M/S Esperanza Educational ... vs The Union Of India And 3 Others
2022 Latest Caselaw 3553 Tel

             THE HON'BLE Dr. JUSTICE G. RADHA RANI

                   WRIT PETITION No.10665 OF 2022

ORDER:

This writ petition is filed to issue writ of mandamus declaring the

action of the 3rd respondent in rejecting the complaint bearing

No.N202122009017829 filed by the petitioner Society under Clause

16(2)(a) of the Reserve Bank -Integrated Ombudsman Scheme, 2021 vide

orders dated 27.01.2022 on the ground that no deficiency in service is

attributable to the 4th respondent, as illegal, arbitrary and violative of

Articles 14, 19 and 21 of the Constitution of India and Section 35(a) of the

Reserve Bank of India Act and contrary to the Resolution Framework 2.0

dated 05.05.2021 issued by the 2nd respondent and consequently to set

aside the orders dated 27.01.2022 issued by the 3rd respondent.

2. Heard Sri PSS Kailashnath, learned counsel for the petitioner

and Sri P. Praveen Kumar, learned panel counsel for the respondent No.4

Bank.

3. The learned counsel for the petitioner submitted that the

petitioner Society was running a chain of Pre-school and Child care centres

in Hyderabad under the name and style of "Esperanza Preschool & 24x7

Care" and was providing services in early childhood education and child Dr.GRR,J

care since the year 2007. During Covid-19 pandemic, which began in

March, 2020, the Preschool and child care services industry was among the

worst hit due to lockdown restrictions imposed by the Government as well

as the reluctance of the parents to send their children to the pre-schools, the

revenue of the petitioner society became abysmal as the only source of

income for the petitioner was through the revenue generated by its pre-

schools. The pre-pandemic strength of the preschool of the petitioner was

about 1200 students, whereas as on 01.11.2021, only 12 students were

availing its services.

3.1. The petitioner society had taken two vehicle loans from the

4th respondent on 06.09.2017 and 02.12.2019 vide loan account

Nos.ALN000600223189 and UCL000600594526 for an amount of

Rs.1,45,10,000/- and Rs,10,00,000/- respectively. Vide notification, dated

27.03.2020, the 2nd respondent introduced Covid-19 Regulatory Package to

mitigate the burden of debt servicing, brought about by destructions on

account of Covid-19 pandemic and permitted all banking entities to grant a

moratorium of three months on payment of all instalments falling due

between 01.03.2020 and 31.05.2020. Thereafter, the aforesaid moratorium

period was extended for another period from 01.06.2020 to 31.08.2020 by

the 2nd respondent vide notification dated 23.05.2020. Vide notification Dr.GRR,J

dated 06.08.2020, the 2nd respondent decided to provide a "Resolution

Framework for Covid-19 related stress" to enable the lenders to implement

the resolution plan in respect of eligible corporate exposures, without

change in ownership and personal loans, while classifying such exposures

as standard, subject to specified conditions. Vide E-mail communication

dated 01.09.2020, the petitioner society requested the 4th respondent to

restructure its loans or extend the moratorium till 30.11.2021.

Subsequently, the petitioner society renewed the aforementioned request to

the 4th respondent vide e-mail communication dated 01.12.2020. Vide

sanction letter dated 18.03.2021, the 4th respondent restructured the loan

accounts of the petitioner society i.e. loan account No. ALN000600223189

for 48 months and loan account No.UCL000600594526 for 53 months for

6 months moratorium on EMI repayment of each loan account thereby

extending moratorium period till October, 2021. When the petitioner

society applied for extension of moratorium period, it was anticipating to

reopen its pre-school around June - September 2021 and reach normal

course of business around November 2021. Due to the unabating pandemic

situation and the delay in administering vaccinations to young children, the

preschool run by the petitioner society continued to remain inoperative as

the parents were unwilling to send their children to the preschools. During Dr.GRR,J

the second wave of the Covid-19 pandemic, vide notification dated

05.05.2021, the 2nd respondent introduced the "Resolution Framework 2.0:

Resolution on Covid-19 related stress of Individuals and Small Business"

