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TMI Blog2015 (1) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 : The petitioner no.1 is a proprietary firm. The petitioner no.2 is a company registered under the Indian Companies Act, 1956, having its Registered Office within the State of Gujarat. The petitioner no.3 is the Director of the petitioner no.2 Company and the petitioner no.4 is the Guarantor and also a Director of the Petitioner no.2 Company. The petitioners availed of a loan facility from the respondent no.2 Punjab National Bank. The respondent no.2 Bank noticed that the loan account of the petitioners was a Non-Performing Asset (NPA) since 30th June 2012 with the outstanding of Rs. 1027 lac (as on the date of the NPA) including the interest at the applicable rate. Despite regular reminders from the bank for payment of the dues, no steps were taken by the petitioners in that regard. Therefore, the respondent no.2 Bank issued a show-cause notice dated 19th February 2013 followed by a second show cause notice dated 14th May 2013 and a final notice dated 8th January 2014 on the premise that the petitioners had defaulted in repayment of the loan amount and the funds borrowed from the Bank were siphoned off and not used for the purpose for which the amount of the loan was disburs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide. Submissions on behalf of the petitioners : Mr.Vishwas Shah and Mr.Mitul Shelat, the learned advocates appearing for the respective petitioners made the following submissions : The RBI Master Circular dated 1st July 2011 as well as the RBI Master Circular dated 2nd July 2012 in respect of the willful defaulters and the instructions contained therein are beyond the legislative competence of the RBI. The circular does not refer to any provision of law under which it has been issued. It has been submitted that the stance of the Reserve Bank of India that issuance of the Master Circular is in exercise of the powers conferred under Section 21 and Section 35-A of the Banking Regulation Act, 1949, is completely misplaced and erroneous. To fortify such submission, strong reliance has been placed on the decision of the Supreme Court in the case of Indian Banks' Association, Bombay and others v. M/s.Devkala Consultancy Service and others, (2004)11 SCC 1. The impugned provisions of the Circular are substantive provisions affecting the rights of the citizens. The substantive provisions can only be by way of a legislative enactment and not by exercise of powers to issue directions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds by obtaining loan from a bank or any other financial institution. The Circular pre-supposes a default, which is otherwise required to be proved in accordance with law before the Debts Recovery Tribunal established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act No.51/1993) or any other competent forum. The word "debt" is defined under Section 2(g) of the RDBI Act, 1993. The question whether there exists any debt or not is a question the bank is obliged to prove and satisfy before the Debts Recovery Tribunal under the RDBI Act, 1993, against the borrower. It has been submitted that the impugned circular which seeks to delegate the function of making a judicial inquiry and issue a declaration regarding the conduct of a borrower as a "willful default" entails serious consequences. Such adjudication is essentially judicial in nature as it involves adjudication of a lis. Such an essential primary function cannot be delegated to a non-judicial authority like a private bank or even a nationalized bank. In support of such submission, strong reliance has been placed on the decision of the Supreme Court in the case of Ram Prasad Narayan Sahi and anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nandi Mukta Sadguru Shree Muktajee Vandasjiswami Survarna Jayant Smarak Trust Vs. V.R. Rudani, AIR 1989 SC 1707; (ii) Praga Tools Corporation v. C.A. Imanual and others, AIR 1969 SC 1306; (iii) Apex Electricals v. ICICI Bank Ltd., 2003(2) GLR 1785; (iv) M/s A-One Mega Mart Pvt. Limited and others v. HDFC Bank and another, (2013)169 Punjab Law Reporter 688; (v) M/s. Inder Surgical v. Union of India and others, 2014(2) Punjab Law Reporter 377. In such circumstances referred to above, it has been prayed that the petitions merit consideration and the reliefs prayed for in the respective petitions be granted. Stance of the Reserve Bank of India : In response to the notice served upon the Reserve Bank of India, an affidavit-in-reply has been filed in the Special Civil Application No.645 of 2014 on behalf of the same duly sworn by its Assistant General Manager, Department of Banking Supervision, Reserve Bank of India, Ahmedabad. The stance of the Reserve Bank of India as could be deduced from the averments made in the reply is thus :- The petition is not maintainable against the Reserve Bank of India. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the banking company. In terms of Section 35 of the Banking Regulation Act, the RBI has the power to conduct statutory inspection of any banking company or cause a scrutiny of the affairs of a banking company and its books of accounts. The RBI has the powers to issue directions under Section 35A of the Banking Regulation Act to the banking companies generally or to any banking company in particular in public interest or in the interest of the banking policy or to prevent the affairs of the banking company being conducted in a manner detrimental to the interest of its depositors or in a manner prejudicial to the interest of the banking company. The Banking Regulation Act envisages action to be taken by the RBI when RBI is satisfied that circumstances warrant such action. Section 36(1) of the Banking Regulation Act empowers the RBI to caution or prohibit banks against entering into certain transactions