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2021 DIGILAW 301 (KER)

Parthas Textiles v. HDB Financial Services Ltd.

2021-03-18

N.NAGARESH

body2021
JUDGMENT : The petitioner is before this Court seeking to direct the 1st respondent to reconsider the request made by the petitioner in Ext.P3, in the light of Exts.P4 and P6 judgments, and to extend Emergency Credit Line Guarantee Scheme to the petitioner by providing a pre-approved loan up to 20% of the loan outstanding as on 29.02.2020, in view of Ext.P1 and disburse the eligible loan amount to the petitioner. 2. The petitioner is a Partnership Firm engaged in textile business. The 1st petitioner approached the respondent-financial institution seeking to sanction loan under Ext.P1 Emergency Credit Line Guarantee Scheme (ECLGS) facility and to restructure the loan. When the 1st respondent failed to consider the request, the petitioner approached this Court filing W.P.(C) No.25105/2020. The said writ petition was disposed of as per Ext.P4 judgment, wherein this Court directed the 1st respondent to consider the request of the petitioner for extension of ECLGS and take a decision in the matter. 3. Contending that the 1st respondent is not considering the request, the petitioner filed R.P. No.994/2020. While the review petition was pending, the 1st respondent issued Ext.P5 sanction order allowing a financial assistance of about 11.28% of outstanding liability. The petitioner would submit that the petitioner is entitled to 20% of the loan outstanding. Ext.P5 sanction has been made overlooking the observations of this Court in Ext.P4 judgment. This Court, however, dismissed the review petition. 4. The learned counsel for the petitioner argued that the object of Ext.P1 Emergency Credit Line Guarantee Scheme is to provide 100% guarantee coverage to eligible Member Lending Institutions against extension of credit up to 20% of loan outstanding as on 29.02.2020. The 1st respondent failed to consider the purpose of Ext.P1 Scheme, contended the learned counsel for the petitioner. The counsel for the petitioner further argued that in Ext.P5, the 1st respondent has made a demand for EMI payable by the petitioner before releasing the first tranche of payment. The 1st respondent cannot make deduction of EMI, nor can make any such a demand. The 1st respondent is therefore liable to be compelled by appropriate writs of this Court to reconsider the request of the petitioner and extend pre-approved loan of 20% of the loan outstanding as on 29.02.2020 and disburse the loan without insisting for payment of EMI arrears, contended the learned counsel for the petitioner. 5. The 1st respondent is therefore liable to be compelled by appropriate writs of this Court to reconsider the request of the petitioner and extend pre-approved loan of 20% of the loan outstanding as on 29.02.2020 and disburse the loan without insisting for payment of EMI arrears, contended the learned counsel for the petitioner. 5. The 1st respondent filed a statement opposing the prayers in the writ petition. The 1st respondent stated that the petitioner has no fundamental or statutory right to avail loan even under ECLGS Scheme. The issue involved in this writ petition is contractual in nature and hence the writ petition is not maintainable. 6. While sanctioning Rs.26,98,696/-in principle, the 1st respondent considered the fact that the petitioner has availed Rs.4,78,00,000/-from various other financial institutions under ECLGS. According to the assessment of the 1st respondent, the said amount is enough for the petitioner to restart the business. The 1st respondent also has to safeguard the primary security in respect of the credit facility in good and enforceable condition. Therefore, the 1st respondent sanctioned Rs.26,98,696/-only under the Scheme. The writ petition is without any merit, contended the learned counsel for the 1st respondent. 7. I have heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the 1st respondent. 8. Pursuant to the directions of this Court contained in Ext.P4 judgment in W.P.(C) No.25105/2020, the 1st respondent has issued Ext.P5 communication dated 27.01.2021. By Ext.P5, the 1st respondent has extended in principle a facility amount of Rs.26,98,696/-towards working capital with a fixed rate of interest at 9.55% per annum. In Ext.P5, the 1st respondent has put a special condition that the petitioner shall pay the entire EMI outstandings before releasing the first tranche of Rs.20,24,222/-. The petitioner is aggrieved by the non-sanctioning of maximum loan limit of 20% and the special condition relating to advance payment of EMI. 9. The application of the petitioner for financial assistance is under Ext.P1 Scheme. Ext.P1 Scheme proposes to provide 100% guarantee to Member Lending Institutions in respect of eligible credit facility extended by them to its borrowers. By the very nature of the Scheme, banks and financial institutions are duty-bound to consider applications under the Scheme in terms of the provisions of the Scheme. Nevertheless, the Money Lending Institutions are expected to sanction the loan taking into account the actual requirement of the borrower. 10. By the very nature of the Scheme, banks and financial institutions are duty-bound to consider applications under the Scheme in terms of the provisions of the Scheme. Nevertheless, the Money Lending Institutions are expected to sanction the loan taking into account the actual requirement of the borrower. 10. The Scheme would make it clear that the term loan facility under the Scheme would be up to 20% of the total credit outstanding. The Scheme would also show that the Money Lending Institutions are expected to check with credit bureau the overall outstanding of the borrower for assessment. The Money Lending Institutions, therefore, indeed has a discretion in the matter of extending loan up to 20% permissible limit. 11. In the case of the petitioner, the statement filed by the 1st respondent shows that the 1st respondent has taken into account the fact that the petitioner has already availed Rs.4,78,00,000/-from various other financial institutions. The 1st respondent assessed that the said amount is enough for the petitioner to restart the business. It is taking into account relevant factors relating to the business of the petitioner that the 1st respondent has taken a decision to sanction in principle a loan of Rs.26,98,696/-. This Court do not find any illegality or arbitrariness in limiting the loan sanction. 12. However, it may be noted that in Ext.P5 communication, the 1st respondent has stipulated a special condition that the petitioner should pay their EMI outstandings before releasing the first tranche of Rs.20,24,222/-. This Court has considered the issue whether the Money Lending Institutions granting the benefit under Ext.P1 Scheme can effect deductions from the ECLGS loan. This Court, in Ext.P6 judgment, held that such deductions cannot be made without the consent of the customer. The special conditions put by the 1st respondent in Ext.P5 regarding advance repayment of EMI outstandings as a condition for disbursement of loan under Ext.P1 Scheme, therefore, cannot stand the scrutiny of law. In the facts and circumstances of the case, the writ petition is disposed of directing the 1st respondent to reconsider the request made by the petitioner in Ext.P3 in the light of Ext.P6 judgment. A decision in this regard shall be taken within a period of ten days.