1 0BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 12.09.2011 CORAM: THE HON'BLE MR.JUSTICE S.MANIKUMAR W.P.(MD)No.9464 of 2011 R.Punniyamoorthy .. Petitioner Vs. 1.The Regional Manager, Regional Office, Central Bank of India, 1-C, Renga Complex, Karur Road, Chinathamani, Trichy. 2.The Branch Manager, Central Bank of India, Kandarvakottai Branch, Kandarvakottai, Pudukkotai District. .. Respondents PRAYER: Writ Petition is filed under Article 226 of the Constitution of India, praying for the issuance of Writ of Mandamus, to direct the respondents to grant the educational loan of Rs.11,70,000/- as per the application, dated 28.09.2010, for the petitioner's son and Rs.3,07,500/- as per the application, dated 05.10.2010, for the petitioner's daughter. For Petitioner : M/s.S.Srimathy For respondents : Mr.R.Pandivel O R D E R The petitioner is the father of one P.Akila, aged about 21 years, studying Electronics and Communication Engineering, at Sri Ramanathan Engineering College, Erode. The college fees, tuition fees and other fees, for the entire course of eight semester is Rs.3,07,500/-, P.Anburaj, his son aged about 19 years, is studying Aeronautical Engineering course in Russia. According to the petitioner, for the above said course, the entire course fee is Rs.11,70,000/-. It is the case of the petitioner that he is an agriculturist and not able to mobilise huge funds for education. However, he has a property worth of Rs.40,00,000/-. Therefore, he has submitted necessary educational loan applications on 28.09.2010 for his son and another application on 05.10.2010, for his daughter respectively to the lead bank. According to the petitioner, the applications were also forwarded to Central Bank of India, Kandarvakottai and that the Bank instructed the petitioner to give collateral security. The petitioner has agreed to give collateral security of his property worth of Rs.40,00,000/- and also submitted the same to the Bank. It is the grievance of the petitioner that even after the submission of the legal opinion and receipt of the collateral security, the education loan, in respect of the petitioner's children have not been sanctioned by the Bank. It is the further contention of the petitioner that though the Government of India, as well as this Court have held in several cases that the bank have to grant educational loans, the same has not been considered from 2010 onwards. In such circumstances, mandamus is sought for, directing the respondents Bank to grant educational loan of Rs.11.7 lakhs to his son, as https://hcservices.ecourts.gov.in/hcservices/ 2 per his application, dated 28.09.2010 and Rs.3,07,500/- to his daughter, as per his application, dated 05.10.2010, respectively to pursue their education in the abovesaid institutions. 2.Inviting the attention of this Court, to the Revised Model Educational Loan Scheme for Pursuing Higher Studies in India and Abroad and particularly to clause 7 of the norms, which deals with security, Mr.R.Pandivel, learned counsel for the Central Bank of India submitted that in respect of educational loan above Rs.7.5 lakhs, apart from co-obligation of parents together with tangible collateral security of suitable value, along with the assignment of future income of the student for payment of installments, a collateral security in the form of suitable third party guarantee is required and that in the absence of the same, the Bank is not be in a position to process the application and grant the loan. He further submitted that as per the report of Hon'ble Justice, Mr.N.V.Balasubramanian Committee, regarding the grant of educational loan, only the tuition fee payable to the college would be granted, though the maximum amount provided under the Revised Model Educational Loan Scheme. It is also the contention of the learned counsel for the Bank that though a maximum amount is provided under the scheme for sanction, imposing a condition of offering security wherever required, it is not necessary that loan amount quoted by the students has to be granted for mere asking, to pursue higher education. According to him, it is the discretion of the authority to grant educational loan taking into consideration, the tuition and other fees payable by the student. 3.Per contra, placing reliance on the Division Bench Judgment of this Court, in W.A.