and generally give advice to any bank. As regards the issuance of directions/guidelines/ circulars etc. by the RBI, the necessary actions as empowered under the law and as considered appropriate and essential in a given situation have always been issued from time to time keeping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme came into force with effect from 1st April 1999. Accordingly, banks and financial institutions started reporting such cases of willful defaults which occurred or were detected after 31st March 1999 on a quarterly basis to the RBI. Taking into consideration the concern expressed over the persistence of the 'willful default' in the financial system in the 8th Report of the Parliament's Standing Committee on Finance (Standing Committee), the RBI, in consultation with the Government of India, constituted a Working Group on Willful Defaulters (WGWD) under the Chairmanship of Shri S.S.Kohli, the then Chairman of the Indian Banks' Association in May 2011 for examining some of the recommendations of the 8th Report on the Parliament's Standing Committee on Financial Institutions. The Group submitted its report in November 2001. The recommendations of the Working Group of Willful Defaulters were further examined by an In-House Working Group constituted by the RBI. Accordingly, the banks/financial institutions were advised on 30th May 2002 for implementation of such recommendations with immediate effect. Pending the passing of the legislation in respect of Credit Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easures required to be adopted by the banks and FIs in identifying and reporting the instances of willful default. Paragraph 3 of the Master Circular stipulates that the decision to classify a borrower as willful defaulter should be entrusted to a committee of higher functionaries of the bank/FI concerned headed by the Executive Director and consisting of two GMs/DGMs as decided by the Board of the Bank/FI. Further, the decision taken on classification of the willful defaulters should be well documented and supported by requisite evidence and should clearly spell out the reasons for which the borrower has been declared as willful defaulter in terms of the guidelines issued by the Bank. The bank/FI is also required to advise the borrower concerned about the proposal to classify him as willful defaulter along with the reasons therefore. The bank/FI is also required to provide a reasonable time to the borrower for making representation against the decision to a committee headed by the Chairman and Managing Director of the bank/FI concerned. The Bank has prescribed a detailed procedure for classification of a particular borrower as a willful defaulter and such classification is require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 20th February 1999 to discourage the banks and financial institutions from granting any further financial aid to the willful defaulters, so as to act as a deterrent for the 'willful defaulters' and in order to safeguard banks from the risks of loan repayments, interest and liquidity. The guidelines contained in the impugned Master Circular have been issued at the instance of the Central Vigilance Commission and pursuant to the recommendations of the Working Groups. The instructions contained in the Master Circular are aimed at curbing the menace of non-performing assets in banks. The RBI, by issuing the said Circular, has taken few positive steps to protect the interests of banks and financial institutions and to ensure that a list of willful defaulters is known and made available to other banks and financial institutions. The said purpose cannot be said to be arbitrary and unjustified. The RBI's circulars on 'willful defaulters' are in consonance with the law of the land and are meant for ensuring transparency and providing accountability so that the bank's funds are not misused by the unscrupulous elements. Submissions on behalf of the Reserve Bank of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions is a part of the banking policy. Such banking policy is specified by the Reserve Bank of India from time to time in the interest of the banking system or monetary stability or sound economic growth. While formulating any banking policy, the Reserve Bank of India has to give due regard to the interest of the depositors and other resources of the bank. Mr.Soparkar submits that the court sitting in a writ jurisdiction under Article 226 of the Constitution may not examine the merits of the policy to find out, whether there could have been a better policy and interfere with such policy. Banking policy requires economic and fiscal expertise. According to Mr.Soparkar, the experts who are qualified to address the issues are the best people to take an appropriate decision in the interest of the entire economy of the nation. Mr.Soparkar laid much stress on the fact that the NPA accounts are a big threat to the economy of the nation. The borrowers, at times, misuse the amount disbursed by the bank and thereby cause immense loss to a particular bank. On matters affecting policy and those requiring expertise, the court should be slow and circumspect to interfere unless such policy is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estriction has to be determined in an objective manner and has to be seen from the point of view of interest of the general public and not merely from the point of view of person upon whom the restrictions are imposed. Mr.Soparkar, therefore, submits that there being no merit in both the writ-applications, the same deserves to be rejected. ANALYSIS : Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration in these petitions is, whether the petitioners are entitled to any of the reliefs as prayed for in their petitions. It is a settled position of law that a statute can be invalidated or held unconstitutional -- (i) if it is ultra vires the Patent Act; (ii) if it is contrary to the statutory provisions other than those contained in the Parent Act; (iii) if law making power has been exercised in bad faith; (iv) if it is not reasonable and it goes against the legislative policy; and (v) if it does not fulfill the object and purpose of the enabling Act. It is also well-settled that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were detected after 31st March 1999 on a quarterly basis. It covered all non-performing borrowal accounts with outstandings (funded facilities and such non-funded facilities which are converted into funded facilities) aggregating Rs. 25 lakhs and above identified as willful default by a Committee of higher functionaries headed by the Executive Director and consisting of two GMs/DGMs. Banks/FIs were advised that they should examine all cases of willful defaults of Rs. 1.00 crore and above for filing of suits and also consider criminal action wherever instances of cheating/fraud by the defaulting borrowers were detected. In case of consortium/multiple lending, banks and FIs were advised that they report willful defaults to other participating/financing banks also. Cases of willful defaults at overseas branches were required be reported if such disclosure is permitted under the laws of the host country." The term "willful default" as contained in clause (2.1) has been redefined in supersession of the earlier definition as under : "2.1 Definition of wilful default The term "wilful default" has been redefined in supersession of the earlier defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; (e) investment in other companies by way of acquiring equities/ debt instruments without approval of lenders; (f) shortfall in deployment of funds vis-a-vis the amounts disbursed/drawn and the difference not being accounted for. 2.2.2 Siphoning of funds, referred to at para 2.1(c) above, should be construed to occur if any funds borrowed from banks/FIs are utilised for purposes un-related to the operations of the borrower, to the detriment of the financial health of the entity or of the lender. The decision as to whether a particular instance amounts to siphoning of funds would have to be a judgement of the lenders based on objective facts and circumstances of the case. The identification of the willful default should be made keeping in view the track record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorised as willful must be intentional, deliberate and calculated." The Circular explains the term "cut-off limits" for use of funds and stipulates the "penal measures" which are required to be taken to prevent the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of such discretionary orders are kept to the barest minimum. To ensure that the identification of a willful defaulter is transparent and objective so as not to cause any inconvenience to the borrowers, the Master Circular, in clause (3), has set out Grievances Redressal Mechanism. The said clause reads as under : "3. Grievances Redressal Mechanism Banks/FIs should take the following measures in identifying and reporting instances of willful default: (i) With a view to imparting more objectivity in identifying cases of willful default, decisions to classify the borrower as willful defaulter should be entrusted to a Committee of higher functionaries headed by the Executive Director and consisting of two GMs/DGMs as decided by the Board of the concerned bank/FI. (ii) The decision taken on classification of willful defaulters should be well documented and supported by requisite evidence. The decision should clearly spell out the reasons for which the borrower has been declared as willful defaulter vis-à-vis RBI guidelines. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitutions, the Reserve Bank of India, in consultation with the Government of India, constituted in May 2001 a Working Group on Willful Defaulters (WGWD) under the Chairmanship of Shri S.S.Kohli, the then Chairman of the Indian Banks' Association, for examining some of the recommendations of the Committee. The Group submitted its report in November 2001. The recommendations of the WGWD were further examined by an In House Working Group constituted by the Reserve Bank. Accordingly, the Scheme was further revised by RBI on May 30, 2002. The above scheme was in addition to the Scheme of Disclosure of Information on Defaulting Borrowers of banks and FIs introduced in April 1994, vide RBI Circular DBOD.No.BC/CIS/47/20.16.002/94 dated 23 April 1994." POWER OF THE RESERVE BANK OF INDIA : We now proceed to deal with the first contention raised on behalf of the petitioners as regards the power of the Reserve Bank of India to issue the Master Circular. According to the learned advocates appearing on behalf of the petitioners the instructions contained in the Master Circular are beyond the legislative competence of the Reserve Bank of India. The Circular does not ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act as also under the Banking Regulation Act have been conferred on the bank with a view to fulfill these objectives. The various powers under the Banking Regulation Act are related to public interest or the interest of banking policy. The expression "banking policy" has been defined in clause (ca) of section 5 of the Banking Regulation Act as under : "(ca) 'banking policy' means any policy which is specified from time to time by the Reserve Bank in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits and other resources of the bank and the need for equitable allocation and the efficient use of these deposits and resources." This definition and power conferred thereunder on the Reserve Bank to specify the policy clearly reflect the object that the banks truly become the instruments of transmitting economic policies including the credit policies of the country