TaxTMI 
TaxTMI 
2021 (7) TMI 1457
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....five lakhs, seventeen thousand, eight hundred and eight only) within 7 days as the outstanding due as on March 31, 2021, failing which, further action would be taken including revocation of Restructuring Agreement entered into between the petitioner Company and the 4th respondent dated 26.07.2018. The 4th respondent herein is also a Company incorporated under the Companies Act, 1956 and is an Asset Reconstruction Company, hereinafter referred to as 'EARC'. The letter dated 30.04.2021, which is impugned in the writ petition, is a fall out of default committed by the petitioner Company towards discharge of the debts forcing the 4th respondent EARC, which company has been assigned the debts due to 9 Initial Lenders under various Agreements between July, 2015 and September, 2016. 2. The petitioner herein is one of the principal promoters of the 1st respondent Company, namely Karaikal Port Trust Limited. Originally, the 2nd respondent, the Government of Puducherry executed a Concession Agreement for the development of Karaikal Port Trust on 25.01.2006 whereby, the petitioner was granted Concession on a public private partnership of BOT (Building, Operate, Transfer) basis for de....
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....g commercial business activity from being crippled or affected by the pandemic outbreak. 5. According to the petitioner in the face of the relief package announced by the 5th respondent, without considering the bonafide and genuine difficulties faced by the 1st respondent during the crisis period, the 4th respondent issued the impugned letter threatening the petitioner that they would be forced to revoke the restructuring agreement if the entire debts running to Rs. 19,95,95,17,808/- was not discharged in seven days. According to the petitioner, the 4th respondent, being an Asset Restructuring Company, which stepped into the shoes of the initial lenders is bound to follow the circular issued by the Reserve Bank of India, the 5th respondent herein, in order to ameliorate the adverse effects impacted on all business due to the onslaught of the corona virus. 6. Further, the petitioner case is that the impugned action of the 4th respondent amounted to throttling the Port activities of the 1st respondent which would have far reaching impact on the economy of the Region. The Port activities are meant to cater to the general public needs and if the activities are crippled or allowed to ....
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....ing contained in any agreement or any other law for the time being in force, any asset reconstruction company may acquire financial assets of any bank or financial institution. ... ... (2) If the bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the asset reconstruction company shall, such asset reconstruction company shall on such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets. According to the learned Senior Counsel, once the reconstruction company deemed to be a lender under SARFAESI Act, it is bound to follow the Reserve Bank of India regulations issued from time to time and in such event, the moratorium circular issued by the Reserve Bank of India on 27.03.2020 and on 23.05.2020 are to be followed before taking any coercive action by the 4th respondent against the writ petitioner. iii) Thirdly, the unjust coercive action, if it is pursued vigorously pursuant to the impugned letter, it would only result in far reaching adverse implications on the financial stability and economy of the Region and....
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....etition under Article 226 of the Constitution is maintainable, where a persons fundamental or legal right is infringed by (i) State or its instrumentalities; or (ii) a private person or private body, in exercise of a public duty [imposed either by Statute or contract or custom] or in the performance of a public function. (b) An aggrieved cannot seek any remedy under Article 226 against a private person or private body, alleging infringement of a fundamental right or legal right, if (i) the private person or private body against whom the grievance is made, does not discharge any public duty or perform any public function; or (ii) the act complained of is by a private person or private body, not in the course of performance of a public duty or a public function (even though such a private person or private body may at other times or in other capacities may exercise public duties or perform public functions). In a nutshell, a writ petition can be maintained against a private individual or a private body, if the grievance is against the action of such private person or body, in exercise of a public duty or performance of a public function, and not otherwise. 11. A public duty is on....
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....Dwarkanath v. ITO (SCR, Pp. 540 G-541 A): "This article is couched in comprehensive phraseology and it ex facie confers a wide power on the High Courts to reach injustice wherever it is found. The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be exercised. It can issue writs in the nature of prerogative writs as understood in England; but the scope of those writs also is widened by the use of the expression 'nature', for the said expression does not equate the writs that can be issued in India with those in England, but only draws an analogy from them. That apart, High Courts can also issue directions, orders or writs other than the prerogative writs. It enables the High Court to mould the reliefs to meet the peculiar and complicated requirements of this country. Any attempt to equate the scope of the power of the High Court under Article 226 of the Constitution with that of the English courts to issue prerogative writs is to introduce the unnecessary procedural restrictions grown over the years in a comparatively small country like England with a unitary from of Go....
