Guha Roy Food Joint And Hotel ... vs The State Of West Bengal & Ors
2023 Latest Caselaw 2113 Cal

               IN THE HIGH COURT AT CALCUTTA
                      Constitutional Writ Jurisdiction
                              Appellate Side

Present :-
The Hon'ble Justice Moushumi Bhattacharya

                           W.P.A 12769 of 2022
      Guha Roy Food Joint and Hotel Private Limited & Anr.
                                     vs.
                      The State of West Bengal & Ors.

For the petitioners                        :       Mr. Mainak Bose, Adv.
                                                   Mr. Rupak Ghosh, Adv.
                                                   Mrs. Sweta Gandhi, Adv.


For the State                              :       Mr. Prantik Garai, Adv.


For the respondent nos.3 and 4             :       Mr. Debnath Ghosh, Adv.
                                                   Ms. Sudeshna Mazumdar, Adv.


For the respondent no. 5                   :       Ms. Sipra Chanda, Adv.

Last Heard on                                  :   27.03.2023.


Delivered on                                   :   30.03.2023.


Moushumi Bhattacharya, J.

1. The petitioners seek a direction on the respondent no. 3 Finance

Company to grant the benefit of an Emergency Credit Line Guarantee

Scheme (ECLGS) to the petitioners. The ECLGS was floated by the National

Credit Guarantee Trustee Company Ltd. of the Ministry of Finance,

Government of India on 23.5.2020 by which the Ministry of Finance

extended 100% guarantee coverage for additional working capital term loans

in case of Banks and FIs and additional term loans up to 20% of their entire

outstanding credit as on 29.2.2020 subject to the account being less than or

equal to 60 days past due as on that date. The petitioners also seek setting

aside of the order passed by the District Magistrate of 18.4.2022 under

section 14 of the SARFAESI Act, 2002.

2. A prayer for an ad-interim protection was refused by this Court by the

order dated 22.8.2022. The petitioners were directed to avail of the remedies

available to the petitioners under the SARFAESI Act, 2002. The petitioners

have filed appropriate applications before the Debts Recovery Tribunal for

that part of the petitioners' claim.

3. Therefore, the only question which is before the Court is whether the

petitioners are entitled to grant of the benefit of the ECLGS and whether the

respondent no. 3 (R3) which is a private Financial Institution comes within

the jurisdiction of a Writ Court for issue of a writ of Mandamus against the

respondent no. 3.

4. The first question which should be dealt with is whether the R3 is

amenable to writ jurisdiction under Article 226 of the Constitution of India.

5. The argument is that the respondent no. 3 Financial Institution (FI) is

a private entity who does not fall within the definition of "state" under Article

12 or "person or authority" under Article 226 of the Constitution and would

not be amenable to judicial review. Several decisions have been pronounced

by the Supreme Court on whether a private entity including a private bank

would come within the purview of Article 226 of the Constitution. There is a

consensus, apparent from the decisions, that a private body would be drawn

within the fold of Article 226 where the private body exercises public

functions or functions having an element of public interest or work with a

reach and depth akin to that performed by the State in its sovereign

capacity.

6. The subject matter of the present writ petition deals with the

Emergency Credit Line Guarantee Scheme (ECLGS) which was floated by the

Ministry of Finance, Government of India, for providing 100% guarantee

coverage for additional working capital term loans in case of Banks and FIs

and additional term loans in case of Non Banking Financial Company

(NBFC) up to 20% of their outstanding credits as on 29th February, 2020.

The Scheme provided that eligible institutions, most specifically Member

Lending Institutions (MLIs), would have to register themselves for seeking

the guarantee cover under the said Scheme. The resolution framework

issued by the Reserve Bank of India (RBI) on 6th August, 2020 with regard to

the said Scheme specifically states that the resolution framework was

necessary in the wake of the economic fallout caused by the Covid-19

pandemic and the resulting financial stress on borrowers across the board.

