TaxTMI 
TaxTMI 
2021 (7) TMI 1457
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.... (Rupees Nineteen hundred ninety five crore, ninety 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 partner....
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....between March and May 2020 in order to prevent any on going 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 ....
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.... 5. Acquisition of rights or interest in financial assets. (1) Notwithstanding anything 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 im....
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.... territorial), the power should be exercised in accordance with well established principles. They are in this context, are as under: (a) A writ petition 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 ....
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.... certain English decisions, it is worthwhile to remember the words of Subba Rao, J. expressed in relation to the powers conferred on the High Court under Article 226 of the Constitution in 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 o....
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....ed where there are other adequate remedies. This difference is brought out by the relief granted in cases of ultra vires. If for example a minister or a licensing authority acts contrary to the principles of natural 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 ....
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....unction. As Sir John Donaldson, M.R. urged, it is important for the courts to 'recognise the realities of executive power' and not allow 'their vision to be clouded by the subtlety and sometimes complexity of the way in 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,....
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....e maintained in respect of secured advances, (c) the maximum amount of advances or other financial accommodation which, having regard to the paid-up capital, reserves and deposits of a banking company and other relevant considerations, may be made by that banking company to any one company, firm, association of persons or individual, (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 ....
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....are binding or not now stands concluded by reason of a Constitution Bench Judgment of this Court in Central Bank of India v. Ravindra and Others [(2002) 1 SCC 367] in the following terms: "55... (5) The power conferred by Sections 21 and 5-A of the Banking Regulation Act, 1949 is coupled with duty to act. The Reserve Bank of India is the prime banking institution of the country entrusted with a supervisory role over banking and conferred with the authority 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 contin....
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....hasise the legal position that the Reserve Bank of India guidelines are binding on all Financial Institutions. He would therefore add that once the RBI guidelines are held to be binding, the public duty is imposed upon the 4th respondent to follow the moratorium package as envisaged in RBI Circulars dated 27.03.2020 and 23.05.2020. (4) In (Transcon Skycity Pvt. Ltd. And Others vs. ICICI Bank and Others), the learned Senior Counsel would draw the attention of this Court to paragraph Nos. 3, 4, 5, 8, 9, 13, 37 & 38 which are extracted 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....
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..... The observations in paragraphs 12, 13, 22 and 24 of this decision are as follows: 12. The scope of Article 226 of the Constitution of India is wide. Writs and orders of diverse nature can be issued. The exercise of this power is not bound in technicities. However same width is not to be implied as to whom the writs and directions can be issued under Article 226. Writs can be issued to the State; an authority; a statutory body; an instrumentality or agency of the State; a company financed and owned by the State; a private body run substantially on State funding; a private 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 perfor....
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....to accord with their avowed objective. Indeed, there is no contractual dispute at all. The financing terms are undisputed. The default is undisputed. The consequence of the default running for 90-days is undisputed. But there intervenes, in globally extraordinary circumstances, directions issued by the RBI, and it is these directions, and their applicability and interpretation that the Petitioners have placed at the centre of these petitions. Dr Saraf's submission, as I understand it, is, therefore, that the reckoning of the moratorium period, the interpretation of the RBI circular and guidelines and 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 quest....
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....t 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." We share this view. The judicial control over the fast expanding maze of bodies affecting the rights of the people should not be put into watertight compartment. It should remain flexible to meet the requirements of variable circumstances. Mandamus is a very wide remedy which must be easily available 'to reach injustice wherever it is found'. Technicalities should not come in the way of granting that relief under Article 226 We, therefore, 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....
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....irements of variable circumstances. Mandamus is a very wide remedy which must be easily available "to reach injustice wherever it is found". Technicalities should not come in the way of granting that relief under Article 226. We, therefore. reject the contention urged for the appellants on the maintainability of the writ petition." The aforesaid observations have been repeated and reiterated in numerous judgments of this Court including the judgment in Unni Krishnan and Zee Telefilms Ltd.(supra), brought to our notice by the learned counsel for the Appellant Mr. Parikh.". 19.3. The RBI cannot take an handsoff approach, it is for the RBI to see to it that the Circular issued by the RBI is implemented in its true letter and spirit. The Union 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 "Shylo....
