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2023 Supreme(Online)(KER) 5462
HIGH COURT OF KERALA
V. G. Arun, J
SARATH G.NAIR – Appellant
Versus
UNION OF INDIA – Respondent
WP(C) 18055/2021
P.A.NOOR MUHAMED, BOBBY K.PAUL, S.GIFFARA, P.A.ABHILASH, BILAL NIAMATHULLA, SRI.GIRISH KUMAR.V., CGC LAL K.JOSEPH
Loans secured against vehicles can be considered property under the Emergency Credit Line Guarantee Scheme, supporting eligibility for financial assistance.
Headnote:
ECLGS - Emergency Credit Line Guarantee Scheme - MSME Development Act 2006 - Sections 9, 10 - The court interpreted the eligibility criteria for ECLGS 3.0, determining that loans secured against vehicles qualify as property, contrary to the bank's restrictive interpretation.
Fact of the Case:
The petitioner, a small enterprise operator, sought financial assistance under ECLGS 3.0 after being denied due to the classification of loans secured by vehicles, which the bank interpreted as ineligible business loans.
Finding of the Court:
The court rejected the bank's narrow interpretation of property concerning ECLGS eligibility, affirming that the petitioner satisfied all eligibility conditions under the scheme.
Issues: The primary issue was whether loans secured by vehicles qualify under the ECLGS 3.0 scheme, as interpreted by the bank.
Ratio Decidendi: The court held that the meaning of 'property' is not restricted to immovable assets and emphasized that regulatory measures should be interpreted to benefit MSMEs, supporting broader eligibility under ECLGS.
Final Decision: The petition was dismissed, affirming the bank's denial of benefits under ECLGS 3.0.
JUDGMENT
Dated this the 6th day of January, 2023 The petitioner is the Proprietor of a small enterprise named 'Surya Travels', conducting tour operations, including interstate passenger transport. Surya Travels is registered under the Ministry of Micro, Small and Medium Enterprises (Udayam Registration). In between the period, 15.11.2018 and 07.02.2020, respondent No. 9 sanctioned 11 loans totaling a sum of Rs.6,74,35,327/- to the petitioner for purchasing 11 stage carriage vehicles for augmenting the business. While repayments were being effected towards the loans, Covid pandemic struck, affecting the business and thereby, the life and livelihood of all persons like the petitioner. With the objective of lending a helping hand to the MSME units to tide over the crisis, various relief measures were brought out by the Central Government. One such relief measure is the Emergency Credit Line Guarantee Scheme (ECLGS). The objective of the scheme is to provide 100% guarantee coverage to Banks and NBFCs, so as to enable them to extend emergency credit facilities to business enterprises/MSMEs to meet their additional term loan/additional working capital requirements. The ECLG Scheme was launched through the National Credit Guarantee Trustee Company Limited (for short NCGTC Ltd), an entity established by the Department of Financial Services, Ministry of Finance as a wholly owned company of the Government of India to act as a common trustee company for multiple credit guarantee funds. The NCGTC Ltd has clarified that ECLGS provides 100% guarantee coverage by the NCGTC Ltd to Member Lending Institutions (MLIS) on Guaranteed Emergency Credit Line (for short GECL) upto Rs.3 Lakh Crore to eligible MSMEs. GECL is a scheme whereby a lender gives a top up loan of 20% (40% in respect of borrowers of hospitality sector, travel and tourism sector etc.) of the borrower's total outstanding credit as on 29.02.2020. As the accounts of the petitioner with respondent No. 9, which is a Member Lending Institution covered under ECLGS, were standard and the accounts satisfied all the requisite conditions for being granted the benefits under the ECLG Scheme, respondent No. 9 extended the benefits due under ECLGS 1.0. to the petitioner’s enterprise.
2. The ECLG Scheme has four components namely ECLGS 1.0, 2.0, 3.0 and 4.0. For easy reference, the details of the four components are extracted hereunder;
“Under ECLGS 1.0, individuals are allowed coverage if they are either (i) MUDRA borrowers or have taken assistance for (ii) commercial purpose vehicle, (iii) commercial / construction equipment, (iv) diagnostic equipment or (v)
have taken loan against property for their own business.
Under ECLGS 2.0, individuals are not eligible.
Under ECLGS 3.0, such of the individuals who have taken loan against 'property' for their own business which falls within one of the specified sectors under ECLGS 3.0 (i.e. one Hospitality/ Travel/Tourism/ Leisure/Sporting/Civil Aviation)
would be eligible, provided all other conditions are met.
ECLGS 4.0 refers to the scheme for providing 100% guarantee coverage by NCGTC to its Member Lending Institutions against extension of eligible credit facility to existing hospitals/ nursing homes/ clinics/medical colleges/units engaged in manufacturing of liquid oxygen, oxygen cylinders etc. who have a loan outstanding with a lending institution (not necessarily MLI) and whose days past due status as on March 31, 2021 was upto 90 days.”
3. According to the petitioner, since his enterprise is eligible and entitled to get the benefits under ECLGS 3.0, Ext.P6 application was submitted to the 9th respondent Bank, requesting to extend the benefit. By Ext. P7 letter dated 09.07.2021, the Bank refused to grant the benefits due under ECLGS 3.0. The reason stated for such refusal is that, as per point No. 141 of the Frequently Asked Questions (FAQs) dated 07.06.2021 of the NCGTC Ltd, only those individuals who have taken loan against property are eligible for
