Writ jurisdiction over credit guarantee scheme implementers where binding guidelines create public duties and eligibility must be considered

A private financial institution implementing the Emergency Credit Line Guarantee Scheme was treated as performing a public function under binding Ministry of Finance, RBI and operational guidelines, so compliance with the Scheme could be examined under Article 226. The Scheme was also described as pre-approved for eligible credit, meaning a borrower's formal application was not a condition precedent where the governing framework did not require one. On the stated facts, the account was standard as on 29.02.2020 and later turned non-performing, while credit rating was not a disqualifying factor. The institution was therefore required to consider the borrower's eligibility and process the claim under the applicable resolution framework.

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Issues: (i) Whether a private financial institution implementing the Emergency Credit Line Guarantee Scheme was amenable to writ jurisdiction under Article 226 of the Constitution of India. (ii) Whether the petitioners were entitled to consideration of the benefit of the Emergency Credit Line Guarantee Scheme on the facts of the case, including the requirement of an application by the borrower and the eligibility criterion of a standard account as on 29.02.2020.

Issue (i): Whether a private financial institution implementing the Emergency Credit Line Guarantee Scheme was amenable to writ jurisdiction under Article 226 of the Constitution of India.

Analysis: The Scheme was framed by the Ministry of Finance in public interest to address Covid-19 related financial stress, and the RBI framework and operational guidelines made it binding on lending institutions. A member lending institution implementing the Scheme was therefore not acting in a purely private capacity but discharging a public function with statutory and public elements. In that setting, writ jurisdiction could be invoked to test compliance with the obligations arising under the Scheme.

Conclusion: The private financial institution was amenable to writ jurisdiction and the writ petition was maintainable.

Issue (ii): Whether the petitioners were entitled to consideration of the benefit of the Emergency Credit Line Guarantee Scheme on the facts of the case, including the requirement of an application by the borrower and the eligibility criterion of a standard account as on 29.02.2020.

Analysis: The record, including the notice under the SARFAESI Act, showed that the petitioners' account was standard as on 29.02.2020 and became non-performing only later. The Scheme and the updated guidelines treated eligible credit as pre-approved, and the borrower's application was not a condition precedent for extension of the benefit. Credit rating was also not a disqualifying factor under the Scheme. On that basis, the respondents had a duty to extend consideration of the benefit in accordance with the applicable RBI framework and NCGTC guidelines.

Conclusion: The petitioners were entitled to consideration of the benefit of the Scheme, and the respondent institution was directed to process the claim in accordance with the governing framework.

Final Conclusion: The writ petition succeeded to the extent that the respondent financial institution was required to consider the petitioners' eligibility for the Scheme and act in accordance with the applicable resolution framework and guidelines.

Ratio Decidendi: An institution implementing a government credit-guarantee scheme and discharging obligations of a public character under binding regulatory directions is amenable to writ jurisdiction, and an eligible borrower under a pre-approved scheme cannot be denied consideration of the benefit on the ground that no formal application was made when the governing framework does not impose such a requirement.

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