in a manner expected of them and serve the cause of public interest. It is the Reserve Bank's function to ensure, as best as it can, that the said object is achieved. Further, in view of the adverse effect that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given. (3) Every banking company shall be bound to comply with any directions given to it under this section." "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 directions as it deems fit, and the banking companies or the banking compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , transparency in balance-sheets, etc. The question for our consideration is, whether it will be open for this court to review the decisions which have been taken by a specialised body like the Reserve Bank of India and arrive at different conclusions. The scope of jurisdiction in such matters has been settled by various judgments of the Supreme Court and the same may be referred to at this stage. In Joseph Kuruvilla Vellukunnel v. Reserve Bank of India, AIR 1962 SC 1371, the position of the Reserve Bank of India is clearly stated in the following paragraphs which are referred to at pp.1379-80 and 1382 as under : "But the most important function of the Reserve Bank is to regulate the banking system generally. The Reserve Bank has been described as a bankers' bank. Under the Reserve Bank of India Act, the scheduled banks maintain certain balances and the Reserve Bank can lend assistance to those banks 'as a lender of the last resort'. The Reserve Bank has also been given certain advisory and regulatory functions. By its position as a central bank, it acts as an agency for collecting financial information and stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not the Reserve Bank of India, the only other authority that could be entrusted with the function would be the Finance Ministry of the Government 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." ...... ..... ..... ..... Nor do the powers of the Reserve Bank end there. The Reserve bank not only has powers over banking companies while they are functioning, but it has also powers when the banking companies wish or are forced to cease to function. If a banking company wants to suspend its business and applies to the High Court for a moratorium, the application is not maintainable, unless it is accompanied by a report of the Reserve Bank indicating that in the opinion of the Reserve Bank the banking company will be able to pay its debts. When the High Court grants the reliefs without such report, it has to call for a report from the Reserve Bank. The High Court is also required to have regard to the interests of the depositors, and even during the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Reserve Bank would act differently in another case. ..... ..... ..... ..... The learned Attorney General, on the other side, drew our attention to Virendra v. State of Punjab,, where it has been pointed out that in judging the reasonableness of any particular law 'the surrounding circumstances in which the impugned law came to be enacted, the underlying purpose of the enactment and the extent and urgency of the evil sought to be remedied' must also be considered. That case concerned the freedom of speech and its alleged curtailment by the Punjab Special Powers (Press) Act, 1956. In judging the reasonableness of the law from the angle of the exclusion of courts, this court observed : "Legislature had to ask itself the question : who will be the appropriate authority to determine at any given point of time as to whether the prevailing circumstances require some restriction to be placed on the right to freedom of speech and expression and the right to carry on any occupation, trade or business and to what extent ? The answer was obvious, namely, that as the State Government was charged wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the country. While examining the power conferred by section 58A of the Companies Act, 1956, on the Central Government to prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited or accepted by non-banking companies, this court in Delhi Cloth and General Mills Co. Ltd. v. Union of India, AIR 1983 SC 937, observed as under : "Mischief was known and the regulatory measure was introduced to remedy the mischief. The conditions which can be prescribed to effectuate this purpose must, a fortiori, to be valid, fairly and reasonably, relate to checkmate the abuse of juggling with the depositors/investors hard earned money by the corporate sector and to confer upon them a measure of protection namely availability of liquid assets to meet the obligation of repayment of deposit which is implicit in acceptance of deposit. Can it be said that the conditions prescribed by the Deposit Rules are so irrelevant or have no reasonable nexus to the objects sought to be achieved as to be arbitrary? The answer is emphatically in the negative. Even at the cost of repetition, it can be stated with confiden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of the banks operating in the country and the interest of depositors. In an underdeveloped country like ours, where majority of the population are illiterate and poor and are not conversant with banking operations and in underdeveloped money and capital market with mixed economy, the Constitution charges the State to prevent exploitation and so the RBI would play both promotional and regulatory roles. Thus the RBI occupies a place of 'pre-eminence' to ensure monetary discipline and to regulate the economy or the credit system of the country as an expert body. It also advises the Government in public finance and monetary regulations. The banks or non-banking institutions shall have to regulate their operations in accordance not only with the provisions of the Act but also the rules and directions or instructions issued by the RBI in