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....nt Nos. 5 and 6 ought, not to have come in the way of considering and approving the request of moratorium by the Petitioner. ..... .... 20.1. Whether a Writ of mandamus can be issued against a private bank to implement the Circular issued by the RBI dated 27.03.2020? 20.2. Is the Circular issued by the RBI dated 27.03.2020 mandatory, directory or discretionary? .... .... 21.19. Hence, a writ petition would be maintainable against the Respondents in the present facts and circumstances for the enforcement of the public duty under the Circular dated 27.03.2020. 11. According to the learned Senior counsel, the above decision of the High Court of Karnataka has held that a writ could be issued against a private Bank. Learned Judge, in fact, considered the package containing moratorium benefit 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 B....
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....hem to 4th respondent as well as RBI seeking clarification as to the extension of the moratorium package to the petitioner in the crisis period. In fact, learned senior counsel would particularly refer to the communication dated 07.06.2021 addressed to the 5th respondent by the 1st respondent seeking extension of loan term period citing force majeure pandemic crisis and also for long terms Restructuring of the loan. The learned Senior counsel would also refer to two decisions in support of his contention. (i) 2008(2) ALT 611 (Ghanta Infrastructures Ltd. Vs. Asset Reconstruction Company (India) Ltd.) Learned counsel would rely on paragraph 50 of the said judgment, which reads as follows: "50. On a careful analysis of the respective stands taken by the parties, the question to be decided is whether the action challenged in the Writ Petition is 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....
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....a Ltd. Vs. Asset Reconstruction Company (India) Ltd.. Learned Senior Counsel would rely on paragraphs 16, 17, 19 and 20, which are extracted hereunder. "(16) We shall now deal with the second question as to whether the petition against ARCIL is maintainable or not. In short, whether ARCIL is a State within the meaning of Article 12 of the Constitution or an instrumentality of the State amenable to the writ jurisdiction of this Court under Article 226 of the Consideration of India. (17) In the case of State of Uttar Pradesh and Another v. Radhe Shyam Rai (2009) 5 SCC 577 while deciding the issue as to whether Uttar Pradesh Ganna Kishan Sansthan, a society registered under the Societies Registration Act is a State within the meaning of Article 12 of the Constitution, the Apex Court has observed in paragraphs 8, 9, 10, 11, 12, 13, 15 and 16 as under: "8. Article 12 of the 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 Indi....
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....ht lead one to characterize an operation as State action." (SCC p. 454, para 96). (2) "97... Another factor which might be considered is whether the operation is an important public function. (SCC p. 454, para 97). (3) "97... The combination of State aid and the furnishing of an important public service may result in a conclusion that the operation should be classified as a State agency. If a given function is of such public importance and so closely related to Governmental functions as to be classified as a Governmental agency, then even the presence or absence of State financial aid might be irrelevant in making a finding of State action. If the function does not fall within such a description, then mere addition of State money would not influence the conclusion." (SCC p. 454, para 97). (4) "111.... The ultimate question which is relevant for our purpose is whether such a Corporation is an agency or instrumentality of the Government 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 Has....
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....ticle 12 of the Constitution of India, applying the tests of administrative control, financial control and functional control. 16. The question as to whether the Board of Control for Cricket in India (BCCI) which is a private body but had a control over the sport of cricket in India is a State within the meaning of Article 12 of the Constitution of India came up for consideration before a Constitution Bench of this Court in Zee Telefilms Ltd. and Another v. Union of India and Others [(2005) 4 SCC 649] wherein the majority felt itself bound by the dicta laid down in Pradeep Kumar Biswas (supra) to opine that it was not a "State within the meaning of Article 12 of the Constitution of India. However, the minority view was as under: "70. Broadly, there are three different concepts which exist for determining the questions which fall within the expression "other authorities": i. The Corporations and the societies created by the State for carrying on its trading activities 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....