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....tural justice, certiorari and mandamus are standard remedies. But if a trade union disciplinary committee acts in the same way, these remedies are inapplicable: the rights of its members depend upon their contract of membership, and are to be protected by declaration and injunction, which accordingly are the remedies employed in such cases." 11. Judicial review is designed to prevent the cases of abuse of power and neglect of duty by public authorities. However, under our Constitution, Article 226 is couched in such a way that a writ of mandamus could be issued even against a private authority. However, such private authority must be discharging a public function and the decision sought to be corrected or enforced must be in discharge of a public function. The role of the State expanded enormously and attempts have been made to create various agencies to perform the governmental functions. Several corporations and companies have also been formed by the Government to run industries and to carry on trading activities. These have come to be known as public sector undertakings. However, in the interpretation given to Article 12 of the Constitution, this Court took the view that many ....
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.... which it can be exerted'. Non-governmental bodies such as these are just as capable of abusing their powers as is Government." Learned Senior Counsel would submit that the Hon'ble Supreme Court in the above decision has held that the Writ of Mandamus would be issued for securing performance of public or a statutory duty and such writ could be issued even against private entity. Even in this case, the learned Senior Counsel, however would concede that the Hon'ble Supreme Court had ultimately found that the subject matter of Civil Appeal would not attract any public element and the dismissal of the writ petition on the ground of maintainability was eventually upheld. (3) In MANU/SC/1351/2009 Civil Appeal Nos. 4970 to 4971 of 2009 dated 31.07.2009 (Sardar Associates and Ors. Vs. Punjab and Sind Bank and Ors.), the learned Senior Counsel in extenso relied on the submissions, discussions and observations in paragraph Nos. 12, 15, 16, 36, 37, 40, 41 & 46, which are extracted hereunder: 12. Dr. Abhishek Manu Singhvi, learned senior counsel appearing on behalf of the appellants would contend that the scheme in relation to one time settlement having been issued by the Res....
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....ividual, (d) the maximum amount up to which, having regard to the considerations referred to in clause (c),guarantees may be given by a banking company on behalf of any one company, firm, association of persons or individual, and (e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given. (3) Every banking company shall be bound to comply with any directions given to it under this section." 16. A bare perusal of the aforementioned provision would clearly show that the Reserve Bank of India is entitled to formulate the policies which the banking companies are bound to follow. Sub-section (3) of Section 21 of the 1949 Act clearly mandates that every banking company shall be bound to comply with the directions given to it in terms thereof. Section 35A of the 1949 Act, which was inserted by the Banking Companies (Amendment) Act, 1956, empowers the Reserve Bank to issue directions inter alia in the interest of banking policy. Section 36 of the 1949 Act also provides for further powers and functions of the Reserve Bank of India; clause (d) of Sub-section (1) whereof reads as under: "36. Fur....
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....thority of issuing binding directions, having statutory force, in the interest of the public in general and preventing banking affairs from deterioration and prejudice as also to secure the proper management of any banking company generally. The Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is, and it ought to be, aware of all relevant factors, including credit conditions as prevailing, which would invite its policy decisions. RBI has been issuing directions/circulars from time to time which, inter alia, deal with the rate of interest which can be charged and the periods at the end of which rests can be struck down, interest calculated thereon and charged and capitalised. It should continue to issue such directives. Its circulars shall bind those who fall within the net of such directives. For such transaction which are not squarely governed by such circulars, the RBI directives may be treated as standards for the purpose of deciding whether the interest charged is excessive, usurious or opposed to public policy." 37. Yet again in Corporation Bank v. D.S. Gowda and Another [(1994) 5 SCC 213], this Court held: "17. ...As pointed out earli....
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....xtracted hereunder: 3. In summary, the Petitioners' case is this. The Petitioners had finance facilities from ICICI Bank. These were to be repaid in instalments. The manner of servicing of the debt was fixed by contractual agreement. There is no dispute that until December 2019 there was little or no significant default on the part of the Petitioners, or at least no default such as would or did trigger the declaration of the Petitioners' accounts with ICICI Bank as nonperforming assets or NPAs. In other words, if there were indeed any past defaults these seem to have been resolved at least until December 2019. The Petitioners agree that the amounts under the repayment schedule due on 15th January 2020 and again on 15th February 2020 were not paid. They accept that those two defaults did occur. The default amounts have not been paid until now. That, too, is undisputed. Now the consequences under the respective and applicable RBI circulars and notifications is that if payment is not made and the accounts are not regularised within 90 days of the date of default then the borrower's account gets classified as an NPA. Other consequences automatically follow. These include ....
