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TMI Blog2012 (4) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... to refer to three cases to notice the factual matrix illustratively. WP No. 24887 of 2010 Wp No.24887 of 2010 is filed against the ICICI Bank Limited (ICICI) and Asset Reconstruction Management Services (ARMS) which is a division of Asset Reconstruction Company (India) Limited (ARCIL). The petitioner's son availed loan about ₹ 16.39 lakhs for construction of house. The loan is secured by the insurance policy issued by IC1CI Lombard Limited and mortgage on the property. The borrower was a software engineer in Mumbai. He died in suspicious circumstances. A Sessions Case being SC No.91 of 2008 on the file of the Sessions Judge, Alibagh in Maharashtra against the borrower's wife and others was pending. After death of his son, the petitioner got issued lawyer's notice dated 9.9.2006 requesting the ICICI to adjust the insurance amount towards the loan. The ICICI responded by issuing notice of demand under Section 13(2) of the Act. The petitioner sent two more legal notices on 21.10.2008 and 6.2.2009 requesting ICICI to settle the insurance claim, in vain. The petitioner moved Banking Ombudsman, Mumbai who passed an order to the effect that since the criminal case was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession. We may mention that WP Nos.22265 of 2010 and 7402 and 27955 of 2011 are also filed against Dhanalakshmi Bank when they initiated action under the SARFAESI Act. WP No.30244 of 2010 ( 5. ) Two incorporated companies filed the instant writ petition challenging the action initiated by the Axis Bank Limited. They prayed for declaration that the action of the said bank in not furnishing the necessary details as requested in the interim objections filed under Section 13(3A), in response to notice of demand issued under Section 13(2) of the SARFAESI Act to M/s. Prestige Avenue Limited (Prestige, for brevity) as illegal and arbitrary besides being contrary to the Banking Code and Standard Board of India and Guidelines issued by the Reserve Bank of India and for further directions. ( 6. ) During the pendency, M/s. Phoenix ARC Private Limited, Mumbai filed WPMP No.6359 of 2012 seeking impleadment. They would contend that they are ARMS registered under the SARFAESI Act, in whose favour Axis Bank assigned the debt of the borrowers with underlying security interest in their favour. Phoenix further submits that when the loan taken by M/s. Prestige and the first petitioner, Axis Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (8) SCJ 979 = AIR 2009 SC 2420, United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110 = AIR 2010 SC 311 and Kanaiyalal Lalchand Sachdev v. State of Maharashtra, (2011) 2 SCC 782 = 2011 (8) SCJ 484. The banks also question the maintainability of writ petitions. They also adverted to merits of each case which need not be summed up here. Maintainability of writ petitions Article 226 of the Constitution of India has two facets. It strikes at infringement of the constitutional rights, fundamental rights, statutory rights and common law rights. If a State as defined in Article 12 of the Constitution of India is guilty of any such violations, it is the duty of the High Court to issue writs to correct the executive excesses. A writ would also be issued if 'any person' entrusted with discharge of public functions acts illegally, unfairly and arbitrarily. These principles are well settled. ( 9. ) From Rajas than State Electricity Board v. Mohan Lal till Pradeep Kumar Biswas, AIR 1967 SC 1857 and thereafter the case law in this constitutional area is phenomenal (M.P. State Cooperative Dairy Federation Limited v. Rajnesh Kumar Jamindar, (2009) 15 SCC 221). The quintessentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be relevant. In Pradeep Kumar Biswas's case (supra), a Larger Bench again reconsidered, Article 12 of the Constitution. The question was whether 'Council of Scientific and Industrial Research (CSIR)' is State. The majority reviewed the earlier case law and held that CSIR is a State and consequently overruled earlier judgment in Sabhajit Tiwari v. Union of India, AIR 1975 SC 1329. It was held as under: The picture that ultimately emerges is that the tests formulated in Ajay Hasia are not a rigid set of principles so that if a body falls within any one of them it must, ex hypothesi, be considered to be a State within the meaning of Article 12. The question in each case would be - whether in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government. Such control must be particular to the body in question and must be pervasive. If this is found then the body is a State within Article 12. On the other hand, when the control is merely regulatory whether under statute or otherwise, it would not serve to make the body a State. ( 11. ) In addition to Som Prakash Rekhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the Courts' power of judicial review is confined to bodies whose power is derived solely from the legislation or exercise the prerogative power. The contention was rejected holding that anybody discharging public duties is amenable to judicial review. The noble and learned Master of the Rules, Sir John Donaldson (as he then was) observed: In determining whether the decisions of a particular body were subject to judicial review, the Court was not confined to considering the source of that body's powers and duties but could also look to their nature. Accordingly, if the duty imposed on a body, whether expressly or by implication, was a public duty and the body was exercising public law functions the Court had jurisdiction to entertain an application for judicial review of that body's decisions. Having regard to the wide-ranging nature and importance of the matters covered by the City Code on Takeovers and Mergers and to the public consequences of non-compliance with the code, the Panel on Takeovers and Mergers was performing a public duty when prescribing and administering the code and its rules and was subject to public law remedies. Accordingly, an application f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of Section 6 in these terms: In this section, 'public authority' includes....