The ECLGS read with the resolution framework/s published by the RBI

binding all commercial banks makes it clear that the Scheme was floated in

public interest to help small and medium scale business tide over the

financial instability caused by the pandemic.

7. The Scheme issued on 23rd May, 2020 read with the Operational

Guidelines updated as on 30th March, 2022 further makes it clear that the

Scheme would be binding on all Banks and FIs as well as NBFCs. The

respondent no. 3 FI is admittedly a Member Lending Institution under the

Scheme and is consequently drawn within the obligations and duties

incorporated therein. The object of the Scheme elevates the Scheme into one

with a clear public element for preserving the public interest following the

pandemic. Therefore, the role of the respondent no. 3 cannot be seen in the

limited scope of a private financial institution. The respondent no. 3 is

discharging a public function under the Scheme on behalf of the

Government of India and the respondent is discharging its duty and acting

as a nodal agency of the State in extending the benefit of the Scheme to its

eligible borrowers.

8. It may also be stated that RBI circulars have statutory force and are

binding on the constituent Banks and FIs who are under a statutory

obligation to comply with the mandates of the circular, refer: Central Bank of

India vs. Ravindra; (2002) 1 SCC 376 where the Supreme Court held that the

power conferred by sections 21 and 35-A of the Banking Regulation Act,

1949 is coupled with a duty to act and that the Reserve Bank of India, as

the prime banking institute of the country, is entrusted with a supervisory

role and is empowered to issue binding directions having statutory force in

the interest of public.

9. Moreover, the Supreme Court has held in several decisions that a

body which performs public or statutory duties for the benefit of the public

would fall within the scope of Article 226. In Federal Bank Ltd. Vs. Sagar

Thomas: (2003) 10 SCC 733, the Supreme Court also made an exception for

a private company or a person where such an entity may be amenable to

writ jurisdiction when it becomes necessary to compel the entity to enforce

any statutory obligations of public nature.

10. The above factors, seen in light of the present facts, persuade this

Court to hold that the respondent nos. 3 and 4 would be amenable to the

writ jurisdiction of the High Court under Article 226 of the Constitution. The

writ petition against the said respondents is accordingly held to be

maintainable.

11. The brief facts which are relevant for adjudication are as follows.

12. The respondent no. 3 granted credit facilities to the petitioner no. 1 in

the form of a Term Loan on 28.2.2019 against a mortgage repayable in

equated monthly instalments. The RBI issued a Circular on 27.3.2020

during the Covid crisis consequent to which the petitioners were granted

moratorium with regard to repayment of EMI between March to August,

2020. The petitioners' loan account remained standard / regular till August,

2020. This would appear from a notice issued by R3 under section 13(2) of

the SARFAESI Act, 2002 which contains the specific statement that the

petitioners' loan account were to be classified as NPA on 15.12.2020 but in

view of the moratorium period granted by the RBI, the same was not done.

Respondent no. 3 classified the petitioners' account on NPA as on

31.3.2021. The Ministry of Finance, Government of India introduced the

ECLGS on 23.5.2020 for providing 100% guarantee coverage for additional

working capital term loan for Banks and Financial Institutions as on

29.2.2020. All scheduled Banks and NBFCs which were in operation for at

least 2 years as on 29.2.2020 were eligible as a Member Lending Institution

(MLI) under the said Scheme. The Operational Guidelines updated as on

30.3.2022 outlines the components of the ECLGS with the extension from

ECLGS 1.0 to ECLGS 4.0 and also provides for the eligibility criteria.

13. Learned counsel appearing for the petitioners submits that the

petitioner no. 1 was eligible under the ECLGS 1.0 as well as 2.0 and 3.0

which were specifically extended to borrowers in the Hospitality sector.