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....asset reconstruction Company set up in the country by leading banks in the Indian banking system. The official sponsors of the respondent Company were State Bank of India, ICICI Bank and IDBI Bank Limited. It is further averred that thereafter in the year 2004 Punjab National Bank joined by acquiring shareholding to the extent of 10%. It is submitted that majority of the shareholding are predominantly nationalised bank and private sector banks. It is submitted that the respondent Company is financially, functionally and administratively dominated by or under pervasive control of the public sector banks which are instrumentality of the State. (19) We seriously called upon the learned Counsel for the petitioner to explain as to what is the material or evidence placed on record to substantiate the same that respondent-ARCIL is a State within the meaning of Article 12 of the Constitution of India so as to make it amenable to writ jurisdiction. Learned Counsel submitted that 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....
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....and would be decided in any other appropriate proceedings with the relevant material and evidence on record in this regard, but the fact that we have answered the first issue against the petitioner, the petition deserves to be rejected and the same is hereby rejected. In the facts and circumstances of the case, we also deem it fir and proper to impose a cost of Rs. 25,000 upon the petitioner. We direct that the amount of cost of Rs. 25,000 be paid to the Gujarat State Legal Services Authority within a period of 15 days from today. Petition stands rejected. 16. The learned Senior counsel would submit that the above decision would also highlight the legal position that the issuance of writ is per se is not a bar against private entity. The learned Senior counsel would finally submit that being a Company which is benefited by the loan availed from the initial lenders and such loans being assigned to the fourth respondent Reconstruction Company, the 1st respondent would earnestly plead for continuance 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 ....
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....ara 2(ii) of the Circular dated April 22, 2009, ARCs may deploy their funds for undertaking restructuring of acquired loan account with the sole purpose of realizing their dues. Therefore, ARCs step into the shoes of the lender in limited circumstances. 3. In terms of circular dated March 27, 2020, all lending institutions are permitted to grant moratorium to their eligible borrowers after framing a Board approved policy in this regard. Accordingly, ARCs may grant moratorium only where they stand as lenders in strict compliance with the instructions for lending institutions contained in the Bank's Covid-19 Regulatory Package. 19. According to the learned Senior counsel, only in the limited circumstances, in the event of deployment of their funds, the loans would be covered under the moratorium declared under Covid 19 Regulatory Package. As far as the 4th respondent Company is concerned, they have not deployed any funds at all and therefore, the principal contention of the maintainability of the writ petition on that 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 instit....
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....3. At any time during the Concession Period, the Lenders shall, in the event of a default by MCL under the Financing Documents and/or this Agreement and if such default is not cured within the cure period permitted under the Financing Documents and/or as the case may be, this Agreement, be entitled to appoint a Substitute Entity to take over the rights and obligations of MCL hereunder and GOP shall accept such appointment, provided that the Substitute Entity is eligible and meets all the requirements for grant of Clearances applied on a non-discriminatory basis. The Substitute Entity shall be entitled to exercise all rights of MCL and discharge all MCL's obligations hereunder. In the event of a default under the Financing Agreements and after the Lenders have commenced an enforcement action against MCL, GOP shall not terminate this Agreement." 23. The learned Senior counsel would submit that following the above agreement in terms of Master Reconstruction Agreement dated 26.07.2019, certain rights have been conferred upon the lenders under Clauses 17 and 18 and as per that the same, the right has been exercised and the notice was issued by the 4th respondent. He would particu....
