High Court of KeralaSingle Judge2023-05-05Review petitions dismissed; common judgment uph...

RP Nos.449 & 450 of 2022 in W.P.(C) Nos.4821/2022 and 3646/2022 (High Court of Kerala)

Case / Petition Number:RP Nos. 449 of 2022 and 450 of 2022

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: N. Nagareesh
Judgment Date: 2023-05-05
Court Decision / Holding: The petitions are dismissed. The Court held there was no error in the common judgment and that the review petitions fail on merits, noting that CIC/RBI regimes, Circulars, and Priority Sector lending considerations do not invalidate the reasoning that co-obligant credit scores can influence loan decisions in light of the facts and regulatory framework.
Final Disposition: Review petitions dismissed; common judgment upheld; no error found on the face of the records.

Parties to the Case

Appellants / Petitioners

The Branch Manager, State Bank of India, Keezhmad Branch, Mundokuty Building, Kuttamassery, Thottumughmar P.O., Aluva-683105
Asst. General Manager, State Bank of India, Head Office, Poojappura, Thiruvananthapuram-695012
The Manager, State Bank of India, Sooranad Branch, Sooranad P.O., Kollam District-690522

Respondents

Gayathri V S, D/o. Sureshkumar V.K., Keerankara Puthenpurayil House, Keezhmad, Thottumugham P.O., ALUVA-683105
Kiran David, Aged 22 years, S/o. Sunil David, Thaliyath House, Patharam P.O., Kollam District-690522

Legal Representation & Advocates

Counsels for Petitioners

• K.K. Chandran Pillai (Sr.)
• S. Ambily

Counsels for Respondents

• O.D. Sivadas
• Manoj Ramaswamy

Case Synopsis & Summary

This is a consolidated review petition matter before the Kerala High Court arising from two writ petitions (W.P.(C) Nos.4821/2022 and 3646/2022) which had challenged a common judgment dated 02.03.2022. The writ petitions concerned education loan denial by the State Bank of India on the ground that the co-borrowers had unsatisfactory CIBIL scores. The petitioners argued that the earlier decision relied on Pranav S.R. v. The Branch Manager, SBI (2020 KHC 4695), which held that unsatisfactory credit scores of parents cannot be a ground to deny education loans and that repayment capacity after education should govern the loan. They urged that the RBI circulars, the Credit Information Companies Act, and related rules/regulations were not properly considered, and that the Act does not regulate bank lending policies. The Bank respondents contended that the CIC Act and RBI guidelines, along with the Priority Sector Lending Directions, 2020, govern credit information and lending policies; they argued that the earlier pronouncement should not bind education loans in the face of these statutory instruments. After hearing both sides, the Court reaffirmed Pranav S.R.’s principle to some extent but ultimately found no error in the common judgment and dismissed the review petitions, keeping the education loan denials aligned with the regulatory framework and case facts.

Provisions of Law Cited

Credit Information Companies (Regulation) Act, 2005Credit Information Companies (Regulation) Act, 2005 – Rules and Regulations (Credit Information Companies Rules, 2006; Credit Information Companies Regulation, 2006)Reserve Bank of India Circular dated 27.06.2014RBI Guidelines (Ext.R2(b))Reserve Bank of India (Priority Sector Lending Targets and Classifications) Directions, 2020

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners argued that the common judgment did not properly apply applicable law. They relied on Pranav S.R. to contend that unsatisfactory credit scores of parents cannot justify denial of education loans, as repayment capacity after education should govern eligibility. They urged that the Credit Information Companies Act, 2005 and the Rules/Regulations thereunder, RBI Circulars, and the RBI Priority Sector Directions were not appropriately considered. They contended that treating education loan borrowers as a distinct category under CIC regime is necessary and that the RBI Circulars should be applied to retail/student lending in line with Vidyalakshmi scheme.

