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TMI Blog1990 (1) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... ble this court to arrive at a fuller understanding of the issues raised in the affidavit of the petitioner and for formulating corrective guidelines that may be essential in preserving national wealth. The first respondent in the writ petition is the Indian Overseas Bank, represented by its Governor. The third respondent is the Union of India represented by the Additional Secretary, Ministry of Finance. 2. In the affidavit filed in support of the petition, the petitioner has stated that he is a tax-payer and a citizen of India. The following are the relevant allegations made in the affidavit in support of the prayers in the writ petition; Notwithstanding the instructions, statutory obligations and restraints imposed by and enjoined by the various Acts, Ordinances, Banking regulations governing the corporate system of hacking in India, in particular by passing the Inspection Report of Sr. A. Namasivayam, former Deputy General Manager and at present Executive Director of the first respondent and contravening the advisory notes and communications of Sri P. S. Khera, Bar-at-law, New Delhi and Sri S. Kanniappan, Associate Lecturer, Government College of Arts and Crafts, Madras, Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Shri S. Kannakappan, Shri P. B. Srinivasan the former Chairman-Managing Director and his Co-brother Shri P. D. Ramamurthy, General Manager, and the then Regional Manager Shri P. R. Ahuja of having contrived an atmosphere to defraud the first respondent to the tune of ₹ 200 crores, which is now sought to be written off. During the years 1981 to 1987, the first respondent lost crores of rupees in its overseas ventures, particularly in Sayapur, Singapore and Hongkong and the present senior Executives are seeking to suppress and conceal the true facts in the public eye. Successive Managements have kept the depositors in the dark. The successors to the top echelon Shri P. D. Ramamurthy, General Manager and Shri S. Padmanabhan, manipulated and deliberately attempted to prevent the revelation of the mala fide acts of their predecessors, committing collusion. Shri P. D. Ramamurthy had misguided the Board of Directors in respect of the advances made by the Singapore Branch of the first respondent by recommending the acceptance of the resignation of an erring officer and reporting that the operation of the first respondent in Singapore were in good order. The illegal acts and omissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing sick mills and industries as reported in The Hindu dated 18-5-1988. The first respondent has proposed to write off the cumulative loss over the years as reflected in its Annual Balance Sheet for the year 1987. The Balance Sheet was published belatedly on 17-5-1988. It appears to be a qualified one as so approved by the auditors of the first respondent. While it is common knowledge that the first respondent had sustained staggering loss in its overseas transactions, the present management of the first respondent has shown in its publication a balance of profit of ₹ 6.62 crores, obviously to mislead the public at large and suppressing the loss during the previous years. In the circumstances the relief prayed for in the petition should be granted. 3. On notice of motion, a counter affidavit was filed on behalf of the first respondent raising certain preliminary objections regarding the maintainability of the writ petition and the locus standi of the petitioner herein. According to the first respondent, the petitioner must satisfy this court that a specific right of his under the statute of the constitution has been violated for him to move a petition under Article 226 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Reserve Bank of India have a special status in the Board of Directors as they are representatives directly appointed by the Government of India, Ministry of Finance and Reserve Bank of India, respectively. The Ministry of Finance keeps itself informed of all aspects of the administration of the Bank. Hence, the writ petition should be dismissed. 4. So runs the counter affidavit of the first respondent. 5. The question of maintainability of the writ petition was heard by Sivasuhramaniam, J. and by order dated 7-12-1988 the learned Judge admitted the Writ Petition overruling the objections raised by the first respondent. He directed notice to respondents 2 and 3. He observed, however, that the question of maintainability is decided only provisionally and it is open to the first respondent to canvass his objections in the main writ petition . It is necessary to extract the following passages from the order of the Learned Judge :-- ..... In spite of the fact that this Court wanted to know whether the First Respondent Bank repudiates the averments contained in paragraph 9 of the petitioner's affidavit relating to several dealings causing loss to the Bank to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter much of argument it is admitted by the Appellant that the Appellant Bank being an authority within the scope of Art, 12 of the Constitution of India, the writ petition will be maintainable against it. However, Mr. C. Ramakrishna, learned counsel for the appellant raises the following points before us: (1) The appellant is not obliged to answer the First Respondent, the writ petitioner; (2) There are other statutory controlling authorities who exercise control and supervision over the affairs of the Appellant Bank, and they alone, if at all, can call upon the Bank to answer these irregularities if ever there is