(hereinafter referred to as "Resolution Framework 2.0"). As per this

Resolution Framework 2.0, the petitioner society was entitled to an

extended moratorium period of 24 months or 2 years. However, the last

date for invocation of resolution under the window was 30.09.2021. The

petitioner society was aware that the restructuring window provided under

Resolution Framework 2.0 would close by September, 2021. In the month

of August, 2021, the petitioner society sought to avail invocation of the

resolution under the Frameworks and on multiple occasions, started

communicating with the 4th respondent by telephonic means. The

personnel of the 4th respondent failed to initiate timely action against the

request of the petitioner society and kept delaying the invocation process

by claiming that the petitioner society was not entitled to avail

restructuring of its loan accounts for the second time. Aggrieved by the

evasive response of the personnel of the 4th respondent, the petitioner

society contacted senior level personnel of the said respondent and vide e-

mail communication dated 30.10.2021, the 4th respondent requested the

petitioner society to provide requisite document for restructuring of its loan Dr.GRR,J

accounts which included returns filed for the Financial Year 2020-21 and

GST returns copy. On 01.11.2021 in pursuance of the communication

with the 4th respondent in August, 2021, the petitioner society submitted

the documents for restructuring of its loan accounts under Resolution

Framework 2.0 vide notification dated 05.05.2021 released by the 2nd

respondent and reiterated its earlier request for an extension in the

moratorium period until June, 2022. In respect of non-submission of

returns for the Financial Year 2020-21, the petitioner society was unable to

pay some statutory dues, due to the severe shortage of funds and hence,

returns could not be filed. Further, the petitioner society being an

Educational Society no GST was applicable on its services and no GST

certificate was available, therefore, GST return of 6 months could not be

submitted. The other documents were submitted by the petitioner society

vide its e-mail communication dated 03.11.2021. The 4th respondent vide

demand notice dated 13.11.2021 called upon the petitioner society to pay

the overdue amount of Rs.5,64,237/- immediately. Upon receipt of the

notice vide e-mail communication dated 28.11.2021 addressed to the 4th

respondent, the petitioner society complained against the delay of the bank

in processing its request for restricting of the loan accounts under the

Resolution Framework 2.0. But, the same was rejected without any Dr.GRR,J

consideration of Covid-19 stress being faced by the petitioner society. The

circulars and directions issued by the RBI were binding on all the banks

including the 4th respondent. The 4th respondent issued the demand notice

dated 13.11.2021 in an arbitrary manner despite the petitioner society

having taken appropriate steps to avail restructuring of its loan accounts

within the stipulated period i.e. before 30.09.2021 in the month of August,

2021. In response to its complaint dated 28.11.2021, the 4th respondent

vide e-mail communication dated 29.11.2021 suggested petitioner society

to contact its Relationship Manager or to visit the nearest Retail Assets

branch for the loan account to be restructured. Being aggrieved by the

recalcitrant attitude of the 4th respondent in failing to provide any relief and

continued demand for repayment of the overdue amounts, the petitioner

society filed complaint before the 2nd respondent which was registered as

complaint No.N202122009017829 on 09.12.2021. In the interregnum, the

4th respondent issued a loan recall notice dated 15.12.2021 informing the

petitioner society that in view of the alleged breach committed due to

failure to pay the contractual amount, the 4th respondent was recalling the

entire outstanding loan and called upon the petitioner society to remit a

sum of Rs.1,01,97,907/- with interest at 2% per month from the date of

default till actual realization within seven days from the date of notice. In Dr.GRR,J

