Sebastian Joseph v. Governor Reserve Bank of India and HDB Financial Services Limited

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **THURSDAY ,THE 07TH DAY OF MARCH 2019 / 16TH PHALGUNA, 1940** ## **WP(C).No. 40053 of 2017** ## **PETITIONER/S:** **SEBASTIAN JOSEPH AGED 51 YEARS PROPRIETOR, UNI-Q MARKETING, 3RD FLOOR, NATIONAL RESIDENCY, EDAPALLY, ERNAKULAM- 682 024** **BY ADVS. SRI.P.C.ANIL KUMAR SMT.P.SREESHA SRI.BECHU KURIAN THOMAS (SR.) SRI.FUAD. C.O.T. SRI.T.M.DEVADAS** ## **RESPONDENT/S:** **1 THE GOVERNOR RESERVE BANK OF INDIA, BANDRA KURLA COMPLEXBANDRA EAST,MUMBAI- 400 001.** **AS PER ORDER DATED 12.2.2019 IN IA.NO.2/2019 RESPONDENT NO.1 IS DELETED AND SUBSTITUTED AS** **“RESERVE BANK OF INDIA, REGIONAL OFFICE AT TRIVANDRUM REPRESENTED BY ITS AUTHORISED OFFICER, BAKERY JUNCTION, PB.NO.6507, THIRUVANANTHAPURAM-695 033.” 2 HDB FINANCIAL SERVICE LIMITED BEANCH OFFICE AT 2ND FLOOR, DOOR 37/1912 J,CHAITHANYA BUILDINGS, OPP SWAPNIL APARTMENTS, KALOOR,KADAVANTHARA ROAD, KADAVANTHARA, KOCHI,KERALA-682 017** 2 _**WP(C).40053/17**_ **3 HDB FINANCIAL SERVICE LIMITED REGISTERED OFFICE AT RADHIKA, 2ND FLOOR, LAW GARDEN,NAVARANGAPURA, AHAMADABAD- 380 009** **BY ADV. SRI.M.A.JOSEPH MANAVALAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26.02.2019, THE COURT ON 7.3.2015 DELIVERED THE FOLLOWING:** ' **C.R'** ## **ANU SIVARAMAN, J. ----------------------------------------------W.P(C).No. 40053 of 2017 ----------------------------------------------Dated this the 7[th] day of March, 2019** ## **JUDGMENT** Heard the learned Senior Counsel appearing for the petitioner and the learned counsel appearing for respondents 2 and 3. 2. The only question raised in this writ petition is whether the petitioner, who is the proprietor of a concern called “UNI-Q Marketing”, is entitled to the benefit of waiver of foreclosure charges/pre-payment penalty in a floating rate term loan on the strength of the guidelines issued by the Reserve Bank of India. Exhibit P1 dated 31.10.2017 was issued on a complaint preferred by the petitioner stating that waiver of foreclosure chargers/pre-payment penalty is available only in respect of floating rate term loan availed by “natural persons” in their individual capacity and not as proprietors or partners of a firm. It is stated that where the loan is availed jointly with a coobligant, all persons who are party to the loan, whether as borrower or co-obligant, shall be natural persons within their individual capacity. 4 _**WP(C).40053/17**_ 3. The learned Senior Counsel appearing for the petitioner submits that the petitioner had availed working capital term loan from respondents 2 and 3. He was entitled to waiver of the pre-closure charges on the basis of the master circular issued by the Reserve Bank of India on June 30, 2014. The master circular, which was made available by the learned Senior Counsel and was not disputed by respondents 2 and 3, provided that all floating rate term loans sanctioned to individual borrowers will be eligible for waiver of foreclosure charges/pre-payment penalty. It is contended that the stand taken by the respondents that the petitioner is a proprietor of a concern and that he is not eligible for the benefit of the waiver is completely untenable. 4. Though the 1[st] respondent has been served with notice, there is no appearance for the 1[st] respondent before this Court. 5. Respondents 2 and 3 have filed a counter affidavit contending that the Reserve Bank of India has specifically stated that the waiver is available only to individuals which means natural persons. It is contended that since the petitioner had availed the loan for his proprietary concern and since the co-obligant was also a proprietary concern, the petitioner is not entitled to the benefit. 6. The learned Senior Counsel appearing for the petitioner would contend that Exhibit P7 communication would clearly show that the 5 _**WP(C).40053/17**_ waiver was applicable for individual borrowers. Relying on the decisions of the Apex Court in _**Ashok Transport Agency v. Awadhesh Kumar and another**_ [(1998)5 SCC 567] and _**M/s.Shankar Finance & Investments v. State of Andhra Pradesh and Others**_ [2008(4) KHC 352] as also of this Court in _**Bhasi v. Purushotham Das**_ [2017(4) KLT 705] the learned Senior Counsel would contend that a proprietor of a proprietary concern is only an individual and there is no distinction between the sole proprietor of a concern and the proprietary concern itself. It is, therefore, contended that the loan availed by the petitioner, who is the sole proprietor of the concern in question is eligible for waiver in terms of the master circular. 