TMI Blog2003 (9) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. - 106 OF 2001 - - - Dated:- 26-9-2003 - Brijesh Kumar Arun Kumar, JJ. JUDGMENT The respondent no.1 Sagar Thomas was working as a Branch Manager in Karunagappally branch of the appellant Bank, namely, the Federal Bank, having its registered office at Alwaye, Kerala. He was, however, suspended on 29.5.1982, since a disciplinary enquiry was ordered into some charges against him for having exceeded his authority in grant of loans and advances to different part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udge, the appellant preferred a writ appeal but referring to a decision of this Court in U.P.State Co-operative Land Development Bank Ltd. vs. Chandra Bhan Dubey Ors. , the Division Bench, observed that in an identical fact situation it was held that writ application would be maintainable, minor distinctions on facts, here and there, would not make the aforesaid decision inapplicable to scheduled banks. With such observations the appeal was dismissed providing that the learned single Judge shall decide writ petition on merits. The Federal Bank Ltd. has preferred this appeal, against the aforesaid judgment of the High Court. Learned senior counsel appearing for the appellant, so as to indicate the structure of the appellant, submits that the Federal Bank Ltd. is a company incorporated under the Indian Companies Act, 1913, now replaced by the Companies Act, 1956. Its activities are regulated by the provisions of the Banking Regulation Act, 1949. The entire shareholding of the company is held by private individuals and entities. The finances of the banks are raised by its own resources and efforts, and the profits of the bank are utilized by the bank for its own purposes. It doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge considered the matter and held that the Federal Bank Limited is performing public duty, as such it is covered under the expression of other authority , within the meaning of Article 12 of the Constitution, hence the writ petition is maintainable before the High Court. The question thus, which falls for consideration is as to 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. A body or organization which is an instrumentality or agency of the State or a company owned and controlled by the State are all included in the expression "the State". If it is found that the petitioner falls within the later category, there would be no hurdle in holding that such a body or organization would undoubtedly be amenable to the writ jurisdiction under Article 226 of the Constitution of India. On the other hand, if it is found that the appellant is a private body in that event it may have to be examined whether a writ petition would be maintainable or not and the extent to which such powers can be exercised. In support of their respective contentions learned counsels placed reliance upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be a relevant factor in classifying the corporation as an instrumentality or agency of Government. (SCC p.509, para 16) (6) Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference of the corporation being an instrumentality or agency of Government. (SCC p.510, para 18)" This Court has observed in paragraph 31 as follows : "The tests to determine whether a body falls within the definition of "State" in Article 12 laid down in Ramana (supra) with the Constitution Bench imprimatur in Ajay Hasia (supra) form the keystone of the subsequent jurisprudential superstructure judicially crafted on the subject which is apparent from a chronological consideration of the authorities cited." After considering a number of decisions it has been observed in para 40 of Pradeep Kumar Biswas (supra) as follows : "The picture that ultimately emerges is that the tests formulated in Ajay Hasia (supra) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Government in exercise of powers under Section 30 of the U.P.Co-operative Land Development Bank Act, 1964. The rules are called the U.P.Co-operative Land Development Banks Rules, 1971, which lay down the conditions of services of the employees. The Institutional Service Boards constituted under Section 122 of the Co-operative Societies Act has also framed service rules according to which dismissal of an employee can be ordered only after its approval by the Institutional Service Board. The U.P.State Co-operative Land Development Bank Ltd. is the only bank constituted under the provisions of the U.P.Co-operative Land Development Bank Act and there cannot be any other State level Land Development Bank for the whole of the State. Apart from the fact that the Bank had exclusive jurisdiction over the whole of the State of Uttar Pradesh, the other Land Development Banks could also be made members of the U.P.State Co-operative Land Development Bank, in any number, as the Registrar of the Co-operative Societies may deem it necessary. It is further found that the Registrar of the Co-operative Societies, U.P. is the trustee for the purpose of securing the fulfillment of the obligations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of India and that department would necessarily be guided by the Reserve Bank having regard to the intimate knowledge which the Reserve Bank has of the banking structure of the country as a whole and of the affairs of each bank in particular......". It has been referred to indicate that the control of the Reserve Bank of India over all the banks would be as if the control is in place of Finance Ministry, Government of India. A reference has then been made to Air India Statutory Corporation Ors. Vs. United Labour Union Ors. , a decision of a three Judge Bench. It has been held that the industry carried on by Air India under authority of central government would involve public law element even though its activity may be commercial in nature. It was held that the Air India was being run by the Airport Authority of India of the Central Government and there was element of deep and pervasive governmental control. Initially it was a statutory authority under the International Airports Authority of India Act, 1971. Later it was amalgamated with National Airports Authority and thereafter it is constituted as a Company under the Companies Act. In that context, it has been held, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h its employees or public by virtue of power vested in it by law, Memorandum of Association or bye-laws or Articles of Association. (11) The instrumentality, agency or person renders an element of public service and is accountable to health and strength of the workers, men and