2021 (7) TMI 1457 - HC - Indian Laws

Maintainability of the Writ Petition - private civil dispute - relationship between the petitioner and the 4th respondent is entirely governed by contractual and commercial agreements or not - no public interest is involved. When the parties to the dispute are governed by Private Agreements and the 4th respondent is admittedly not a State or Instrumentality of the State and whether the public law remedy can be resorted to in the facts and circumstances pleaded by the petitioner company? HELD THAT - What is challenged in the writ petition is a communication dated 30.04.2021 issued by the 4th respondent, a private Company against the petitioner which is a private Company invoking certain clauses in terms of restructuring agreement of loan dated 26.07.2018(MRA) between the contesting parties. As far as the maintainability of the writ against a private person or private legal entity is concerned, the legal position is no more res integra. There are numerous judgments of the Hon'ble Supreme Court and various High Courts holding that the issuance of writ cannot be denied merely because it is sought to be issued against a private person or private entity. Therefore, this Court does not wish to open up any fresh vista on the rudimentary understanding of the progressive expansion of public law jurisdiction in matters where the Court finds interplay of private interest and public duty. It is axiomatic that writ would lie against private person or private entity in certain circumstances scripted in various decisions of the Hon'ble Supreme Court and High Courts from time to time. The benefit of moratorium as envisaged in Reserve Bank of India Circulars is not available to the petitioner at all is the case of the 4th respondent. It was further argued that the grant of benefit of the moratorium in this case would not arise even otherwise, as the 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. The bedrock of the triangular relationship, as between the 1st petitioner and 1st respondent on one hand and the 4th respondent on the other is indisputably a private and commercial consideration with no shred of public element involved in discharge of their mutual obligation and rights among them. The facts narrated would unequivocally demonstrate that the petitioner has been extended loans to the tune of several hundred crores by various Nationalised Banks since 2006 when first concessional agreement was signed on 25.01.2006 and the subsequent agreement on 06.11.2006 between the 1st respondent and the initial lenders, namely consortium of nationalised/private Institutions and in terms of which, the repayments were scheduled and the functioning of the 1st respondent had been governed and monitored by the lending institutions i.e., by initial lenders through the 3rd respondent Indian bank as their Agent. In a contractual relationship purely governed by commercial consideration, enforcing the terms of contract/agreement by one party as against the other could be subjected to judicial scrutiny under writ jurisdiction of this Court is a knotty question and the answers are not be found on any definite legal principles or defined contours of factual 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. - even assuming the Circulars of RBI need to be implemented across the spectrum, regardless of the nature of defaults by the defaulting party, merely because the 4th respondent has not complied with the circulars, can that failure alone provide a door 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. 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. 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 - In exercise of writ jurisdiction, this Court would certainly not get involved in the commercial disputes entirely arising from the private relationship driven by commercial consideration and issue any command as that would amount to injudicious intrusion and invasive transgression into the defined areas of conflict governed by mutual rights, liabilities and obligations. If the doors of public law are to be thrown open for matters like the present one, it would only lead to opening the pandora's box and all the private disputes would find a back door entry and have recourse to writ jurisdiction as a easier option for serving private ends. Such scenario would eventually lead to dilution of the essence of the writ jurisdiction namely, serving public interest. The writ petition is not maintainable and hence, the same is dismissed.

Summary

Issues Involved:
1. Maintainability of the Writ Petition
2. Public Duty and Public Interest
3. Applicability of RBI Circulars
4. Contractual and Commercial Agreements
5. Judicial Review of Private Disputes

Detailed Analysis:

1. Maintainability of the Writ Petition:
The primary issue was whether the writ petition is maintainable against a private entity, the 4th respondent, an Asset Reconstruction Company (ARC), under Article 226 of the Constitution of India. The petitioner argued that the writ petition is maintainable as the issues raised touch upon public interest and the 4th respondent, having stepped into the shoes of nine nationalized banks, is discharging a public duty. The court, however, held that the writ petition is not maintainable. It emphasized that the relationship between the petitioner and the 4th respondent is governed by private and commercial agreements, and no public interest is involved. The court stated, "The bedrock of the triangular relationship, as between the 1st petitioner and 1st respondent on one hand and the 4th respondent on the other is indisputably a private and commercial consideration with no shred of public element involved in discharge of their mutual obligation and rights among them."

2. Public Duty and Public Interest:
The petitioner contended that the 4th respondent, by virtue of being assigned the debts from nationalized banks, is performing a public duty and should comply with RBI regulations, particularly the moratorium circulars issued during the COVID-19 pandemic. The court rejected this argument, stating that the 4th respondent's actions are purely within the private domain and do not involve any public duty. The court noted, "The transaction between them is plainly commercial without a tinge or shade of public function involved."

3. Applicability of RBI Circulars:
The petitioner argued that the 4th respondent failed to comply with the RBI circulars dated 27.03.2020 and 23.05.2020, which provided for a moratorium on loan repayments due to the COVID-19 pandemic. The 4th respondent countered that the moratorium benefit is discretionary and not mandatory. The court agreed with the 4th respondent, stating that the circulars are regulatory and do not impose a legal compulsion on the 4th respondent to extend the moratorium. The court observed, "The circular, while delineating the policy permitted the financial institutions to consider grant of the benefit of moratorium. The circular also envisages exemption from the benefit in regard to the loan accounts being declared as NPA."

4. Contractual and Commercial Agreements:
The court emphasized that the dispute arises from a contractual relationship governed by commercial agreements, specifically the Master Restructuring Agreement (MRA) dated 26.07.2018. The court noted that the enforcement of contractual terms by one party against the other does not warrant judicial scrutiny under writ jurisdiction. The court stated, "In a contractual relationship purely governed by commercial consideration, enforcing the terms of contract/agreement by one party as against the other could be subjected to judicial scrutiny under writ jurisdiction of this Court is a knotty question and the answers are not to be found on any definite legal principles or defined contours of factual circumstances."

5. Judicial Review of Private Disputes:
The court held that judicial review in the realm of public law is not applicable to private disputes arising from commercial relationships. The court stated, "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 relationship." The court concluded that the writ petition is not maintainable and dismissed it, stating, "For all the above reasons, this Court finds that the writ petition is not maintainable and hence, the same is dismissed. No costs. Consequently, connected miscellaneous petitions are closed."

Conclusion:
The court dismissed the writ petition, holding that it is not maintainable as the dispute arises from a private and commercial relationship governed by contractual agreements, and no public duty or public interest is involved. The court emphasized that the RBI circulars are regulatory and do not impose a mandatory obligation on the 4th respondent to extend the moratorium benefit.