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....ving their own ends The loan transactions between the petitioner and the 4th respondent company governed by commercial consideration but cleverly being brought within the realm of a public law remedy. 25. The learned Senior counsel in support of the legal contention that the writ petition is not maintainable would refer to the following case laws; (1) Federal Bank Ltd., Vs. Sagar Thomas & Others reported in (2003) 10 SCC 733. The learned Senior counsel particularly referred to Paragraphs 26 to 29, 32 & 33 which are extracted hereunder; "26.A company registered under the Companies Act for the purposes of carrying on any trade or business is a private enterprise to earn livelihood and to make profits out of such activities. Banking is also a kind of profession and a commercial activity, the primary motive behind it can well be said to earn returns and profits. Since time immemorial, such activities have been carried on by individuals generally. It is a private affair of the company though case of nationalized banks stands on a different footing. There may, well be companies, in which majority of the share capital may be contributed out of the State funds and in t....
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....any itself may not sink because of its own mismanagement or the interest of the shareholders or people generally may not be jeopardized for that reason. Besides taking care of such interest as indicated above, there is no other interest of the State, to control the affairs and management of the private companies. The care is taken in regard to the industries covered under the Industries (Development and Regulation) Act, 1951 that their production which is important for the economy may not go down yet the business activity is carried on by such companies or corporations which only remains a private activity of the entrepreneurs/companies. 27. Such private companies would normally not be amenable to the writ jurisdiction under Article 226 of the Constitution. But in certain circumstances a writ may issue to such private bodies or persons as there may be statutes which need to be complied with by all concerned including the private companies. For example, there are certain legislations like the Industrial Disputes Act, the Minimum Wages Act, the Factories Act or for maintaining proper environment say Air (Prevention and Control of Pollution) Act, 1981 or Water (Prevention and....
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....nies also as well as industries manufacturing goods of importance. Otherwise these are purely private commercial activities. It deserves to be noted that it hardly makes any difference that such supervisory vigilance is kept by the Reserve Bank of India under a Statute or the Central Government. Even if it was with the Central Government in place of the Reserve Bank of India it would not have made any difference, therefore, the argument based on the decision of All India Bank Employees' Association (supra) does not advance the case of the respondent. It is only in case of mal-functioning of the company that occasion to exercise such powers arises to protect the interest of the depositors, shareholders or the company itself or to help the company to be out of the woods. In the times of normal functioning such occasions do not arise except for routine inspections etc. with a view to see that things are moved smoothly in keeping with fiscal policies in general. 29. There are a number of such companies carrying on the profession of banking. There is nothing which can be said to be close to the governmental functions. It is an old profession in one form or the other carried....
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.... 33. For the discussion held above, in our view, a private company carrying on banking business as a scheduled bank, cannot be termed as an institution or company carrying on any statutory or public duty. A private body or a person may be amenable to writ jurisdiction only where it may become necessary to compel such body or association to enforce any statutory obligations or such obligations of public nature casting positive obligation upon it. We don't find such conditions are fulfilled in respect of a private company carrying on a commercial activity of banking. Merely regulatory provisions to ensure such activity carried on by private bodies work within a discipline, do not confer any such status upon the company nor puts any such obligation upon it which may be enforced through issue of a writ under Article 226 of the Constitution. Present is a case of disciplinary action being taken against its employee by the appellant Bank. Respondent's service with the bank stands terminated. The action of the Bank was challenged by the respondent by filing a writ petition under Article 226 of the Constitution of India. The respondent is not trying to enforce any statutory dut....
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....the writ jurisdiction. But in certain circumstances, a writ may issue against such private bodies where these violate statutory provisions. When there is no violation of any statutory provisions, a writ may not be issued at all. It also made clear that there is nothing on the basis of which it can be said that carrying on the profession of banking as akin to carrying on governmental functions. Rather banking is an old profession in one form or the other carried on by individuals or 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 or others no doubt have impact on the economy of the country in general, but such activities cannot be classified as one falling in the category of discharging of duties/functions of public nature. Merely because the Reserve Bank of India lays the banking policy in the interest of the banking system or in the interest of monetary stability, it does not mean that private companies carrying on the business of banking, discharge any public function or public duty. Thus, ultimately, the Supreme Court held that the writ petition against Federal Bank is not maintainable. ....
