Educational Loan-To Provide Financial Support to Economically Weaker Students: High Court of Kerala

IN THE HIGH COURT OF KERALA AT ERNAKULAM THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR THE HONOURABLE MR. JUSTICE SHAJI P.CHALY TUESDAY THE 09TH DAY OF MARCH 2021 18TH PHALGUNA 1942 WA.No.378 OF 2021 AGAINST THE JUDGMENT IN WP(C) 27421 2020(C) OF HIGH COURT OF KERALA THE SOUTH INDIAN BANK LTD. REPRESENTED BY ITS MANAGING DIRECTOR HEAD OFFICE MISSION QUARTERS T.B.ROAD THRISSUR 680001 THE BRANCH MANAGER THE SOUTH INDIAN BANK LTD. OMALLOOR BRANCH OMALLOOR P.O. PATHANAMTHITTA PIN 689647 AGED 18 YEARS D O.UDAYAN MANGATTU HOUSE ATTARIKOM OMALLOOR P.O. PATHANAMTHITTA PIN 689647 R1 BY ADV. SRI.GEORGE ABRAHAM PACHAYIL THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 09.03.2021 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING W.A.No.378 OF 2021 2 Dated this the 9th day of March 2021 S.MANIKUMAR C.J Instant writ appeal is filed challenging the judgment of the writ court in W.P.(C)No.27421 of 2020 dated 29.1.2021 by which a learned Single Judge allowed the writ petition setting aside Exhibit P4 and directed the appellants respondents to reconsider the case of the petitioner for educational loan in tune with the true spirit and intent behind Exhibit P8 scheme and to pass appropriate orders within three weeks from the date of receipt of a copy of the judgment. 2. Short facts leading to the filing of the writ appeal are as hereunder Writ petition was filed by the respondent herein an applicant for Education Loan seeking for a writ of mandamus or such other writ of appropriate nature ordering the respondents appellants to recall Exhibit P4 loan rejection letter and to consider the loan application in terms of Exhibit P8 loan scheme and grant educational loan to the petitioner for her B.Sc 3. The second appellant has filed a counter affidavit mainly contending that the reason for rejecting the application was that the petitioner has not secured the minimum of 80 % marks in the individual qualifying subjects in W.A.No.378 OF 2021 3 her plus two exams as stipulated by the bank s norms on eligibility for 4. It was contended that Exhibit P8 is the original scheme which was proposed in the year 2001 and in the course of time several changes have been made in the scheme. The Banks are free to adopt their own standards for the eligibility criteria in respect of students who have not secured admission through the process of Common Entrance Examination. As per Exhibit R 2for such higher education is prescribed for sanctioning educational loan when the student is securing admission not through a Common Entrance Examination process. The Applicant writ petitioner had secured admission not on the basis of a Common Entrance Test in the State. It is in view of the changed policy the application of the petitioner was rejected more than one year ago. 5. The learned Single Judge by judgment in W.P.(C)No.274220 dated 29.1.2021 allowed the writ petition setting aside Exhibit P4. Relevant portion of the impugned judgment reads as under “6. Going by Ext.P8 Scheme petitioner cannot be said to be ineligible for Educational Loan. It is also a matter to be considered by the Bank that she is undergoing Nursing Course which is a professional undergraduate course and the Bank has to look into the W.A.No.378 OF 2021 4 prospects of the said course while considering her application. The financial position of the mother of petitioner cannot have any effect on determining the eligibility of the petitioner for Educational Loan The Bank is not expected to deny the opportunity to pursue her opportunity on the ground that her mother parents are defaulters in repayment of housing loan. 7. It is also relevant to note that this Court had in Exts.P9 and P10 judgments in W.P. Nos.19248 2019 and 10968 2020 had directed the respective Banks to grant the benefits covered by the Model Educational loan Scheme to the petitioners therein. 8. Though the learned counsel for the respondent submitted that in those cases the rejection was on the ground of CIBIL score of the parents of the petitioners in the present case the case of the petitioner is not seen considered in tune with the provisions contained in Ext.P8 Scheme. The stringent provisions in Ext.R2(a Scheme framed by the respondent Bank cannot supersede the provisions in Ext.P8 Scheme. Therefore Ext.P4 shall stand set aside. There shall be a direction to the respondents to reconsider the case of the petitioner for educational loan in tune with the true spirit and intent behind Ext.P8 Scheme and to pass appropriate orders on it. Appropriate action shall be taken within a period of three weeks from the date of receipt of a copy of the judgment. Accordingly the writ petition is disposed of.” 6. Challenging the above judgment appellants have filed the writ appeal on the following grounds “B) The Learned Single Judge should have found that Exhibit P 8 was the original scheme which was proposed in the year 2001 and in the course of time several changes have been made in the scheme by the Indian W.A.No.378 OF 2021 5 Bank s Association. The student should have obtained admission to a higher education course in recognized institutions in India or abroad through Common Entrance Test Merit Based Selection Process after completion HSC for loan eligibility. The Indian Bank s Association has issued IBA Model Educational Loan Scheme for Pursuing Higher Education in India and abroad 2015 and Revised Guidance Notes on Model Educational Scheme for Pursuing Higher Education in India and abroad with a Covering letter dated August 17 2015 a copy of which is produced herewith marked Annexure A1. C) It was based on such changes made in the scheme by the Indian Bank s Association that Exhibit R 2was adopted and issued by the Appellant Bank. As was evident from Exhibit P 2 the respondent got admission on the basis of the entrance examination conducted by the college. The admission was not based on any Common Entrance Test Hence at best it could be treated as admission to the course in the Management Quota. The admission could not be considered meritorious