(MD)No.23 of 2011, dated 11.01.2011, M/s.Srimathi, learned counsel for the petitioner submitted that it is obligatory on the part of the bank to sanction not only the educational loan for the tuition fee, but the educational also includes mess/hostel fee, payable by a student and all that is required by the student is only to satisfy the norms, as per the Revised Model Educational Loan Scheme, for Pursuing Higher Studies In India and Abroad. she therefore, submitted that when the petitioner has offered a collateral security of a property worth of Rs.40 lakhs for repayment of both the loans sought for to the petitioner's children, there is no need to insist for a personal bond or a third party guarantee, which is required only in the case of loan above 4 lakhs and upto 7.5 lakhs. According to her, when the request for educational loan is above 7.5 lakhs, the condition precedent for sanction of the loan is co-obligation of parents together with tangible collateral security in the form of suitable value and personal bond or third party security is not at all required. Learned counsel for the petitioner further submitted that the abovesaid condition of offering collateral security has already been complied with, grant of educational loan to the petitioner's children should not be delayed and in such circumstances, prayed for issuance of a writ of mandamus. Heard the learned counsel for the parties and perused the materials available on record. 4.The Revised Model Educational Loan Scheme for Pursuing Higher Studies In India and Abroad, is as follows; https://hcservices.ecourts.gov.in/hcservices/ 3 "1.Introduction Education is central to the Human Resources Development and empowerment in any country. National and State level policies are framed to ensure that this basic need of the population is met through appropriate public and private sector initiatives. While government endeavour to provide primary education to all on a universal basis, higher education is progressively moving into the domain of private sector. With a gradual reduction in government subsidies higher education is getting more and more costly and hence the need for institutional funding in this area. The scope of education has widened both in India and abroad covering new courses in diversified areas. Development of human capital is a national priority and it should be the endeavour of all that no deserving student is denied opportunity to pursue higher education for want of financial support. Loans for education should be seen as an investment for economic development and prosperity. Knowledge and information would be the driving force for economic growth in the coming years. Based on recommendations made by a study group, IBA had prepared a Model Educational Loan Scheme in the year 2001 which was advised to banks for implementation by Reserve Bank of India vide circular NO.RPCD.PLNFS.BC.No.83/06, dated 12.05/2000-01, dated April 28, 2011 along with certain modifications suggested by the Government of India. In line with the announcement made by the Hon'ble Finance Minister in his Budget Speech for the year 2004-05, IBA had communicated certain changes in the security norms applicable to educational loans with limits above Rs.4 lakhs and up to Rs.7.5 lakhs. We have been receiving enquiries from members seeking clarifications on the various provisions of the scheme based on feedback received from the branches. With a view to ensure that the scheme is implemented in letter and spirity, it was decided to review the scheme and make modifications in the scheme to facilitate smooth operation at bank branches. Towards this, a Working Group of General Managers drawn from select banks was constituted at IBA. This revised model scheme has been prepared based on the suggestions made by the Group. 2.OBJECTIVES OF THE SCHEME The Educational Loan Scheme outlined below aims at providing financial support from the banking system to deserving / meritorious students for pursuing higher education in India and abroad. The main emphasis is that every meritorious student though poor is provided with an opportunity to pursue education with the financial support from the banking system with affordable terms and conditions. No deserving student is denied an opportunity to pursue higher education for want of financial support. https://hcservices.ecourts.gov.in/hcservices/ 4 3.APPLICABILITY OF THE SCHEME The scheme detailed below could be adopted by all Commercial Banks. The scheme provides broad guidelines to the banks for operationalising the educational loan scheme and the implementing bank will have the discretion to make changes suiting tot he convenience of the students /parents to make it more customer friendly." 