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Kerala High Court
K.H Faisal vs The Regional Manager, Bank Of Baroda , ... on 11 December, 2025
2025:KER:95624
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE M.A.ABDUL HAKHIM
THURSDAY, THE 11TH DAY OF DECEMBER 2025 / 20TH AGRAHAYANA,
1947
WP(C) NO. 44800 OF 2025
PETITIONERS:
1 K.H FAISAL
AGED 31 YEARS
S/O K.K.HANEEFA,
KARENGAL HOUSE,
VELLARAKKAD P.O,
TALAPALLY TALUK,
THRISSUR DISTRICT,
PIN - 680584
2 K.S SUDEEP
AGED 31 YEARS
S/O SUBASH,
KOTTARAPPATTU HOUSE NANGALLOOR,
AKKIKAVU P.O,
TALAPALLY TALUK,
THRISSUR DISTRICT,
PIN - 680519
BY ADVS.
SHRI.N.ANILKUMAR
SHRI.K.R.RAJAGOPALAN NAIR (PERUMBAVOOR)
SMT.DEEPA DEVI C.
SMT.K.C.GAYATHRI
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2
RESPONDENTS:
1 THE REGIONAL MANAGER,
BANK OF BARODA,
REGIONAL OFFICE,
THRISSUR,
PIN - 680004
2 THE MANAGER,
BANK OF BARODA,
THRISSUR CITY MAIN BRANCH,
THRISSUR.,
PIN - 680001
BY ADV SRI.K.ANAND
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 11.12.2025, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
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3
C.R.
JUDGMENT
1. The Petitioners, who are two in number, have filed this
Writ Petition seeking direction to the Respondent/Bank
to close the loan account of a private limited company by
the name, M/s. Messwaala Enterprise Private Limited,
which is sanctioned as per Ext.P3, after accepting the
outstanding amount, and to issue NOC to HDFC Bank,
which has sanctioned a new loan of Rs.2.20 Crores to
the said Company as per Ext.P4. The Petitioners claim
that Messwaala Enterprise Private Limited is a startup
company promoted by them, and they are the directors
of the said company.
2. The case of the Petitioners is that Messwaala Enterprise
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Private Limited availed a Term Loan of Rs.60,00,000/-
and an Overdraft facility of Rs.40,00,000/- from the
Respondent/Bank. They are the guarantors of the said
loans. When they required an additional loan for the
expansion of their business, they approached the
Respondent/Bank by submitting the necessary
application. Since the Respondent/Bank did not sanction
the additional loan, Messwaala Enterprise Private
Limited approached the HDFC Bank, and the HDFC
Bank has sanctioned a Cash Credit loan of Rs.2.20
Crores on the personal guarantees of the Petitioners.
Messwaala Enterprise Private Limited produced the
Demand Drafts issued by the HDFC Bank out of the said
loan for closure of the loan account with the
Respondent/Bank. But the Respondent/Bank refused to
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close the loan account, insisting on closure of the loan
availed by another Company promoted by the Petitioners
by the name, Fasusa Private Limited. Hence, the
Petitioners have filed this Writ Petition.
3. The Respondent/Bank has filed a Counter Affidavit
opposing the prayers in the Writ Petition.
4. The Petitioners have filed the I.A. No.1/2025, producing
certain additional documents, and the Respondent/Bank
has also filed I.A. No.2/2025 for receiving certain
additional documents.
5. I heard the learned Counsel for the Petitioners, Sri.
Anikumar N., and the learned Counsel for the
Respondent/Bank, Sri. K. Anand.
6. The learned Counsel for the Petitioners invited my
attention to Ext.P4 Sanction Letter issued by the HDFC
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Bank granting Cash Credit loan of Rs.2.20 Crores. One
of the conditions for the disbursement of the loan is the
closure of the loans from the Respondent/Bank. The
Respondent/Bank illegally rejected the request of
Messwaala Enterprise Private Limited for closing the
loan, as per Ext.P7, on untenable reasons. The loan
granted to Fasusa Private Limited is sufficiently secured
by collateral security by the creation of mortgage over
immovable properties belonging to one of its directors.
There could not be any prejudice to the Bank on account
of the closure of the loan availed by Messwaala
Enterprise Private Limited. It would only improve the
recovery position of the Bank as the entire loan liability of
one of the companies is settled. The Respondent/Bank
cannot restrict the right of the borrower to avail a loan
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from any other Bank when better benefits are available
to them. The Petitioners were compelled to approach the
HDFC Bank since the Respondent refused to extend an
additional loan for the expansion of their business. The
learned Counsel further contended that the
Respondent/Bank relied on Ext.R1(a) Circular issued by
the RBI, which is not applicable to the case on hand, as
the same is applicable only to large exposure framework,
which would be equal to or above 10% of the Bank's
eligible capital base.
