The court affirmed that a bank can pursue simultaneous recovery actions and suits for loan defaults, even when loans are covered by a guarantee scheme.

JUDGMENT

Dated this the 4 th day of April, 2023 Captioned writ petitions are filed by one and the same person, the proprietor of a printing unit by name, “Gayathri Graphics”, Kalady, Ernakulam, challenging the revenue recovery action initiated by the Union Bank of India – respondents 1 and 2, as per the provisions of the Kerala Revenue Recovery Act, 1968 . According to the petitioner, the unit is a Micro, Small and Medium Enterprises, which was sanctioned with two loans as per a scheme launched by the Union Bank of India, Kalady Branch. Admittedly, repayment was defaulted, consequent to which, the bank has filed O.S.Nos.175/2019 and 176 of 2019 before the Munisiffs court, to recover the amounts of Rs.6,34,516/- and Rs.1,49,511/- along with interest and cost.

2. The case projected by the petitioner is that while the suits are so pending revenue recovery action is initiated by the respondent bank as per the provisions of the Kerala Revenue Recovery Act, 1968 and consequently, the revenue authorities have issued notices under sections 7 and 34 of the Act, 1968. It is thus challenging the legality and correctness of the said actions of the bank, the writ petition is filed. It is also contended that since the loans are sanctioned to the petitioner under the Micro, Small and Medium Enterprises Scheme, there is a clear prohibition from initiating for recovery of the amounts. According to the petitioner, the Scheme has been launched with a laudable objective and the same is meant for upliftment of poor entrepreneurs like the petitioner. That apart, it is contended that the loans granted to the petitioner would come under the purview of the Prime Ministers Mudra Yojana Scheme and the same has been given without any security and is fully insured.

3. The sum and substance of the contention is that even if the petitioner has defaulted for payment of money, the bank can recover the amounts due from the Credit Guarantee Fund for Micro Units (CGFMU). It is the further contention of the petitioner that the filing of the suit as well as the recovery action are illegal, unjust and unconstitutional. That apart it is contended that the bank ought to have taken note of the fact that due to COVID-19 pandemic, the industry had to be closed down and therefore, the bank ought to have refrained itself from resorting to the legal actions against the petitioner. It is thus seeking to quash the suit proceedings as well as the revenue recovery action, the writ petition is filed.

4. The Branch Manager of the Union Bank of India – the 1 st respondent, has filed a detailed counter affidavit disputing the claims and demands raised by the petitioner. Among other contentions, it is stated that the petitioner was granted loans under the Mudra Scheme, as a term loan under the Micro, Small and Medium Enterprises category with guarantee coverage. Fact remains, the petitioner had been a defaulter in the year 2016 itself, evident from Exhibit R1A notice issued by the bank to the petitioner dated 4.10.2016. After receipt of notice, the petitioner approached the bank and gave a reply dated 27.6.2017, admitting that he is a defaulter and assured the bank that the entire arrears with the bank will be cleared and the loan accounts will be closed, evident from Exhibit R1B dated 27.6.2017.

5. The sum and substance of the contentions advanced by the bank is that the bank is entitled as of right to institute suits, and simultaneously initiate recovery proceedings resorting to the provisions of the Act, 1968. That apart, it is submitted that the impression of the petitioner that since the loan is covered by the Credit Guarantee Fund Trust for Micro & Small Enterprises, the petitioner is not liable to make repayment, is not correct. According to the bank, the Credit Guarantee Fund Trust for Micro & Small Enterprises had been set up by the Government of India and the Small Industries Development Bank of India in August, 2000, to make the collateral free credit facilities availabl