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.... body discharging public duty or positive obligation of public nature; and a person or a body under liability to discharge any function under any statute, to compel it to perform such a statutory function. A private company would normally not be amenable to the writ jurisdiction under Article 226 of the Constitution. However, there are legislations like the labour legislation or environmental legislation which mandate certain duties. A writ may lie for compliance such duties, for example, under the Industrial Disputes Act. A writ would not lie to enforce purely private law rights. Even if a body is performing a public duty and is amenable to writ jurisdiction, all its decisions would not be subject to judicial review. Contractual duties are enforceable as matters of private law by ordinary contractual remedies such as damages, injunction, specific performance and declaration. Before issuing any writ, particularly writ of mandamus, the Court has to satisfy that action of such authority, is in the domain of public law as distinguished from private law. For a function to be of a public character, the function must be closely related to functions performed by the State in its sovereign....
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....nd its applicability to even pre-existing defaults but ones which have not already resulted in an NPA declaration are squarely matters of public law that are amenable to the jurisdiction of this Court. ... ... 13. As I said earlier, I do not intend to decide the question of maintainability at this ad-interim stage. I have taken up the matters because of the grave and extreme urgency so that there should not be by 15th April 2020, just a few days hence, an automatic rendering of the Petitioners' accounts as NPA with other attendant consequences. The question of maintainability is kept at large for an appropriate date. In the above case, the Bombay High Court has held that the writ petition was maintainable against a Private Bank, particularly, in consideration of the moratorium benefits extended during the period of the present pandemic crisis. After elaborate discussion, the learned Judge of the Bombay High Court has held that the Mandamus could be issued to a Private Bank and would also direct the Private Bank to reckon the moratorium period for the purpose of readjustment of the repayment schedule. The learned Senior counsel would state that in similar circumstances, ....
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....reject the contention urged for the appellants on the maintainability of the writ petition." ... ... 19.2. He has also relied on the decision of the Hon'ble Apex Court in the case of RAMESH AHLUWALIA v. STATE OF PUNJAB reported in (2012) 12 SCC 331, wherein at Paras 12 and 13, it has been held as under: "12. We have considered the submissions made by the learned counsel for the parties. In our opinion, in view of the judgment rendered by this Court in Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust, there can be no doubt that even a purely private body, where the State has no control over its internal affairs, would be amenable to the jurisdiction of the High Court under Article 226 of the Constitution, for issuance of a writ of mandamus. Provided, of course, the private body is performing public functions which are normally expected to be performed by the State Authorities. 13. In the aforesaid case, this Court was also considering a situation where the services of a Lecturer had been terminated who was working in the college run by the Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust. In those ....
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....nion of India and State Governments cannot also wash off their hands since it is Union of India and the state governments who are responsible for the lockdown and therefore are responsible for the financial distress which has been caused to the Petitioner. 19.4. Neither the Union of India nor the RBI would take a handsoff approach and leave the Petitioner at the mercy of Respondent Nos. 5 who is acting as the infamous "Shylock" in the famous play "Merchant of Venice" authored by Sir William Shakespeare. 19.5. What is sought to be done by Respondent Nos. 5 and 6 at the cost of Respondent No. 7 is not only restricted to taking of a pound of flesh, but such taking of the flesh would kill the Petitioner inasmuch as non-payment of dues to Respondent No. 7 would automatically result in the Petitioner's account being treated as an NPA. 19.6. The Circular issued by the RBI has to be implemented in its true letter and spirit. No technical defences or objections could be raised by the Banks which would come in the way of achieving the objectives of the Circular dated 27.03.2020 issued by the RBI inasmuch as the aim and objects of the Circular being to keep the economy and businesse....
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....nefit issued by RBI during Covid 19 situation. By holding that the writ is maintainable, a direction was ultimately issued by the learned Judge directing the RBI to enforce the Recovery Package as contained in Circular dated 27.03.2020 and further quashed the recovery communications of the private Banks. The learned Judge also directed the private Banks to grant the benefit of moratorium to the borrowers therein. 12. Therefore, the learned Senior Counsel would submit that when the 4th respondent is admittedly, a financial institution under SARFAESI Act, having stepped into the shoes of initial lenders of 9 Nationalised Banks, has a public duty to follow RBI Circular and it cannot be gainsaid by the 4th respondent that the transaction is purely governed by Private Agreements on a private domain and therefore, no public element is involved and resist the writ petition on the ground of its maintainability. He would finally add that in an extraordinary situation like the present one, call for extraordinary, heightened remedy, in order to prevent miscarriage of justice and also to protect public interest, in the process. 13. Mr. P.H. Aravind Pandian, learned Senior Counsel appearing f....
