Sarath G. Nair v Union of India and 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. 18055 OF 2021** ## **PETITIONER:** SARATH G.NAIR, AGED 46 YEARS (PROPRIETOR, SURY TRAVELS), S/O.GOPALAKRISHNAN NAIR, SURYA, KALLUNGAL LANE, ALUVA EAST, ERNAKULAM DISTRICT, PIN-683101. BY ADVS. P.A.NOOR MUHAMED BOBBY K.PAUL S.GIFFARA P.A.ABHILASH BILAL NIAMATHULLA ## **RESPONDENTS:** 1 UNION OF INDIA REPRESENTED BY THE SECRETARY, MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES, NIRMAN BHAVAN, NEW DELHI-110001. 2 THE SECRETARY DEPARTMENT OF FINANCIAL SERVICES (BANKING DIVISION), MINISTRY OF FINANCE, 3RD FLOOR, JEEVAN DEEP BUILDING, SANSAD MARG, NEW DELHI-110001. 3 THE ADDITIONAL SECRETARY & DEVELOPMENT COMMISSIONER (AS & DC), MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES, NIRMAN BHAVAN, NEW DELHI-110001. 4 RESERVE BANK OF INDIA REPRESENTED BY ITS GOVERNOR/AUTHORIZED REPRESENTATIVE, RESERVE BANK OF INDIA, CENTRAL OFFICE BUILDING, SHAHID BHAGAT SINGH ROAD, MUMBAI-400001. 5 THE REGIONAL DIRECTOR, RESERVE BANK OF INDIA, BAKERY JUNCTION, P.B.NO.6507, THIRUVANANTHAPURAM-695033. W.P.(C). 18055/2021 2 6 UNION OF INDIA NATIONAL CREDIT GUARANTEE TRUSTEE COMPANY LTD., REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, SWAVALAMBAN BHAVAN, C-11, G BLOCK, BANDRE-KURALA COMPLEX, BANDRA (E), MUMBAI400051. 7 THE DIRECTOR, MSME-DEVELOPMENT INSTITUTE (MSME-DI), MINISTRY OF MSME, GOVERNMENT OF INDIA, KANJANY ROAD, AYYANTHOLE P.O., THRISSUR-680003. 8 ICICI BANK LIMITED REPRESENTED BY ITS CHAIRMAN/MANAGING DIRECTOR, ICICI BANK TOWERS, BANDRA-KURLA COMPLEX, MUMBAI-400051. 9 THE MANAGER ICICI BANK LTD., COMMERCIAL VEHICLE LOANS, SECOND FLOOR, PUSHPAMANGALAM, SERVICE RD., NEAR BHIMA JEWELLERY, EDAPPALLY, KOCHI, PIN-682024. BY ADVS. SRI.GIRISH KUMAR.V., CGC LAL K.JOSEPH ## **OTHER PRESENT:** DSGI S MANU THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 04.08.2022, THE COURT ON 06.01.2023 DELIVERED THE FOLLOWING: W.P.(C). 18055/2021 3 ## **JUDGMENT** Dated this the 6[th] day of January, 2023 The petitioner is the Proprietor of a small enterprise named 'Surya Travels', conducting tour operations, including interstate passenger transport. Surya Travels is registered under the Ministry of Micro, Small and Medium Enterprises (Udayam Registration). In between the period, 15.11.2018 and 07.02.2020, respondent No. 9 sanctioned 11 loans totaling a sum of Rs.6,74,35,327/- to the petitioner for purchasing 11 stage carriage vehicles for augmenting the business. While repayments were being effected towards the loans, Covid pandemic struck, affecting the business and thereby, the life and livelihood of all persons like the petitioner. With the objective of lending a helping hand to the MSME units to tide over the crisis, various relief measures were brought out by the Central Government. One such relief measure is the Emergency Credit Line Guarantee Scheme (ECLGS). The objective of the scheme is to provide 100% guarantee coverage to Banks and NBFCs, so as to W.P.(C). 18055/2021 4 enable them to extend emergency credit facilities to business enterprises/MSMEs to meet their additional term loan/additional working capital requirements. The ECLG Scheme was launched through the National Credit Guarantee Trustee Company Limited (for short NCGTC Ltd), an entity established by the Department of Financial Services, Ministry of Finance as a wholly owned company of the Government of India to act as a common trustee company for multiple credit guarantee funds. The NCGTC Ltd has clarified that ECLGS provides 100% guarantee coverage by the NCGTC Ltd to Member Lending Institutions (MLIS) on Guaranteed Emergency Credit Line (for short GECL) upto Rs.3 Lakh Crore to eligible MSMEs. GECL is a scheme whereby a lender gives a top up loan of 20% (40% in respect of borrowers of hospitality sector, travel and tourism sector etc.) of the borrower's total outstanding credit as on 29.02.2020. As the accounts of the petitioner with respondent No. 9, which is a Member Lending Institution covered under ECLGS, were standard and the accounts satisfied all the requisite conditions for being granted the benefits under the ECLG W.P.