Contentions of Respondents

The respondents argued that the CIC Act and its regulations govern credit information and disclosure, while lending policies remain under Banking Regulation Act/RBI governance. They submitted that RBI Circulars, Guidelines Ext.R2(b), and the Priority Sector Lending Directions, 2020, are applicable and that the common judgment correctly considered them. They claimed that the term Client can include education loan borrowers, and that circumstances warrant caution before overriding established lending policies. They also argued that the Act does not regulate lending decisions and that regulatory and policy instruments should govern risk management and NPAs, not judicially mandating loan sanction in these cases.

Cited Precedents (4)

Case Name	Citation	Treatment	Explanation
Pranav S. R. v. The Branch Manager, State Bank of India and another	2020 KHC 4695	Positive	Court relied on this decision to support the proposition that unsatisfactory credit scores of parents cannot be the sole basis to deny education loans; repayment capacity after education is crucial.
Kasaragod Co-operative Educational Society Limited v. Registrar of Co-operative Societies (General)	2016 (3) KHC 630	Distinguished	Was a case involving denial of a commercial loan; not applicable to education loan facts.
ICICI Bank Limited v. Official Liquidator of APS Star Industries Limited and others	(2010) 10 SCC 1	Distinguished	Did not apply to the facts pleaded in these writ petitions.
Annamalai University represented by Registrar v. Secretary to Government, Information and Tourism Department and others	(2009) 4 SCC 590	Distinguished	Did not apply to the facts of the present petitions.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE N.NAGARESH** **FRIDAY, THE 5[TH] DAY OF MAY 2023 / 15TH VAISAKHA, 1945** **RP NO. 449 OF 2022** **AGAINST THE JUDGMENT IN WP(C) 4821/2022 OF HIGH COURT OF** ## **KERALA** ## **REVIEW PETITIONER:** **THE BRANCH MANAGER, STATE BANK OF INDIA, KEEZHMAD BRANCH, MUNDOKUTY BUILDING, KUTTAMASSERY, THOTTUMUGHAM P.O., ALUVA-683105.** **BY ADVS. K.K.CHANDRAN PILLAI (SR.) S.AMBILY** **RESPONDENT:** **GAYATHRI V S, D/O. SURESHKUMAR V.K., KEERANKARA PUTHENPURAYIL HOUSE, KEEZHMAD, THOTTUMUGHAM P.O.,M ALUVA-683105.** **BY SRI. O.D. SIVADAS** **THIS REVIEW PETITION HAVING COME UP FOR ADMISSION ON 05.05.2023, ALONG WITH RP.450/2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** RP Nos.449 & 450 of 2022 : 2 : ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE N.NAGARESH** **FRIDAY, THE 5[TH] DAY OF MAY 2023 / 15TH VAISAKHA, 1945 RP NO. 450 OF 2022** **AGAINST THE JUDGMENT IN WP(C) 3646/2022 OF HIGH COURT OF** ## **KERALA** ## **REVIEW PETITIONERS:** - **1 ASST. GENERAL MANAGER , STATE BANK OF INDIA, HEAD OFFICE, POOJAPPURA, THIRUVANANTHAPURAM-695012.** - **2 THE MANAGER, STATE BANK OF INDIA, SOORANAD BRANCH, SOORANAD P.O., KOLLAM DISTRICT-690522.** **BY ADVS. K.K.CHANDRAN PILLAI (SR.) S.AMBILY** ## **RESPONDENT:** **KIRAN DAVID, AGED 22 YEARS, S/O. SUNIL DAVID, THALIYATH HOUSE, PATHARAM P.O., KOLLAM DISTRICT-690522.** ## **BY ADV MANOJ RAMASWAMY** **THIS REVIEW PETITION HAVING COME UP FOR ADMISSION ON 05.05.2023, ALONG WITH RP.449/2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** RP Nos.449 & 450 of 2022 : 3 : ## **N. NAGARESH, J.** ````````````````````````````````````````````````````````````` ## R.P. No.449 of 2022 in W.P.(C) No.4821 of 2022 and R.P. No.450 of 2022 in W.P.(C) No.3646 of 2022 ````````````````````````````````````````````````````````````` _Dated this the 5[th] day of May, 2023_ ## **O R D E R** ~ ~ ~ ~ ~ ~ The respondent-Banks in W.P.