TaxTMI 
TaxTMI 
2020 (8) TMI 881
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.... W.P.(C) No. 26060/2019 challenging the entire proceedings initiated by the respondent bank, consequent to the classification of the appellant's account as NPA. While the above writ petition was pending consideration, the said partnership firm entered into a settlement with the respondent bank assuring them payment of a minimum of Rs. 100 lakhs before the end of November, 2019 and further undertook to close the account before 31st March, 2020. The said writ petition was therefore withdrawn, based on the said agreement between the parties vide Ext. P2 judgment. In accordance with the undertakings made, the appellant made a payment of Rs. 100 lakhs to the account of the partnership firm. The appellant also sought renewal of cash credit limits and complete waiver of the overdues/penal interest, as well as the reduction of interest in the accounts. 3. The respondent bank, however, failed to reply to Ext. P3 letter despite several reminders send by the appellant. In the meanwhile, the mandatory renewal of license of all government works contractors were to be made prior to 31.3.2020, as per G.O.(MS) No. 22/2020/PWD issued by the State Government. The appellant therefore, requeste....
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....k, the said function to be discharged by the bank, part takes the colour of an executive function of the State Government upon which the livelihood of the appellant and his employees hinge. 6. The appellant being a Government contractor is yet to receive over Rs. 8 crores towards realisation of various bill submitted to both Kerala and Tamil Nadu Governments. The appellant has obtained arbitration awards and judgments from various Civil Courts determining the dues payable to the appellant, by both the Governments towards the works carry out by the appellant, as evidenced from Exts. P7 to P9. 7. Suffice to state that all the details of the receivables of the appellant, were duly informed to the respondent bank, who had also verified the same with the concerned Departments and obtained assurances of payment. It is no fault of the appellant that payments due from the State Governments of both Kerala and Tamil Nadu are delayed. The factors contributing to such delay is clearly beyond the control of the appellant. According to the appellant, his entire business would fail, due to the non issuance of this Solvency Certificate. 8. The appellant is solvent and fully capable of rep....
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....efused to issue a solvency certificate to the appellant, which is mandated for renewal of the appellant's license, as a Government Works Contractor. Appellant has contended that classification of the appellant's account as NPA is erroneous, and refusal to issue solvency certificate, Ext. P6 is arbitrary, and violative of the fundamental rights of the appellant guaranteed under Articles 14 & 19 (1)(g) of the Constitution of India. 14. Challenging the action of the bank, the appellant therefore filed W.P.(C) No. 12774/2020 for the following reliefs: i. issue a writ in the nature of certiorari or any other appropriate writ, order, direction to the respondent bank quashing the decision leading to Ext. P6 and direct the first petitioner to consider the application for issue of solvency certificate made by the petitioner afresh and pass appropriate orders therein within a reasonable time so as to enable the petitioner duly complete the formalities mandated for renewal of his license as seen from Ext. P5. ii. issue a writ in the nature of mandamus or any other appropriate writ, order, direction to the respondent bank directing them to reclassify the petitioner....
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....ncies without following the guidelines. It is further contended that the petitioner would have no remedy as against the refusal of solvency certificate and that as such, this Court is duty bound to issue a writ as sought for. 6. I have considered the contentions advanced. The Apex Court in Sagar Thomas's case has specifically held that a private company carrying on banking business as a scheduled bank is not carrying out any statutory or public duty and that it cannot be compelled to perform its commercial obligations through the issue of a writ under Article 226 of the Constitution of India. The Madhya Pradesh High Court in Pt. Girija Shankar Sharma's case was considering the refusal of a solvency certificate by the District Collector and it was held that though the issuance of solvency certificate is not regulated by any statutory provision, a government officer, who is entrusted with the duty of considering applications for solvency certificates has to exercise his administrative functions bona fide and with a fair mind. On a finding that the decision to refuse solvency certificate taken by the District Collector was vitiated by malafidies, the High Court interf....
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....the contention that, bank is performing a public duty and therefore a writ petition is maintainable. Relying on the decisions in Pt. Girija Shankar Sharma vs. Collector, Hoshangabad reported in AIR 1974 MP 83 and the judgment of the Hon'ble Supreme Court in Binny Limited and another v. Sadasivan and others reported in (2005) 6 SCC 657, learned counsel for the appellant has prayed for reversal of the judgment in W.P.(C) No. 12774 of 2020 dated 23.7.2020. 19. Heard learned counsel for the appellant and perused the materials on record. 20. Order impugned in the writ petition Ext. P6 dated 29.5.2020 reads thus: Shri. Sleebachen. Y Charuvila Veedu, Changamanadu P.O. Kottarakara, Kollam-691557. Dear Sir, Sub: Your letter dated 26.5.2020 Ref: Your NPA accounts with branch Edamon With regard to your letter dated 26.5.2020, we inform as follows: Bank is not in a position to issue Solvency Certificate at this juncture, as your accounts are continuing in NPA status since 2018. The same has already been conveyed to you in advance. However, considering your present financial difficulties, Bank may extend ....
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....s under: "2. The petitioner wanted to give a tender for construction of tube-wells, the last date for which was 6-12-1972. For giving tender, solvency certificate of Rs. 1,00,000/- (One lac) was required by the petitioner. He, therefore, filed an application on 9-11-1972 accompanied by certain documents vide Annexures A, B, C to the Collector, Hoshangabad who was the competent authority to grant the certificate. The said application was rejected by the Collector on 7-12-1972 vide Annexure 'D'. The contention of the petitioner is that the rejection of his application was mala fide due to personal grudge against Shri Ramlal Sharma, the natural father of the petitioner and that it was wholly unjustified. He has, therefore, filed this petition, praying that the order of the Collector, Hoshangabad be quashed and an appropriate writ be Issued directing the respondent to issue a solvency certificate for Rs. 1,00,000/- (One Lac) to the petitioner." 27. Among other defence, learned counsel for the respondent therein, has raised a preliminary objection that the writ petition is not maintainable, because the grant of solvency certificate is regulated by Government instruct....