(C). 18055/2021 5 Scheme, respondent No. 9 extended the benefits due under ECLGS 1.0. to the petitioner’s enterprise. 2. The ECLG Scheme has four components namely ECLGS 1.0, 2.0, 3.0 and 4.0. For easy reference, the details of the four components are extracted hereunder; “Under ECLGS 1.0, individuals are allowed coverage if they are either (i) MUDRA borrowers or have taken assistance for (ii) commercial purpose vehicle, (iii) commercial / construction equipment, (iv) diagnostic equipment or (v) have taken loan against property for their own business. Under ECLGS 2.0, individuals are not eligible. Under ECLGS 3.0, such of the individuals who have taken loan against 'property' for their own business which falls within one of the specified sectors under ECLGS 3.0 (i.e. one Hospitality/ Travel/Tourism/ Leisure/Sporting/Civil Aviation) would be eligible, provided all other conditions are met. ECLGS 4.0 refers to the scheme for providing 100% guarantee coverage by NCGTC to its Member Lending Institutions against extension of eligible credit facility to existing hospitals/ nursing homes/ clinics/medical colleges/units engaged in manufacturing of liquid oxygen, oxygen cylinders etc. who have a loan outstanding with a lending institution (not necessarily MLI) and whose days past due status as on March 31, 2021 was upto 90 days.” W.P.(C). 18055/2021 6 3. According to the petitioner, since his enterprise is eligible and entitled to get the benefits under ECLGS 3.0, Ext.P6 application was submitted to the 9[th] respondent Bank, requesting to extend the benefit. By Ext. P7 letter dated 09.07.2021, the Bank refused to grant the benefits due under ECLGS 3.0. The reason stated for such refusal is that, as per point No. 141 of the Frequently Asked Questions (FAQs) dated 07.06.2021 of the NCGTC Ltd, only those individuals who have taken loan against property are eligible for ECLGS 3.0. The petitioner having availed loan on the security of the vehicles purchased, is not entitled for the benefit. Aggrieved by the refusal to sanction the benefit under ECLGS 3.0, this writ petition is filed seeking the following reliefs; i) Declare that the reason stated by the respondent No.9 in Exhibit-P7 for refusing to sanction the petitioner the benefits guaranteed under ECLGS 3.0 (Emergency Credit Line Guarantee Scheme) covered by Exhibit-P5 issued by the respondent No.6 is unsustainable in view of the fact that his loans are against his properties i.e. vehicles; ii) Declare that the further reason stated orally by the respondent No.9 for refusing to sanction the petitioner the benefits guaranteed under ECLGS 3.0 (Emergency Credit Line Guarantee Scheme) covered by Exhibit-P5 issued by the W.P.(C). 18055/2021 7 respondent No.6 that the petitioner's loans were booked in his individual name and therefore it does not come under the term proprietary is unsustainable for the reasons stated in Ground B hereinabove. iii) Issue writ of mandamus or any other appropriate writ, order or direction commanding the respondents No.1 to 8 to overrule the objection raised by the respondent No.9 in Exhibit-P7 and the further oral objection, which has been mentioned in Ground B hereinabove, in the matter of sanctioning the petitioner the relief measures guaranteed under ECLGS 3.0 (Emergency Credit Line Guarantee Scheme) covered by Exhibit-P5 issued by the respondent No.6; iv) Issue a writ of mandamus or any other appropriate writ, order or direction commanding the respondents No.1 to 8 to direct forthwith the respondent No.9 to sanction the petitioner all the benefits he is entitled to under ECLGS 3.0 (Emergency Credit Line Guarantee Scheme) covered by Exhibit-P5 issued by the respondent No. 6; and (v) Grant such other reliefs as this Hon'ble Court is pleased to find fit and proper to secure the ends of justice and to prevent the miscarriage of justice. 