State Bank of India v. Nikhil Mathew and Directorate of Public Grievances

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR.JUSTICE ASHOK MENON** **FRIDAY, THE 15TH DAY OF FEBRUARY 2019 / 26TH MAGHA, 1940** ## **WA.No. 2361 of 2018** **AGAINST THE JUDGMENT IN WP(C)NO.3033/2018 DATED 22.05.2018 OF HIGH COURT OF KERALA.** ## **APPELLANTS/RESPONDENTS 1 TO 3:** - **1 STATE BANK OF INDIA, SPBB, SANGAMAM BUILDINGS, GROUND FLOOR, OPPOSITE AKG CENTRE, GAS HOUSE JUNCTION, THIRUVANANTHAPURAM-695001, REPRESENTED BY ITS CHIEF MANAGER.** - **2 CHIEF MANAGER, STATE BANK OF INDIA, REGIONAL BUSINESS OFFICE-1, SANGAMAM BUILDING, OPPOSITE AKG CENTRE, GAS HOUSE JUNCTION, THIRUVANANTHAPURAM-695001.** - **3 DEPUTY GENERAL MANAGER (B & O), STATE BANK OF INDIA, SANGAMAM BUILDINGS, OPPOSITE AKG CENTRE, GAS HOUSE JUNCTION, THIRUVANANTHAPURAM-695001, BY ADV. SRI.S.EASWARAN, SC, SBI** ## **RESPONDENTS/PETITIONER & 4TH RESPONDENT:** **1 SRI. NIKHIL MATHEW, S/O.SHAJI MATHEW, RESIDING AT 3-D, ABAD DQAFFODIL GARDEN, MARKET ROAD, THRIPPUNITHURA P.O., ERNAKULAM, COCHIN-682301.** **- 2 -** **W.A.No.2361 of 2018** **2 DIRECTORATE OF PUBLIC GRIEVANCES, CABINET SECRETARIAT, 2ND FLOOR, SARDAR PATEL BHAVAN, SANSAD MARG, NEW DELHI-110001,** **REPRESENTED BY ITS ADDITIONAL SECRETARY.** **BY ADVS. R1 SRI.P.GOPINATH MENON(SR.) R1 SRI.JOSON MANAVALAN R1 SRI.K.JOHN MATHAI R1 SRI.KURYAN THOMAS R1 SRI.M.GOPIKRISHNAN NAMBIAR R1 SRI.PAULOSE C. ABRAHAM R2 MR.B.PRAMOD, CGC** ## **OTHER PRESENT:** ## **SRI NAVOD PRASANNAN PATTALI, FOR 1ST RESPONDENT.** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 15.02.2019, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **W.A.No.2361 of 2018** ## **- 3 -** ## **JUDGMENT** ## **Vinod Chandran,J.** **The appeal arises from the judgment of the learned Single Judge, which directed grant of One Time Settlement [for brevity “OTS”] under a scheme brought out by the State Bank of India [for brevity “SBI”]; the appellant.** **2. The sparse facts which require to be stated, for consideration of this appeal are that the 1[st] respondent herein, who was the writ petitioner, availed of a Career Loan from the SBI. It so happened that the father of the borrower a SBI employee, stood as co-obligant to the loan along with mortgage offered of immovable property. The 1[st] respondent pursued a pilot training course, with the loan; but could not secure a suitable job on completion and hence could not liquidate the loan liability. For the last ten years, the 1[st] respondent had paid about Rs.26 lakhs in the loan account and on receiving Exhibit P6 communication, the 1[st] respondent sought for inclusion of the loan account under the OTS scheme.** **3. The OTS scheme was called “RINN SAMADHAN-II** **SCHEME”; the salient features of which are available in Annexure A1 produced along with the Review Petition. However, the Bank declined consideration of the loan** **W.A.No.2361 of 2018 - 4 -** **account under the OTS Scheme by Exhibit P7. The Bank's contention was that it was a staff loan account, since the co-obligant, the father of the 1[st] respondent, was an employee of SBI.** **4. The learned Single Judge found that if that was so, there was no reason why Exhibit P6 communication was issued to the 1[st] respondent. After having issued Exhibit P6, there could not have been a denial of settlement under the scheme. The learned Single Judge also looked at the nature of the scheme and found that it is a non-discretionary and non-discriminatory scheme, which applies on board to all borrowers. Reliance was placed on the decision of the Hon'ble Supreme Court in** _**Sardar Associates and Others v**_ **.** _**Punjab and Sind Bank and Others**_ **[** _**(2009) 8 SCC 257**_ **], wherein the Bank had raised the ground of adequate security being available to decline an offer of OTS. The Hon'ble Supreme Court found that the adequacy of the security cannot be a reason to decline consideration under OTS. The learned Single Judge also gave short shrift to the contentions raised by the appellant-Bank as to the maintainability of a writ petition under Article 226 relying on the decision of the Hon'ble Supreme Court in** _**The Comptroller and Auditor General of India, Gain Prakash,**_ **W.A.No.2361 of 2018** ## **- 5 -** _**New Delhi & Another v**_ **.** _**K.S.Jagannathan & Another**_ **[** _**AIR 1987 SC 537**_ **].