In such cases the percentage of marks obtained in the qualifying examination could alone be made the basis for eligibility for sanction of educational loan. And on the basis of the condition prescribed under Exhibit R 2 the petitioner was not eligible for sanction of the D) In any commercial lending decision creditworthiness of the borrower and the viability of the scheme are important. The student borrower has no credit history and as such he is assumed to be creditworthy. But as per the Model Educational Loan Scheme the parent guardian must be a co borrower and should execute security documents along with the student. However it is likely that the joint borrower for the loan has a credit history and any adverse feature could have a bearing on the assessment of credit risk. As per the Master Circular Prudential Norms on Income Recognition Asset Classification and Provisioning pertaining to Advances issued by the Reserve Bank of India the classification as NPA is borrower specific and not account specific. If the joint borrower has a loan account with the Bank and the loan is treated as Non Performing Asset the Bank runs the risk of having to consider the student loan also as NPA ab initio. In the present case also the housing loan of the parents had turned Non Performing Asset since 07 04 W.A.No.378 OF 2021 6 2018. Hence the decisions Exhibits P 9 and P 10 relied on by the petitioner respondent require reconsideration. Of course in the Revised Guidance Notes there is provision for overcoming this contingency in as much as the Bank can insist on a joint borrower acceptable to the Bank in case of adverse credit history of the parent guardian of the student.” 7. Learned counsel for the appellants also submitted that as per the circular No.324 CC GEN 115 19 20 dated 9th September 2019 the bank has modified the Education Loan Scheme. Appellant bank had revised the policy as permitted vide the revised Guidance Notes on Model Eductional Loan Scheme issued by IBA in 2015 8. Today when the matter came up for hearing on instructions Mr.K.K.John learned counsel for the appellant bank submitted that the case of the respondent would be considered as a special case for grant of educational loan. Submission is placed on record 9. Though the learned counsel for the appellant made an attempt to argue on the merits of this case taking note of the above submission made by the learned counsel for the bank we are not inclined to advert to the same The main object of educational loan scheme is that a meritorious student economically weaker should be provided with an opportunity to pursue education with the financial support from the banks at affordable terms and W.A.No.378 OF 2021 7 10. We direct the appellants to consider the request of the respondent s application for grant of educational loan for pursuing her B.Sc. Nursing course as a special case and grant educational loan within a period of two weeks from the date of receipt of a copy of the judgment. All other issues raised in this writ appeal are left open. If there is any challenge to the circular the same can be adjudicated in accordance with law at a later point of time. Accordingly writ appeal is disposed of S.MANIKUMAR CHIEF JUSTICE SHAJI P. CHALY JUDGE W.A.No.378 OF 2021 8 PETITIONER S EXHIBITS ANNEXURE A1 COPY OF THE IBA MODEL EDUCATIONAL LOAN SCHEME 2015 WITH COVERING LETTER DATED AUGUST 17 2015 AND REVISED GUIDANCE NOTES ON MODEL EDUCATIONAL LOAN SCHEME FOR PURSUING HIGHER EDUCATION IN INDIA AND TRUE COPY P.S. TO JUDGE

Summary: The main objective of educational loan scheme is to provide with an opportunity to economically weaker student to pursue their education with the financial support from the banks at affordable terms and conditions. This remarkable judgement was passed by High Court of Kerala in the case of Ms. Parvathy Udayan v. The South India Bank Ltd Represented by Its Managing Director, Head Office Mission Quarters, T.B. Roads, Thrissur [WA.No.378 OF 2021] by the Honorable Chief Justice Mr. S Manikumar &amp; The Honorable Justice Shaji P.Chaly The Mandamus Writ petition was filed by the respondent herein who was an applicant for Education Loan ordered the respondents/appellants to recall Exhibit P4 loan rejection letter and to consider the loan application in terms of Exhibit P8 loan scheme and grant educational loan to the petitioner for her B.Sc. Nursing course. The reason for rejecting the application before was that the petitioner had not secured the minimum of 80 % marks in the subjects in her 12th exams as stipulated by the bank’s norms on eligibility for educational loan. Later the honorable court Going by Ext.P8 Scheme opinioned that “petitioner cannot be said to be ineligible for Educational Loan. It is also a matter to be considered by the Bank that she is undergoing Nursing Course, which is a professional undergraduate course and the Bank has to look into prospects of the said course, while considering her application. The financial position of the mother of petitioner cannot have any effect on determining the eligibility of the petitioner for Educational Loan” While Challenging the earlier judgment, appellants had filed the writ appeal on the following grounds that, “the admission was not based on any Common Entrance Test. Hence at best it could be treated as admission to the course in the Management Quota. The student borrower has no credit history and as such he is assumed to be creditworthy” While going through the matter, Mr.K.K.John, learned counsel for the appellant/bank submitted that, “the case of the respondent would be considered as a special case for grant of educational loan.”  The court was of the opinion that, “Though the learned counsel for the appellant made an attempt to argue on the merits of this case, taking note of the above submission made by the learned counsel for the bank we are not inclined to advert to the same. The main object of educational loan scheme is that a meritorious student, economically weaker should be provided with an opportunity to pursue education with the financial support from the banks at affordable terms and conditions.”