4. Adv. P.A. Noor Muhamed, learned Counsel for the petitioner, commenced his arguments by submitting that, the petitioner being the proprietor of an MSME, the petitioner’s request for financial assistance ought to be approached, keeping in mind the objectives set out in the MSME Development Act, 2006, with particular focus on W.P.(C). 18055/2021 8 Sections 9 and 10. It is contended that, having already extended the benefit of ECLGS 1.0 to the petitioner, there is no justifiable reason for denying the benefit of ECLGS 3.0 to him. The only reason put forth is based on the answer to query No. 141 in Ext.P4 FAQs, as per which individuals who have taken loans against the security of property and for their own business are eligible for ECLGS 3.0. The Bank has interpreted property to mean only immovable property, which goes against the very object of the ECLG Scheme. Such interpretation cannot be accepted, since the answer in FAQ 141 as regards ECLGS 3.0 is that, individuals who have taken loan against property for their own business in one of the sectors specified under ECLGS 3 would be eligible. It is not stated that 'only' such individuals are eligible for ECLGS 3.0 or that other categories of borrowers are ineligible. FAQ 141 also does not specify that the property should be immovable property. Ext.P5 Operational Guidelines does not state that the loan should be against immovable property. Moreover, as per the settled principles of law, W.P.(C). 18055/2021 9 courts should interpret beneficial provisions literally so as to give it wider meaning than a restrictive meaning. The expression 'eligible borrower' under ECLGS 3.0 takes in all business enterprises/MSMEs in the hospitality, travel & tourism, sporting and civil aviation sectors. As per Clause 7, the eligibility criteria for the benefit under ECLGS 3.0 are threefold; (i) It must be an MSME (ii) the MSME must be in one of the sectors like travel and tourism etc. and (iii) the past dues of the MSME should be upto 60 days as on 29.02.2020. The petitioner meets the aforesaid three parameters and hence, refusal to grant loan is ex facie illegal. 5. Adv. Girish Kumar V, learned CGC appearing for respondents 1, 2, 3 and 7 submitted that the petitioner had availed commercial vehicle loan from the ICICI Bank which is not a loan against property. The benefits of ECLGS 3.0 are available to those enterprises/individuals who have availed loans on the security of immovable property. The petitioner's attempt to contend that the hypothecated commercial vehicles would fall within the W.P.(C). 18055/2021 10 definition of 'property' is untenable and liable to be discarded outright. 6. Adv. Lal K. Joseph learned Counsel appearing for respondents 8 and 9 raised a preliminary objection against maintainability of the writ petition based on the decision in **Federal Bank Ltd v. Sagar Thomas** [(2003) 10 SCC 733]. It is contended that the petitioner cannot rely on the benefit extended under ECLGS 1.0 to claim the benefit of ECLGS 3.0. As far as ECLGS 1.0 is concerned, even those individuals who have availed loans for purchase of commercial purpose vehicles are covered, whereas the benefit of ECLGS 3.0 is confined to such individuals who have taken loan against property. The FAQs are to be read in conjunction with the guidelines and if so, the petitioner's claim can only be rejected. 7. Replying to the contention regarding maintainability, learned counsel for the petitioner drew attention to the objective of NCGTC Ltd and submitted that the NCGTC Ltd is providing 100% guarantee W.P.(C). 