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.... amenable to the writ jurisdiction of this Court for the purpose of judicial review or not. It is true that on the face, prima facie, the contentions advanced by the respondents on the aspect of maintainability appears to be attractive since it would fall under the realm of contractual field and even otherwise inasmuch as it is a lis concerned with such contract, the Writ Petition cannot be maintained. However, the question does not stop there. The 1st respondent-ARCIL, though it is discharging duties concerned with contractual transactions and commercial transactions, it cannot be forgotten that it is in a way is a creature of a statute or at any rate, definitely bound by the provisions of the Act and also further bound by the Reserve Bank of India directives. In the light of the same, it may not be laid down as a broad proposition that under no circumstances, the actions of such a party as the 1st respondent-ARCIL can be called in question before a writ Court. It is one thing to say that the Writ Petition itself is not maintainable and it is yet another thing to say that the power of judicial review not to be exercised inasmuch as a lis would fall within the realm of contractual ....
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....he Constitution of India reads as under:-"12. Definition. In this part, unless the context otherwise requires, "the State includes the Government and Parliament of India and the Government and the legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India." Law in this behalf has developed a lot. With the changing societal conditions, a large number of bodies exercising public functions have been brought within the purview of the definition of "State. We need not dilate on the development of law in this regard in view of the decisions rendered by this Court beginning from Rajasthan State Electricity Board v. Mohan Lal [(1967) 3 SCR 377], Ajay Hasia v. Khalid Mujib Sehravardi [(1981) 1 SCC 722] and other decisions including a Seven-Judge Bench decision of this Court in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology [(2002) 5 SCC 111]. 9. We may also notice that P.K. Ramachandra Iyer and Others v. Union of India and Others [(1984) 2 SCC 141] wherein Indian Council for Agricultural Research (ICAR) was held to be a "State within the meaning of Article 12 of the Constitution of India,....
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....rnment for carrying on a business for the benefit of the public. In other words, the question is, for whose benefit was the Corporation carrying on the business?" (SCC p. 454, para 111). 13. This Court referred to Ajay Hasia (supra) wherein the tests gathered from the decision of this Court in Ramana Dayaram Shetty v. International Airport Authority of India [(1979) 3 SCC 489] were stated in the following terms: "9.. (1) One thing is clear that if the entire share capital of the Corporation is held by Government, it would go a long way towards indicating that the Corporation is an instrumentality or agency of Government. (SCC p. 507, para 14). (2) Where the financial assistance of the State is so much as to meet almost entire expenditure of the Corporation, it would afford some indication of the Corporation being impregnated with Governmental character. (SCC p. 508, para 15). (3) It may also be a relevant factor ... whether the Corporation enjoys monopoly status which is State conferred or State protected. (SCC p. 508, para 15). (4) Existence of deep and pervasive State control may afford an indication that the Corporation is a State agency or instrumentality. (SCC p. 508, para 1....
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....ities in terms of Article 298 of the Constitution where for the capital, infrastructure, initial investment and financial aid, etc. are provided by the State and it also exercises regulation and control thereover. ii. Bodies created for research and other developmental works which are otherwise Governmental functions but may or may not be a part of the sovereign function. iii. A private body is allowed to discharge public duty or positive obligation of public nature and furthermore is allowed to perform regulatory and controlling functions and activities which were otherwise the job of the Government. 71. There cannot be same standard or yardstick for judging different bodies for the purpose of ascertaining as to whether any of them fulfils the requirements of law therefor or not. 80. The concept that all public sector undertakings incorporated under the Companies Act or the Societies Registration Act or any other Act for answering the description of State must be financed by the Central Government and be under its deep and pervasive control has in the past three decades undergone a sea change. The thrust now is not upon the composition of the body but the duties and functions perf....
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....hat he has annexed some information regarding the Company from the website of the respondent Company. Except this, there is no other material or evidence to substantiate as regards whether respondent ARCIL is a State within the meaning of Article 12 of the Constitution of India. The law so far as subject of Article 12 is concerned has been reproduced in the preceding paragraphs as laid down by the Honourable Supreme Court from time to time in various matters, but even if the principles laid down by the Honourable Supreme Court are to be made applicable for determining this issue, we are unable to do it because of lack of evidence and pleadings in the present case. In our opinion, when a point which is ostensibly a point of law is required to be substantiated by fact, the party raising the point, if he is a writ petitioner, must plead and prove such facts by evidence which must appear from the writ petition. If the facts are not pleaded or the evidence in support of such facts is not annexed to the writ petition, the Court will not entertain the point. In this context, it would be expedient to rely upon a judgment of the Honourable Supreme Court in the case of Bharat Singh v. State ....