(C) Nos.3646 of 2022 and 4821 of 2022 have filed the above review petitions aggrieved by the common judgment dated 02.03.2022 in the writ petitions. The writ petitions were filed by the petitioners therein aggrieved by denial of education loan by the officers of the State Bank of India. In both the cases, the education loan was denied on the ground that the CIBIL score of the co-borrowers are not satisfactory. RP Nos.449 & 450 of 2022 : 4 : 2. The writ petitioners relied on the judgment of this Court in _**Pranav S.R. v. The Branch Manager, State Bank of India and another** [2020 KHC 4695]_ wherein it was held that unsatisfactory credit scores of the parents cannot be a ground to deny education loans for the reason that it is the repayment capacity of the applicant after their education which is the deciding factor. After considering the arguments advanced by the writ petitioners and the Standing Counsel appearing for the Bank, this Court, relying on the judgment in _**Pranav S. R.**_ (supra) allowed the writ petitions and directed the respondents to reconsider their loan applications, disregarding the low credit scores of the co-obligants and sanction and disburse the eligible loan amount. It is aggrieved by the said direction that the respondents have filed these review petitions. 3. The Senior Counsel appearing at the instance of the review petitioners argued that the common judgment in the writ petitions has been rendered by this Court without analysing the provisions of the Credit Information Companies RP Nos.449 & 450 of 2022 : 5 : (Regulation) Act, 2005, the Credit Information Companies Rules, 2006 and the Credit Information Companies Regulation, 2006. The Credit Information Companies (Regulation) Act, 2005 and the Rules and Regulations made thereunder are enacted with specific legislative intentions. The finding of this Court that low CIBIL score of the coobligant in an application for education loan cannot be a reason for rejection of loan application, is against the intention of the Act, 2005. It was further submitted that the effect of the DRT Act and SARFAESI Act was not considered by this Court while deciding the issue. 4. The Senior Counsel further urged that one of the major items of bad debts which are NPAs and which could not be recovered, are amounts covered by education loans. Default occurs even after taking co-borrowers with satisfactory CIBIL score. The effect of Circulars issued by the RBI and other Banks cannot be considered independently and in isolation. RP Nos.449 & 450 of 2022 : 6 : 5. The Senior Counsel pointed out that the finding of this Court that _**Kasaragod Co-operative Educational Society Limited v. Registrar of Co-operative Societies (General)** [2016 (3) KHC 630]_ was a case involving denial of a commercial loan and will not apply to the facts in the writ petitions, may not be correct. The term “Client” would include education loan borrowers also. 6. The Senior Counsel further argued that the Union of India, the Reserve Bank of India and the Credit Information Companies concerned ought to have been made parties in the writ petitions. As they are not in the party array, the writ petitions were not maintainable. Interest of justice requires that the common judgment in the writ petitions be reviewed. 7. I have heard the learned Senior Counsel appearing at the instance of the review petitioners and the respective learned counsel appearing for the writ petitioners. 8. This Court considered the arguments advanced by the writ petitioners and delivered a common judgment in RP Nos.449 & 450 of 2022 : 7 : W.P.(C) Nos.3646 and 4821 of 2022 on 02.03.2022. While considering the issue whether low CIBIL score / Credit score of the parents / co-obligants can be a reason to deny education loan, this Court took note of the judgment of this Court in _**Pranav S. R.**_ (supra). In _**Pranav S. R.**_ (supra), wherein this Court held that unsatisfactory credit scores of parents cannot be a ground to reject education loans in view of the fact that the repayment capacity of the students after his/her education should be the deciding factor as per the Circulars issued by the Indian Banks Association. 9. The arguments advanced by the review petitioners is that this Court has not considered the impact of relevant Circulars while delivering the judgment in _**Pranav S.R.