Sanction, release of loan by a Financial Institution is purely a contractual matter: HC

Representational Photo

The Jammu and Kashmir High Court has ruled that the sanction and release of loan by a Financial Institution in favour of a borrower is purely a contractual matter governed by the terms and conditions of the loan agreement and it has no jurisdiction to interfere in such matters. 

While dismissing two writ petitions by a student, a bench of Justice Sanjay Dhar held that one cannot seek direction for releasing loan amount sanctioned in his or her favour to a college different from the one mentioned in the letter sanctioning the loan.

This, the court said, in response to plea by a student who was seeking direction to Jammu and Kashmir Women’s Development Corporation (WDC) to release the instalments of her education loan to M/S KhwajaYounus Ali Medical College, Bangladesh where she had taken admission for MBBS after the Community Based Medical College Bangladesh had refused to give her admission.

She submitted before the court that it was due to the delay of the WDC that the first installment of loan could not be released in favour of Community Based College by the last date stipulated for deposition of the fee.  The College authorities, she said, refused to admit her and consequently she approached M/S KhwajaYounus Ali Medical College, Bangladesh through her consultancy service and secured her admission in the College.

It was on the basis of the admission letter of Community Based Medical College Bangladesh in favour of the petitioner that an education loan of Rs 30 lakh was sanctioned in her favour by the Corporation for pursing MBBS course in the College.

In this regard, a sanction letter dated 24.12.2018 was issued by the WDC after verifying the antecedents of the petitioner and upon execution of a mortgage deed by the father of petitioner in favour of the Corporation.

Subsequently, the first installment of fee that had been transferred by the Corporation to the Community Based Medical College, Bangladesh was, in turn, transferred to M/S KhwajaYounus Ali Medical College, Bangladesh.

While the petitioner contended that the information regarding the change in College was conveyed to the WDC, she said the Corporation through a letter asked her to repay the amount of loan which had been released in her favour.

The petitioner further contended that she had completed her first year MBBS course in M/S KhwajaYounus Ali Medical College and the College authorities issued a notice to her for depositing the second-year fee before appearing in the examination. The WDC, she said, refused to release the second installment of the loan in her favour.

Pointing out that the loan was sanctioned by the Corporation on the condition that the petitioner had got admission in the Community Based Medical College, Bangladesh, the court said M/S KhwajaYounus Ali Medical College, Bangladesh was not in picture at all at the time of sanction of education loan.  

The Court also justified the action of the WDC directing the petitioner to refund the first installment of loan amount saying she admittedly had, on her own, transferred the first installment of loan from the Community Based Medical College, Bangladesh to M/S KhwajaYounis Ali Medical College, Bangladesh without informing the Corporation. The same, the court said, was a breach of terms and conditions of the sanction letter.

“I do not find any scope for this court, particularly in exercise of its writ jurisdiction, to interfere into the action of respondent Corporation in not releasing the installments of loan in favour of the petitioner, the same being purely a matter relating to contractual

Obligations of the parties,” Justice Dhar said while dismissing the petitions.  

With regard to the delay on the part of the WDC in sanctioning of loan in favour of petitioner, the court said “it would be open for the petitioner to approach the Civil Court and agitate this aspect of the matter for obtaining appropriate relief against the respondent-Corporation.”