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2023 (3) TMI 1533 - HC - Indian LawsGrant of benefit of an Emergency Credit Line Guarantee Scheme (ECLGS) to the petitioners - whether the petitioners are entitled to grant of the benefit of the ECLGS and whether the respondent no. 3 (R3) which is a private Financial Institution comes within the jurisdiction of a Writ Court for issue of a writ of Mandamus against the respondent no. 3? - HELD THAT - The respondent FI had a duty and an obligation to extend the benefit of the ECLGS to the petitioners at the relevant point of time and its inaction and failure to do so makes the impugned action amenable to interference by the Writ Court. The reasons for which the writ petition has been held to be eligible are also to be referred to in this context. This Court had passed the judgment on substantially similar facts in OLIVE TREE RETAIL PRIVATE LIMITED AND ORS. VERSUS SOUTH INDIAN BANK LIMITED AND ORS. 2023 (1) TMI 1423 - CALCUTTA HIGH COURT with reference to the ECLGS. The material shown to this Court by the respondent does not persuade this Court to come to a different view in the present facts. Petition is accordingly allowed by directing the R3 Financial Institution to consider grant of benefit of the ECLGS to the petitioners in terms of the Resolution Framework/s circulated by the RBI and the Guidelines published by the NCGTC on 30.3.2022 with regard to the ECLGS. The eligibility of the petitioners shall be considered in accordance with the relevant ECLGS and the Resolution Framework which would apply to the petitioners case. The writ petition is disposed of.
Issues Involved:
1. Whether the respondent no. 3 Finance Company is amenable to writ jurisdiction under Article 226 of the Constitution of India. 2. Whether the petitioners are entitled to the benefit of the Emergency Credit Line Guarantee Scheme (ECLGS). 3. The eligibility of the petitioners under the ECLGS and the obligations of the respondent no. 3 Financial Institution. Issue-wise Detailed Analysis: 1. Amenability to Writ Jurisdiction: The primary issue was whether the respondent no. 3, a private financial institution, falls within the jurisdiction of a Writ Court under Article 226 of the Constitution. The court examined whether the respondent no. 3 exercises public functions or functions with a public interest element. The court referenced several Supreme Court decisions establishing that private entities can be subject to Article 226 when performing public duties. The court found that the ECLGS, floated by the Ministry of Finance, was designed to serve public interest by providing financial stability during the Covid-19 pandemic. The respondent no. 3, as a Member Lending Institution under the Scheme, was seen as performing a public function. Consequently, the court held that the respondent no. 3 is amenable to writ jurisdiction under Article 226. 2. Entitlement to the Benefit of ECLGS: The court addressed the question of whether the petitioners were entitled to the benefits under the ECLGS. It was established that the Scheme provided 100% guarantee coverage for additional working capital term loans for eligible institutions. The Scheme's objective was to mitigate financial stress due to the pandemic, thus having a public interest element. The petitioners argued that they were eligible under ECLGS 1.0, 2.0, and 3.0, particularly extended to the Hospitality sector. The court noted that the petitioners' loan accounts were standard as of 29.2.2020, making them eligible under the Scheme. The court emphasized that the Scheme did not require an application from eligible borrowers, as it was a pre-approved loan offer from the lending institution. 3. Eligibility and Obligations of Respondent No. 3: The court examined the eligibility criteria and the obligations of the respondent no. 3 under the ECLGS. The Scheme required that borrowers' accounts be standard as of 29.2.2020, which was satisfied by the petitioners. The court noted that the respondent no. 3 had a duty to extend the Scheme's benefits to eligible borrowers, contrary to its claims that the petitioners were ineligible due to defaults. The court highlighted that the Scheme's eligibility was not dependent on the borrower's credit rating or Bureau Score. The court found that the respondent no. 3's failure to extend the benefits constituted grounds for judicial intervention. Conclusion: The court concluded that the respondent no. 3 was obligated to consider granting the ECLGS benefits to the petitioners, in accordance with the RBI's Resolution Framework and the NCGTC Guidelines. The court directed the respondent no. 3 to complete the process within a reasonable timeframe to ensure the Scheme's relevance for the petitioners. The writ petition was allowed, and the request for a stay of the judgment by the financial institutions was refused.
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