Khandelwal (Akshay) Pvc Pipes PVT. LTD vs. National Credit Guarantee Trustee Company LTD.

Held

The Court held that the sanction of a loan is entirely within the domain of the banking authority. It found no illegality or irregularity in the rejection of the petitioners' request for a WCTL under the ECLGS scheme by IDBI Bank (opposite parties no. 7-9). The Court noted that the bank had considered the application and passed a detailed, reasoned order for rejection. Key reasons cited by the Court for upholding the rejection included the petitioner company opening a current account with the State Bank of India without the bank's knowledge, in contravention of the sanction terms, and routing sales through SBI, which breached the loan agreement. Furthermore, the company's account was consistently overdue before the COVID-19 crisis, indicating inherent weaknesses rather than COVID-19-related stress. The Court also considered the petitioner's non-cooperation in stock audits since November 2018 and the unsatisfactory CIBIL credit scores of the promoters. Consequently, the Court was not inclined to interfere with the bank's decision. The writ petition was dismissed.

Facts

The petitioners, a company and its Managing Director, filed a writ petition seeking a direction to IDBI Bank (opposite parties no. 7-9) to release emergency credit facilities under the Emergency Credit Line Guarantee Scheme (ECLGS). They also sought action against the bank for violating ECLGS guidelines. The company, a registered MSME, applied for the ECLGS loan on April 18, 2020, due to business distress caused by COVID-19. The bank, after requesting documents, rejected the application on September 2, 2020, vide Annexure-14. The petitioners argued they met the scheme's requirements, while the bank cited several reasons for rejection, including variations in GST returns, an ongoing DGGI investigation, the unit being non-operational, routing of sales through another bank (SBI) in contravention of loan terms, pending security creation, unsatisfactory account conduct, non-cooperation in stock audits, and unsatisfactory CIBIL scores of promoters.

Key Issues

1. Whether the petitioners are entitled to the benefits of the Emergency Credit Line Guarantee Scheme (ECLGS) as per the Government of India's guidelines, considering the bank's rejection of their application. Petitioner's contention: The petitioners argued that they had satisfied all the requirements of the ECLGS scheme and were therefore entitled to its benefits. They contended that the bank's rejection order dated September 2, 2020, was erroneous and prejudiced them, necessitating judicial intervention. Revenue/State's contention: The judgment does not record any specific arguments presented by the revenue or state. The court's decision is based on the reasons provided by the bank for rejecting the loan application, which were detailed in the impugned order.