any such irregularity. Lastly it is contended, in any event, having regard to several legal impediments it is impossible that such prayer can ever be granted because should such an enquiry is to take place into the affairs of the Appellant-Bank, that will be violative of the legal provisions. The merits of the above contentions we are not called upon to decide now, because that stage has not arisen. The learned Judge, for the purpose of admission of the writ petition, has merely held that the writ petition is maintainable in view of the fact that the allegations in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent and the allegations of the petitioner could not be presumed to be admitted. I do not think it necessary to decide whether the said direction given by the Bench is binding on me as it runs counter to principles of law established and recognised by the Supreme Court of India. No such argument was advanced by the petitioner, who appeared in person. Even otherwise, on the facts and circumstances of this case, I do not propose to exercise myself over that question. 9. The second respondent has filed a counter affidavit annexing thereto a copy of the guidelines issued by it to all banks. The third respondent has filed a separate counter-affidavit. The stand taken by respondents 2 and 3 is almost similar. On the question of maintainability of the writ petition, both of them support the first respondent. It is the contention of the second respondent that the petitioner has no locus standi and the petition cannot be treated as a public interest litigation. According to the counter-affidavit, a public litigation envisages (a) a Court action by an individual or a group of individuals belonging to a community or an indeterminate class against an administrative wrong affecting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of a customer with a bank are subject to law both in India and Singapore and any direction to a bank to make public the accounts of its customers of an overseas branch would cause grave prejudice to the bank concerning its operations abroad. After taking a similar stand in its counter-affidavit, the third respondent has stated that the Central Government is closely monitoring and keeping itself informed of the working of all the Nationalised Banks including the working of the first respondent bank. 10. In the course of arguments, the petitioner placed reliance on the provisions of the Consumer Protection Act, 1986 for sustaining his locus standi. He invited my attention to the provisions of the Comptroller and Auditor General's (Duties, powers and Conditions of Service) Act, 1971 and the documents referred to in the affidavit. Filed in support of the writ petition comprising of correspondence between some of the Directors and the Chairman as well as the Inspection Report of Shri A. Namasivayam, the present Executive Director of the first respondent Bank. The petitioner submitted that the materials placed before this Court are sufficient to enable this Court to issue a Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the report of Shri. Namasivayam who is only an employee of the first respondent and they cannot be directed to place the report before the Court. Learned counsel for third respondent adopted the arguments advanced by learned counsel for the second respondent. 13. In his reply, the petitioner submitted that after the judgment of the Division Bench in W.P. No. 20 of 1989, it is not open to the respondents to raise the question of maintainability of the writ petition. He argued that the Auditor appointed under the Banking Regulation Act by the first respondent is its own man and he cannot be expected to view the matter impartially. He also contended that the Form of Balance Sheet prescribed under the relevant provisions, does not help anybody to find out the clear position of the Bank. He referred to Ss. 45D, 45T and 46A of the Banking Regulation Act and submitted that this court has ample powers to direct the first respondent to disclose whether there are any bad debts and it was also contended by him that the fact that the Reserve Bank claims to have taken the necessary steps in the matter shows that something has gone wrong with the first respondent Bank and the entire affai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no public has to be on the ascendant in a society where supineness must be substituted by activism if the dynamic rule of law is to fulfil itself. 'Locus standi' has a larger ambit in current legal semantics than the accepted, individualistic jurisprudence of old. 15. In S. P. Gupta and others v. President of India and others [1982]2SCR365 , the law was stated thus (at page SC 189; AIR 1982) :-- 18..... But there may be cases where the State or a public authority may act in violation of a constitutional or statutory obligation or fail to carry out such obligation, resulting in injury to public interest or what may conveniently be termed as public injury as distinguished from private injury. Who would have standing to complain against such act or omission of the State or public authority? Can any member of the public sue for judicial redress? Or is the standing limited only to a certain class of persons? Or there is no one who can complain and the public injury must go unredressed To answer these questions it is first of all necessary to understand what is the true purpose of the Judicial function. This is what Prof. This stated in his book on Locus Standi and Judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation take its birth perhaps from the righteous indignation of the petitioners, against the State Government at their bartering away of four acres of land belonging to the zoo to the Taj Group of Hotels. The writ petition is mainly based on the ground that the decision of the Government is arbitrary. The question to be answered is whether this accusation can be justified. On a perusal of the records I find that the State Government had made available to the Court all the relevant documents so as to satisfy the Court about the propriety of its action. 