Branch Manager, State Bank Of India vs Gayathri V S

N. Nagaresh, J

The respondent-Banks in W.P.(C) Nos.3646 of 2022 and 4821 of 2022 have filed the above review petitions aggrieved by the common judgment dated 02.03.2022 in the writ petitions. The writ petitions were filed by the petitioners therein aggrieved by denial of education loan by the officers of the State Bank of India. In both the cases, the education loan was denied on the ground that the CIBIL score of the co-borrowers are not satisfactory.

The writ petitioners relied on the judgment of this Court in Pranav S.R. v. The Branch Manager, State Bank of India and another [2020 KHC 4695] wherein it was held that unsatisfactory credit scores of the parents cannot be a ground to deny education loans for the reason that it is the repayment capacity of the applicant after their education which is the deciding factor. After considering the arguments advanced by the writ petitioners and the Standing Counsel appearing for the Bank, this Court, relying on the judgment in Pranav S. R. (supra) allowed the writ petitions and directed the respondents to reconsider their loan applications, disregarding the low credit scores of the co-obligants and sanction and disburse the eligible loan amount. It is aggrieved by the said direction that the respondents have filed these review petitions.

The Senior Counsel appearing at the instance of the review petitioners argued that the common judgment in the writ petitions has been rendered by this Court without analysing the provisions of the Credit Information Companies (Regulation) Act, 2005, the Credit Information Companies Rules, 2006 and the Credit Information Companies Regulation, 2006. The Credit Information Companies (Regulation) Act, 2005 and the Rules and Regulations made thereunder are enacted with specific legislative intentions. The finding of this Court that low CIBIL score of the co-obligant in an application for education loan cannot be a reason for rejection of loan application, is against the intention of the Act, 2005. It was further submitted that the effect of the DRT Act and SARFAESI Act was not considered by this Court while deciding the issue.

The Senior Counsel further urged that one of the major items of bad debts which are NPAs and which could not be recovered, are amounts covered by education loans. Default occurs even after taking co-borrowers with satisfactory CIBIL score. The effect of Circulars issued by the RBI and other Banks cannot be considered independently and in isolation.

The Senior Counsel pointed out that the finding of this Court that Kasaragod Co-operative Educational Society Limited v. Registrar of Co-operative Societies (General) [2016 (3) KHC 630] was a case involving denial of a commercial loan and will not apply to the facts in the writ petitions, may not be correct. The term “Client” would include education loan borrowers also.

The Senior Counsel further argued that the Union of India, the Reserve Bank of India and the Credit Information Companies concerned ought to have been made parties in the writ petitions. As they are not in the party array, the writ petitions were not maintainable. Interest of justice requires that the common judgment in the writ petitions be reviewed.

I have heard the learned Senior Counsel appearing at the instance of the review petitioners and the respective learned counsel appearing for the writ petitioners.

This Court considered the arguments advanced by the writ petitioners and delivered a common judgment in W.P.(C) Nos.3646 and 4821 of 2022 on 02.03.2022. While considering the issue whether low CIBIL score / Credit score of the parents / co-obligants can be a reason to deny education loan, this Court took note of the judgment of this Court in Pranav S. R. (supra). In Pranav S. R. (supra), wherein this Court held that unsatisfactory credit scores of parents cannot be a ground to reject education loans in view of the fact that the repayment capacity of the students after his/her education should be the deciding factor as per the Circulars issued by the Indian Banks Association.

The arguments advanced by the review petitioners is that this Court has not considered the impact of relevant Circulars while delivering the judgment in Pranav S.R.(supra). In the judgment under review, this Court considered Ext.R2(a) Circular dated 27.06.2014 issued by the Reserve Bank of India. This Court noted that the said Circular dated 27.06.2014 has been issued in the context of providing a data format for furnishing credit information to Credit Information Companies. This Court held that the Circular is primarily intended to apply commercial borrowers.

The Senior Counsel for the review petitioners would submit that the said Circular is applicable to education loans also. In the common judgment, this Court noted that the Circular has made it clear that the loan policies should be suitable to the retail borrowers and consumer borrower segment.

This Court also took into consideration Ext.R2(b) Guidelines issued by the RBI. This Court found that those Guidelines were issued for the purpose of maintaining accounting standards. Though the Guidelines proceeded to declare that the term “retail banking” would take in student and education loans, the education loans provided by the Banks in India under Vidyalakshmi Scheme stand on a different footing.

This Court also considered the impact of the Reserve Bank of India (Priority Sector Lending Targets and Classifications) Directions, 2020 wherein education is categorised as a priority sector.

Regarding the judgment in Kasaragod Co-operative Educational Society Limited (supra), this Court found that the said case was relating to denial of a commercial loan and will not apply to the facts of the cases pleaded in the writ petition. This Court also considered the judgments of the Apex Court in ICICI Bank Limited v. Official Liquidator of APS Star Industries Limited and others [(2010) 10 SCC 1] and Annamalai University represented by Registrar v. Secretary to Government, Information and Tourism Department and others [(2009) 4 SCC 590] and found that those cases did not apply to the facts pleaded in the writ petitions.

The review petitioners would contend that this Court did not consider the impact of the Credit Information Companies (Regulation) Act, 2005 and the Rules and Regulations made thereunder. The Act, 2005 has been enacted for regulation of Credit Information Companies and to facilitate efficient distribution of credit and for matters connected therein or incidental thereto. The Act provides for registration and management of Credit Information Companies and provides for functions of Credit Information Companies. The Act deals with collection and furnishing of credit information. The Act also lay down information privacy principle. The Act, 2005 does not in any manner regulate the Policies and Rules and Regulations relating to advances and loans by Banking Companies, which are primarily regulated by the Banking Regulation Act and the RBI Act and the Rules and Regulations made thereunder. The contentions put forth by the review petitioners based on Credit Information Companies (Regulation) Act, 2005 will not in any manner affect the judgments of this Court in Pranav S. R. (supra) or one under review.

There is no error apparent on the face of the records of the case. The review petitions are therefore found to be without any merits. The review petitions are therefore dismissed.