Partly allowed

Reena v. the Union of India

Kerala HC6 Mar 2019WP(C)/496/2019

Case brief

AI extract

What is this about?

In a writ petition, the petitioner challenged the inaction and lack of reasons for loan rejection under the Stand-Up India Scheme. The Court held that while banks have discretion, they must communicate rejection with reasons within one month of the judgment and assigned the burden of proof.

What did the court decide?

Directed respondents to communicate reasons for rejection to the petitioner via the address in the writ petition within one month of the date of this judgment.

Reena Vs the Union of India — Banking and Recovery | Kerala HC (2019)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

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WEDNESDAY,THE 06TH DAY OF MARCH 2019 / 15TH PHALGUNA, 1940

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WP(C).No. 496 of 2019

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PETITIONER/S:

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REENA, AGED 38 YEARS, D/O VIJAYAN, VALLATH HOUSE, ENGANDIYOOR P.O., THRISSUR DISTRICT. PIN-680615.

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BY ADV. SRI.RAJESH CHAKYAT

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RESPONDENT/S:

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1 THE UNION OF INDIA, REPRESENTED BY THE SECRETARY, DEPARTMENT OF FINANCIAL SERVICES, MINISTRY OF FINANCE, ROOM NO.67-B, NEW DELHI. PIN-110001.

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2 REGIONAL MANAGER,

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CANARA BANK, ABA PLAZA, 1ST FLOOR, KOORKKANCHERY, THRISSUR. PIN-680007

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3 REGIONAL MANAGER, BANK OF BARODA, MARINE DRIVE, ERNAKULAM PIN-682011

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4 REGIONAL MANAGER, STATE BANK OF INDIA, REGIONAL OFFICE, PARAMAKAVU DEVASOWM BUILDING, THRISSUR. PIN-680001.

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5 THE BRANCH MANAGER, CANARA BANK, KOMBODINJAMAKKAL BRANCH, BUILDING NO.15714, THAZHEKKAD.P.O., THRISSUR. PIN-680697

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6 THE BRANCH MANAGER, BANK OF BARODA, ASHTAMICHIRA BRANCH, ASHTAMICHIRA P.O., THRISSUR DISTRICT. PIN-680731.

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W.P.(C) No.496 of 2019

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7 THE BRANCH MANAGER, STATE BANK OF INDIA, ADB CHALAKUDY BRANCH, 1ST FLOOR, TOWN HALL SHOPPING COMPLEX, MAIN ROAD, CHALAKUDY PIN-680307.

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BY ADVS. R1 - SRI.S.BIJU, CGC R3 & R6 - SMT.R.REMA R5 - DR.PAULY MATHEW MURICKEN

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 06.03.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.P.(C) No.496 of 2019

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JUDGMENT

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This writ petition is filed by the petitioner

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seeking direction to respondents 2 to 7 to consider Ext.P3 application and grant loan to the petitioner in accordance with Ext.P1 Scheme within a period of two weeks, and for other consequential reliefs. Brief material facts for the disposal of the writ petition are as follows:

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Petitioner is an unmarried woman who wants to set up a Greenfield enterprise of packing and repacking unit at Kombodinjamakkal, Thrissur District, in respect of packing/re-packing of grocery, food articles etc. etc. by using machinery. According to the petitioner, she has sufficient experience in the field. Thereupon, in accordance with Ext.P1 Scheme launched by the Government of India in the name “Stand- Up India” to provide financial aid or support to entrepreneur, such as people belonging to Scheduled Castes and Scheduled Tribes or any women entrepreneur, petitioner applied for loan before the respondent Banks. The 5^th respondent i.e., the Canara Bank is the lead Bank. Case of the petitioner is that, petitioner is fully eligible to have the benefits of the Scheme and in accordance with the stipulations contained under the

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W.P.(C) No.496 of 2019

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Scheme, application was submitted through online and

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the application was accepted. Petitioner opted three banks viz., (1) Canara Bank; (2) Bank of Baroda; and (3) State Bank of India, Thrissur District respectively, evident from Ext.P3.

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Even though petitioner has submitted an application on 19.11.2018, no action was taken to

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dispose of the application taking into account the stipulations contained under Ext.P1 Scheme to dispose

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of the application, within three weeks. Therefore, petitioner filed Exts.P4 to P6 complaints before the aforesaid Banks. After the filing of the complaints, the Bank of Baroda has issued a letter through E-mail,

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stating that the said Bank is not interested in granting the loan, evident from Ext.P7. It is also

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projected by the petitioner that Ext.P7 is not in accordance with the provisions of the Scheme, and

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further, the bank cannot decline the loan stating that Bank is not interested, since if the petitioner fulfils

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the criteria, the Bank is duty bound to sanction the loan as per the Scheme. It is also pointed out that, the other Banks have not even cared to issue any reply to the application submitted by the petitioner.