18055/2021 11 coverage to member lending institutions like the 8th respondent Bank. Going by the provisions of the MSME Development Act and Ext. P5 guidelines, the 8th respondent has no discretion in the matter of extending the benefits of ECLGS, once the borrower is found to have satisfied the requirements. As such, even though 8th respondent is a private Bank, while disbursing the benefits under the ECLGS, the Bank is exercising a statutory duty and a public function. The 8[th] respondent would therefore fall within the meaning of 'any person or authority' under Article 226. In support of this contention reliance is placed on the decision in **Andi Mukta S.S.M.V.S.S.J.M.S. Trust v. V.R. Rudani** [(1989) 2 SCC 691]. 8. The legal position regarding maintainability of writ petition against private/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; W.P.(C). 18055/2021 12 “ _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 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 appellant Bank. The respondent's_ W.P.(C). 18055/2021 13 _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._ 9. This court also had occassion to consider the issue in **Unimoni Financial Services Ltd v IDBI Bank Ltd** [2020 SCC OnLine Ker 7347]. There, the writ petition was filed challenging the demand for processing fee and withholding of title deeds mortgaged with the IDBI Bank. After elaborate consideration, it was held that providing credit facilities or loans on the strength of title deeds given as security, are not actions taken in discharge of any public function, even cases involving Public Sector/Banks, since such action arises out of contractual transactions entered into between the parties and the bank. In spite of the above legal position, I find substance in the distinction drawn by the Counsel for the petitioner by pointing out that the 8[th] respondent is exercising a public function as the Bank it is bound by the terms of the ECLGS and the Guidelines issued under the MSME Development Act. Undoubtedly, the object of the MSME Development Act, the W.P.(C). 18055/2021 14 Scheme and the Guidelines is to lend a helping hand to MSMEs. Viewed in that manner, there is merit in the contention that the 8th respondent is exercising a public function while disbursing the benefits of ECGS to MSMEs. Therefore, the challenge against maintainability of the writ petition is rejected. 10. On merits, I find that the refusal to sanction the financial assistance to the petitioner under ECLGS 3.0 to be unassailable. Although various contentions are raised by the petitioner regarding the limited discretion vested with the 8[th] respondent in the matter of sanctioning the benefit under the Scheme, those contentions will not hold good in the light of the statement in the counter affidavit of respondent No.6, the relevant portion of which is extracted hereunder; “4. It is submitted that NCGTC has issued detailed operational guidelines for the scheme, which are to be read along with the FAQs. The same are updated from time to time and uploaded on the website namely, www.ncgtc.in. It is the responsibility of the Member Lending Institutions (MLI) to check the eligibility of the borrower and satisfy itself, as the guarantees are issued automatically based on submissions of W.P.(C). 18055/2021 15 the MLI on the portal.' 5. It is submitted that the Petitioner had approached ICICI Bank for loan under ECLGS 3.0 which was denied by ICICI Bank on the ground that as per NCGTC FAQ No. 141 - loan under ECLGS 3.0/3.0(Extension) is to be granted only to such of the individuals who have taken loan against property (LAP) for their own business. 