Court directed State Bank of Travancore to reconsider education loan applications under Arya precedent, one dismissed on merit bars.
Impugned order set aside; Bank to supply forms and decide within six weeks; other petitions dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS
MONDAY, THE 22ND DAY OF AUGUST 2016/31ST SRAVANA, 1938
WP(C).No. 3416 of 2016 (B)
PETITIONER(S) :
KAILASNADH N.M., S/O. MANOJ M.B., AGED 19 YEARS, NEDUMPURATH HOUSE, PALAKKAMOOLA, KARIYAMBADI P.O., WYNADU DISTRICT, PIN- 673 591.
BY ADVS. SRI.JOHN JOSEPH(ROY) SRI.K.G.RADHAKRISHNAN
RESPONDENT(S) :
1. THE STATE BANK OF TRAVANCORE, MEENANGADI BRANCH, VIA KALPATTA, WYNADU DISTRICT, PIN- 673 591, REPRESENTED BY ITS MANAGER.
2. CANARA BANK OF INDIA, REPRESENTED BY MANAGER, LEAD DISTRICT OFFICE P.B.NO. 35, KALPATTA, WYNADU DISTRICT, PIN- 673 121.
R1 BY SRI.T.SETHUMADHAVAN (SENIOR ADVOCATE) ADV. SRI.K.JAYESH MOHANKUMAR R2 BY ADV. SRI.P.GOPINATH MENON, S.C
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22-08-2016, ALONG WITH W.P(C).NO. 5014 OF 2016 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
Msd.
WP(C).No. 3416 of 2016 (B)
APPENDIX
PETITIONER(S)' EXHIBITS :
EXHIBIT P1: TRUE COPY OF THE APPROVAL ORDER OF THE INSTITUTE DATED 07.04.2015 OF THE AICTE TO THE INSTITUTE.
EXHIBIT P4: TRUE COPY OF THE ADMISSION CERTIFICATE OF PETITIONER.
EXHIBIT P5: A TRUE COPY OF THE R.B.I. CIRCULAR REF.NO.RPCD.PLNFS.BC. NO.83/06.12.05/2000-2001 DATED 28.04.2001 ALONG WITH THE MODEL EDUCATIONAL LOAN SCHEME.
EXHIBIT P6: TRUE COPY OF THE VOCATIONAL HIGHER SECONDARY EXAMINATION CERTIFICATE OF THE PETITIONER.
EXHIBIT P7: TRUE COPY OF THE LETTER DATED 02.03.2016 ISSUED BY THE 1ST RESPONDENT BANK.
EXHIBIT P8: TRUE COPY OF THE MODEL EDUCATIONAL LOAN SCHEME FOR PERSUING HIGHER EDUCATION IN INDIA AND ABROAD PUBLISHED BY THE INDIAN BANKS ASSOCIATION IN SEPTEMBER, 2012.
RESPONDENT(S)' EXHIBITS :
NIL
//TRUE COPY//
P.S.TO JUDGE.
Msd.
ALEXANDER THOMAS, J.
==================
W.P.(C).Nos.3416, 10801, 5014, 5307 & 6414 of 2016
==================
Dated this the 22nd day of August, 2016
J U D G M E N T
W.P.(C).Nos.3416/2016 & 10801/2016:
The prayers including the amended prayer in W.P.(C).No.
3416/2016 are as follows:
and/or
The prayers in W.P.(C).No.10801/2016 are as follows:
W.P.(C).3416/16 etc. - : 2 :-
(Modified) reads as follows:
“A. IBA MODEL EDUCATION LOAN SCHEME (MODIFIED)
1.OBJECTIVES OF THE SCHEME
The Educational Loan Scheme outlined below aims at providing financial support from the banking system to meritorious students for pursuing higher education in India and abroad. The main emphasis is that the meritorious student, though poor, is provided with an opportunity to pursue higher education with the financial support from the banking system with affordable terms and conditions.
W.P.(C).3416/16 etc. - : 3 :-
2. ELIGIBILITY CRITERIA 2.1. Student eligibility
. Should be an Indian National.
. Should have secured admission to a higher education course in recognized institutions in India or Abroad through Entrance Test/Merit Based Selection process after completion of HSC (10 plus 2 or equivalent) It would be in order for banks to consider a meritorious student (who qualifies for a seat under merit quota) eligible for loan under this scheme even if the student chooses to pursue a course under Management Quota seat in an institution for reasons of convenience (proximity) or choice of course.