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....tion under Article 226 of the Constitution of India were stated as follows: i) the State (Government); ii) an 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; and viii) a person or a body under liability to discharge any function under any Statute, to compel it to perform such a statutory function. .......... 29. Reliance placed by Mr. Malhotra on Ajay Hasia and Ors. (supra) is out of place. Neither is it established that the entire share capital of the respondent is held by the government, nor is it established that the State exercises deep and pervasive control over the affairs of the respondent. There is nothing to show that the respondent is financially, functionally, or administratively dominated by or under the control of the government, much less to show that the said control is pervasive. At the highest, the control is merely regulatory-by the RBI, on account of ....
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.... Ors. (supra), the Apex Court has held that any private organization which is performing public functions and is bound by the Rules framed by the State, would also be amenable to writ jurisdiction. In the case of M/s. Zee Tele Films Ltd. And another Vs. Union of India and ors. (supra), the Apex Court has also reiterated the same law. However, the question arises whether banking can be said to be a public function. Admittedly, banking is one of the commercial activities which may be performed by a statutory bank, nationalized bank, corporate bank formed under the Companies Act as well as by non-banking financial companies. Each of the above has a different constitution. They are governed by different provisions. While Banks formed under the statute are governed by the statute framed by the State and thus would fall within the definition of State and other authorities under Article 12, corporate Banks formed under the Companies Act or non-banking financial companies also formed under the Companies Act, would be governed by its Article of Association and they, therefore, have a separate Constitution altogether. Their share capital is also relevant as to who would be the controlling bo....
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....ure and do not attract any public character or element and the transaction namely the agreement entered into by the 4th respondent with the petitioner herein is a private loan transaction governed by mutual agreement with liabilities, obligations and rights and any dispute touching upon such obligations, rights and liabilities do not come within the purview of the writ jurisdiction of this Court. The learned Senior counsel would finally submit that not a shred of public interest is involved nor any public duty is cast on the 4th respondent, in the circumstances of the case and therefore, invoking the writ jurisdiction of this Court is ex facie misconceived and the writ petition is liable to be rejected. 29. Mr. AR. L. Sundaresan, learned Senior Counsel, as a matter of reply would submit that the arguments advanced on behalf of the 4th respondent that the Circular would not apply as the 4th respondent has not deployed any funds in the 1st respondent Company, would amount to misreading of the clarification issued by the Reserve Bank of India. He would submit that the clarification does not say that the Company should deploy funds for the purpose of extension of the moratorium bene....
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....te person or private entity in certain circumstances scripted in various decisions of the Hon'ble Supreme Court and High Courts from time to time. 34. In the above circumstances, the 4th respondent's amenability to the writ jurisdiction of this Court being a private Company is beyond the pale of any legal controversy on a conceptional understanding of the settled legal position. This Court is not called upon to decide the amenability per se of the 4th respondent to the writ jurisdiction. The consideration of this Court is from the perspective of the nature of the dispute qua private parties. Therefore, the judicial endeavour is appreciation of the relationship of the parties, their mutual rights and obligations within the private and commercial frame work and in that relationship collaterally or concomitantly any public duty is imposed or public interest is involved to bring the dispute arising from such relationship within the mischief of writ jurisdiction of this Court or not? 35. On behalf of the petitioner, it was elaborately and vehemently argued by the learned Senior Counsel Mr. AR.L. Sundaresan, that the writ is maintainable and his principal contentions are th....
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....4th respondent was from 9 nationalised Banks. Therefore, the 4th respondent has assumed the character of a public institution and therefore, any action of its, could be brought within the realm of judicial review under Article 226 of the Constitution of India. The maintainability of the writ petition, thus, is premised on the above principal submissions, which need to be addressed either to uphold or to discountenance the same. 38. According to the 4th respondent, the benefit of moratorium as envisaged in Reserve Bank of India Circulars dated 27.03.2020 and 23.05.2020 are not applicable to the loan agreement for more than one reason. In fact, this position was emphasised by the learned Senior Counsel Mr. Satish Parasaran that in terms of a clarification issued by the Reserve Bank of India that a moratorium may be granted only when the Financial Institution is involved in the deployment of funds for undertaking restructuring of acquired loan account. In the present case, the 4th respondent did not deploy funds at all as the Master Restructuring Agreement (MRA) dated 26.07.2018 entered into only with the original assigned debt. 39. In the circumstances, the benefit of moratoriu....