(b) any person certain of whose functions are functions of a public nature.... The Judge, before whom application for judicial review came up, dismissed the same holding that LCF was not a public authority within the meaning of Section 6(3) of the Human Rights Act. The Court of Appeal, by a unanimous decision rendered by Lord Woolf C.J. dismissed the appeal holding that LCF was not local authority nor it can be said to exercise statutory powers in performing functions of a public nature i.e., maintaining a home. It was held (as summarized in the head note) as under: The role that the foundation was performing manifestly did not involve the performance of public function. The fact that it was a large and flourishing organization did not change the nature of its activities from private to public. While the degree of public funding of the activities of an otherwise private body was relevant to the nature of the functions performed, it was not by itself determinative of whether the functions were public or private. The foundation was not standing in the shoes of the local authority. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 226 confers power on the High Courts to issue writs for enforcement of the fundamental right as well as non-fundamental rights. The words Any person or authority used in Article 226 are, therefore not to be confined only to statutory authorities and instrumentalities of the State. They may cover any other person or body performing public duty. The form of the body concerned is not very much relevant. What is relevant is the nature of the duty imposed on the body. The duty must be judged in the light of positive obligation owed by the person or authority to the affected party. No matter by what means the duty is imposed. If a positive obligation exists mandamus cannot be denied, (emphasis supplied) As pointed out by Professor De Smith, education, health care and social welfare provided from funds raised by taxation or deemed to be public goods or collective services and any body dispensing these forms public functions. Some of them are also supplemental Government functions or either way citizens and persons cannot be turned away by the judicial review Court. ( 17. ) Whether provision of banking services amounts to providing public goods or collective services. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to two facets of Article 226, namely, whether the entity is a State and whether it performs public functions. After reviewing the earlier case law on both the issues, the Supreme Court observed as follows. 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. ... 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 lakhs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 the High Court interfered and has 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 with 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....... Merely because Reserve Bank of India lays the banking policy in the interest of the banking system or in the interest of monetary stability or sound economic growth having due regard to the interests of the depositors etc. as provided under Section 5(c)(a) of the Banking Regulation Act does not mean that the private companies carrying on the business or commercial activity of banking, discharge any public function or public duty. These are all regulatory measures applicable to those carrying on commercial activity in banking and these companies are to act according to these prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hallmark of our system. ... So far as remedy under Article 226 of the Constitution of India is concerned, the submission is that it may not always be available since the dispute may be only between two private parties, the banking companies, cooperative banks or financial institutions, foreign banks, some of them may not be authorities within the meaning of Article 12 of the Constitution of India against whom a writ petition could be maintainable. Thus the position that emerges is that a borrower is virtually left with no remedy. Where access to the Court is prohibited and no proper adjudicatory mechanism is provided such a law is unconstitutional and cannot survive. In support of the aforesaid contentions besides others, reliance has particularly been placed upon the case L. Chandra Kumar v. Union of India, (1997) 3 SCC 261 and Surya Dev Rai v. Ram Chander Rai, 2003 (5) ALD 36 (SC) = (2003) 6 SCC 675. A reference has also been made to the decision of Kihoto Hollohan v. Zachillhu, 1992 Supp (2) SCC 651. In the case of L. Chandra Kumar's case (supra), it is held, some adjudicatory process through an independent agency is essential for determining the rights of the parties, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Courts have departed from well-settled legal principles (Salam Khan v. Tamil Nadu Wakf Board, Chennai, AIR 2005 Mad 241). But, as held in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai, AIR 1999 SC 22 = (1998) 8 SCC 1 = 1998 (6) ALD (S.C.S.N.) 20, the alternative remedy does not operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principles of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. ( 26. ) Sarfaesi Act provides for effective and efficacious remedy under Sections 17 and 18 of the Act; original application under Section 17(1) and appeal under Section 18 to Debts Recovery Tribunal (DRT) and Debts Recovery Appellate Tribunal (DRAT) respectively. They are vested with wide powers and can nullify and cure any arbitrary action by banks/FIs pursuant to Section 13(4). In cases arising under SARFAESI Act, the Supreme Court laid down that if any borrower and a third party has any tangible grievance against notice under Section 13(4) or action taken under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dismissing the writ petition challenging the dispossession of the appellants from the secured properties under SARFAESI Act, was affirmed observing as follows: We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT. ... ... In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See Sadhana Lodh v. National Insurance Co. Ltd., 2003 (3) ALD 63 (SC) = (2003) 3 SCC 524, Surya Dev Rai v. Ram Chander Rai (supra) and SBI v. Allied Chemical Laboratories, (2006) 9 SCC 252. ... In City an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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