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2022 Supreme(Online)(KER) 56252
HIGH COURT OF KERALA
MUHAMMED FINOSAR T.V., – Appellant
Versus
MICRO UNITS DEVELOPMENT & REFINANCE AGENCY LTD.(MUDRA LTD.), – Respondent
WA/441/2022
SRI.JAYASANKAR V, NAIR, CENTRAL GOVERNMENT COUNSEL (B/O) C.AJITH KUMAR K. P. SUDHIR M. PREMCHAND
Credit histories, including settlements, significantly influence loan eligibility under the framework established by regulatory acts.
Headnote:
Finance - Micro Finance - Credit Information Companies (Regulation) Act, 2005 - Section 2(d), 2(e), 2(f), 2(g), 17 - The court held that the creditworthiness assessment and CIBIL score under the Act justified the denial of loan under the MUDRA scheme based on a previous settlement.
Fact of the Case:
The appellant, an auto rickshaw driver, sought a MUDRA loan but was denied due to an unsatisfactory credit score stemming from a prior loan settlement. He contended that his liability was cleared but the credit reporting agency had not updated this information.
Issues: Whether the learned Single Judge erred in declining the relief based on the appellant's creditworthiness and the validity of the CIBIL score as it pertained to the loan application.
Ratio Decidendi: The court concluded that a borrower's history, including settlements, can adversely affect loan eligibility, validating the procedure followed by the bank in denying the loan.
Final Decision: The appeal is dismissed.
J U D G M E N T
Shaji P. Chaly, J.
The writ petitioner has filed the instant appeal challenging the judgment of the learned Single Judge in W. P. (C) No. 30487 of 2021 dated 18.02.2022 whereby the following reliefs sought for by the appellant was declined by the writ court:- “(i) A writ of mandamus or any other appropriate writ or order directing 3rd respondent to sanction and disburse Mudra Loan for petitioner's micro enterprise described in Ext. P4 to P6;
(ii) A writ of mandamus or any other appropriate writ or order directing 3rd respondent to consider Ext. P5 application submitted by writ petitioner and take a decision thereon, strictly adhering to Ext. P1 and P2 published by 1st respondent and Ext. P3 Master Directions published by the Reserve Bank of India, ignoring his credit score;
(iii) A writ of mandamus or any other appropriate writ or order directing respondents 4 and 5 to place on record discharge of petitioner's hire purchase liability and to refresh his credit score, within a time frame as fixed by this Hon'ble Court.”
2. Brief material facts for the disposal of the appeal are as follows:- 3. Appellant is an auto rickshaw driver and according to him, he used to take auto rickshaw on rent and ply in rural areas of Kozhikode District. Since the State Government recently granted thousand CNG/LPG/Electric auto rickshaw permits in Kozhikode city, appellant thought of purchasing a CNG auto rickshaw and applied for 'MUDRA' loan launched by the Micro Units Development & Refinance Agency Ltd. (MUDRA Ltd.), Mumbai, the 1st respondent, evident from Exts.
P1 and P2.
4. According to the appellant, in accordance with Exts. P1 and P2, the Reserve Bank of India has published Ext. P3 Master Directions in order to process applications of the applicants who applies for loan under MUDRA scheme, however according to the appellant, the 3rd respondent, namely the Branch Manager, Punjab National Bank, Kozhikode Link Road Branch, Kozhikode, declined to entertain Ext. P5 application stating that appellant's credit track record is not satisfactory, since there is a liability towards the 4th respondent Bank namely HDFC Bank, Nadakkavu Branch, Kozhikode.
5. The case projected by the appellant is that the liability towards the 4th respondent Bank was cleared on 23.11.2017 evident from Ext. P7 account statement issued by the 4th respondent Bank, however it is stated that the 4th respondent Bank has not communicated discharge of liability to the 5th respondent, namely the Managing Director, Trans Union CIBIL Limited, Mumbai, and therefore the CIBIL score still remains unsatisfactory.
6. Therefore it is contented that the impugned orders of the respondents are illegal and arbitrary which ought to have been interfered with by the writ court and granted the reliefs sought for by the appellants.
7. The 4th respondent Bank - HDFC Bank Ltd. has filed a counter affidavit basically contenting that the appellant was a chronic defaulter in repayment of the monthly installments, however later the appellant approached the Bank requesting for settlement of dues. 8. Accordingly the request of the appellant was accepted by the Bank and the transaction was settled by waiving an amount of Rs. 22,555/- and accordingly, the appellant has paid a total amount of Rs.
61,000/- towards one time settlement on 23.11.2017.
9. According to the 4th respondent, a settlement letter was issued to the appellant wherein it was specifically informed that under the Credit Information Companies (Regulation) Act, 2005 , information of loan repayment would be shared with Credit Information Bureau of India Ltd., the 5th respondent, or any other credit rating agency / regulatory body; that the Bank has categorically apprised the appellant that if the loan dues are paid off in settlement plan / compromise, the status of the borrower shall be displayed as 'settled' in the records of credit rating agency, which may act as hindrance in case of any credit assistance sought for by the borrower in fu