5.Regarding the eligibility of the petitioner's children to seek for educational loan under the scheme, there is no quarrel. The authorised signatory of the State Bank of India, the lead bank after considering the loan application of the petitioner's son, on 29.08.2010, has sanctioned the said amount for continuing Aeronautical Engineering Course as education loan provisionally, subject to their banks terms and conditions and production of necessary documents. The authorisied signatory has also directed the applicant to approach Kandarvakottai Branch for processing the loan. 6.Perusal of the loan application, of the petitioner's son submitted to the bank manager, Central Bank of India, shows that property in Survey Nos.53/4A1 & 53/4A2, Kattunaval Vattam, Kattunaval, in the name of the petitioner's father, value of Rs.45 lakhs, has been offered as collateral security for the loan amount of Rs.11.7 lakhs, being the course fee. Material on record, further shows that P.Vimala Daughter of the writ petitioner and sister of the applicants Ms.P.Akila and Mr.P.Anburaj, children of the p[etitioner, has also given a guarantor's consent letter to the Branch Manager, Central Bank of India. However, the receipt of the abovesaid consent letter given by one of the family members, is refuted. Further, according to the learned counsel for the Bank, such letter cannot be taken as third party guarantee, as it is given by a close relative. Material on record also disclose that as per the communication of the Russian Cultural Centre, the petitioner's son Mr.P.Anburaj has been selected for admission to Aeronautical Engineering course in Kazan State Technical University, Russia and that he should pay the charges for admission on the head mentioned as expenses. 7.In sofaras the loan application, dated 05.10.2011, submitted for Ms.P.Akila is concerned, the above said property has not been offered as a collateral security, since the amount claimed was less than Rs.4 lakhs and that as per the norms of the Revised Model Educational Loan Scheme, no collateral security is required. But as stated supra, the applicant's sister Mrs.Vimala has stood as a guarantor. Perusal of the letter, dated 21.06.2009, of Sri Ramanathan Engineering College, Erode, shows that the fee structure and the grand total for II to VIII semesters was Rs.3,07,500/- which includes, tuition fees, special fees, book fees, lab utility, Hostel Rent, Mess fee, etc., as extracted hereunder: FEES STRUCTURE (In Rupees) Particul ars 2009- 2010 2010- -2011 2011- -2012 2012- -2013 II Sem III Sem IV Sem V Sem VI Sem VII Sem VIII Sem Tuition fees 16,250 16,250 16,250 16,250 16,250 16,250 16,250 Special Fees 5,000 5,000 5,000 5,000 5,000 5,000 5,000 https://hcservices.ecourts.gov.in/hcservices/ 5 Particul ars 2009- 2010 2010- -2011 2011- -2012 2012- -2013 Book Fees 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Lab Utility 1,250 1,250 1,250 1,250 1,250 1,250 1,250 Dev. Fees 5,000 5,000 5,000 5,000 5,000 5,000 5,000 Hostel Rent - 6,000 - 6,000 - 6,000 - Mess Bill 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Maintena nce & Electric ity - 2,000 - 2,000 - 2,000 - Total 40,500 48,500 40,500 48,500 40,500 48,500 40,500 8.The contention that the petitioner's son has to remit a sum of Rs.11.7 lakhs, as course fee for Aeronautical Engineering in Russia, has not been disputed. As per the communication of the Russian Agricultural Centre, the Course fee is as follows; "Pre-training course 1year Tution fee US$1500 B.E.Programme Duration 4 year Tution Fee US$2500 Medium of instruction Russian Registration Fee US$50 (on arrival) Students dormitory US$600/semester" 9.The quantum of finance, as per the Revised Model Educational Loan Scheme for pursuing Higher Studies In India and Abroad, is that if the study is in India, the applicant is entitled to a maximum of Rs.10 lakhs and if the study is a foreign country, the applicant is entitled to a maximum amount of Rs.20 lakhs. Thus, it could be seen from the material on record that the loan amount claimed by the petitioner's children, are within the permissible norms. In so far as the security to be offered by the applicant, as per clause No.7 of the norms, upto Rs.4 lakhs, is that there should be co-obligation of parents and no security is required and for the amount above Rs.4 lakhs and upto Rs.7.5 lakhs, co-obligation of parents together, third party guarantee is required. The Bank in its discretion, in exceptional cases, can also waive third party guarantee, if satisfied with the net-worth/means of parent/s who would be executing the document as "join borrower". For loan amount above Rs.7.5 lakhs, the requirement is, co-obligation of parents together with tangible collateral security to satisfy the value along with the assignment of future income of the student for payment of installments. 