** **5. Sri.S.Easwaran, learned Counsel appearing for the Bank would first contend that OTS is an internal arrangement made by the Bank to enable recovery of debts which may not normally be recoverable and no right flows from the same so as to approach this Court under Article 226. The learned Counsel also submits that Exhibit P6 communication is despatched after the Adalat and, hence, there is a dispute on the despatch of such communication itself. It is also pointed out that even in Exhibit P6 the Bank had reserved the right to reject or cancel the OTS proposal at any stage without assigning any reason, as per the Bank's internal guidelines. Hence, even if Exhibit P6 is properly sent to the 1[st] respondent, necessarily the Bank had a right to decline such consideration; which the Bank did by Exhibit P7 finding it to be a staff loan account. No right as such accrues to the borrower for reason only of an intimation of the OTS scheme having been received. Annexure A2 is relied on to indicate the various ineligibilities contemplated in the Circular itself. It is pointed out that the loan amounts were adequately secured by the co-obligant's employment with the Bank itself. The** **W.A.No.2361 of 2018 - 6 -** **ineligibility was not only on the basis of the staff account, but also on the basis of the ineligibility flowing from clause 3 which makes ineligible loan accounts where the Bank has issued notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for brevity “SARFAESI Act”]. The very intention of such a provision is to ensure that settlement is not offered to persons who have furnished adequate security for the loan. There is also a mortgage of a valuable property, which covers the loan account. The allegation of discrimination cannot hold good since no other employee has been granted the benefit.** **6. Sri.P.Gopinath Menon, learned Senior Counsel appearing for the 1[st] respondent, would, however, submit that this is not a staff loan account and there is no benefit granted by way of reduced rate of interest or otherwise, for reason only of the co-obligant being a staff member. The learned Senior Counsel refers to Exhibit R1(b), which is a communication issued by the SBI to the Banking Ombudsman, where, at the time of granting the loan the 1[st] respondent had approached the Bank claiming reduced rate of interest, as the co-obligant is the employee of SBI. Therein, the appellant had taken a specific contention that** **W.A.No.2361 of 2018 - 7 -** **only Student Loans and Scholar Loans are granted at concessional rate of interest and Career Loans stand outside such categorization. The learned Senior Counsel seeks to uphold the judgment of the learned Single Judge.** **7. With respect to the contention raised on the right flowing from the internal arrangement, we cannot agree with the appellant-Bank to decline jurisdiction under Article 226. Internal or not, when a public authority frames a scheme for the purpose of a benefit extended to the borrowers from the general public, the authority has a duty to extend such benefit within the parameters of the scheme so framed. The refusal to consider a person who does not fall within the scheme may not be justiciable, if the person declined is not covered by the terms of the OTS. However when, as in the present case, there is a question raised as to exclusion from the scheme; arbitrarily and on extraneous reasons definitely Article 226 can be invoked. The public authority has a duty, sacrosanct and inviolable to act fairly when a benefit is extended to its borrowers, from the public, to act fairly and within the confines of the scheme, and without discrimination, exercising whatever discretion conferred within well defined parameters. The allegation of discrimination cannot be looked at merely on** **W.A.No.2361 of 2018 - 8 -** **the aspect of any other employee being denied the benefit. What is relevant is as to whether the status of the co-obligant as an employee of the bank, would be a reasonable classification, based on which the OTS is declined, which otherwise applies to other borrowers. We perfectly agree with the learned Single Judge, in having followed the precedent in** _**K.S.Jagannathan,**_ **to negative the preliminary objections on maintainability** _**.**_ **8. The further contention of Sri.Easwaran is that the reliance placed on Exhibit P6 is not proper. We perfectly understand that at the initial stage of implementation of a scheme, the Bank would definitely issue such offers to all the borrowers; but that alone would not necessarily mean that the borrower would come under the terms of the scheme. For example, if a proceeding had been taken under the SARFAESI Act and an attachment is made, the scheme specifically excludes such borrowers from being included under the OTS. A person who has been issued with a notice identical to Exhibit P6 cannot claim, based on receipt of the notice alone, that he should be included under the scheme despite the scheme excluded such individual or loan.** ## **9. Pausing here for a moment, we have to deal with** **W.A.No.2361 of 2018 - 9 -** **the contention of the Bank that adequate security is one of the grounds for declining the prayer for consideration under the OTS. We have to first notice that such an exclusion is not available in the scheme and what the Bank attempts to do is to draw a corollary, as an inference, from the express exclusion of those loans in which proceedings under the SARFAESI Act have been taken. No such corollary can be drawn since the exclusion operates, only when a notice under the SARFAESI Act is issued and the mortgaged properties are attached, which are found to be adequately sufficient to satisfy the dues in the loan account. In this context, we have also to notice the judgment relied