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....s ultimately, declared the loans extended to the petitioner herein being the principal promoter of the 1st respondent as Non-Performing Asset (NPA) and subsequently, the loans were negotiated and it was finally assigned vide assignment deeds entered into by 9 Banks with the 4th respondent between July 2015 and September, 2016. 42. Thereafter, there was a Master Restructuring Agreement (MRA) entered into on 26.07.2018 and the payments had been rescheduled at the instance of the petitioner and the 1st respondent. After July 2018, the schedule of payments being governed by MRA between the petitioner and the 4th respondent, the petitioner appears to have committed defaults on several occasions and therefore, the 4th respondent was constrained to issue the impugned communication invoking clause 18 of the Restructuring Agreement dated 26.07.2018 calling upon the petitioner to forthwith pay the entire outstanding to the tune of Rs. 19,95,95,17,808/- within 7 days, failing which, the agreement shall stand revoked. 43. In a contractual relationship purely governed by commercial consideration, enforcing the terms of contract/agreement by one party as against the other could be subjecte....
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....enefit of the moratorium by one party in favour of the other party, is dependant on various facts to be taken into consideration within the private and contractual precincts of such relationship. 45. In the above circumstances, when the very applicability of the Reserve Bank of India circular is being seriously questioned by the 4th respondent, the interpretation of the contents of the circular dated 27.03.2020 and the subsequent clarification issued by the RBI to the petitioner call for adjudication of factual controversies as between the 4th respondent and the petitioner. In that process, this Court inevitably would have to traverse and delve into the areas of factual conflicts entirely governed by contractual relationship in order to render findings as to what is deployment of funds, the definition of lenders as stated in the clarification letter dated 16.06.2020, the terms of MRA dated 26.07.2018 etc. If this Court were to investigate into the disputed areas of understanding between the private parties, it would certainly amount to pitch forking a public law jurisdiction into a private dispute arising under a valid contractual relationship between the parties. 46. The abo....
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.... of the parties and assume the coloration of public interest. 48. As stated above, the very applicability of the circulars in question itself is in doubt as far as the petitioner loan account is concerned and even assuming for a moment it is applicable that the circular would by itself can be pleaded as a shield against the action taken by the 4th respondent and consequently, project the dispute before a public law platform? If the arguments advanced on behalf of the petitioner in this regard are to be accepted, any loan transaction running to hundreds of crores between the parties can be brought within the realm of public law remedy seeking judicial review of the action taken by the private companies exercising its rights under the private agreement on the ground that there are instructions by the RBI and Government of India regulating the financial relationship of the parties. The ominous effect of such expansive outreach would only lead to serving feigned public interest and eventually end up serving private interests in the bargain. 49. In order to apply the legal principles evolved over the years that writ Courts could issue "command" against private person or private en....
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....en the parties. In the absence of any compulsion/obligation or legal mandate to follow a particular course of action, then the right exercised by the 4th respondent within the four corners of the commercial agreements and the dispute arising thereof would certainly not come within the broad context of public law recourse. 51. It was argued on behalf of the 1st respondent Port that the activities of the Port substantially touch upon the public interest. It was submitted that more than 2000 vessels and 80 million tonnes of cargo are being handled by the 1st respondent Port every year. The cargo comprising coal, iron-ore, fertilizer, limestone, cement, crude oil, agro products, wheat, sugar etc. Major customers of the Port are TANGEDCO, India Cement, Ramco Cement, Dalmia Cement, Chemplast Sanmar etc. Any disruption of its activities by the adverse action of the 4th respondent would only lead to short supply of essential goods and ultimately, would only undermine the public interest. Further, it was also pleaded that the 1st respondent provided employment to thousands of employees directly or indirectly and the continuance of payments of salaries and other related obligations would ....