10.Under the Revised Model Educational Loan Scheme, it is made clear that if the educational loan sought for is upto Rs.4 lakhs, it is suffice, that there is co-obligation of parents and no security in the form of third https://hcservices.ecourts.gov.in/hcservices/ 6 party guarantee or collateral security by offering any property is required. In the case of educational loan, for above Rs.4 lakhs and upto Rs.7.5 lakhs, there should be not only co-obligation of parents, but the applicant has to furnish collateral security in the form of suitable third party guarantee. In the case on hand, in so far as the request of the petitioner's daughter viz., Ms.P.Akila is concerned, as stated supra, the entire course fee for the semester II to VIII, is only Rs.3,07,500/-. It does not exceeded Rs.4 lakhs. Though the learned counsel for the Bank placing reliance on the report of Hon'ble Mr. Justice N.V.Balasubramanian Committee, submitted that only the tuition fee, admission fee, special fee, laboratory/computer/Internet fee, and amenities fee and such other fees, incidental for academic pursuit alone can be sanctioned and that above fees do not include hostel, mess charges, this Court is not inclined to subscribe to the said contention, in view of the Division Bench Judgment of this Court in W.A.(MD).No.23 of 201, dated 11.01.2011, wherein when similar objections were raised in respect of grant of education loan, including mess fee and hostel fee and the Division Bench, after considering the bank's objections, has ordered as follows; "5.In this writ appeal, the grievance expressed by the appellant is that unless and until the mess and hostel fee is paid, the appellant will not be permitted to undergo the course. The purpose of sanctioning educational loan is to encourage the persons who are not having source of their income to undergo their higher study course and the respondent bank having sanctioned the fee payable is also bound to sanction the mess fee and hostel fee as claimed by the appellant, which is supported by the expenditure certificate issued by the college where the appellant is undergoing the course. 6.The writ appeal is allowed and the appellant is directed to get a certificate from the college where he is undergoing the course as on today and on production of the same, the respondent bank is directed to sanction the said amount towards mess fee and hostel fee along with the loan amount already sanctioned." 11.Reverting back to the claim of the petitioner's daughter P.Akila, student of Sri Ramanathan Engineering College, Erode, it is evident from the letter, dated 21.06.2009, that apart from tuition fee, special fee, the student has to pay, book fee, laboratory fee, development fee, mess fee, hostel rent and maintenance and electricity charges, amounting to Rs.3,07,500/- for semester Nos.II to VIII of the engineering course. The amount towards book fee, lab utility fee, developmental charges, maintenance are already included in the committee's report. What has been excluded are only hostel, transport and mess charges and any other recurring or non recurring fee, including capitation fee. A sum of Rs.2,000/- has been directed to be paid, towards electricity maintenance and the said charge is also negligible. However, maintenance charges are also included in the commission's report. In view of the Division Bench Judgment, directing payment of mess and hostel charges, the objection of the learned counsel for the Bank that only tuition and other fees permissible, as per the committee's report could be sanctioned as educational loan, is not acceptable. It is also to be noted that when the objections were made by the same learned counsel, on the same lines that https://hcservices.ecourts.gov.in/hcservices/ 7 has been repelled. 