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W.P.(C) No.496 of 2019 5

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statement, refuting the allegations and claims and demands raised by the petitioner. The receipt of the

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application from the petitioner is admitted. According to the 5^th respondent, M/s. Kombidi Traders is presently run in the premises occupied on lease agreement for a period of 11 months with effect from 01.05.2018. As

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per the proposal, the address provided is 'rented' and upon receipt of the proposal from Stand-Up India portal for consideration of the loan under the Stand-Up India Scheme, the Bank contacted the petitioner, but the

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petitioner did not turn up. The Branch Manager verified the residential address of the petitioner, however, the Bank officials could not locate the party in the address and found that the rented premises is

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occupied by the petitioner's brother, Jayaraj. On enquiry, it was known that M/s. Kombodi Traders is run

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by petitioner's brother as a proprietor. On further enquiry, it was found that her brother's wife, Ambika Jayaraj is enjoying over draft and term loan facilities to the tune of Rs.42.23 lakhs and Rs.15 lakhs respectively from Canara Bank, Kallettumkara Branch and

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the status of the above accounts is known as 'NPA'. Further, petitioner has no credit history for both

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W.P.(C) No.496 of 2019

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'CIBIL' and 'CRIF'. As per petitioner's KYC documents

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submitted while opening the Current Account with the Branch, she is a permanent resident of Engandiyur, Chavakkad Taluk, Thrissur, which is different from the residential address shown in the Stand-Up India

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proposal, wherein the residential address of the petitioner is shown as 'Vallathu House, Avittathur'.

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Thus, upon verification of the unit, it is found that

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the unit namely Kombodi Traders, is run by someone else, though the petitioner is the proprietor of the unit.

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It is also stated that, as per Head Office Circular No.314/2016 dated 31.05.2016 issued by the

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Bank in connection with Stand-Up India Scheme, as part of eligibility, it is clearly stated that the loan under the Scheme is extended to existing customers with satisfactory track record for last two years. On an

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assimilation of the situation, petitioner does not satisfy the above requirements relating to eligibility for consideration of the loan under the Scheme, evident from Annexure-R5(a) Circular. In the instant case, the date of opening of the current account of the

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petitioner with the Bank is on 09.10.2018, and in that view of the matter, petitioner does not satisfy the

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W.P.(C) No.496 of 2019

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above criteria. It was thereupon that the application

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submitted by the petitioner was rejected by the bank, through the web portal.

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The 3^rd and 6^th respondents have also filed a joint statement almost in similar lines raised by the 5^th respondent. The sum and substance of the contention put forth by the said respondents is also to the effect

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that petitioner is not entitled to get the benefit of the Scheme, in view of the bad track record maintained

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by the petitioner in accordance with the terms and regulations of the Bank for providing loans under the Scheme.

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A reply statement is filed by the petitioner

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to the statement filed by the 5^th respondent, basically contending that the Banks have not taken into account

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the purpose of the Scheme launched by the Government of India, and has not considered the application in terms of the Scheme. It is also pointed out that, by virtue of the provisions of the Scheme, when an application is

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submitted, petitioner is entitled to get a reply assigning reasons. Therefore, the stand adopted by the Banks that they have intimated the petitioner through online, without assigning reasons, cannot be sustained.

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W.P.(C) No.496 of 2019 8

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petitioner, learned CGC and the respective counsel appearing for the respondent Banks. Perused the pleadings and the documents on record.

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petitioner is on the basis of Ext.P1 Scheme. According to the petitioner, once the petitioner puts up an application, the banks are duty bound to consider the same in accordance with the Scheme and the Banks' regulations and norms may not have much weight vis-a-vis the provisions of the Scheme. It is also

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pointed out that, the loan applications will have to be processed within the time frame prescribed under Ext.P1, which read thus:

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“Process loans within the time-frame as stipulated in Code of Bank's Commitment to SME borrower (Application for loan upto Rs.5 lakh within 2 weeks, between Rs.5-25 lakhs in 3 weeks, above Rs.25 lakhs in 6 weeks, from the date of receipt of application provided the application is complete in all respects and is accompanied by documents required)”.

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According to the petitioner, the Bank is duty

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bound to follow the stipulations contained thereunder

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and the Banks have not taken a decision within the

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time-frame prescribed thereunder, the inaction of the

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Bank is illegal, liable to be interfered with by this Court and appropriate directions are to be issued. So

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W.P.(C) No.496 of 2019

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also, petitioner has relied upon yet another stipulation in Ext.P1 in respect of rejection of

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application, which read thus:

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“In case of rejection, reason to be made known to borrower as stipulated in the Code of Bank's Commitment to Customers”.