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.... honest man competent to the discharge of his office ought to confine himself. Wilson v. Rastall, (1792) 4 TR 753 at p. 757." .................................................................................................... .................................................................................................... 11. The Government usually insist upon a solvency certificate before accepting a tender of a party. Thus a solvency certificate is essential for a party, who wants to engage in a contract or other business activity with the Government. An arbitrary refusal of the solvency certificate therefore infringes upon the fundamental right of the party to carry on trade or business guaranteed by Article 19 of the Constitution of India." 29. Going through the judgment, it is evident that the exercise of power by the Collector was found to be erroneous and hence the court set aside the order impugned therein. There cannot be any doubt that Collector is exercising a public duty. Question as to whether bank is discharging public duty or not, was not a question raised therein. Said judgment is totally inapposite to the case on hand. It cannot be....
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....26 is pre-eminently a public law remedy and is not generally available as a remedy against private wrongs. It is used for enforcement of various rights of the public or to compel the public/statutory authorities to discharge their duties and to act within their bounds. It may be used to do justice when there is wrongful exercise of power or a refusal to perform duties. This writ is admirably equipped to serve as a judicial control over administrative actions. This writ could also be issued against any private body or person, specially in view of the words used in Article 226 of the Constitution. However, the scope of mandamus is limited to enforcement of public duty. The scope of mandamus is determined by the nature of the duty to be enforced, rather than the identity of the authority against whom it is sought. If the private body is discharging a public function and the denial of any right is in connection with the public duty imposed on such body, the public law remedy can be enforced. The duty cast on the public body may be either statutory or otherwise and the source of such power is immaterial, but, nevertheless, there must be the public law element in such action. Sometimes, ....
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....be precedent applicable to the case before us, where the declaration of NPA and the refusal to issue a Solvency Certificate were challenged. None of the decisions relied by the learned counsel for the appellant lend support to his proposition of law that a writ against a bank is maintainable. 34. At this juncture, we deem it fit to consider what precedent means: In C.J. Thomas v. South Indian Bank Limited and others reported in [1987(1) KLT 101], the appellants therein working in banks not included in the Schedule to the Reserve Bank of India Act, 1934 challenged their non-promotion and super session. Relevant portion of the judgment reads thus: "7. It was strenuously argued before us that these two banks are discharging public functions and that there is an effective and strict control by the Reserve Bank and that would be sufficient to bring these two banks within the definition of "State" in Article 12. It may be that these banks are discharging public functions or that the functions they discharge are sufficiently important to the public. It is true that the Reserve Bank of India has a hold and control over the functioning of all scheduled banks. These two ....
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....rmed as an institution or company performing any public function/duty, and the dispute arising out of the contract of personal service between the Bank and the appellant is not amenable to the writ jurisdiction under Article 226 of the Constitution of India. 36. In Rajbir Surajbhan Singh v. Chairman, Institute of Banking Personnel Selection, Mumbai reported in (2019) 14 SCC 189 : 2019 (&) SCALE 23 : 2019 (3) KHC 625, after considering a catena of decisions, the Hon'ble Supreme Court held thus: "8. It is true that the Governor of the Reserve Bank of India and the Chairmen of certain Public Sector Banks along with the Joint Secretary, Banking Division, Ministry of Finance are members of the governing body of the Respondent-Institute. There is no dispute that the Respondent is not constituted under a statute. It is also not disputed that the Respondent does not receive any funds from the Government. The Respondent is not controlled by the Government. The letter dated 20.09.2010 produced by the Appellant along with the rejoinder affidavit does not show deep and pervasive control by the Government of India. The question of whether the Council of Scientific and Indus....
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....ministrative Action', which is as follows: "To be enforceable by mandamus a public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter, common law, custom or even contract." 11. In Regina v. Panel on Take-Overs and Mergers, Ex parte Datafin PLC and Another, Lloyd L.J. speaking for the Court of Appeal held that if the duty is a public duty, then the body in question is subject to public law. The distinction must lie in the nature of the duty imposed, whether expressly or by implication. He referred to an earlier judgment in Reg. v. Criminal Injuries Compensation Board, Ex. Parte Lain where Diplock L.J. held that in addition to looking at the source of power for the purpose of deciding the question [1987] 1 Q.B. 815 (C.A.) : [1967] 2 Q.B. 864, D.C. pertaining to public law, nature of power is an important facet to decide whether a dispute pertains to public law or private law. 12. There is no manner of doubt that a Writ Petition under Article 226 is maintainable even against a private body provided it discharges public functions. While deciding the question as to whether ICRISAT ....
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....nt tests for appointment in banking and other financial institutions, is not a public duty. The Respondent is not a creature of a statute and there are no statutory duties or obligations imposed on the Respondent. 15. This Court in Federal Bank case held that a Writ Petition under Article 226 of the Constitution is not maintainable against a scheduled bank on the ground that the business of banking does not fall within the expression "public duty". As the activity of the Respondent of conducting the selection process for appointment to the banks is voluntary in nature, it cannot be said that there is any public function discharged by the Respondent. There is no positive obligation, either statutory or otherwise on the Respondent to conduct the recruitment tests. For the reasons above, we are of the considered opinion that the Respondent is not amenable to the Writ Jurisdiction under Article 32 or Article 226 of the Constitution of India." 37. While considering a case as to whether a church performing marriage, discharges a public duty and amenable to writ jurisdiction, in W.A. No. 53 of 2020 dated 30.6.2020, this court held thus: "18. Public duty generally said....