the event of failure to remit the aforementioned amount, the 4th respondent

stated that it would repossess and sell the hypothecated assets. On

31.12.2021 the 4th respondent addressed an e-mail to the petitioner society

in reference to the latter's complaint before the 2nd respondent. On the

other hand, in the e-mail communication, the 4th respondent admitted that

the petitioner society approached the bank in the month of August, 2021

and that it had advised the petitioner society to contact its Relationship

Manager. The non-submission of any written request or document by the

petitioner society to the 4th respondent was only on account of the evasive

responses of the personnel of the 4th respondent in processing the oral

request of the petitioner society and the failure of the 4th respondent to

inform the petitioner society that the request had to be made in written

form. Further, the petitioner society immediately, forwarded the requisite

document vide e-mail dated 03.11.2021 in response to the e-mail dated

30.10.2021 sent by the 4th respondent. Vide order dated 27.01.2022, the

3rd respondent closed the complaint submitted by the petitioner society as

rejected under Section 16(2)(a) of the Reserve Bank - Integrated

Ombudsman Scheme, 2021 holding that there was no deficiency in service

on the part of the 4th respondent to facilitate the request of the petitioner

society to restructure its loan accounts. Aggrieved by the order dated Dr.GRR,J

27.01.2022 issued by the 3rd respondent, the petitioner society filed this

petition.

4. The learned Panel Counsel for the 4th respondent submitted that

the 2nd respondent issued 2.0 guidelines dated 05.05.2021 for restructuring

of loan accounts extending moratorium period from the month of October

2021 to March, 2022 and the applicants should submit their request before

30.09.2021. The 2nd respondent stated in the guidelines that the decision

with regard to the above shall be taken by lending institutions by

30.09.2021. The petitioner did not come forward with extension of

moratorium before 30.09.2021. According to his own admissions in the

writ petition, there was no request application before the 4th respondent for

extension of moratorium period from October, 2021 to March, 2022. The

petitioner made application for restructuring of loan under guidelines 2.0

scheme on 01.11.2021 to the respondent. The NACH presentation made

on both loan accounts of the petitioner from October, 2021 onwards had

been getting bounced with the reason 'insufficient balance' and the loan

accounts were overdue for payments. As such, the 4th respondent issued

legal notice dated 13.11.2021 for repayment of loan after completion sof

moratorium period given to the petitioner. But, the petitioner made

another complaint to the respondent through e-mail dated 28.11.2021 for Dr.GRR,J

restricting of loan accounts under 2.0 guidelines of the 2nd respondent for

moratorium period from October, 2021 to June, 2022. Thereafter, the 4th

respondent issued letter dated 31.12.2021 to the petitioner informing that

written request/documents submission to the respondent bank for

restructuring under 2.0 Framework made on or before 30.09.2021 only

were eligible for restructuring norms. The petitioner approached the 3rd

respondent Ombudsman and made the complaint against the 4th

respondent. The 4th respondent made submissions with documents before

the 3rd respondent and the 3rd respondent passed orders dated 27.01.2022

that there was no deficiency in service that could be attributed towards the

respondent bank, hence, prayed to dismiss the writ petition.

5. Perused the record. The record would disclose that the petitioner

society and the petitioner were granted two car loans for a new car and a

used car in the year 2017 and 2019 for a loan amount of Rs.1,45,10,000/-

and Rs.10,00,000/- respectively from the 4th respondent's branch at

Hyderabad. Due to Covid-19 pandemic, the 2nd respondent issued

notification with guidelines for moratorium of loans due to lockdown

restrictions imposed by the 1st respondent. The petitioner availed

moratorium of loan accounts under 1.0 scheme. The 2nd respondent

extended moratorium time vide notification dated 23.05.2020 and Dr.GRR,J

06.08.2020. The petitioner requested for restructuring of loan accounts

and the same was acknowledged and the loans of the petitioner were

restructured as per 2nd respondent's guidelines. The petitioner made

request letter in the month of February, 2021 and submitted the restructure

forms dated 10.03.2021 to the respondent Bank and the loans were

restructured respectively for 48 and 53 months with six months

moratorium for EMI repayment of each loan account, as per the sanction

letter dated 18.03.2021. The EMI's of the petitioner would start from

October, 2021 as per the restructured loan accounts. The 2nd respondent

issued 2.0 Guidelines dated 05.05.2021 for restructuring of loan account

and extended the moratorium period from the month of October, 2021 to

March, 2022. The applicants should submit their request before

30.09.2021. But, the petitioner did not come forward for extension of

moratorium before 30.09.2.021. Admittedly, no request application was

made by the petitioner before the 4th respondent for extension of

moratorium period from October, 2021 to March, 2022. The petitioner

made application for restructuring of loan account under Guidelines 2.0

scheme on 01.11.2021. Thus, the application for restructuring of loan as

per the 2.0 Guidelines scheme was not filed within time. The said

application was refused by the 4th respondent stating that the petitioner was Dr.GRR,J

not eligible for restructuring norms. The petitioner approached the 3rd

respondent Ombudsman and made the complaint. The 3rd respondent, after

consideration, passed orders dated 27.01.2022 stating that there was no

deficiency in service that could be attributed towards the respondent Bank.

