Facts of the Case

  • The Petitioners: The dispute involves two connected writ petitions filed by Shiju P. John. In W.P. (C) No. 13183 of 2021, the petitioner is Shilju P. John, acting as the sole proprietor of Magna Refrigeration, which is registered as a Micro Enterprise. In W.P. (C) No. 28418 of 2022, the petitioner is Greeneo Cool Paradise Pvt. Ltd., represented by its Managing Director, Shiju P. John.
  • The Dispute: The petitioners had availed credit/financial facilities from Punjab National Bank (the respondent bank).
  • Grievance and Correspondence: The petitioners submitted several official requests and representations to the Branch Manager and Circle Head of Punjab National Bank. These included requests dated August 20, 2020, and September 8, 2020, seeking an enhancement of their Cash Credit limit to ₹30 Lakhs.
  • Emergency Relief Demands: The petitioners also made representations to the Ministry of Finance and the Managing Director of Punjab National Bank, seeking urgent financial assistance under the Emergency Credit Line Guarantee Scheme (ECLGS).
  • Invocation of Writ Jurisdiction: Alleging arbitrary inaction, denial of enhancements, and general deficiency of service on the part of Punjab National Bank, the petitioners approached the High Court of Kerala under Article 226 of the Constitution of India to compel the bank to grant the requested financial upgrades.

Issues Involved

  • Whether a writ petition under Article 226 of the Constitution of India is maintainable against a commercial banking institution for disputes arising purely out of commercial loan enhancement and alleged deficiencies in banking services.
  • Whether the availability of an effective, specialized, alternate statutory forum—specifically the Banking Ombudsman Scheme—bars the High Court from adjudicating contentious factual and operational issues under its extraordinary writ jurisdiction.

Petitioner’s Arguments

  • Compliance with MSME and GST norms: The learned Counsel for the petitioners argued that the business concerns were legitimate, law-abiding entities holding proper Udayam Micro Enterprise Registration, valid GST Registration, and consistent Income Tax Return (ITR) acknowledgments.
  • Arbitrary Denial of Credit: It was argued that the respondent bank acted arbitrarily and failed to support a viable micro-enterprise by ignoring multiple formal requests for cash credit enhancement up to ₹30 Lakhs.
  • Entitlement to Emergency Schemes: The petitioners contended that they were legally eligible for financial assistance under the Emergency Credit Line Guarantee Scheme formulated by the Government of India to protect MSMEs, and the bank's denial directly crippled their operational capacity.

Respondent’s Arguments

  • Alternative Remedy Available: The learned Standing Counsel for Punjab National Bank contended that the writ petitions were fundamentally misconceived because the core grievance pertained to a contractual or service-based dispute with a commercial banking entity.
  • No Public Duty Violation: The bank maintained that credit sanctioning and loan enhancements are purely commercial banking decisions based on risk assessment, and do not fall under the purview of public duties enforceable through writs.
  • Proper Forum: The bank argued that any alleged deficiency of service falls squarely within the regulatory domain of the Banking Ombudsman Scheme, making the direct approach to the High Court an circumvention of established legal procedure.

Court Order & Findings

  • No Adjudication on Merits: The Hon’ble High Court, presided over by Mr. Justice V.G. Arun, explicitly declined to decide or rule upon the highly contentious factual and legal issues raised by both parties.
  • Existence of an Effective Statutory Alternative: The Court explicitly found and observed that the petitioners have an entirely effective and specialized remedy available before the Banking Ombudsman.
  • Nature of the Dispute: The Court noted that since the entire grievance of the petitioners stems from an alleged "deficiency of service" on the part of the respondent bank, it must be filtered through the designated statutory framework.
  • Final Disposition: Consequently, the High Court closed both writ petitions without addressing the internal merits. The Court granted absolute permission to the petitioners to approach the Banking Ombudsman in strict accordance with the procedure prescribed under the Banking Ombudsman Scheme.

Important Clarification

  • Deficiency of Service vs. Writ Jurisdiction: The High Court clarified that a commercial bank's decision regarding loan or cash credit enhancement falls under the category of business operations and banking services. Any grievance regarding the denial or delay of such requests constitutes a "deficiency of service" rather than a violation of public duty.
  • Mandatory Exhaustion of Statutory Remedies: Even when dealing with micro and small enterprises (MSMEs) facing operational financial stress, the existence of a specialized administrative forum—such as the Banking Ombudsman Scheme—requires aggrieved parties to exhaust that statutory route before invoking the extraordinary writ jurisdiction of the High Court under Article 226.
  • Preservation of Legal Rights: The closing of a writ petition on grounds of an alternative remedy does not amount to a dismissal on merits. The petitioners retain full legal rights to present all their arguments, documents, and representations before the Banking Ombudsman for an independent review.

Section Involved

  • Article 226 of the Constitution of India: Power of High Courts to issue certain writs.
  • The Banking Ombudsman Scheme (Integrated Ombudsman Scheme): Statutory mechanism for redressal of grievances against deficiency in banking services.

Link to download the order - https://mytaxexpert.co.in/uploads/1783153375_822compressed.pdf

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