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....ntinuance of its port operation without any coercive action being taken against the petitioner which may inevitably lead to paralysing the Port activities affecting the public interest at large 17. Per contra, Mr. Satish Parasaran, learned Senior counsel appearing on behalf of the contesting 4th respondent EARC would submit that the assignment of loans was made between July 2015 and September, 2016 in favour of the 4th respondent and thereafter, the default payments were rescheduled at the request of the petitioner by entering in a Master Reconstruction Agreement on 26.07.2018 (MRA). At that point of time itself, the discharge of debts by the petitioner was irregular, but in order to provide an opportunity to the petitioner for stabilising their business MRA was put in place. According to the learned Senior counsel, the dispute arising out of letter issued by the 4th respondent dated 30.04.2021 is entirely a private dispute governed by the contractual agreement dictated commercial consideration. While enforcing the contractual Clauses and seeking to recover the huge outstanding amounts from the petitioner, there is no public duty cast upon the lender nor any public interest is bei....
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.... premise would have no legal legs to stand on. Even otherwise, learned Senior counsel would submit that it is a discretion vested in the financial institutions to grant moratorium or not on the basis of the approved policies of the Board. According to the learned Senior counsel that the petitioner's loan account has been declared as NPA several years before the Covid-19 pandemic and with a view to help the petitioner to tide over those difficulties the loans were restructured in July 2018 (MRA) In such circumstances, the question of extension of the benefit of moratorium due to Covid 10 situation to the petitioner did not arise at all. 20. Even otherwise, factually the default in payments which necessitated the issuance of impugned notice to the petitioner occurred after October, 2020 consecutively. As a matter of fact, the default period fell outside the moratorium period contemplated in the RBI circular and therefore, the emphasis placed on the RBI Circulars as a ruse to maintain the writ petition is devoid of any merit. The present attempt by the petitioner to invoke the public law remedy where no public function or public character attached to the relationship nor any publ....
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.... as per that the same, the right has been exercised and the notice was issued by the 4th respondent. He would particularly refer to Clauses 17 (17.1 to 17.2) & 18(1) (a to d) which read as follows; "17. EVENTS OF DEFAULT Each of the events or circumstances set out in this Clause 17 (Events of Default) is an Event of Default. 17.1. Non-Payment An Obligor does not pay on the due date any amount payable pursuant to a Restructuring Document, at the place at and in the currency in which it is expressed to be payable, unless such payment is made within 90 days of its original due date. 17.2. Other Obligations An Obligor fails to comply with any material provision of the Restructuring Documents to which it is a party (other than those referred to in Clause 17.1 (Non-payment) unless such failure (Where capable of being remedied) is remedied or cured to the satisfaction of the Majority Restructuring Lenders within 60 dates of such failure having occurred. .... 18. RIGHTS UPON DEFAULT 18.1. Acceleration and enforcement of rights On and at any time after the occurrence of an Event of Default, each Restructuring Lender (except as otherwise stated below) may: (a) with noti....
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....that view of the matter there may be more participation or dominant participation of the State in managing the affairs of the company. But in the present case we are concerned with a banking company which has its own resources to raise its funds without any contribution or shareholding by the State. It has its own Board of Directors elected by its shareholders. It works like any other private company in the banking business having no monopoly status at all. Any company carrying on banking business with a capital of five lacs will become a scheduled bank. All the same, banking activity as a whole carried on by various banks undoubtedly has an impact and effect on the economy of the country in general. Money of the shareholders and the depositors is with such companies, carrying on banking activity. The banks finance the borrowers on any given rate of interest at a particular time. They advance loans as against securities. Therefore, it is obviously necessary to have regulatory check over such activities in the interest of the company itself, the shareholders, the depositors as well as to maintain the proper financial equilibrium of the national economy. The Banking companies have no....
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....ol of Pollution) Act, 1974 etc. or statutes of the like nature which fasten certain duties and responsibilities statutorily upon such private bodies which they are bound to comply with. If they violate such a statutory provision a writ would certainly be issued for compliance of those provisions. For instance, if a private employer dispense with the service of its employee in violation of the provisions contained under the Industrial Disputes Act, in innumerable cases the High Court interfered and have issued the writ to the private bodies and the companies in that regard. But the difficulty in issuing a writ may arise where there may not be any non-compliance or violation of any statutory provision by the private body. In that event a writ may not be issued at all. Other remedies, as may be available, may have to be resorted to. 28. The six factors which have been enumerated in the case of Ajay Hasia (supra) and approved in the later decisions in the case of Ramana (supra) and the seven Judges Bench in the case of Pradeep Kumar Biswas (supra) may be applied to the facts of the present case and see as to those tests apply to the appellant bank or not. As indicated earlier, share ....