7. On the other hand, the learned Counsel for the
Respondent/Bank contended that the Petitioners have
no locus standi to file this Writ Petition, as Messwaala
Enterprise Private Limited is the borrower. The Ext.P9
Agreement produced by the Petitioners themselves
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would reveal the close operational and financial
connection between the aforesaid two companies, and
the aforesaid two companies have to be treated as
connected counterparties within the meaning of
Ext.R1(a) Circular. Both Messwaala Enterprise Private
Limited and Fasusa Private Limited are group
companies. They are to be treated as a single borrower.
As per RBI guidelines, the closure of one of the loans
belonging to such a single borrower could not be
permitted. It would adversely affect the recovery position
of the Bank. It will prejudice the Bank's credit exposure
in the account. As per the Ext.P3 Loan Sanction Letter,
when the borrower requires additional funds, the
borrower has to make an application and wait for the
reply of the Bank for a period of 60 days, and without
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waiting the said period, Messwaala Enterprise Private
Limited approached HDFC Bank and obtained the loan.
It is in violation of Clauses 7(e), (k) and (m) of Ext.P3
Loan Sanction Letter, which mandates permission of the
Respondent/Bank before obtaining a loan from any other
entity. Ext.R1(B), prepared at the time of granting the
loan to Messwaala Enterprise Private Limited, would
show that the loan was granted to Messwaala Enterprise
Private Limited, treating the said company as a group
company of Fasusa Private Limited. In such cases, it is
not permissible for Messwaala Enterprise Private Limited
to close one of the loans availed by the group
companies. The Respondent/Bank is legally justified in
refusing the closure of the loan. Even now, the
Respondent/Bank is ready to close the loan if the loan
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taken by Fasusa Private Limited is closed.
8. I have considered the rival contentions.
9. From the admitted facts, it is clear that Fasusa Private
Limited availed a Term Loan of Rs.60,00,000/- and an
Overdraft facility of Rs.40,00,000/- from the
Respondent/Bank on 02.01.2023 as per Ext.P10
Sanction Letter. Ext.P10 would show that Fasusa Private
Limited had furnished security for the said loan by
creating mortgage of two immovable properties and
hypothecation of movables and by submitting personal
guarantees of its three directors and other security
documents. Later, a Term Loan of Rs.60,00,000/- and
an Overdraft facility of Rs.40,00,000/- were granted to
M/s. Messwaala Enterprise Private Limited as per Ext.P3
Sanction Letter on 16.12.2024. The Petitioners are the
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common directors in both Companies. Fasusa Private
Limited is having another director who offered the
collateral security for the loan availed by Fasusa Private
Limited. The Ext.P9 Agreement would show the working
arrangement between the two companies. Ext.R1(B)
Communication addressed to the Chief Manager of the
Respondent/Bank was prepared for the purpose of
providing a loan to Messwaala Enterprise Private
Limited. It shows that the loan was granted to
Messwaala Enterprise Private Limited as a group
company of Fasusa Private Limited. On account of these
facts, it could be held that both companies are group
companies.
10. The question is, is it permissible for one of the group
companies to close the loan without closing the loan of
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the other group companies. Even though the learned
Counsel for the Respondent/Bank relied on Ext.R1(a)
Circular, as rightly pointed out by the learned Counsel for
the Petitioners, the said Circular is applicable only to the
large exposure framework. The 'large exposure' is
defined in Clause 4 therein. It would show that large
exposure is equal to or above 10% of the Bank's eligible
capital base. The purpose of the said Circular is to avoid
concentration of assets of the Bank in a single
counterparty or in a group of connected counterparties. It
deals with the limitation of the Banks to lend to a single
borrower, risking the capital of the Banks. It is intended
to ensure the financial stability of the Banks. The subject
loan is not a large exposure, and hence Ext.R1(a)
Circular is not applicable. Since Ext.R1(a) Circular is not
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applicable to the case on hand, the definition of
connected counterparties in Ext.R1(a) Circular has no
relevance in this case. The learned Counsel could not
point out any guideline of RBI which mandates that when
loans are availed by different companies forming a group
of companies, one of the companies cannot close the
loan without the closure of the loan by the other
companies.
11. The learned Counsel for the Respondent/Bank relied on
Clauses 7(e), (k) and (m) in Ext.P3 Sanction Letter,
which prevents the borrower from availing any other
financial assistance during the currency of the loan from
any other entity without the permission of the
Respondent/Bank. I am of the view that those clauses
are not available to prevent the borrower from obtaining
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a loan from any other entity for closing the loan from the
Respondent/Bank. Those clauses are applicable only if
the borrower continues with the loan and avails financial
assistance from any other entity. When better benefits
are available to the borrower, it is at the discretion of the
borrower to avail financial assistance from any other
Bank, so long as it does not violate any of the
contractual terms or RBI Circular. Even before this
Court, the Respondent/Bank has no case that it is ready
to provide additional loan required by Messwaala
Enterprise Private Limited. In such a case, Messwaala
Enterprise Private Limited is fully justified in approaching
HDFC Bank, which sanctioned the loan. Messwaala
Enterprise Private Limited is utilizing a part of the loan
granted by HDFC Bank to close the loan availed from
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the Respondent/Bank.