12.The second objection raised by the learned counsel for the Bank is that apart from tangible collateral security, the petitioner has to furnish a third party guarantee, on the ground that fee for educational loan above Rs.4 lakhs and upto Rs.7.5 lakhs, when a third party security is required, the said condition is also applicable to educational loan for more than Rs.7.5 lakhs, is liable to be rejected, for the reason that when the scheme has prescribed a slab in granting educational loan (i) upto Rs.4 lakhs (ii), above Rs.4 lakhs and upto Rs.7.5 lakhs, and (iii) above 7.5 lakhs, different conditions have been prescribed, as stated supra. At the risk of repetition, in respect of loans upto Rs.4 lakhs, it is suffice that there is co-obligation of parents and no security is required. For above Rs.4 lakhs and upto Rs.7.5 lakhs in addition to co-obligation of parents, it requires a collateral security in the form of suitable third party guarantee. The bank may, at its discretion, in exceptional cases, waive third party guarantee, if satisfied with the net-worth/means of parent/s who would be executing the document as "joint borrower". In the case of educational loan above Rs.7.5 lakhs, the requirement is that, along with co-obligation of the parents, applicant has to produce a tangible collateral security of suitable value along with the assignment o future income of the student for payment of instalments. In all the above said three cases, the loan documents should be executed by both the student and the parent/guardian as joint borrower. Wherever, the land/building is already mortgaged, the unencumbered portion can be taken as security on second charge basis provided it covers the required loan amount. The main reason for offering security in the form of land/building /Government Securities / Public Sector Bonds, etc. is only to make the loan secured for the purpose of realisation. Needless to say that as per the recent enactments, for realisation of loan amount, whether it be in the form of educational loan or otherwise, sufficient measures are provided. The interpretation of the bank that for the loan amount above Rs.7.5 lakhs, besides tangible collateral property security, a third party guarantee is also required, is a misconstruction. When there is a specific exclusion of third party guarantee and when a more stringent condition of offering a tangible collateral security in respect of property of suitable value is insisted under the scheme, there is no need for the applicant to furnish a third party security. If there was any intention for the framers of the revised scheme to make a third party guarantor also to bind over in respect of education loan for more than Rs.7.5 lakhs, the revised guidelines itself, would have provided, for such condition. In the absence of the above, it is not open to the respondents bank to read into such clause and to insist for a third party guarantee. Such condition can be insisted, only in respect of educational loan above Rs.4 lakhs and upto Rs.7.5 lakhs, along with co-obligation of the parents. It is also to be noted that even such personal bond or the third party guarantee can be waived, in the discretion of the bank. 13.In the light of the above discussion, non consideration for sanction of education loan of the petitioner's children is not inconformity with the Revised Model Educational Loan Scheme, for pursuing Higher Studies in India and Abroad. The loan amounts sought for, are well within the quantum of finance, that is Rs.10 lakhs in the case of study in India and Rs.20 lakhs in the case of study in abroad. During the course of argument, M/s.Srimathi, learned counsel for the petitioner submitted that the https://hcservices.ecourts.gov.in/hcservices/ 8 collateral security of Rs.40 lakhs offered to the petitioner could be taken as securities in respect of both loans. When adequate security is offered, the bank is bound to sanction the loan amounts, without any delay. Accordingly, a direction is issued to the respondents to grant educational loan of Rs.11,70,000/- to the petitioner's son, as per the application, dated 28.09.2010 and Rs.3,07,500/- to the petitioner's daughter, as per the application dated 05.10.2010, on accepting the collateral security property worth Rs.40 lakhs for both the loan amounts and subject to other eligibility conditions, within a period of two weeks from the date of receipt of a copy of this order. It is again made clear that the Bank shall not insist for a guarantee from a third party, in respect of both loans. 14.With the above directions, the Writ Petition is allowed. Consequently, connected miscellaneous petition is closed. No costs. SD ASST REGISTRAR ( CO ) /TRUE COPY/ SUB ASST REGISTRAR gcg To 1.The Regional Manager, Regional Office, Central Bank of India, 1-C, Renga Complex, Karur Road, Chinathamani, Trichy. 2.The Branch Manager, Central Bank of India, Kandarvakottai Branch, Kandarvakottai, Pudukkotai District. 1CC TO MR.R. PANDIVEL ADVOCATE, SR: 30884: DM::2011:SEPTEMBER:14:: Order made in W.P.(MD)No.9464 of 2011 Dated:-12.09.2011 8p:4C:: https://hcservices.ecourts.gov.in/hcservices/