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....r by a group of them. Losses incurred in the business are theirs as well as the profits. Any business or commercial activity, may be banking, manufacturing units or related to any other kind of business generating resources, employment, production and resulting in circulation of money are no doubt, are such which do have impact on the economy of the country in general. But such activities cannot be classified one falling in the category of discharging duties, functions of public nature. Thus the case does not fall in the fifth category of cases enumerated in the case of Ajay Hasia (supra). Again we find that the activity which is carried on by the appellant is not one which may have been earlier carried on by the government and transferred to the appellant company. For the sake of argument even if it may be assumed that one or the other test as provided in the case of Ajay Hasia (supra) may be attracted that by itself would not be sufficient to hold that it is an agency of the State or a company carrying on the functions of public nature. In this connection, observations made in the case of Pradeep Kumar Biswas (supra) quoted earlier would also be relevant. ..... 32. Merely bec....
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.... position, the appeal deserves to be allowed." (2) Radhakrishna Vs. Aditya Birla Finance Ltd., reported in The learned Senior counsel particularly referred to Paragraphs 9 to 11 which are extracted hereunder; "9. In this context, it would be profitable to refer to the decision of the Supreme Court as rendered in the case of Federal Bank Ltd. Vs. Sagar Thomas, reported in AIR 2003 S.C. 4325. Though the said judgment is rendered in the context of a private company carrying on banking business, the ratio of the said decision can apply with equal force to non-banking financial company like opposite party No. 1 which stands more or less on the same footing. There the Supreme Court has made it clear that a writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State (Govt.); (ii) Authority; (iii) a statutory body; (iv) an instrumentality or agency of the State; (v) a company which is financed and owned by the State; (vi) a private body run substantially on State funding; (vii) a private body discharging public duty or positive obligation of public nature (viii) a person or a body under liability to discharge any function under any Statute, ....
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....ision of the Reserve Bank of India Act, 1934, it is clear that the non-banking financial companies only indulge in ordinary business or commercial activities which cannot be described as akin to governmental function. Therefore, following the ratio of the above noted judgment, these activities cannot be classified as one falling under the category of discharging of public function or public duty. Thus the opposite party No. 1 cannot be covered either under parameter (vii) or (viii) as delineated in Federal Bank case (supra). Admittedly other six parameters are not attracted to the present case. The above ratio has also been referred to in the decision of the Supreme Court in the case of Ramakrishna Mission and another Vs. Kago Kanya and others, reported in 2019 (5) SCALE 559. 11. Besides above, there exists no pleadings whatsoever to show that either the opposite party No. 1 is a "State" within the meaning of Article 12 of the Constitution or is under an obligation to discharge any statutory function vis-à-vis the grievance raised. Rather Mr. Pal as indicated earlier has fairly submitted that there exists no statutory rule to take care of the grievance of the petitioner. I....
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.... 5, which is extracted hereunder; "5. The first hurdle to be crossed by the writ petitioners is regarding the maintainability of the writ petition. Admittedly, respondent No. 3 is a nonbanking financial company as has been stated in para 2 of the writ petition. The business of such a company is regulated by the Reserve Bank of India and other statutory authorities. Itself, it is not a statutory authority and no funds have been infused in it by either the Central Government or the State Government. Its activities are purely commercial and no public duty is being performed by it. Thus, it is neither 'State' under Article 12 of the Constitution of India nor is it an 'Authority' within the meaning of Article 226 thereof. Respondent No. 3 is only a financial institution as defined in Section 2(m) of the SARFAESI Act, 2002 and nothing more. Thus, the present writ petition is not maintainable. In this regard, we refer to with advantage to a Single Bench judgment dated 8.5.2017 passed by the Delhi High Court in WP(C) 8031 of 2016 M/s. Rajpur Hydro Power Ltd. and others vs. M/s. PTC India Financial Services Ltd.. After an exhaustive consideration of the law on the subject,....
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....owever, so far as the control of the Reserve Bank of India is concerned, the same is only limited to the extent that are guidelines controlling over all interests, method and manner of banking may be regulated. Merely because there is certain regulations from Reserve Bank of India, the concerned corporate Bank itself would not become an authority controlled by the Government or by the State and it will not have a statutory flavour." 26. In all the above decisions, both the Hon'ble Supreme Court and other High Courts have held that the writ petition is not maintainable against Private Company. According to the learned Senior counsel, in Federal Bank case, the Hon'ble Supreme Court has held that the regulation of the Reserve Bank of India are issued only in the interest of monetary stability and sound economy growth. Merely RBI lays down banking policies, in the interest of the banking system or monetary stability, it does not mean that private companies carrying on business or commercial activity of banking are discharging any public function or public duty. 27. The learned Senior counsel particularly emphasizes the fact that the Hon'ble Supreme Court in the said case ....