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Relying upon the said provision, learned counsel for

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the petitioner submitted that, even assuming that the loan application was rejected through web portal, no reasons are assigned, since the Banks have only stated that 'not interested'.

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On the other hand, learned counsel appearing for the respective Banks submitted that, the Banks have their own norms and prescriptions in order to evaluate each and every application submitted by the parties, and they are entitled as of right to identify the history of the petitioner in respect of banking and other matters. When the application was received, necessary enquiry was made and field verification was also done, the address given by the petitioner in that application was not correct and in that address, petitioner's brother is conducting an industrial unit, and on further verification, it was also found that petitioner is residing in an entirely different place. Furthermore, in accordance with the norms and

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prescriptions of the Bank, petitioner is not entitled

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to get the loan as is sought for.

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I have evaluated the rival contentions made

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across the Bar, and in my considered view, Ext.P1 is a Scheme launched by the Government of India, prescribing certain standards and specifications to provide loans to any entrepreneur in terms of the Scheme. However, Ext.P1 cannot be said to be the sole criteria for granting the loan by the Banks, because the Banks have their own methods and manner of assessing the loan application conducting study about the same and to identify whether the applicant is a person capable of re-payment of the loan advanced. It is an admitted fact that the Banks have made enquiry and found that petitioner is not entitled for availing the loan in accordance with the terms and conditions prescribed by the Banks for release of loan amounts. Therefore, it

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cannot be said that the conduct on the part of the Bank is in any manner illegal or arbitrary, liable to be

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interfered with by this Court, exercising the discretionary jurisdiction conferred under Article 226 of the Constitution of India. Moreover, the findings

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are rendered on the basis of factual circumstances and this Court is not expected to sit over the factual

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W.P.(C) No.496 of 2019

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foundation made by the respective Banks and the

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conclusions arrived at thereunder. Apart from the same, no documents are produced by the petitioner before this Court even to identify whether the petitioner has got any clear and sincere interest in securing the loan and to run any industry.

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Now the sole question remains to be considered is, whether the petitioner is entitled to get the loan rejection order. It is an admitted case of the Banks

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that they have rejected the application through the web portal by assigning the reason 'not interested'. Going

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by Ext.P1 stipulations quoted above, it is clear that

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the reason shall be made known to the borrower as

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stipulated in the Code of Bank's Commitment to Customers. Therefore, it is only just and proper, if

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the Banks are not interested in advancing loan to the petitioner, the Banks may communicate the same to the petitioner in the address mentioned in this writ petition, assigning reasons, at the earliest possible,

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and at any rate, within a month from the date of receipt of a copy of this judgment.

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The writ petition is disposed of with the above

direction.

Sd/-

SHAJI P.CHALY

JUDGE

St/07.03.2019

W.P.(C) No.496 of 2019

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APPENDIX

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PETITIONER'S/S EXHIBITS:

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EXHIBIT P1	A TRUE COPY OF THE SCHEMES DOCUMENT OF "STAND UP INDIA"
EXHIBIT P2	A TRUE COPY OF THE SCHEMES DOCUMENT OF CGTMSE.
EXHIBIT P3	A TRUE COPY OF THE ONLINE APPLICATION SUBMITTED BY THE PETITIONER IN STAND UP INDIA DATED 22/11/2018.
EXHIBIT P4	A TRUE COPY OF THE COMPLAINT PREFERRED TO REGIONAL MANAGER, CANARA BANK, THRISSUR DATED 07/12/2018.
EXHIBIT P5	A TRUE COPY OF THE COMPLAINT PREFERRED TO REGIONAL MANAGER, BANK OF BARODA, ERNAKULAM DATED 07/12/2018.
EXHIBIT P6	A TRUE COPY OF THE COMPLAINT PREFERED TO REGIONAL MANAGER, STATE BANK OF INDIA, THRISSUR DATED 07/12/2018.
EXHIBIT P7	A TRUE COPY OF THE MAIL ISSUED BY THE BANK OF BARODA DATED 13/12/2018.
RESPONDENTS' ANNEXURE:
ANNEXURE-R5(A)	A TRUE PHOTOCOPY OF THE CIRCULAR NO.314/2016 DATED 31.05.2016 ISSUED BY CANARA BANK, HEAD OFFICE, BANGALORE.

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//TRUE COPY//

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P.S. TO JUDGE

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St/-

Reena v. the Union of India

Case brief

What is this about?

What did the court decide?

Reena v. the Union of India

Case brief

What is this about?

What did the court decide?

What the court decided

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