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TMI Blog2017 (6) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 17 of the SARFAESI Act. Given the fact that the Statute lays down a step-by-step procedure for the creditor to take action thereunder and remedies have been provided to the debtor against such action, judicial prudence demands that this Court must refrain from exercising its jurisdiction under Article 226 of the Constitution of India. Any view to the contrary shall derail the procedure contemplated under the Statute and seriously impact the rights of financial institutions like the respondent herein, to recover its dues. Thus the plea of the petitioners that the respondent is amenable to writ jurisdiction of the High Court is repelled. It is held that the present petition is not maintainable against the respondent under Article 226 of the Constitution of India as it is neither a “State”, or “any other person or authority” and nor is it discharging any public or statutory duty. If they have a grievance against the respondent, then the petitioners must seek recourse to proceedings under the SARFAESI Act, which provides for a special procedure for recovery of debts due to the Banks and financial institutions, to be moved at the appropriate stage. - W.P.(C) 8031/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date and had sought time to file a counter affidavit, which was duly filed. On 11.11.2016, Mr. Rajeeve Mehra, learned Senior Advocate appearing for the respondent had questioned the maintainability of the present petition on the ground that the respondent is neither a State nor a public authority or a government agency and also on the ground that the petition as filed, is not maintainable in law. In view of the aforesaid preliminary objections, the parties were first directed to address arguments on the maintainability of the present petition. 4. Mr. Rajeeve Mehra, learned Senior Advocate appearing for the respondent argued that the present petition is not maintainable against the respondent. He sought to throw light on the constitution of the respondent to urge that it is a private entity, not involved in any public function or duty; that it is not an authority within the meaning of Article 226 of the Constitution of India; that it is not a State within the meaning of Article 12 of the Constitution of India; that it does not fall in the ambit of an instrumentality of the State or a public authority ; that it is not a government owned or controlled bank; that no sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g as a Director of M/s PTC India Ltd, who also happens to be a nominee Director of the Ministry of Power; that the Directors/independent Directors/nominee Directors of M/s PTC India Ltd. are also Ex-Technocrats and former Secretaries in the Government of India and have been working with Public Sector Undertakings; that as per the statement of shareholding pattern of the respondent, M/s PTC India Ltd. holds 60% shares and other Central Government/State Government Undertakings namely, NTPC, PFC, NHPC, Power Grid Corporation etc. collectively hold 16.22% shares. 7. It was therefore urged on behalf of the petitioners that the Government of India exercises a deep and pervasive control over the affairs of the respondent through its Public Sector Undertakings and the officials appointed as Directors in the respondent/company play a vital role in the affairs of the respondent; that the Government being involved in the formation of the respondent, its management, control and financial assistance extended to the respondent, makes it amenable to writ jurisdiction and resultantly, the contractual obligations cast on the respondent can well be examined under Article 226 of the Constitution o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority to the adversely affected person. In the case of Federal Bank (supra), the Supreme Court had carved out eight categories of bodies/persons in para 18 of the said judgment, who were held to be amenable to writ jurisdiction of the High Court, as below:- 18. From the decisions referred to above, the position that emerges is that a writ petition under Article 226 of the Constitution of India may be maintainable against (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. 12. On a glance at the categories carved out above, it is clear that the Supreme Court has recognized the fact that a writ petition can lie against three sets of bodies as mentioned at Sr.No.(vi), (vii) and (viii) above. The logic of including a private body/entity was explained in the case of Binny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer: Jain Plastics and Chemicals (supra) and Binny Ltd. (supra)] 15. In the case of Satyawati Tondon (supra), referring to the case of Mardia Chemicals Ltd. and Ors. vs. UOI and Ors. reported as (2004) 4 SCC 311 , the Supreme Court had held that the self-imposed restraint placed by the High Courts in entertaining a petition under Article 226 of the Constitution of India applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. The said view was expressed in the following words:- 43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharge functions of public nature. XXX XXX XXX 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 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 banki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Air (Prevention and Control of Pollution) Act, 1981 or Water (Prevention and Control 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 with those provisions. For instance, if a private employer dispenses with the service of its employee in violation of the provisions contained under the Industrial Disputes Act, in innumerable cases th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities. It deserves to be noted that it hardly makes any difference that such supervisory vigilance is kept by Reserve Bank of India under a statute or the Central Government. Even if it was with the Central Government in place of Reserve Bank of India it would not have made any difference, therefore, the argument based on the decision of All India Bank Employees' Assn. vs. National Industrial Tribunal; AIR 1962 SC 171 does not advance the case of the respondent. It is only in case of malfunctioning 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 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 on by individuals or by a group of them. Losses incurred in the business are theirs as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Exchange of India Ltd. The purpose of incorporation of the respondent has been declared in the Main Objects clause of its Memorandum of Association, which discloses that the focus is on carrying out commercial activity of making investments in and financing all kinds of projects, industry, companies and persons engaged in various activities in the energy sector. Clause A.1 of the Memorandum of Association of the respondent/company throws light on the objects of the respondent and states as follows:- 1. To carry on and engage in the business in India or abroad for investment/financing whether short term, medium term, intermediate and long term, working capital and any other investment or loan requirements in all types of projects, industry and company(ies) or persons engaged in any kind of business inclusive of but not limited to Power Generation, Transmission and Distribution, Capital Goods/Plant and Machinery Deployment, Engineering Construction, Energy Sector, Fuel Supply, Oil and Gas Sector, Gas fields, Refining of Crude Oil, Gasification, Regasification, import of fuels, Liquefactions plant, pipelines and coal mine/coalfield, mining of coal, facilitating transportati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rming any public function or it participates in social and economic affairs in public interest or works for the collective benefit of a section of the public. Merely because the respondent/company has entered into a Loan Agreement with the petitioners in the course of conducting commercial transactions, will not make it amenable to writ jurisdiction when the said loan has been extended as a part of its business activity. 22. The judgments cited by learned counsel for the petitioners would also not be of any avail. In the case of Mysore Paper Mills (supra), the Supreme Court had held that the nature of the duty imposed on the body to be adjudged in the light of the positive obligation owed by it to the affected party, would be determinative of the question of issue of a writ of mandamus to compel its performance and had gone on to observe that there cannot be a straight-jacket formula for adjudging as to whether any person or authority answers the description of State within the meaning of Article 12, for which it would be necessary to look into the constitution of the body, the purpose for which it had been constituted, the manner of its functioning including and the mode of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, on the eve of filing the petition, the respondent had in fact issued a notice to the petitioners on 02.09.2016, under Section 13(2) of the SARFAESI Act, to which they had responded by forwarding a reply on 27.10.2016 taking inter alia, several objections. A rejoinder was duly issued by the respondent vide letter dated 17.11.2016, stating inter alia that in the event the petitioners fail to pay a sum of ₹ 65,73,75,290/-, calculated upto 15.08.2016, together within future interest within 15 days from the date of issuance of the rejoinder, the respondent shall seek legal recourse under Section 13(4) of the SARFAESI Act. Pertinently, by the time the petitioners had dispatched a reply to the respondent s notice under Section 13(2) of the SARFAESI Act, the present petition had already been filed and notice was issued thereon on 15.09.2016. 26. Till the date of reserving the judgment in the present petition, the respondent had not taken any further action against the petitioners under Section 13(4) of the SARFAESI Act. The court may hasten to clarify here that after issuance of the notice under Section 13(4) of the SARFAESI Act, the Statute does not specify any timeline ..... X X X X Extracts X X X X X X X X Extracts X X X X
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