. The entrance test conducted by Government/Approved Regulatory Bodies or Universities approved by UGC/AICTE may be reckoned for this purpose.
. Entrance test or selection purely based on marks obtained in qualifying examination may not be the criterion for admission to some of the post graduate courses or research programmes. In such cases, we may take into consideration the reputation of the institution concerned and the employability of applicant on the completion of the course, for sanction of loans.
As Education Loan is, henceforth, restricted to applicants securing admission through merit-based selection process only all stipulations regarding minimum marks stand withdrawn.”
Clause B dealing with Model Education Loan Scheme for Loans
under Management quota, reads as follows:
“B. MODEL EDUCATION LOAN SCHEME FOR LOANS UNDER MANAGEMENT QUOTA
1. ELIGIBILITY
i) Students securing admission to seats under Management Quota through entrance exams conducted by private self financing colleges in Kerala State.
. Any admissions to courses outside the State of Kerala except admissions through common entrance test like CAT, MAT, GATE, IIT, All India Medical and Engineering Entrance tests, NIIT or any common entrance test conducted by Govt. of India/approved regulatory bodies.
W.P.(C).3416/16 etc. - : 4 :-
ii) Admissions secured to courses without any entrance exams.
iii) A minimum of 60% Marks both for the qualifying examinations and qualifying subjects individually (viz. Physics, Chemistry and Mathematics for Engineering and Physics, Chemistry and Biology for Medical/Nursing) will be stipulated for granting Education Loan under Management Quota.
(i) Government/regulatory authority approved free structure applicable for respective States shall be considered for the courses.
(ii) Reasonable expenses upto the maximum of Rs.3000 per month may be considered for hostel expenses apart from other eligible course expenses.
3. SECURITY
(i) For loans upto Rs. 2.5 lakh - No security. Parent to be joint borrower.
(ii) For loans between Rs. 2.5 lakh to Rs. 4 lakh - Third party guarantee having net worth to cover the loan amount or Equitable mortgage of landed property with sufficient value.
(iii) For loans above Rs. 4 lakh - Equitable mortgage of landed property with sufficient value.”
submits that both the petitioners have secured an aggregate of 60% marks in qualifying examinations and in the individual subjects concerned and they would be qualified to be considered for grant of education loans under Category B above in the management quota.
W.P.(C).3416/16 etc. - : 5 :-
scheme has been considered by the Division Bench in para 16 of the said reported ruling, the relevant part of which reads as follows:
"16........ A Master Circular dated 20.11.2012 [a copy of which was produced as Ext.R2(f)] has been issued by the S.B.T., which Scheme is applicable for the purpose of present Writ Petitions. The said Circular contains two Schemes, namely; (A) I.B.A. Model Education Loan Scheme (Modified) and (B) Model Education Loan Scheme for Loans under Management Quota (Non-I.B.A. Scheme) (Modified). Under category 'A', 'Eligibility Criteria' is prescribed as under :-
“2. ELIGIBILITY CRITERIA
The entrance test conducted by Government/Approved Regulatory Bodies or Universities approved by U.G.C./A.I.C.T.E may be reckoned
W.P.(C).3416/16 etc. - : 6 :-
for this purpose.
Para 17 of the said Division Bench ruling has dealt with category B
of the aforequoted provisions for Model Education Loan Scheme for
Loans under the Management Quota, which reads as follows:
"17. Now, we refer to 'Model Education Loan Scheme for Loans under Management Quota', which was prescribed as category 'B', in which, 'Eligibility' was described as under :-
“1. ELIGIBILITY
(i) Students securing admission to seats under Management Quota through entrance exams conducted by private self financing colleges in Kerala State.
(ii) Admissions secured to courses without any entrance exams.
(iii) A minimum of 60% Marks both for the qualifying examinations and qualifying subjects individually (viz., Physics, Chemistry and Mathematics for Engineering and Physics, Chemistry and Biology for Medical/Nursing) will be stipulated for granting Education Loan under Management Quota.”