6. It is submitted that in the instant case, ICICI Bank had extended credit facilities to the Petitioner for purchasing vehicles in the name of Proprietary concern and the commercial vehicles formed primary securities in this case. Thus, this loan was a commercial vehicle loan and not loan against property (LAP) and hence, ineligible for assistance under ECLGS 3.0." ## 11. In this context, it is apposite to read FAQ Nos.138 and 141 extracted hereunder; ## “ **138. I am an eligible borrower having availed assistance under ECLGS 1.0 or EC Can I avail assistance under ECLGS** ## **3.0 also?** Yes, if you are covered by the sectors for ECLGS 3.0. The facility being provided under ECLGS 3.0 should be treated separately. Such of the eligible borrowers who have availed assistance under ECLGS 1.0 or 2.0 are also eligible for assistance under ECLGS 3.0, but they shall be eligible for only additional credit upto 20% of their total loan outstanding (fund based) as on February 29, 2020. Separate loan account is to be maintained for ECLGS 3.0. **141. I am an individual borrower engaged in the business of Hospital canteens etc.) /Travel/Tourism/ Leisure/** W.P.(C). 18055/2021 16 ## **Sporting/Civil Aviation sec eligible MLI. Am I eligible for assistance under ECLGS 3.0 ?** Under ECLGS 1.0, individuals are allowed coverage if they are either have taken assistance for (ii) commercial purpose vehicle, (iii) co equipment, (iv) diagnostic equipment or (v) have taken loan again business. Under ECLGS 2.0, individuals are not eligible. Under ECLGS 3.0, such of the individuals who have taken loan aga business which falls within one of the specified sectors Hospitality/Travel/Tourism/Leisure/Sporting/Civil Aviation) would be conditions are met.” 12. A conjoint reading of the above answers leads to the only conclusion that the understanding of the scheme of the 6th respondent as reflected in paragraphs 4 and 5 of the counter affidavit extracted above cannot be faulted. Being the propounder of the scheme, the 6th respondent is the best suited authority to speak about its niceties. The 8th respondent bank having acted in terms of the Scheme, this Court cannot, even in exercise of the power under Article 226, interpret the provisions of the scheme in another manner and issue a writ of mandamus to grant the benefit of the Scheme to the petitioner. W.P.(C). 18055/2021 17 Therefore, despite the assertive submissions by the learned Counsel for the petitioner, the reliefs sought can only be declined. In the result, this writ petition is dismissed. **Sd/V.G.ARUN JUDGE** sb W.P.(C). 18055/2021 18 ## **APPENDIX OF WP(C) 18055/2021** |PETITIONER EXHIBITS|| |---|---| |Exhibit P1|TRUE COPY OF THE UDYAM REGISTRATION| ||CERTIFICATE ISSUED TO THE PETITIONER.| |Exhibit P2|TRUE COPY OF THE RELEVANT PAGE RELATING TO| ||ECLGS AS DOWNLOADED FROM THE OFFICIAL WEBSITE| ||OF NCGTC LTD.| |Exhibit P3|TRUE COPY OF THE LETTER DATED 23.05.2020| ||ADDRESSED BY THE NCGTC LTD TO THE HEADS OF| ||ALL COMMERCIAL BANKS, FINANCIAL INSTITUTIONS| ||AND NON-BANKING FINANCIAL INSTITUTIONS.| |Exhibit P4|TRUE COPY OF THE FREQUENTLY ASKED QUESTIONS| ||ON ECLGS UPDATED AS ON 07.6.2021 AND ISSUED| ||BY THE NCGTC LTD.| |Exhibit P5|TRUE COPY OF THE ECLGS OPERATIONAL GUIDELINES| ||UPDATED AS ON 07.06.2021 ISSUED BY THE NCGTC| ||LTD.| |Exhibit P6|TRUE COPY OF THE APPLICATION DATED 03.05.2021| ||SUBMITTED BY THE PETITIONER.| |Exhibit P7|TRUE COPY OF THE LETTER DATED 09.7.2021 OF| ||THE RESPONDENT NO.9.| |Exhibit P8|TRUE COPY OF THE LETTER DATED 08.08.2021 OF| ||THE RESPONDENT NO.1.| |Exhibit P9|TRUE COPY OF THE PETITION DATED 05.07.2021| ||SUBMITTED BY THE PETITIONER BY WAY OF EMAIL| ||TO THE RESPONDENT NO.6 (NCGTC LTD).| |Exhibit P10|TRUE COPY OF THE PETITION DATED 10.08.2021| ||SUBMITTED BY THE PETITIONER BY WAY OF EMAIL| ||TO THE RESPONDENT NO.5 (REGIONAL DIRECTOR,| ||RESERVE BANK OF INDIA).| |Exhibit P11|TRUE COPY OF THE SANCTION LETTER DATED| ||18.06.2021 ISSUED BY THE RESPONDENT NO.9 TO| ||ANOTHER SIMILARLY SITUATED PERSON.| 19 ## W.P.(C). 18055/2021 Exhibit P12 TRUE COPY OF THE LETTER DATED 31.05.2021 ADDRESSED BY THE NCGTC LTD.