According to counsel the petitioners were hence entitled to 40% of the total

outstanding as on 29.2.2020 as also 20% under ECLGS 1.0. Counsel

further submits that the petitioners' total credit outstanding as on

29.2.2020 was approximately Rs. 3 crores which makes the petitioners

eligible for 40% of Rs. 3 crores that is Rs. 1.20 crores.

14. Learned counsel appearing for the R3 Financial Institution submits

that the writ petition was filed primarily for setting aside the order passed by

the District Magistrate on 18.4.2022 under section 14 of the SARFAESI Act,

2002. Counsel submits that the eligibility criteria under the Scheme is

subject to the DPD (Days Past Dues) and the classification of the account as

SMA-1 and SMA-2. Counsel submits that the petitioners had every option to

apply under the Scheme but chose not to. Counsel submits that the

petitioner no. 1 maintains the two loan accounts with the R3 and that the

petitioners exceeded the DPD by 60 days and also submits that the

petitioners failed to make payments after 26.12.2019. Further, the

petitioners made continuous default in the payment of instalments which

rendered the petitioners ineligible for any benefit under the Scheme.

Counsel submits that the ECLGS on 23.5.2020 was modified on 26.11.2020

which incorporated an opt-in facility which means that the person must

make an application for obtaining the benefit of the Scheme

15. The objection taken on behalf of the R3 with regard to the primary

relief claimed in the writ petition has become academic since the order

passed by this court on 8.12.2022 records that the petitioners were already

before the Debts Recovery Tribunal as on that date against the order passed

by the District Magistrate under section 14 of the SARFAESI Act, 2002. The

petitioners have not prayed for any relief with reference to the order passed

by the District Magistrate and have restricted their prayers only to grant of

the benefit under the ECLGS.

16. The notice issued by the respondent under section 13(2) of the

SARFAESI Act specifically records that the loan accounts of the petitioners

were to be classified as NPA on 15.12.2020 in accordance with the master

directions issued by the Reserve Bank of India. The 13(2) notice further

records that the loan accounts of the petitioners however were not classified

as NPA on 15.12.2020 in view of the moratorium extended by RBI for 6

months on payment of instalments falling due between 1.3.2020 -

31.8.2020 vide circulars dated 27.3.2020 and 23.5.2020 of the RBI. The

respondent no. 3 has also referred to an interim order passed by the

Supreme Court on 23.3.2021 in Writ Petition (C) No. 476 of 2020; Small

Scale Industrial Manufacturers Association v. Union of India whereby the

Supreme Court directed that the loan accounts which were not declared

NPA till 31.8.2020 shall not be declared as NPA till further orders. The above

notice makes it clear that the petitioner's loan account remained standard /

regular as on 29.2.2020. The petitioner's loan account was classified as NPA

only subsequently on 31.3.2021.

17. The date 29.2.2020 is significant since the Operational Guidelines

updated as on 30.3.2022 by the National Credit Guarantee Trustee

Company (NCGTC) (Ministry of Finance, Government of India) provides for

the eligibility criteria under the Scheme and that every Member Lending

Institution (MLI) was to provide 100% guarantee in respect of eligible credit

facility extended by them to the borrowers whose accounts were standard as

on 29.2.2020. This would appear from Guideline 4 of the updated

Guidelines which defines an eligible borrower under the ECLGS 1.0.

Moreover, the petitioner no.1 was also eligible under the ECLGS 1.0, ECLGS

2.0 and ECLGS 3.0 which were specifically extended to borrowers in the

Hospitality Sector. These also show that the petitioner was entitled to 40% of

the total outstanding as on 29.2.2020.

18. Since the petitioners total credit outstanding as on 29.2.2020 was Rs.

3 crores the petitioner was entitled to receive 40% of the 3 crores i.e. Rs.

1.20 crores. The petitioners were otherwise entitled to 20% of Rs. 3 crores

under ECLGS 1.0 which is 60 lakhs. It must also be noted that since the

credit facility required to be granted under the Scheme is by way of a pre-

approved loan, 100% of which was guaranteed by the National Credit

Guarantee Trustee Company Limited (Ministry of Finance, Government of

India), every eligible borrower was statutorily entitled to additional credit

facility approved under the Scheme.