58. My purpose in adding these few lines of my own is to highlight the need for restraint on the part of the public interest litigants when they move Courts. Public interest litigation has not come to stay. But one is led to think that it poses a threat to Courts and public alike. Such cases are now filed without any rhyme or reason. It is, therefore, necessary to lay down clear guidelines and to outline the correct parameters for entertainment of such petitions. If Courts do not restrict the free flow of such cases in the name of Public Interest Litigations, the traditional Litigation will suffer and the Courts of Law, instead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nomic transformation to usher-in an egalitarian social order and a welfare-State. 19. In the light of the above principles enunciated by the Supreme Court there is no doubt that the petitioner as a citizen and tax Dayer of this country has the requisite 'standing' to maintain the writ petition as his complaint is that the high officials of Nationalised Bank have failed to do their duty resulting in a huge loss of over 200 crores of rupees to the bank and thereby to the nation. It is wholly unnecessary for him to invoke the provisions of the Consumer Protection Act. There is considerable force in the arguments of learned counsel for the first respondent that the said Act is not applicable to this case, but I do not find it necessary to pronounce upon the same as I take the view that the petitioner has 'Locus standi' to file this writ petition as a rate-prayer in this country. JURISDICTION 20. I shall now consider whether this Court has jurisdiction to entertain the writ petition. Though at one stage of the arguments learned counsel for the first respondent contended that there is total lack of jurisdiction with this Court, he did not, wisely, if I may say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule. His salary and other conditions of service shall be such as may be determined by parliament by law and, until they are so determined, shall be as specified in the Second Schedule. He shall not be eligible for further office either under the Government of India or under the Government of any State after he has ceased to hold his office. Subject to the provisions of the Constitution and of any law made by Parliament, the conditions of service of persons serving in the Indian Audit and Accounts Department and the Administrative powers of the Comptroller and Auditor-General shall be such as may be prescribed by rules made by the President after consultation with the Comptroller and Auditor-General. The administrative expenses of his office, including all salaries, allowances and pensions payable to him or in respect of persons serving in that office, shall be charged upon the Consolidated Fund of India. Under the latter Article, the Comptroller and Auditor-General shall perform such duties and exercise such powers in relation to the accounts of the Union and of the Slates and of any other authority or body as may be prescribed by or under any law made by Parliament, and until ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to consider the position of Nationalised Banks including State Hank of India via-a-via the provisions of the Tamil Nadu Shops and Establishments Act, which exempt from the purview of the Act Establishments under Central Government, in C. V. Raman v. Management of Bank of India (1988)IILLJ423aSC . In that case, while holding that such Banks are establishments under the Central Government, the Supreme Court held unequivocally that the Banks were not departments of the Central Government or owned by the Central Government, even though the Central Government has a deep pervasive control over the Banks. 25. Section 14 of Act 56 of 1971 provides for audit by the Comptroller and Auditor-General of the accounts of bodies or authorities substantially financed by grants or loans from the Consolidated Fund of India or a State or of a Union territory having a Legislative Assembly. S. 15 of that Act requires him to scrutinise the procedures by which any authority sanctioning a grant or a loan from the Consolidated Fund of India or of any State or of a Union territory having a Legislative Assembly to any authority or body other than a foreign State or International Organisation satisfied it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k' vi/., The Indian Overseas Bank Limited . Ss. 19 and 20 of Act 56 of 1971 read thus :-- 19. Audit of Government companies and Corporation.