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.... that for enforcement of the Circular dated 27.03.2020, the remedy under Article 226 is available and there cannot be any doubt on that aspect, as the Courts have held that writ would lie against private entities for enforcement of Reserve Bank of India Circulars. Therefore, he would reiterate that the writ is maintainable in the facts and circumstances of the case as pleaded and demonstrated. 31. Heard, Mr. AR.L. Sundaresan, learned Senior Counsel for the petitioner, P.H. Aravindh Pandian, learned Senior Counsel for the 1st respondent, Mr. V. Kumaran, learned Additional Government Pleader the 2nd respondent and Mr. Satish Parasaran, learned Senior Counsel appearing for the 4th respondent. 32. Learned Senior Counsels/counsel have addressed their detailed arguments with supportive pleadings/materials and citations advancing their respective positions in regard to the maintainability of the writ petition. The issue of maintainability of the writ petition would have to be confined in this case with reference to the relationship of the parties and the dispute arising thereunder and whether such dispute calls for a public remedial action or it must be relegated to the private law reme....
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....ned communication dated 30.04.2021. According to the learned Senior counsel, the 4th respondent is under legal obligation and has a public duty to comply with the Reserve Bank of India circulars issued particularly, during the Covid-19 situation permitting the Banking Institutions to grant moratorium to all the loans availed by the individuals, companies, institutions etc. When there is a duty cast upon the banks and the financial institutions which admittedly included the 4th respondent, failure to follow the circulars amounted to abdicating its public duty enjoined upon them and in that view of the matter, a command ought to be issued by this Court by way of a Writ for their compliance. 36. As a corollary to the above, it was also submitted that in a loan sanction of the present nature involving hundreds of crores, there is always public interest involved. Before any adverse or coercive action to be initiated, forcing a borrower to come to terms with such action, the Finance Institution is required to take into consideration not only mutual rights and obligations expressed under the agreement but importantly the impact of such action on the economy of the region and the conseque....
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.... defaults in discharge of the loan occurred several years before the pandemic crisis which led to the Master Restructuring Agreement in 2018 and thereafter also, there had been defaults and even presently, the defaults had occasioned after August, 2020 i.e., beyond the permissible period of moratorium as envisaged in the Circulars issued by the Reserve Bank of India. The defaults of the petitioner initially cover the month of October & November, 2020 and the dues pertaining to those months had been settled only in March and April 2021 and from December 2020, the repayments are outstanding as on date. Therefore, the question of extending the benefit of moratorium to the petitioner did not arise at all. 40. Apart from the above submission, it was also vehemently argued that grant of extension of benefit of moratorium is the discretion extended to the lending institution and there is no compulsion or mandate for grant of moratorium across the board. In any event, it was submitted that mere non-compliance of the regulatory circulars cannot provide a relief to the petitioner in a public law remedy. 41. The bedrock of the triangular relationship, as between the 1st petitioner and 1st r....
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....in are extended to private domain as well. As a consequence of the march of law the judicial review is directed against the action, decision making process and not concerned with identity of the body as such. In the back drop of this understanding what is to be seen and found is that the impugned action herein of the 4th respondent could impel the Court to outreach or to observe self imposed restraint as part of constitutional behaviour is a matter of deconstruction of the facts as it presented. 44. The impugned communication has been issued by the 4th respondent in violation of the circulars issued by the Reserve Bank of India is what pleaded and argued on behalf of the petitioner. In this regard, this Court has to see whether the moratorium benefit as contemplated in the circulars is to be extended across the Board without any discretion accorded to the respective Banking Institutions vis-a-vis their customers or not? The circular dated 27.03.2020 which appeared to be the fulcrum of the petitioner's submission for maintaining the writ petition begins with the preamble that certain regulatory measures had been initiated and announced by the Reserve Bank of India for schedule ....
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....r way to the petitioner to invoke the extraordinary jurisdiction of this Court in the realm of public law remedy? The answer may have to be in the negative. It cannot be in dispute that the RBI circular is regulatory in nature for ensuring monetary stability across the country. It is again not in dispute that every financial institution is bound to follow the directives of the Reserve Bank of India issued from time to time for maintaining fiscal discipline. But that fact alone may not give rise to a right to have a recourse to public law remedy in the dispute unreservedly emanated from the commercial relationship of the parties. In this regard, the observations of the Hon'ble Supreme Court of India in Federal Bank case reported in 2003(10) SCC 733 (Federal Bank Ltd. vs. sagar Thomas and Ors.) in paragraphs 26 to 33 which have been extracted supra have clearly enunciated the legal position that merely because some regulatory measures are issued by the RBI, a private company carrying on banking business cannot be termed as discharging public function or public duty. The succinct observation of the Hon'ble Supreme Court is again extracted hereunder as a pointer to the maintain....