Category 'B' is applicable for admission under the Management Quota. It is stated that admissions to courses outside the State of Kerala were treated to be admissions under Management Quota except admissions through common entrance test like C.A.T.,
W.P.(C).3416/16 etc. - : 7 :-
M.A.T., GATE, I.I.T., All India Medical and Engineering Entrance Test, NIIT or any common entrance test conducted by Govt. of India/approved regulatory bodies."
has dealt with Division Bench ruling of the Madras High Court in
A.Kasinathan v. Branch Manager, Canara Bank [Laws (Mad) 20124-52], which reads as follows:
"24. The prescription of 60% marks in the qualifying examination and qualifying subjects although has been challenged in W.P.(C) No.20420 of 2015, but no substantial grounds have been raised to treat it as arbitrary, perverse or illegal. In this context, the learned counsel for the Bank has rightly placed reliance on the Division Bench judgment of Madras High Court reported in A.Kasinathan v. Branch Manager, Canara Bank, Town Hall Road, Madurai (Laws (Mad)-2012-4-52). In the said case, revised guidelines of Educational Loan Scheme-2011 of Indian Banks Association (I.B.A.) imposing restriction of 60% marks for considering educational loan in case of students who secured admission under “Management Quota” was under challenge. The Madras High Court held that there is no inherent right to educational loan, which is referred in paragraph 10 of the said case, which is to the following effect :-
“10. No inherent right to educational loan :- From the Scheme of Art.21A of the Constitution, it is the primary obligation of the State to provide free and compulsory education to all children of the age of 6-14 years and in the recent judgment dated 12.4.2012, the Supreme Court upheld the constitutional validity of right of children to free and compulsory education under Right to Education Act, 2009 which provides for free and compulsory education to children between age of 6 and 14 years and mandates government/aided/non-minority and unaided schools to reserve 25% of the students for these children. There is no such fundamental right to higher education. Of course, under Art.41, the State, shall within its economic capacity and development, make effective provision for securing the right to education. In terms of Art.21A and Art.41, while there is a right to education, there is no inherent right to educational loans.
Principles of lending loans:- The essence of Banking business is receiving money on current account for deposit from the public, repayable on payment by cheque, draft or otherwise and lending or investing the same. Only from out of the interest that is earned the banks will have to pay the salary to their staff, pay interest to their depositors and transact bank's business, maintain the Bank and meet other expenses.
W.P.(C).3416/16 etc. - : 8 :-
Banks should follow the well known principles of sound lending. (i) safety - the foremost principle of sound lending is to ensure the safety of the funds lent. While lending money, the Banks must carefully consider the chance of its being repaid by the borrower along with interest; and (ii) Profitability - Commercial Banks are profit-earning institutions; and nationalized banks are no exception to this. They must employ their funds profitably so as to earn sufficient income out of which the banker is to pay interest to the depositors, salaries to the staff and to meet various other establishment expenses and distribute dividends to the shareholders. The rates of interest charged by bankers primarily depend on the directives issued by the Reserve Bank of India.”
The Division Bench further held that there is nothing wrong in the banks stipulating any restriction for the students who secured admission under Management Quota. The Division Bench, repelling the challenge, laid down in paragraphs 12 and 14 of the said judgment as follows :-
“12. As is well known, while lending loan, the main concern of the Bank is safeguarding the amount which was sanctioned and advanced and chance of getting the money back with interest. In order to ensure prompt repayment of the educational loan, Bank is emphasizing the future prospects of the students, employment potential. For getting jobs/employment in different parts of the country/abroad, one of the criteria is academic performance and there is nothing wrong for the Banks in stipulating 60% marks for the students who secured admission under “Management Quota”.
In a competitive and dynamic global environment, everywhere where better standards are expected from private sector to Government employment, merit plays a key role. Like in other loans, Bank's main concern is that the educational loan amount advanced to students is repaid with interest within the stipulated period. Employability potential and merit are very relevant for which academic performance of the students is very much relevant. While so, there is nothing wrong in the Banks in insisting upon the merits i.e., students securing admission under Management quota and for grant of educational loans, ought to have secured 60% marks.
Re-contention - Discrimination of students opting for “Management Quota”:- The learned counsel for the petitioners contended that in single window system of admission, all the students get admission
W.P.(C).3416/16 etc. - : 9 :-
and students opt for “Management Quota” for various reasons either because it is nearer to their residence and availability of courses of their choice” and while so, it is an undesirable attitude form the Banks to discriminate between Management and Government quota.