-- (1) The duties and powers of the Comptroller and Auditor-General in relation to the Audit of the accounts of Government companies shall be performed and exercised by him in accordance with the provisions of the Companies Act, 1956. (2) The suits and powers of the Comptroller and Auditor-General in relation to the audit of the accounts of corporations (not being companies) established by or under law made by Parliament shall be performed and exercised by him in accordance with the provisions of the respective legislations. (3) The Governor of a State or the Administrator of a Union territory having a Legislative Assembly may, where he is of opinion that it is necessary in the public interest so to do, request the Comptroller and Auditor-General to audit the accounts of a corporation established by law made by the Legislature of the State or of the Union territory, as the case may be, and where such request has been made, the Comptroller and Auditor-General shall audit the accounts of such corporation and shall have, for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentations with regard to the proposal for such audit. By virtue of sub-sec. (3) of S. 20, the audit of the accounts of the first respondent Bank shall not be entrusted to the Comptroller and Auditor-General, except where the President or a Governor of a State or the Administrator of a Union territory having a Legislative Assembly, as the case may be, is satisfied that it is expedient so to do in the public interest and except after giving a reasonable opportunity to the concerned body or authority to make representations with regard to that proposal of audit. 27. Hence, the matter is left by Act 56 of 1971 to the satisfaction of the President of the Union or the Governor of a State or the Administrator of a Union territory having a Legislative Assembly. 28. In State of Rajasthan v. Union of India [1978]1SCR1 , a question arose with reference to Arts. 355 and 356 of the Constitution of India read with Art. 174. Art. 356(1) of the Constitution of India calls for an assessment of a situation and the satisfaction of the President. The Supreme Court held that the satisfaction of the President was a subjective one and could not be tested by reference to any objective tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 226 of the Constitution of India. In so far as this part of the argument is concerned, I do not find any difficulty in rejecting the same. The first respondent has not chosen to file any counter affidavit denying the correctness or genuineness of the documents on which reliance is placed by the petitioner in his affidavit filed in support of the writ petition in spite of the fact that the first respondent had been served with a copy of the affidavit soon after notice of motion was ordered by this Court. Having taken a stand that it is not necessary for the first respondent to make any statement positively with reference to the facts or deny the averments found in the petitioner's affidavit, it is not now open to the first respondent to dispute the correctness or genuineness of the statement. However, that does not lead to a presumption of the facts against the first respondent. 32. Learned counsel for the first respondent produced before me the Annual Report of the Chartered Accountants of the first respondent Bank, which comprises the Balance Sheet and Profit and Loss Account for the year ending 31st December, 1987. According to the Balance Sheet, debts considered doubtf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny information relating to or to the affairs of its constituents except in circumstances in which it is, in accordance with law or practices and usages customary among bankers, necessary or appropriate for the corresponding new bank to divulge such information. (2) Every director, member of a local,, board or a committee, or auditor, advisor, officer or other employee of a corresponding new bank shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the Third Schedule. (3) Every custodian of a corresponding new bank shall, as soon as possible, make a declaration of fidelity and secrecy in the form set out in the Third Schedule. 34. Learned counsel for the first respondent place reliance on two judgments of the House of Lords in The Law Reports 1978 in D. v. National Society for The Prevention of Cruelty to Children (1978) AC 171 and in the Law Reports 1983 in AIR Canada v. Secretary of State for Trade (1983) 2 AC 94. In the former case, Lord Denning M. R. observed as follows :-- We are also asked to assume that the object of the action is to obtain damages from the N.S.P.C.C. and not merely to obtain the name of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The occasion was, no doubt, a privileged occasion and the mother would have to prove express malice in order to make the informant liable. 35. In the latter case, the House of Lords observed at Pp. 410 and 411 : 9. The due administration of justice. In all the case it is said that the courts are required to have regard to the public interest in the due administration of justice. But I would point out that this depends on the nature of the issue between the parties. In some cases it means simply ascertaining the truth -- finding out what in fact happened --and then adjusting the rights and liabilities of the parties on the faith of it. That is how the Judge regarded our present case. He said : The Concern of the Court must surely be to ensure that the truth is elicited, not caring whether the truth favours one party or the other but anxious that its final decision should be grounded on a sure foundation of fact ..... In my judgment documents are necessary for fairly disposing of a cause or for the due administration of justice if they give substantial assistance to the Court in the determining the facts upon which the decisions in the cause will depend. That is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the erring officials. 