Kerala High Court in SBI’s Appeal: Writ Jurisdiction Cannot be Invoked in Connection to Grant of Loan

Kerala High Court in SBI’s Appeal: Writ Jurisdiction Cannot be Invoked in Connection to Grant of Loan

The Kerala High Court by its division-judges bench comprising of Chief Justice S.V.N. Bhatti and Justice Basant Balaji stayed the decision passed by the single judge Justice P.V. Kunhikrishnan wherein it was held that an application for education loan by a student could not be rejected on the ground of a low CIBIL (Credit Information Bureau [India] Limited) score.

Through its decision, the single judge had cautioned banks to adopt a ‘humanitarian approach’ while considering applications for education loans.

“Students are the nation builders of tomorrow. They have to lead this country in future. Simply because, there is low CIBIL score to a student, who is an applicant for Education loan, I am of the considered opinion that, Education loan application ought not have been rejected by Bank,” the Court had observed.

However, the division bench was of the view that the writ jurisdiction of the Court could not be invoked on matters involving grant of loan.

The interim stay was granted by the Court in the appeal filed by the State Bank of India (SBI) against the Single Judge decision dated 30 May, 2023.

The brief background of the case was that the respondent (initially petitioner) who is a student, had availed two loans, of which one was overdue for Rs.16,667/-, and the other loan was written off by the Bank. The CIBIL score of the petitioner was low due to these reasons. It was submitted by the counsels for the petitioner that unless the amount was received immediately, the petitioner would be in trouble.

The counsels placed reliance upon the decision in Pranav S.R. vs. The Branch Manager & Anr. (2020), wherein the Court had held that the unsatisfactory credit score of the parents of a student could not be a ground for rejecting an educational loan, since the repayment capacity of the student after his education ought to be the deciding factor as per the scheme.

The Court, while noting the factual circumstances, and the fact that the petitioner had obtained a job in Oman, was of the considered opinion that the balance of convenience was in favor of the respondent, and that the application for the education loan ought not to have been rejected only on ground of the low CIBIL score.

Aggrieved by the decision of the single judge, the appellant (initially respondent)- SBI submitted that neither the borrower (the petitioner student) nor the co-borrower (mother of the petitioner student) had the required CIBIL Score fixed as per the Central enactments, the Credit Information Companies Act, 2005, and the Banks.

The appellants further submitted that the enactments were made with definite legislative intent and that the interim order of the Single Judge affected banks and financial institutions at large.

Pertinently, the appellant pointed out that there was no supporting document on record to show that the petitioner had received confirmed employment, which was one of the key factors weighed by the Singe Judge in issuing the aforementioned interim order.

The appeal reads, “Appellants have reliable information that the petitioner has not got any employment as stated by him, and he has misled and misrepresented the Hon’ble Court in getting the interim Order.”

The appellant flagged out that the case of the respondent that he had submitted the application in August 2022 was also incorrect, and that the application which had actually been submitted on 14 March, 2023, was returned on 4 April, 2023, with the reasons for the return also being conveyed to him.

The appellants submitted that whether any fee was pending as was submitted by the respondent was unclear, since he could not have continued in the institution from the year 2022 till May 2023 without paying the fees.

Lastly, the appellants contended that if the interim order which is in the nature of a final order is permitted to continue, and since there is direction to sanction and release the loan forthwith, the appellants will be irreparably prejudiced. The petitioner is not legally entitled to get the loan.

The appellants were represented by Senior Advocate K.K. Chandran Pillai and Advocate S. Ambily.

Senior Advocate George Poonthottam, and Advocates Nisha George, and Ann Maria Francis appeared on behalf of the student.