14. On behalf of the writ petitioners, it was then contended that while Government is trying for inclusive growth in the field of education, such moves in fixing marks as 60% for those students, who secured admission, under “Management Quota” will discriminate the students on quota. It was further contended that State and Nationalised banks should strive for equal opportunity both for securing admission in Government colleges and those who are admitted under “Management Quota” through single window system.
Management Quota :- Management quota refers to the number of seats in educational institutions other than government institutions, which is being offered by the management to the students on the basis other than merit. The admission to the management quota seats will be in the hands of the management where students are selected by the management through criteria set out by them. The students admitted under management quota will not be selected based on the performance in the entrance examinations or marks they have scored in the qualifying Examination. So the capacity of such students to secure jobs as other meritorious students are much less and as well as the probability of landing a good job is also less. This will impact the repaying capacity of the students admitted under management quota.
As per the Revised Guidelines, for grant of educational loans to students, who have secured admission, under “Management Quota” can be considered only if students have secured 60% marks in the Board Examination. Such stipulation of 60% marks is with an objective keeping merit as the criteria and assessment of potentials of salary a student will get on completion of course. It is stated that non-performing assets in educational loans are mounting. It was further stated that inasmuch as 6% of the outstanding loans to the Banks are the educational loans. In the present day context, employability of a person depends upon various factors, one of which is certainly academic performance. When the students have secured admission to the management quota through the
W.P.(C).3416/16 etc. - : 10 :-
criterion set out by the Management, the capacity of such students to secure jobs are much less. Loan given to such students could turn bad as their employment potential is less. It is in this context I.B.A. stipulated 60% marks. So far as the Bank is concerned, Bank should never overlook the safety principle while advancing the loans or investment of its surplus funds.”
We fully endorse the view taken by the Division Bench of Madras High Court in the aforesaid case."
The Division Bench of this Court in Arya's case supra in para 24 has also held that their Lordships fully endorsed the aforequoted view taken by the Division Bench of the Madras High Court in Kasinathan's case supra.
W.P.(C).3416/16 etc. - : 11 :-
W.P.(C).3416/16 etc. - : 12 :-
Bank authorities have even declined to issue an application form for consideration of education loan, etc.
W.P.(C).3416/16 etc. - : 13 :-
bank will process those applications and if they require any further clarifications or documents from the petitioners, that may also be communicated to the petitioners, upon which the petitioners shall produce such necessary materials/ documents etc.
With these observations and directions, the abovecaptioned
Writ Petitions (Civil) stand finally disposed of.
W.P.(C).Nos.6414/2016, 5014/2016 & 5307/2016:
As already noted in the judgment in W.P.(C).No. 3416/2016
and connected case, the Division Bench of this Court in Arya v. Reserve Bank of India reported in 2015(4) KLT 478 has held that so long as the admissions secured by the candidates/students concerned are not on the basis of performance in the competitive examinations test conducted by Government/Approved Regulatory Bodies, their admissions can only be said to be one made under the management quota and that as per the norms approved on behalf of the Indian Bankers' Association, a minimum of 60% marks both in
W.P.(C).3416/16 etc. - : 14 :-
the competitive examinations and qualifying subjects individually is required to be passed by the candidates. It is pointed out by the respective Advocates concerned for the respective banks in these cases that none of the writ petitioners herein has secured with 60% marks in the qualifying examination and qualifying subjects individually as required in the above said norms and that therefore they are ineligible to be considered for the grant of education loan
even in the management quota. The fact regarding the nonacquisition of the minimum marks as indicated above is not rebutted by any of the petitioners. Accordingly W.P.(C).No. 6414/ 2016, 5014/2016 and 5307/2016 stand dismissed. However, there will be no order as to costs.
sdk+
Sd/ALEXANDER THOMAS, JUDGE
///True Copy///
P.S. to Judge
3 issues framed by the court
Whether education loan applications of petitioners required reconsideration under the Arya precedent regarding management quota admissions.
Whether petitioners who failed to secure minimum qualifying marks are entitled to education loans under management quota.
Whether the impugned rejection order was arbitrary in light of procedural lapses in the bank's consideration.
Colour shows how this judgement treated each authority
Arya v. Reserve Bank of IndiaApplied¶84
Arya v. Reserve Bank of India
A.Kasinathan v. Branch Manager, Canara BankReferred¶108
A.Kasinathan v. Branch Manager, Canara Bank
KAILASNADH N.M. & ORS.
THE STATE BANK OF TRAVANCORE & ORS.
ALEXANDER THOMAS
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
