Am Distributors vs. The Manager, South Indian Bank LTD. - Kerala High Court, 03 February 2021

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE SMT. JUSTICE P.V.ASHA WEDNE AY, THE 03RD DAY OF FEBRUARY 2021 / 14TH MAGHA,1942 WP(C).No.26505 OF 2020(K) PETITIONER: AM DISTRIBUTORS 37/3985 B, 50/2364C. THENKUDATH BUILDING, NEAR LULU MALL, EDAPPALLY POST, ERNAKULAM-682 024, REPRESENTED BY MANAGING PARTNER MR.MUHAMMED BASHEER. BY ADV. SMT.K.LATHA RESPONDENTS: 1 THE MANAGER, SOUTH INDIAN BANK LTD. BANERGY ROAD, ERNAKULAM-682 018. 2 UNION OF INDIA, REPRESENTED BY SECRETARY TO DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, ROOM NO.46, NORTH BLOCK, NEW DELHI-110 001. 3 ADDL R3. MANAGING DIRECTOR CRIF HIGH MARK CREDIT INFORMATION SERVICES P LTD,FOFB-04,04,06 FOURTH FLOOR ART GUILD HOUSE PHOENIX MARKET CITY CTS NO.124/B 15 LBS MARG, KURLA WEST, MUMBAI,MAHARASHTRA 400070, INDIA(ADDL RESPONDENT NO. 3 IS IMPLEADED AS PER ORDER DATED 11.01.2021 IN IA 1/2021.) R1 BY SRI.K.K.JOHN,SC,SOUTH INDIAN BANK R1 BY ADV. SRI.ASISH K.JOHN R2 BY ADV. P.R.AJITH KUMAR, CGC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 03.02.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C).No.26505 OF 2020(K) 2 JUDGMENT Dated this the 3rd day of February 2021 The petitioner is a dealer who holds UDYAM MSME registration certificate and GST registration. This writ petition is filed aggrieved by the denial of the benefit of Emergency Credit Line Guarantee Scheme (ECLGS) introduced by the Reserve Bank of India, for which 100% guarantee is provided by the National Credit Guarantee Trustee Company (NCGTC) to Member Lending Institutions (MLIs). Under this scheme an additional term loan facility is made admissible to eligible MSMEs/Business Enterprises, individual borrowers to the tune of 20% of the total outstanding credit up to Rs.50 crore. The petitioner had submitted an application before the 1st respondent bank.

It is stated that the petitioner is enjoying cash credit facility from the 1st respondent Bank. It is stated that it has various accounts with various private banks and NBFCs and the substantial fund based loans are availed from the respondent bank. It is having sanctioned limits of credit

WP(C).No.26505 OF 2020(K) 3 facility to the tune of Rs.6.30 crores as on 29.2.2020. It is also stated that the petitioner is having three business loans with Bajaj Finserve Limited and none of these accounts are classified as NPA or SMA-2 as on 29.2.2020. One of the conditions for being an eligible borrower for availing the benefit of the scheme is that the borrower accounts should be classified as regular, SMA-0 or SMA-1 as on 29.2.2020 and shall not be NPA or SMA-2 as on 29.2.2020. Producing the Bank statement Ext.P4 the petitioner claimed that it is eligible to get the benefit under the ECLGS. But the respondent-bank did not take any positive steps based on the petitioner's application.

The respondent has filed a counter affidavit stating that the petitioner does not come under the definition of eligible borrower because under clause 1.0 of Ext R2(b) scheme, the Borrower account should be less than or equal to 60 days Past Due status as on 29.2.2020. It is also stated that the individual MLIs have to verify across all lending institutions from the credit bureau. On verification of CRIF report of the petitioner, as on 29.2.2020 the

WP(C).No.26505 OF 2020(K) 4 respondent bank found that petitioner was having DPD above 60 days in a Corporate Vehicle Loan with some other bank. Therefore, it is stated that the petitioner is therefore not eligible under the scheme, in view of the said report from the CRIF. It is stated that R1(c) letter was issued to the petitioner informing the same.

The petitioner has filed a reply affidavit pointing out that the alleged vehicle loan was not NPA. It is stated that the account was already closed with the last EMI of Rs.11,168/- on 4.11.2019. It is stated that a sum of Rs.4,820/- which is shown as payable on 4.11.2019 is bank charges and petitioner was not aware of the same as it was making payment of monthly EMIs regularly to the Tata Motors Finance Ltd. Producing Ext P6 accounts statement of Tata Motors it is stated that the said sum of Rs.4820 was was not due towards any loan account and it cannot be said that, the said loan was DPD as on 29.02.2020 as alleged by the respondent-bank. The petitioner points out that, on the basis of the said report with respect to a meager sum of Rs.4,820/- it cannot be denied the benefit of the Scheme.

WP(C).No.26505 OF 2020(K) 5 The petitioner has also produced Exts.P8 and P10 accounts statements from Dhanalakshmi Bank and Tata Motors finance ltd to show that all those accounts were closed. The petitioner relies on para 4 of Ext R1 (b) scheme and states that the bank charges which remained as due unknowingly cannot be said to be an amount in default and the petitioner has not become ineligible for the benefit.

The petitioner also relied on the explanation given to the eligible borrower which says that the exception has been allowed for overdues of the borrower in respect of their credit cards/savings account/current account provided the said overdues did not exceed 1% of the loan account (i.e. GECL amount) extended under the scheme and that the overdue amount were regularized prior to assistance being extended under the scheme. Petitioner also relies on the answers on the FAQ given by the Reserve Bank and states that in cases where the Credit Bureau commits mistake in reporting data it is the duty of the MLI to satisfy itself as to the eligibility of the borrower as per the scheme guidelines.