6. The contention of the learned counsel for the petitioner was that

the order of the 3rd respondent was a non-speaking order. It was not a

reasoned order. The 3rd respondent failed to take into consideration that

the 4th respondent admitted that the petitioner society had approached the

bank in the month of August, 2021 for restructuring its loan accounts. The

4th respondent was attempting to shirk its responsibility on the pretext of

non-submission of any written request in respect of loan re-structuring.

The requirement of a written request/document seeking restructuring was

neither prescribed under Resolution Framework 2.0 nor the 4th respondent

requested the petitioner society to submit its restructuring request in a

written format. On the basis of a mere technicality, the 4th respondent was

denying the petitioner society the option to restructure its loan accounts as

well as the extended moratorium period till June, 2022 and relied upon the

judgment of the Hon'ble Apex Court in Sardar Associates and others v.

Punjab and Sind Bank and others1 on the aspect that the Reserve Bank

AIR 2010 SC 218 Dr.GRR,J

of India circulars were binding on all the banks and of the Judgment of this

Court in Principal Commissioner of Service Tax, Customs, Central

Excise & Service Tax v. R.R. Global Enterprises2 (P) Ltd. on the aspect

that substantive benefit cannot be denied for procedural irregularity.

7. There is no dispute about the fact that the guidelines issued by

the Reserve Bank of India were binding on all the banks. The 4th

respondent had also not denied the same and was only contending that the

petitioner had not made any written request within the period prescribed by

the Reserve Bank of India in the said guidelines. As per 2.0 Guidelines

dated 05.05.2021, for restructuring of loan accounts and extending

moratorium period from October 2021 to March 2022, the applicants

should submit their request before 30.09.2021 and a decision with regard

to same shall be taken by the lending institutions by 30.09.2021.

Admittedly, the written request was made by the petitioner only on

01.11.2021. Thus, the petitioner had not complied the guidelines

prescribed by the RBI for restructuring of loan accounts and for extending

the moratorium period from October, 2021 to March, 2022. The

contention of the petitioner was that non-submission of any written request

by the petitioner society to the 4th respondent was only on account of the

2016 (58) GST 13 (Andhra Pradesh) Dr.GRR,J

evasive response of the personnel of the 4th respondent and the failure of

the 4th respondent to inform the petitioner society that the request ought to

be made in a written format. Thus, the petitioner was throwing blame on

the 4th respondent and was contending that substantive benefits could not

be denied for procedural irregularities. When the availability of the benefit

is dependent upon the fulfilment of certain conditions, the said conditions

cannot be dismissed as matters of procedure. The petitioner failed to file

the application within the prescribed period as per the guidelines. To

consider that he was not aware of the same, it was not the first time he

sought for extension of the moratorium period and restructuring of loan

instalments. He had already applied earlier and had successfully availed

the same as per 1.0 Guidelines. Thus, he could not throw the blame on the

respondents stating that the respondents failed to inform him that the

request ought to be made in a written format. Considering all the issues

and observing that that as there was no deficiency in the service that could

be attributed towards the bank only, the 3rd respondent dismissed the

complaint filed by the petitioner. This Court finds no illegality in the order

of the 3rd respondent in rejecting the complaint of the petitioner and finds

no reason to set aside the order dated 27.01.2022 issued by the 3rd

respondent.

Dr.GRR,J

8. In the result, the Writ Petition is dismissed. No order as to costs.

Miscellaneous Petitions pending, if any, shall stand closed.

_____________________ Dr. G. RADHA RANI, J July 08, 2022 KTL