19. Moreover, contrary to the allegation made on behalf of the FI, the

Scheme does not require an eligible borrower to apply for the approved

credit facility under the Scheme. The relevant part of the Scheme shows that

lending institutions shall ensure that the benefit of the Scheme is extended

to borrowers having stress on account of Covid-19. This would appear from

the Resolution Framework issued by the RBI for Covid-19 related stress on

6.8.2020. There is nothing in the Resolution Framework issued by RBI to

require a borrower to apply for the benefit of the Scheme.

20. Moreover, FAQ 11 to the ECLGS updated as on 31.3.2022 and issued

by the National Credit Guarantee Trustee Company shows that the ECLGS

is a pre-approved loan and that an offer will come out from the MLI to the

eligible borrower for the pre-approved loan which the borrower may choose

to accept. If the borrower is not interested in availing of the loan, the

borrower may indicate accordingly. The Sector-specific thresholds, which is

part of the Circular issued by RBI on 7.9.2020 also includes hotels,

restaurants and tourism as sectors which were brought within the benefit as

a Covid-19 related measure affecting certain sectors more than others. The

respondent FI hence had a duty and obligation to extend the Scheme to the

petitioners.

21. The objections as to the eligibility of the petitioners is also without

basis since the said allegation is contrary to the notice issued by the

respondent FI to the petitioner under section 13(2) of the SARFAESI Act. The

notice reflects that the petitioners' accounts were standard on 29.2.2020

which makes the petitioner eligible under the Scheme. The Scheme makes it

clear that the only requirement for eligibility is that the borrowers' account

would have to be standard / regular as on 29.2.2020.

22. The document placed on behalf of the respondent FI reflects inter alia

that any reference to the petitioners' credit rating is irrelevant to the Scheme

which would also be evident from the FAQs in relation to the Circular by the

National Credit Guarantee Trustee Company. FAQ no. 85 specifically states

that the Scheme is designed with specified eligibility criteria and 100%

guarantee by the Government of India and that the coverage from NCGTC is

not restricted by a borrower's credit rating or Bureau Score. Moreover, the

opt-in facility referred to by the respondent is of 26.11.2020 which is also

much earlier to the Guidelines issued by NCGTC on 30.3.2022 which has

been relied on by the petitioners.

23. The above reasons make it clear that the respondent FI had a duty

and an obligation to extend the benefit of the ECLGS to the petitioners at

the relevant point of time and its inaction and failure to do so makes the

impugned action amenable to interference by the Writ Court. The reasons

for which the writ petition has been held to be eligible are also to be referred

to in this context. This Court had passed the judgment on substantially

similar facts in Olive Tree Retail Private Limited vs. South Indian Bank

Limited; 2023 SCC OnLine Cal 143 with reference to the ECLGS. The

material shown to this Court by the respondent does not persuade this

Court to come to a different view in the present facts.

24. WPA 12769 of 2022 is accordingly allowed by directing the R3

Financial Institution to consider grant of benefit of the ECLGS to the

petitioners in terms of the Resolution Framework/s circulated by the RBI

and the Guidelines published by the NCGTC on 30.3.2022 with regard to

the ECLGS. The eligibility of the petitioners shall be considered in

accordance with the relevant ECLGS and the Resolution Framework which

would apply to the petitioners' case. The respondent no. 3 shall complete the

entire exercise within an appropriate time frame so that the Scheme remains

subsisting and relevant as far as the petitioner is concerned.

25.. The writ petition is disposed of accordingly.

26. The prayer for stay of the judgment made on behalf of the Financial

Institutions is considered and refused.

Urgent Photostat certified copies of this judgment if applied for be

supplied to the respective parties upon fulfillment of requisite formalities.

(Moushumi Bhattacharya, J.)