7. I have considered the contentions advanced. The Apex Court in several decisions has clearly held that there is no distinction between a proprietor and a proprietary concern. In _**Ashok Transport Agency's case (supra)**_ , the Apex Court has held that a partnership firm differs from a proprietary concern owned by an individual. It was held that proprietary concern is only the business name in which the proprietor of the business carries on the business and that a suit against such a firm is a suit against the proprietor. In _**M/s.Shankar Finance & Investments's case (supra)**_ , the Apex Court held that a proprietary concern is nothing but an individual trading under a trade 6 _**WP(C).40053/17**_ name and he cannot sue in the trading name but must sue in his own name. In a decision in a matter arising under the Negotiable Instruments Act, a Division Bench of this Court in _**Bhasi's case (supra)**_ has held that as contrasted from a company incorporated under the Companies Act, 1956 which is a legal entity distinct from its share holders, a proprietary concern is not a legal entity distinct from its proprietor. A proprietary concern is nothing, but an individual trading under a trade name. A person may carry on business in the name of a business concern, but he being proprietor thereof, would be solely responsible for conduct of its affairs. 8. Though the decisions of this Court are rendered in different contexts, the decisions relied on by the learned Senior Counsel and the further decisions under the provisions of the Income Tax Act as well as the Negotiable Instruments Act are authority on the point that a proprietary concern is only a trade name and the rights and liabilities are of the sole proprietor. A reading of the master circular would show that waiver of foreclosure charges/pre-payment penalty is intended for the benefit of individual borrowers. The term 'individual borrowers' in the above context is used in contra distinction to corporate entities or partnership firms. A person who avails a floating rate loan would be entitled to the benefit while a Company or a partnership firm would not. 7 _**WP(C).40053/17**_ 9. The petitioner is the proprietor of a concern which availed the loan. In view of the decisions of the Apex Court and of this Court, it cannot be disputed that the petitioner would be entitled to the benefit of waiver, since he has availed of the loan as the sole proprietor of the proprietary concern. In the above view of the matter, I am of the opinion that the view taken in the impugned orders to the effect that the petitioner is not entitled to the waiver, since he is not a “natural person” is completely unsustainable. The petitioner, who is the sole proprietor, is an individual and is therefore eligible for the benefit of the waiver as provided in the master circular. In the above view of the matter, the impugned orders are set aside. There will be a direction to the respondents to consider the claim of the petitioner for waiver of foreclosure/pre-payment charges on the basis of of the master circular made mention of in Exhibit P1. All eligible benefits shall be provided to the petitioner at the earliest, at any rate, within one month from the date of receipt of a copy of this judgment. The writ petition is ordered accordingly. Sd/- **ANU SIVARAMAN JUDGE** _vgs_ 8 _**WP(C).40053/17**_ ## **APPENDIX** **PETITIONER'S/S EXHIBITS: EXHIBITP1 A TRUE PHOTOCOPY OF THE ORDER NUMBER DNBS.CO.ZMD(W) NO.940/13.27.001/2017-18 DATED 31-10-2017 EXHIBITP2 A TRUE PHOTOCOPY OF THE ORDER NO.RBI/201415/121 DNBS(PD).CC NO.399/03.10.42/2014-15 DATED 14-07-2014 EXHIBIT P3 A TRUE PHOTOCOPY OF THE FINAL SANCTION/COMMUNICATION LETTER DATED 22-072015 EXHIBIT P4 A TRUE PHOTOCOPY OF THE PAN NUMBER AEEPJ 3526L EXHIBITP5 A TRUE PHTOCOPY OF THE TDS CERTIFICATE EXHIBIT P6 A TRUE PHOTOCOPY OF THE COMPLAINT DATED 0603-2017 EXHIBITP7 A TRUE PHOTOCOPY OF THE ORDER NUMBER CEPC(T) 648/10.09.001/2016-17 DATED 24-032017**