12. The next contention of the learned Counsel for the
Respondent/Bank is that the closure of one of the loans
by one of the Group Companies is prejudicial to the
credit exposure of the Bank. Going by Exts.P3 and P10
Sanction Letters, it is clear that the security furnished for
the loan availed by Fasusa Private Limited is stronger
than the security furnished for the loan of Messwaala
Enterprise Private Limited. There is no mortgage security
for the loan of Messwaala Enterprise Private Limited.
The Respondent/Bank will not be benefited in any way
by retaining the security furnished for the loan of
Messwaala Enterprise Private Limited, for the loan
availed by Fasusa Private Limited. There will not be any
decrease in security. The Respondent/Bank will only be
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benefited from the closure of the loan of Messwaala
Enterprise Private Limited, which is not having much
security, since the liability of the group companies is
reduced. Hence, the contention of the learned Counsel
for the Respondent/Bank that the Bank will be prejudiced
on closure of the loan account by Messwaala Enterprise
Private Limited is unsustainable.
13. The learned Counsel for the Respondent/Bank
challenged the locus standi of the Petitioners to file the
Writ Petition. Admittedly, the Petitioners are the only
directors of Messwaala Enterprise Private Limited. They
are the guarantors of the loan, which is the subject
matter of the Writ Petition. Hence, they can very well
maintain the Writ Petition even without M/s. Messwaala
Enterprise Private Limited on the party array.
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14. In view of the aforesaid discussion, this Writ Petition is
allowed, directing the Respondent/Bank to accept the
outstanding loan amount with respect to Ext.P3 loan
from M/s. Messwaala Enterprise Private Limited and
issue NOC to HDFC Bank to enable M/s. Messwaala
Enterprise Private Limited to avail the loan sanctioned as
per Ext.P4, within a period of two weeks from the date of
receipt of a copy of this judgment.
Sd/-
M.A.ABDUL HAKHIM
JUDGE
sms
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APPENDIX OF WP(C) NO. 44800 OF 2025
PETITIONER EXHIBITS
Exhibit P1 THE TRUE COPY OF THE STARTUP
CERTIFICATE ISSUED ON 01/06/2023
Exhibit P2 TRUE COPY OF THE CERTIFICATE OF
INCORPORATION ISSUED BY THE DEPUTY
REGISTRAR ON 11/10/2022
Exhibit P3 TRUE COPY OF THE SANCTION LETTER DATED
16/12/2024
Exhibit P4 TRUE COPY OF THE SANCTION LETTER WITH
TERMS AND CONDITIONS
Exhibit P5 TRUE COPY OF THE EXTRACT OF EMAIL
Exhibit P6 TRUE COPY OF THE EXTRACT OF THE EMAIL
Exhibit P7 THE TRUE COPY OF THE REPLY MAIL FROM
BANK
Exhibit P8 THE CERTIFICATE OF INCORPORATION OF
FASUSA PRIVATE LTD DATED 17/02/2022
Exhibit P9 TRUE COPY OF THE CONTRACT MADE BETWEEN
THESE TWO COMPANIES ON 03/08/2023
Exhibit P10 TRUE COPY OF THE LOAN SANCTION LETTER
OF FASUSA PRIVATE LTD
Exhibit P11 GSTR-1 SHOWING THEN DETAILS OF OUTWARD
SUPPLIES OF GOODS OR SERVICES
Exhibit P12 THE BANK STATEMENT OF FASUSA PRIVATE
LTD FOR THE PERIOD FROM 01/07/2025 TO
04/12/2025
Exhibit P13 THE INCOME TAX UPDATED RETURN
ACKNOWLEDGEMENT OF FASUSA PRIVATE LTD.
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RESPONDENT EXHIBITS
EXHIBIT R1(a) The True Copy of the RBI I,arge Exposue
Framework (LEF)
DBR.No.BP.BC.43/21.01.003/2018-19 dated
03.06.2019
Exhibit R1(B) THE TRUE COPY OF THE SANCTION NOTE OF
M/S MESSWALA DATED NIL
Exhibit R1(C) THE TRUE COPY OF THE OVERDRAFT ACCOUNT
STATEMENT OF M/S FASUSA PVT. LTD.
BEARING ACCOUNT NO. 08350400000210
