2003 (9) TMI 707 - SC - Companies Law

Whether the appellant bank is a private body or falls within the definition of the State or local or other authorities under the control of the Government? Whether a writ petition would be maintainable or not and the extent to which such powers can be exercised? Held that - 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 duty on the part of the Bank. That being the position, the appeal deserves to be allowed. In the result, the appeal is allowed and the judgment and order passed by the High Court is set aside and the writ petition is held to be not maintainable. There will, however, be no order as to costs.

Issues Involved:
1. Maintainability of the writ petition against a private bank under Article 226 of the Constitution.
2. Whether the Federal Bank Ltd. is performing public duty and falls under the definition of 'other authority' within the meaning of Article 12 of the Constitution.
3. The extent of regulatory control by the Reserve Bank of India (RBI) and the Central Government over the Federal Bank Ltd.
4. The applicability of various judicial precedents regarding the definition of 'State' and 'public duty' under Article 12 and Article 226.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The primary issue is whether a writ petition under Article 226 of the Constitution of India is maintainable against the Federal Bank Ltd., a private banking company. The respondent challenged the dismissal order by filing a writ petition in the High Court. The Federal Bank raised a preliminary objection regarding the maintainability of the writ petition, arguing that it is a private entity and not a 'State' or its instrumentality under Article 12.

2. Public Duty and 'Other Authority' under Article 12:
The learned single Judge of the High Court found that the Federal Bank performs public duty and is thus amenable to writ jurisdiction. The Judge observed that the activities carried on by the bank are vital to public interest and have the potential to affect the socioeconomic development and growth of the nation. Therefore, the bank was deemed to perform public functions, ensuring monetary stability and sound economic growth, and was classified as an 'other authority' under Article 12.

3. Regulatory Control by RBI and Central Government:
The Federal Bank argued that it is a private entity incorporated under the Companies Act, with its activities regulated by the Banking Regulation Act. The bank's finances are raised by its own resources, and it does not perform any sovereign function. The appellant emphasized that the control exercised by the RBI and the Central Government is regulatory and not pervasive or participatory. The court examined various provisions of the RBI Act, the Banking Regulation Act, and the Industries (Development and Regulation) Act to determine the nature and extent of control over the bank.

4. Judicial Precedents:
The court referred to several judicial precedents to determine whether the Federal Bank falls within the definition of 'State' or 'public authority.' Key cases considered include:

- Pradeep Kumar Biswas vs. Indian Institute of Chemical Biology: The court discussed the tests laid down to determine whether a body is an instrumentality or agency of the government.
- U.P. State Co-operative Land Development Bank Ltd. vs. Chandra Bhan Dubey: The court distinguished this case, noting that the U.P. Land Development Bank had pervasive state control and statutory obligations, unlike the Federal Bank.
- Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust vs. V.R. Rudani: The court noted that a writ can be issued to any body performing public duty, but emphasized that the Federal Bank does not have statutory or public obligations similar to those in Andi Mukta.

Conclusion:
The Supreme Court concluded that the Federal Bank Ltd., being a private entity with regulatory control by the RBI and the Central Government, does not perform public functions or duties that would make it amenable to writ jurisdiction under Article 226. The court held that the writ petition was not maintainable, as the bank's activities are commercial and do not involve any statutory or public duty enforceable through a writ. The appeal was allowed, and the High Court's judgment was set aside.

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