**_ (supra). In the judgment under review, this Court considered Ext.R2(a) Circular dated 27.06.2014 issued by the Reserve Bank of India. This Court noted that the said Circular dated 27.06.2014 has been issued in the context of providing a data format for furnishing credit information to Credit Information Companies. This Court held that the Circular is RP Nos.449 & 450 of 2022 : 8 : primarily intended to apply commercial borrowers. 10. The Senior Counsel for the review petitioners would submit that the said Circular is applicable to education loans also. In the common judgment, this Court noted that the Circular has made it clear that the loan policies should be suitable to the retail borrowers and consumer borrower segment. 11. This Court also took into consideration Ext.R2(b) Guidelines issued by the RBI. This Court found that those Guidelines were issued for the purpose of maintaining accounting standards. Though the Guidelines proceeded to declare that the term “retail banking” would take in student and education loans, the education loans provided by the Banks in India under Vidyalakshmi Scheme stand on a different footing. 12. This Court also considered the impact of the Reserve Bank of India (Priority Sector Lending Targets and Classifications) Directions, 2020 wherein education is categorised as a priority sector. RP Nos.449 & 450 of 2022 : 9 : 13. Regarding the judgment in _**Kasaragod Cooperative Educational Society Limited**_ (supra), this Court found that the said case was relating to denial of a commercial loan and will not apply to the facts of the cases pleaded in the writ petition. This Court also considered the judgments of the Apex Court in _**ICICI Bank Limited v. Official Liquidator of APS Star Industries Limited and others** [(2010) 10 SCC 1]_ and _**Annamalai University represented by Registrar v. Secretary to Government, Information and Tourism Department and others** [(2009) 4 SCC 590]_ and found that those cases did not apply to the facts pleaded in the writ petitions. 14. The review petitioners would contend that this Court did not consider the impact of the Credit Information Companies (Regulation) Act, 2005 and the Rules and Regulations made thereunder. The Act, 2005 has been enacted for regulation of Credit Information Companies and to facilitate efficient distribution of credit and for matters connected therein or incidental thereto. The Act provides for RP Nos.449 & 450 of 2022 : 10 : registration and management of Credit Information Companies and provides for functions of Credit Information Companies. The Act deals with collection and furnishing of credit information. The Act also lay down information privacy principle. The Act, 2005 does not in any manner regulate the Policies and Rules and Regulations relating to advances and loans by Banking Companies, which are primarily regulated by the Banking Regulation Act and the RBI Act and the Rules and Regulations made thereunder. The contentions put forth by the review petitioners based on Credit Information Companies (Regulation) Act, 2005 will not in any manner affect the judgments of this Court in _**Pranav S. R.**_ (supra) or one under review. There is no error apparent on the face of the records of the case. The review petitions are therefore found to be without any merits. The review petitions are therefore dismissed. Sd/- **N. NAGARESH, JUDGE** aks/03.05.2023 RP Nos.449 & 450 of 2022 : 11 : ## **APPENDIX OF RP 449/2022** ## **PETITIONER'S ANNEXURES** |**Annexure**|**1**|**COPY OF**|**JUDGMENT DATED**|**02/03/2022 OF**| |---|---|---|---|---| |||**THIS**|**HON'BLE**<br>**COURT**|**IN**<br>**WPC**| |||**NO.4821/2022.**||| |**Annexure**|**2**|**COPY OF**|**JUDGMENT DATED**|**03/09/2021 IN**| |||**WPC NO.,14236/2021 OF **||**THIS HON'BLE**| |||**COURT.**||| RP Nos.449 & 450 of 2022 : 12 : ## **APPENDIX OF RP 450/2022** ## **PETITIONER'S ANNEXURES** **Annexure 1 COPY OF JUDGMENT DATED 02/03/2022 OF THIS HON'BLE COURT IN WPC NO.3646/2022. Annexure 2 COPY OF JUDGMENT DATED 03/09/2021 IN WPC NO.14236/2021 OF THIS HON'BLE COURT.**