed question, therefore, is as to whether the Bank was justified in declining the loan applied for on that ground. 8. It is seen that the Indian Banks' Association has modified the original Model Education Loan Scheme formulated by them on a few occasions subsequently, having regard to the operational difficulties in implementing the original scheme and the lending Banks were accordingly sanctioning and disbursing loans after making appropriate W.P.(C) No.19248 of 2019 ..8.. changes in their loan schemes in tune with the revised guidance notes issued by the Indian Banks' Association. The revised guidance notes on Model Education Loan Scheme for pursuing higher education issued by the Indian Banks' Association in the year 2015 indicate that the loan scheme is one conceived by them as a socially and economically relevant scheme aiming to provide need based finance to meritorious students for taking up higher education. The revised guidance notes referred to above also indicate that repayment possibilities of educational loans are not to be assessed based on the financial position of the parents and the same has to be assessed based on the projected future earnings of the students on employment after education. The relevant portion of the revised guidance notes on Model Education Loan Scheme issued by Indian Banks' Association reads thus: “Educational Loan Scheme is a socially and economically relevant loan scheme from the Indian Banking industry. Rightly, the RBI has included education loans as part of the priority sector lending of Banks. It aims to provide need-based finance to meritorious student for taking up higher education. **==> picture [61 x 7] intentionally omitted <==** x x x x x x W.P.(C) No.19248 of 2019 ..9.. The model scheme does not look at the financial position of parents while evaluating loan to a meritorious student. Repayment possibilities have to be based on projected future earnings of the student on employment after education. To avoid subjectivity in assessment, it is suggested that the Banks may fix from time to time earning potential for various courses, percentage of income to be considered for repayment etc. A well laid appraisal procedure will ensure that the decision to sanction an education loan is based on sound commercial logic, besides serving a noble social cause.” 9. Insofar as the object of the Educational Loan Schemes formulated by the Bank in compliance with the circular issued by the Reserve Bank of India having statutory force is to ensure that a meritorious student shall not be deprived of the opportunity to pursue higher education merely on the ground that he/she does not have resources for the same, and insofar as the Model Scheme formulated by Indian Banks' Association which was forwarded by the Reserve Bank of India to lending Banks for formulation of appropriate Educational Loan Schemes was one in which the repayment possibilities of the loan were contemplated to be made not on the financial position of the parents but solely on the projected W.P.(C) No.19248 of 2019 ..10.. future earnings of the students on employment after education, I am of the view that the rejection of the request for loan on the ground that the father of the petitioner does not have the requisite credit score is arbitrary and violative of the spirit of the circular issued by the Reserve Bank of India dated 28.04.2001 which is binding on the Bank. In the result, Ext.P6 is quashed and respondents 1 and 2 are directed to disburse to the petitioner the loan sanctioned, as communicated to her in terms of Ext.P5 e-mail, forthwith. Respondents 1 and 2 would be free to insist another relative of the petitioner acceptable to the Bank to act as joint borrower, in the place of the father of the petitioner for the purpose of disbursing the loan. **Sd/P.B.SURESH KUMAR JUDGE** ds 04.12.2019 W.P.(C) No.19248 of 2019 ..11.. ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 THE TRUE COPY OF THE ALLOTMENT MEMO OBTAINED BY THE PETITIONER FROM THE PRIVATE SELF FINANCING NOORUL ISLAM COLLEGE OF DENTAL SCIENCE, NIMS MEDICITY, ARALUMMOODU P.O., THIRUVANANTHAPURAM.** **EXHIBIT P2 THE TRUE COPY OF THE CERTIFICATE NO.NICDS/BDS/2017-2018 DATED 19.10.2017 ISSUED BY THE PRINCIPAL, NOORUL ISLAM COLLEGE OF DENTAL SCIENCE TO THE PETITIONER.** - **EXHIBIT P3 THE TRUE COPY OF THE COURSE CERTIFICATE NO.NICDS/BDS/CERT-855/1718 DATED 20.10.2017 ISSUED BY THE PRINCIPAL, NOORUL ISLAM COLLEGE OF DENTAL SCIENCE.** - **EXHIBIT P4 THE TRUE COPY OF THE E-MAIL COMMUNICATION DATED 31.12.2017 SENT BY THE 2ND RESPONDENT TO THE PETITIONER.** - **EXHIBIT P5 THE TRUE COPY OF THE E-MAIL COMMUNICATION DATED 13.09.2018 SENT BY THE RESPONDENTS TO THE PETITIONER.** - **EXHIBIT P6 THE TRUE COPY OF THE COMMUNICATION DATED 10.109.2018 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER.** **EXHIBIT P7 THE TRUE COPY OF THE RECEIPT DATED 14.06.2017 ISSUED BY THE MANAGER, SBI, PUNALUR TOWN BRANCH TO THE PETITIONER'S FATHER.** W.P.(C) No.19248 of 2019 ..12.. **EXHIBIT P8** **THE TRUE COPY OF THE APPLICATION DATED 04.02.2019 SUBMITTED BY THE PETITIONER'S FATHER BEFORE THE TAAN UNION CIBIL LIMITED, MUMBAI.** **RESPONDENT'S/S EXHIBITS: EXHIBIT R3(A): TRUE COPY OF E-MAIL SENT BY 3RD RESPONDENT TO THE PETITIONER.**