women, adequate means of livelihood, the security for payment of living wages, reasonable conditions of work, decent standard of life and opportunity to enjoy full leisure and social and cultural activities to the workmen. (12) Every action of the public authority, agency or instrumentality or the person acting in public interest or any act that gives rise to public element should be guided by public interest in exercise of public power or action hedged with public element and is open to challenge. It must meet the test of reasonableness, fairness and justness. (13) If the exercise of the power is arbitrary, unjust and unfair, the public authority, instrumentality, agency or the person acting in public interest, though in the field of private law, is not free to prescribe any unconstitutional conditions or limitations in their actions." One of the important factors to be considered is, if it is a stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. This is a striking departure from the English Law. Under Article 226, writs can be issued to "any person or authority". It can be issued "for the enforcement of any of the fundamental rights and for any other purpose". Shri Sachar has also stressed upon the observation made in the later part of para 19 and para 20 where it has been observed: ".....Any attempt to equate the scope of the power of the High Court under Article 226 of the Constitution with that of the English courts to issue prerogative writs is to introduce the unnecessary procedural restrictions grown over the years in a comparatively small country like England with a unitary form of government into a vast country like India functioning under a federal structure....." Para 20 "....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. ......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....." While making his subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been referred to, which in turn refers to Kumari Shrilekha Vidyarthi Vs. State of Uttar Pradesh , holding that arbitrariness, even in contractual obligation of public character is violative of Article 14 of the Constitution. the Court held that rates of premium must be reasonable and acceptable. It cannot be unjust and excessive. Thus the touchstone of test is the reasonableness and non-arbitrariness of the action even in the contractual matters of the State or its agencies and instrumentalities. The appellant in reply also referred to The Praga Tools Corporation Vs. Shri C.A.Imanual Ors. , where it was held that a company registered under the Companies Act is neither statutory nor any public duty is imposed on it by any statute in respect of which enforcement would be sought by means of a mandamus. Mandamus lies to secure the purpose of a public or statutory duty. No mandamus or order of reinstatement of an office which is essentially of a private character can be issued. A mandamus can be issued to compel the official of a society to carry out the terms of the statute under or by which the society is constituted or governed and also to companies or corporations to carry out d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the inclusion in the Second Schedule of any bank not already so included which carries on the business of banking [in India] and which - (i) has a paid-up capital and reserve of an aggregate value of not less than five lakhs of rupees, and (ii) satisfies the Bank that its affairs are not being conducted in a manner detrimental to the interests of its depositors, and (iii) [is a State co-operative bank or a company] as defined [section 3 of the Companies Act, 1956 (1 of 1956), or an institution notified by the Central Government in this behalf] or a corporation or a company incorporated by or under any law in force in any place[outside India]; (b) direct the exclusion from that Schedule of any scheduled bank, - (i) the aggregate value of whose paid-up capital and reserves becomes at any time less than five lakhs of rupees, or (ii) which is, in the opinion of the Bank after making an inspection under section 35 of the Banking Regulation Act, 1949 (10 of 1949), conducting its affairs to the detriment of the interests of its depositors, or (iii) which goes into liquidation or otherwise ceases to carry on banking business: xxx xxx xxx The Preamble of the RBI Act has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection with the report as, in the opinion of the Central Government, seems reasonable, by order in writing - (a) prohibit the banking company from receiving fresh deposits; (b) direct the Reserve Bank to apply under section 38 for the winding up of the banking company: Provided that the Central Government may defer, for such period as it may think fit, the passing of an order under this sub-section, or cancel or modify any such order, upon such terms and conditions as it may think fit to impose." Section 35-A empowers the Reserve Bank to give directions, which reads as under : "35A. Power of the Reserve Bank to give directions.- (1) Where the Reserve Bank is satisfied that :- (a) in the [public interest]; or [(aa) in the interest of banking policy; or] (b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or (c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6) Where an order under sub-section (1) has been made, the Reserve Bank may, by order in writing, appoint a suitable person in place of [the chairman or director] or chief executive officer or other officer or employee who has been removed from his office under that sub-section, with effect from such date as may be specified in the order. (7) to (8) xxxx xxxx" Section 36AB of the Banking Regulation Act empowers the Reserve Bank to appoint additional directors of the banking company in the interest of the company or its depositors. Sub-section (1) reads as under : "36AB. Power of Reserve Bank to appoint additional directors.