WP(C).No.26505 OF 2020(K) 6

At the same time the learned counsel appearing for the bank also relies on R1(b) scheme itself and pointing out clause 7 which deals with eligible borrowers, it is stated that MLIs are expected to check with the credit bureau the overall outstanding of the borrower to assess the eligibility of the borrower. It also provides the borrower accounts should be less than or equal to 60 days past due as on 29.02.2019 in order to be eligible under the scheme. It further provides that all borrower accounts which had NPA or SMA-2 status as on 29.2.2020 shall not be eligible under ECLGS-1.0 and all borrower accounts which had NPA or SMA-2 or SMA-1 status as on 29.2.2020 shall not be eligible under ECLGS-2.0. 7. On consideration of the contentions raised by Smt. K. Latha, the learned Counsel for the petitioner and Sri. K.K.John, the learned Counsel appearing for the 1st respondent Bank, it is seen that the only objection raised as against the eligibility of the petitioner is on the basis of the credit report where a sum of Rs.4,820/- is shown as due in its vehicle loan account as on 29.2.2020. At the same time

WP(C).No.26505 OF 2020(K) 7 the petitioner has produced all the documents to show that the said account in which the vehicle loan was availed was already closed and even Rs. 4,820/-, which could be the bank charges was also subsequently paid. The 'amount in default” is defined as follows in in para 4 of the Ext R1(b) scheme, as follows: “Amount in Default : means the principal and interest amount outstanding in the account of the borrower in respect of term loan/working capital term loan facility/crystalised non-fund facility (including interest) as the case may be, as on the date of the account becoming NPA, or on the date of lodgment of claim application, whichever is lower, or on such other date as may be specified by Trustee Company for perferring any claim against the guarantee cover subject to a maximum of amount guaranteed.”

Going by the aforesaid definition, it cannot be said that the petitioner's account was in default or that any amount was default in the account of petitioner, on the basis of the entry, in the credit report. At any rate as per the answers given in the FAQ it is the duty of the 1st respondent to consider the case of petitioner on the basis of the documents she has produced from which it can be seen that the alleged

WP(C).No.26505 OF 2020(K) 8 sum of Rs.4280/- cannot be a defaulted amount and it was only bank charges which would not make the petitioner an ineligible borrower or out of the definition of eligible borrower.

Even though, the Credit Bureau has been impleaded as 3rd respondent in this writ petition and notice is seen to have been served on them they have not entered appearance. The petitioner has got every right to get the data relating to her account reported correctly. In the circumstance, I am of the view that the report of the 3rd respondent in respect of the vehicle loan account of the petitioner could not have been made correctly. As the 3rd respondent has not appeared before this court, the petitioner shall approach the 3rd respondent with the requisite details from the Tata Motors to get the credit report corrected. There shall be a direction to the 3rd respondent to take appropriate emergent steps to correct the entries in respect of the petitioner's credit report on receipt of such application from the petitioner, which shall be done within a period of three weeks of receipt of such application from

WP(C).No.26505 OF 2020(K) 9 petitioner. In the meanwhile there shall also be a direction to the 1st respondent-bank to reconsider the application of the petitioner for the benefit of the ECLGS, taking note of the definition of amount in default as well as 1% exception admissible to treat her as an eligible borrower and to pass appropriate orders within a period of three weeks. P.V.ASHA JUDGE ska

WP(C).No.26505 OF 2020(K) 10 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 THEOF UDYAM MSME REGISTRATION CERTIFICATE OF THE PETITIONER. EXHIBIT P2 THEOF THE RELEVANT PORTION OF GECL UPDATED AS ON OCTOBER 31ST, 2020. EXHIBIT P2 A THEOF THE EXTENDED CREDIT LINE GUARANTEE SCHEMES MODIFICATION IN OPERATIONAL GUIDELINES LETTER NO.2718 DATED 4TH AUGUST 2020. EXHIBIT P3 THEOF THE SANCTION/RENEWAL OF CREDIT FACILITIES LETTER ISSUED BY THE FIRST RESPONDENT BANK TO THE PETITIONER. EXHIBIT P4 THEOF THE RELEVANT BANK STATEMENT OF THE PETITIONER. EXHIBIT P5 THEOF THE LETTER DATED 25.11.2020 SUBMITTED BY THE PETITIONER BEFORE THE RESPONDENT BANK. EXHIBIT P6 THEOF THE BANK STATEMENT ISSUED BY TATA MOTORS FINANCE LIMITED [FORMERLY KNOWN AS SHEBA PROPERTIES LTD) DATED 18.12.2020. EXHIBIT P7 THEOF THE LETTER DATED 4.12.2020, FILED BY THE PETITIONER BEFORE THE FIRST RESPONDENT BANK EXHIBIT P8 THEOF THE LETTER DATED 3.11.2020 ISSUED BY THE DHANALAKSHMI BANK TO THE PETITIONER EXHIBIT P9OF THE NOTICE OF CONTRACT TERMINATION OF HIRE PURCHASED VEHICLE ISSUED BY TATA MOTORS FINANCE LIMITED EXHIBIT P10 THEOF THE LOAN SETTLEMENT LETTER DATED 18TH JUNE 2016 ISSUED BY THE PETITIONER TO TATA CAPITAL EXHIBIT P11 THEOF THE PETITIONER COMPANY'S CREDIT REPORT