on by the learned Single Judge in** _**Sardar Associates**_ **. Therein, the question of adequacy of security offered was found to be not a reason to decline inclusion under an OTS. Here also the Bank's submission is that the mortgaged property, coupled with the employment of the co-obligant in the Bank itself, would fairly ensure the recovery of the loans. We again notice that the employment of the co-obligant in the Bank itself is a mere fortuitous circumstance and any borrower who approaches the Bank for Career Loan would have been granted such a loan on comparable employment in any other organization. When any** **W.A.No.2361 of 2018 - 10 -** **other borrower would not have been excluded, the exclusion on the ground of the co-obligant being an employee would not stand the test of reasonableness and it would be struck down as arbitrary and discriminatory.** **10. The further contention taken by the appellant is that the employees are expected and have a duty to ensure that the loans availed are settled with the Bank. Pointed reference is made to the service regulations at Annexure A6. Reliance is placed on Clause 50.(9) in Annexure A6, which is extracted herein below:** **“No officer shall abuse or fail to comply with any of the terms and conditions in respect of any loan, advance or other facility granted by the Bank either directly or indirectly to the officer or through any other agency, including loans for purchase of vehicles or construction of houses”.** **The specific reference to vehicle and home loans commend us to interpret the same as including the staff loans which have a beneficial term or a reduced rate of interest. Of course even a loan otherwise availed by the staff would be covered by the above clause. In the present case the employment of the co-obligant, in SBI was not the reigning factor in the grant of loan, since any other person with a comparable employment would have also been granted the same facility. We would say that in fact the employee has risen** **W.A.No.2361 of 2018 - 11 -** **up to the occasion to settle a long pending loan taken for the career prospects of his son; by his son, despite the career aspirations having not been fulfilled, by offering to settle the same under the OTS. There can be no failure to settle the loans found in such a voluntary action taken by the borrower, whose co-obligant is an employee of the Bank.** **11. We also agree with the learned Single Judge that there is no question of the account being a staff account merely for the reason that the co-obligant is an employee of the Bank. Staff accounts have its own beneficial provisions insofar as reduced rate of interest or an extended period for payment at times extending to the superannuation of the employee and so on and so forth. It is an admitted fact that the loan was not granted as a staff loan and granted to the son of an employee by reason of the security offered by mortgage of landed property as also the father, an employee of the Bank, standing as co-obligant to the loan. As we already found, the mortgage as also the status of an co-obligant, which is akin to a surety; all are securities offered for the due payment of the loan, the adequacy of which, as has already been held by the Supreme Court, cannot be a reason not to permit** **W.A.No.2361 of 2018 - 12 -** ## **settlement of the claim under the OTS.** **12. We have also to notice Exhibit R1(b), which has a compelling import on the refusal citing the ground of a staff account not falling under the scheme. The communication was addressed by the appellant to the Banking Ombudsman when the 1[st] respondent had approached the Ombudsman for a beneficial grant with concessional rate of interest, the borrower being the son of an employee. We extract paragraph 4 of the communication, which specifically indicates that there is no concession offered for reason of the co-obligant being an employee:** **“4. The concessional rate of interest to the wards of Bank employees as per the e-circular No.P&HRD 174/2009-10/CDO/P&HRD - IR/20/2009-10) dt.23.06.09 encompasses only Student Loans and Scholar Loans and not other types of loans for education like Career Loans availed of by Sri.Nikhil Mathew and his father. Though such interest benefit covered both existing as well as the new Student Loans, vide page 2, the benefit could not be passed on to Sri.Mathew as his loan continued to be Career loan for the earlier said reasons”.** **We find that the ground of being a staff account, which is excluded under the scheme, does not at all appeal to us.** **W.A.No.2361 of 2018 - 13 -** **We perfectly agree with the learned Single Judge and reject the appeal. The Bank shall inform the amounts to be deposited under the OTS Scheme within a period of two weeks from the date of receipt of a certified copy of this judgment and the 1[st] respondent shall settle the same within one month from the date of such communication. Parties are left to suffer their respective costs.** **Sd/K.VINOD CHANDRAN JUDGE** **Sd/ASHOK MENON JUDGE** **Vku/-** ## **[ true copy ]**