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....unt (MRA) etc. The consideration of these facts and its adjudication cannot be undertaken by this Court in a writ jurisdiction. On a wafer thin legal basis, contending RBI circulars being not followed, the writ petition is sought to be maintained. This Court is of the view that such slender premise is not good enough to maintain the writ petition in the circumstances of the case. 55. On behalf of the petitioner, decisions have been cited in extenso and the relevant paragraphs have also been extracted supra. As regards the first 2 decisions viz., 2002(1) KCC R367 (Karnataka Bank limited vs. Rekha Rao and Ors. (MANU/KA/0849/2001) and 2005(6) SCC 657 (Binny Ltd. vs. V. Sadasivam) are concerned, as stated in the preamble portion of this order, this Court has no difficulty in accepting the settled legal position that writ can be issued against private person or private entity. In Karnataka High Court decision, it was finally held that the writ petition was not maintainable against the private Bank in consideration of the facts of that case. As regards the Hon'ble Supreme Court's decision reported in 2005(6) SCC 657 (Binny Ltd. vs. V. Sadasivan) is concerned, the Hon'ble S....
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.... therein is to seek remedy other than judicial review in the realm of public law. 57. One other decision relied on is MANU/SC/1351/2009 (Sadar Associates and Ors. Vs. Punjab and Sind Bank and Ors.). It was the case that went from Debt Recovery Tribunal. While dealing with RBI guidelines, the Hon'ble Supreme Court referred to its Constitution Bench's decision reported in 2002(1) SCC 367 (Central Bank of India s. Ravindra and Ors.) and extracted its observation as under: "55... (5) The power conferred by Sections 21 and 35-A of the Banking Regulation Act, 1949 is coupled with duty to act. The Reserve Bank of India is the prime banking institution of the country entrusted with a supervisory role over banking and conferred with the authority 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 wou....
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.... not of any significant use for the petitioner to advance their case on maintainability. 60. As far as the last decision is concerned, viz., 2020 SCC Online Kar 835 (Velankani Information Systems Limited rep. By its Managing Director Kiron D. Shah v. Secretary, Ministry of Home Affairs, Govt. of India), it is also a case almost identical in nature decided during pandemic time on 08.07.2020. What was challenged in that writ petition was also action initiated by a private bank and the challenge principally was on the ground that the bank did not follow the Reserve Bank of India circular. The learned Judge has extensively dealt with the case and finally allowed the case of the petitioner therein by following a different set of judgments of the Hon'ble Supreme Court overlooking the law laid down by the Hon'ble Supreme Court in Federal Bank case (2003 (10) SCC 733). However, this Court finds that the learned Judge has delved pervasively into the factual disputes and held that the petitioner therein was entitled to the moratorium protection and in that context, RBI was directed to enforce the recovery package as contained in the Circular dated 27.03.2020 and consequently, the ....
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....iorari remedy would certainly not be made available to a private party under the specious plea of involvement of public interest. The already stretched boundaries of writ jurisdiction for advancing the bonafide constitutional goals cannot be further stretched to bring all private disputes within the fold of judicial review. 65. The examination of the issue of maintainability of the writ petition ought to be from the stand point of whose action under challenge and whose interest, it seeks to unsettle and in the process of any collateral effect of the impugned action cannot be the basis or reason to hold that the writ is maintainable. If this Court were to accept the above arguments, the same principle would have to be applied to all large loan transactions involving crores of rupees, as any adverse action initiated by the private lender, there would always be challenges galore from the defaulters in the realm of public law remedies. If the doors of public law remedy are to open to such defaulters, the public law remedy would become handy for the large borrowers to approach this Court for judicial review of action taken by the lenders in the realm of private and commercial relatio....