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....ed to the relationship of the parties. The transaction between them is plainly commercial without a tinge or shade of public function involved. This Court also does not apparently see any public duty imposed on the 4th respondent that is referable in the context of complying with certain provisions contained in the enactments like Industrial Disputes Act, Minimum Wages Act, the Factories Act or the Statutes relating to Pollution etc., or even certain duties which have been imposed by common law, custom, or even contract stretching the requirement in terms of the observation of the Supreme Court of India as under: "22. Here again, we may point out that mandamus cannot be denied on the ground that the duty to be enforced is not imposed by the statute. Commenting on the development of this law, Professor de Smith states: "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". [Ed.: S.A. de Smith, Judicial Review of Administrative Action (4th Edn., Stevens & Sons Ltd., London 1980) at p. 540.] We share this view. The judicial control ov....
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....n, if the Ports activities are to be crippled, the shipments carrying essential assignment meant for public would be affected appears to be made out of desperation. The argument may appear to be attractive on a first blush on a precipitous understanding but if it is carefully examined, it could be seen that it is a furtive attempt by the petitioner to hide behind the 1st respondent to lend legitimacy for approaching this Court seeking judicial review of a private action. No doubt, Port activities are essential services to keep the public interest afloat, but the 1st respondent is again a private company. Its activities may touch upon public interest, nevertheless, the petitioner cannot be allowed to craftily project the port activities for the purpose of hitching on the public interest bandwagon. 53. This Court is unable to countenance the above arguments for the purpose of holding the writ petition maintainable. In fact, it has been submitted on behalf of the 4th respondent that there was no action initiated against the 1st respondent towards crippling of its operations. This Court, even otherwise, is of the view that if any action taken where the loan amounts involved to the tun....
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.... above, the Court cautioned that contractual duties cannot be enforced by way of Mandamus. Even in case of contractual matters in respect of public body, principles of judicial review have limited application as in para 10 of the judgment stated below: The courts always retained the discretion to withhold the remedy where it would not be in the interest of justice to grant it. It is also to be noticed that the statutory duty imposed on the public authorities may not be of discretionary character. A distinction had always been drawn between the public duties enforceable by mandamus that are statutory and duties arising merely from contract. Contractual duties are enforceable as matters of private law by ordinary contractual remedies such as damages, injunction, specific performance and declaration. In the Administrative Law (Ninth Edition) by Sir William Wade and Christopher Forsyth, (Oxford University Press) at page 621, the following opinion is expressed: "A distinction which needs to be clarified is that between public duties enforceable by mandamus, which are usually statutory, and duties arising merely from contract. Contractual duties are enforceable as matters of private ....
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....rectives. Its circulars shall bind those who fall within the net of such directives. For such transaction which are not squarely governed by such circulars, the RBI directives may be treated as standards for the purpose of deciding whether the interest charged is excessive, usurious or opposed to public policy." In the above observation, it could be seen that transactions which are not squarely governed by Circulars of the RBI that Circulars to be treated as standards to judge the action taken by the private Banks is opposed to any public policy In the light of the observation and the ruling, the petitioner cannot compel this Court to issue a command, namely Mandamus and more so, Writ of Certiorari. 58. The other decision relied on by the petitioner namely, the decision of Bombay High Court reported in (Transcon Iconica Pvt. Ltd. and Ors. vs. ICICI bank and Ors. The facts in that case are almost identical as the borrower has approached the High Court of Bombay by invoking the writ jurisdiction on the ground that the respondent private Bank therein did not follow the circular issued by the Reserve Bank of India dated 27.03.2020 during Covid-19 crisis. The writ petition was enterta....
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....endered on the factual context of the respective transaction. In fact, in the 2nd decision of the Gujarat High Court, it was ultimately held that no definite facts were placed before the Court to hold that the private company therein is not discharging public functions. 62. Coming back to this case, the very entitlement of the benefit of moratorium is being questioned seriously and this Court is also prima facie of the view that there appears to be substantial force in the submission made on behalf of the 4th respondent in this regard. Therefore, the applicability of Reserve Bank of India circular itself being an unsure case of the petitioner, the question of maintaining the writ petition on that plank would have to necessarily fail. 63. On the other side of the legal spectrum, the judgments relied on by the learned Senior Counsel for the 4th respondent which have been extracted supra would on all fours cover the challenge to the maintainability of the writ petition. This Court in the course of the judicial discourse found that the decisions against the private entities rendered in the realm of public law remedy, are pertaining to the issue of writ of mandamus, thus, directed the....