37. The allegation against the second respondent is very vague and it is found in paragraph 18(a) of the affidavit filed in support of the writ petition. It reads that The Reserve Bank of India had, in order to maintain the equilibrium in the liquidity concerning the first respondent and to preserve the 'liquid ratio' extended its guarantee to the Central Bank of Singapore and Hongkong as it was essential to protect the interests of the depositors in those cities and to conserve the image of the first respondent. The allegations in paragraphs 18(f) and (g) are as follows :-- (f) The auditors appointed by the first respondent were at their wits end to approve the annual balance sheet of the first respondent. They appear to have refused certification. (g) There is 'writing off' in the air, inasmuch as there is no escape On the basis of the vague allegations, no writ could be issued against the respondents. The second respondent has filed a counter affidavit in which it is stated in paragraphs 8 and 9 as follows :-- 8. The second respondent closely monitors the activity of the foreign branches of the Indian Banks and issues a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial losses. (f) The banks were also asked to look into the viability of operations of each of the overseas branches and those of the branches which are non-viable are directed to be closed and that he viable branches are effectively and efficiently managed. 38. In paragraph 10 it is stated that in regard to writing off of loans, the second respondent had issued guidelines to all banks and a copy of the same is annexed to the counter affidavit. In paragraph 11 it is averred that inasmuch as the second respondent had taken necessary steps and since it is the only body authorised to supervise and control the banks in the country, any order directing relief as prayed for in the writ petition would be against public interest. In paragraph 13 reference is made to S. 13 of Banking Companies (Acquisition and Transfer of Undertakings Act, 1970) and S. 42 of the Singapore Act and averred that any direction to a bank to make public the accounts of its customers of an overseas branch would cause grave prejudice to the banks concerned in its operation abroad. I find that the guidelines which are claimed to have been issued in regard to writing off of loans and which are annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner that there is no difficulty in recovering the amounts from the persons to whom loans have been issued by the first respondent in Singapore and other foreign countries, no writ can be issued by this Court as prayed; for by the petitioner herein. 42. in the course of arguments, learned counsel for the second respondent stated that the second respondent is putting pressure on the first respondent's head office to issue Letters of Comfort to its branch situated overseas. He also stated that it is not possible for the second respondent to make public the steps taken by the second respondent in this regard. According to him, the secrecy is necessary in order to maintain the prestige of the entire country in the eye of the foreign country viz., Singapore. 43. As laid down by the Supreme Court, this Court has to weigh on the one hand the public interest that would be served by issuing a writ as prayed for and on the other the public interest that will be served by refusing to issue the same. In my opinion, in view of the express admissions made by the petitioner that it is possible to recover the amounts from the persons who had taken loans as they are not in affluent circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nonetheless it has power to ensure that the aforesaid two main organs of Slate function within the constitutional limits. It is the sentinel of democracy. Judicial review is a powerful weapon lo restrain unconstitutional exercise of power by the Legislature and executive. The expending horizon of judicial review has taken in its fold the concept of social and economic justice. While exercise of powers by the legislature and executive is subject to judicial restraint, the only check on our own exercise of power is the self-imposed discipline of judicial restraint. at page SC 1906, AIR 1989. 19. When a State action is challenged, the function of the Court is to examine the action in accordance with law and to determine whether the legislature or the executive has acted within the powers and functions assigned under the Constitution and if not, the Court must strike down the action. While doing so the Court must remain within its self-imposed limits. The Court sits in judgment on the action of a co-ordinate branch of the Government. While exercising power of judicial review of administrative action, the Court is not an appellate authority. The Constitution does not permit the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Development Bank, the Exim Bank, the National Bank, the State Bank of India, a corresponding new bank, a regional rural bank and a subsidiary bank. Under sub-sec. (3), for the purpose of this section, banking company will include a Nationalised Bank, which will fall under the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (Act 5 of 1970). Under S. 9 of the said Act, the Central Government is empowered to make a scheme for carrying out the provisions of the Act after consultation with the Reserve Bank. It is not necessary to refer to the provisions in detail. Suffice it to point out that a Board of Directors is constituted under the scheme made under the said section. Under sub-sec. (5) of S. 9 of Act 5 of 1970, every scheme made by the Central Government shall be laid, as soon as may be after after it is made, before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in to successive sessions and if, before the expiry of the session in which it is so laid or the session immediately following, both Houses agree in making any modification in the scheme or both Hou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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