- (1) If the Reserve Bank is of [opinion that in the interest of banking policy or in the public interest or] in the interests of the banking company or its depositors it is necessary so to do, it may, from time to time by order in writing, appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the banking company: xxx xxxx" Section 36AE has also been referred to which empowers the Central Government to acquire undertakings of banking companies in the interests of the depositor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use serious injury or damage to the interests of the trade, industry or business to which it pertains; or (c) that the financial position of any company is such as to endanger its solvency;........." The report of the special audit is to be submitted to the Central Government by the Chartered Accountants deputed for special audit. The special auditor, in the audit report shall include all the matters required to be included in an auditor s report under Section 227 of the Companies Act and the matters as the Central Government may, also direct to include. The Central Government is also authorized to direct any particular person to furnish such information or additional information to the auditor and failure to do so shall render such person liable to be punished by imposition of fine. The Central Government, on consideration of the report is empowered to take such action as provided under the Act or any other law for the time being in force. Section 235 of the Companies Act empowers the Central Government to appoint one or more competent persons as inspectors to investigate the affairs of any company on the application of the shareholders and submit the report to the Central Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rector or any other office, to make an inquiry into the case and record its decisions in that regard. On the basis of the report of the High Court the Central Government has power to remove such a person as the Director or as the case may be. A reference has also been made to certain provisions of Industries (Development and Regulation) Act, 1951. Section 15 empowers the Central Government to cause investigation to be made into the affairs of the industrial undertaking in certain eventualities. The same reads as under : "15. Power to cause investigation to be made into scheduled industries or industrial undertakings.- Where the Central Government is of the opinion that - (a) in respect of any scheduled industry or industrial undertaking or undertakings - (i) there has been, or is likely to be, a substantial fall in the volume of production in respect of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings as the case may be, for which, having regard to the economic conditions prevailing, there is no justification; or (ii) there has been, or is likely to be, marked deterioration in the quality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in the order....." Section 18-AA empowers the Central Government to take over the industrial undertaking without investigation in the given circumstances. In view of the provisions indicated above under the Companies Act and the Industrial (Development and Regulation) Act, it is submitted that the nature and the control over the companies is more or less of the same degree and nature as the control exercised over the banking companies under the Banking Regulation Act. There is control and supervision over the functioning and working and the conduct of business of the companies. A watchful eye is kept over the interest of the share holders, the interest of the company itself as well as over the production of company, even managing director can be removed by the Central Government. It has also the powers, as indicated above, to take over the management of a company. Such powers are drastic; nonetheless they remain regulatory in nature in the interest of the industry, the company, the shareholders and in the general interest since production of goods of importance is most essential for proper economic growth and stability of the country. A company registered under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness, is maintained. So as to ensure adherence to such fiscal discipline, if need be, at times even the management of the company can be taken over. Nonetheless, as observed earlier, these are all regulatory measures to keep a check and provide guideline and not a participatory dominance or control over the affairs of the company. For other companies in general carrying on other business activities may be manufacturing, other industries or any business, such checks are provided under the provisions of the Companies Act, as indicated earlier. There also, the main consideration is that the company itself may not sink because of its own mismanagement or the interest of the shareholders or people generally may not be jeopardized for that reason. Besides taking care of such interest as indicated above, there is no other interest of the State, to control the affairs and management of the private companies. The care is taken in regard to the industries covered under the Industries (Development and Regulation) Act, 1951 that their production which is important for the economy may not go down yet the business activity is carried on by such companies or corporations which only remains a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a member of the Board of Directors. In the normal functioning of the private banking company there is no participation or interference of the State or its authorities. The statutes have been framed regulating the financial and commercial activities so that fiscal equilibrium may be kept maintained and not get disturbed by the mal-functioning of such companies or institutions involved in the business of banking. These are regulatory measures for the purposes of maintaining the healthy economic atmosphere in the country. Such regulatory measures are provided for other companies also as well as industries manufacturing goods of importance. Otherwise these are purely private commercial activities. It deserves to be noted that it hardly makes any difference that such supervisory vigilance is kept by the Reserve Bank of India under a Statute or the Central Government. Even if it was with the Central Government in place of the Reserve Bank of India it would not have made any difference, therefore, the argument based on the decision of All India Bank Employees Association (supra) does not advance the case of the respondent. It is only in case of mal-functioning of the company that occas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve obligation to the affected party. The writ petition was held to be maintainable since the teacher whose services were terminated by the institution was affiliated to the university and was governed by the Ordinances, casting certain obligations which it owed to that petitioner. But it is not the case here. Our attention has been drawn by the learned counsel for the appellant to paragraphs 12, 13 and 21 of the decision (Andi Mukta) to indicate that even according to this case no writ would lie against the private body except where it has some obligation to discharge which is statutory or of public character. Merely because the 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 of 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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