exercise of the power thereunder. Chapter 3-B expressly deals with regulations of deposit and finance received by the RNBCs. The directions, therefore, are statutory regulations." Thus, from the above, the law is well-settled that the Reserve Bank of India, which is described as the supreme bank of the country, is empowered to regulate the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of E.Sathyanarayanan (supra), yet with due deference we are unable to subscribe to the views expressed by His Lordship, more particularly, when there are Supreme Court decisions on the issue. DELEGATED LEGISLATION : The above takes us to deal with the submission as regards the scope and power of the Reserve Bank of India to issue the Master Circular in exercise of powers under the delegated legislation. It is true that a delegated legislation can be challenged before the Courts on the ground of being ultra vires the parent Act. The Courts can adjudge the legality and validity of delegated legislation by applying the doctrine of ultra vires. The doctrine of ultra vires has two aspects: substantive and procedural. When delegated legislation goes beyond the scope of the authority conferred by, or it is in conflict with, the parent statute it is invalid and this is known as substantive ultra vires. When the regulation-making authority deviates from the procedure, if any, prescribed by the parent statute for making regulations, it is known as procedural ultra vires. In these writ petitions, what is urged is the substantive ultra vires only and not procedural ultra vires. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de under the Constitution or a statute, must be intra vires the parent law under which power has been delegated. If the regulation-making power is conferred and the regulations made are in excess of that power the regulation would be void even if the Act provided that they shall have effect as if enacted in the Act. The validity of the regulation is always open to challenge on the ground that it is unauthorised. The validity of the delegated legislation is a question of vires, that is, whether or not the power has been exceeded or otherwise wrongfully exercised or is inconsistent with the parent Act. The doctrine of ultra vires quite often is one of the recognised principles/grounds to invalidate a delegated legislation. The basic principle of this doctrine is that an authority being the creature of the law it has only such powers as are granted to it by the law. Declaring a rule in the Karnataka Motor Vehicle Rules, 1963 ultra vires the Motor Vehicles Act, 1939 as the rule was inconsistent with a section in the Act, the Supreme Court, in State of Karnataka v. H.Ganesh Kamath, AIR 1983 SC 550, held that the rule-making power cannot include within its scope the power to make a rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o has locus standi to challenge the validity of the subordinate legislation in question." Thus, the Court while reviewing the validity of a delegated legislation, should presume such delegated legislation prima facie to be intra vires and it is for the person aggrieved to prove affirmatively that the presumption in favour of constitutionality, competence, fairness and reasonableness is unsustainable as held by the Apex Court in State of U. P. v. Baburam, AIR 1961 SC 751. The onus of establishing invalidity is on the challenger. The question whether a particular delegated legislation is in excess of the power of the supporting legislation conferred on the delegate, has to be determined with regard not only to specific provisions contained in the relevant statute conferring the power to make rule or regulation, but also the object and purpose of the Act as can be gathered from the various provisions of the enactment. It would be wholly wrong for the Court to substitute its own opinion as to what principle or policy would best serve the objects and purposes of the Act, nor is it open to the Court to sit in judgment of the wisdom, the effectiveness or otherwise of the policy, so as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank of India are in the larger interest of the public and it being a body of experts in banking, the directions given by it should not be lightly brushed aside. STATUTORY STATUS OF THE CIRCULAR: The above takes us now to deal with the submission as regards the statutory status of the Master Circular. It has been strenuously contended before us by the learned advocates appearing on behalf of the petitioners that the impugned Master Circular has no force in law and cannot be termed as a statutory circular. In short, the sum and substance of the submission canvassed on behalf of the petitioners is that, if the Reserve Bank of India wanted to issue a Master Circular laying down a policy for declaring the borrowers as willful defaulters and the consequences of the same, then the same could have been done only by enacting a law within the meaning of Article 13 of the Constitution of India, otherwise a circular will have no force of law. We are not impressed even by such submission as we have already indicated in our earlier part of the judgment the source of power and the exercise of the same by the Reserve Bank of India in the interest of banking and banking policy. It is clear th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notifications etc. made or issued by the Government or any subordinate authority in the exercise of delegated legislative power. ..............7. The question relating to a post-constitution order or notification in the context whether it amounts to law was considered by the Supreme Court in Jayantilal Amratlal v F. N. Rana, AIR 1964 SC 648....The Court further observed as follows: "This is not to say that every order issued by an executive authority has the force of law. If the order is purely administrative, or is not issued in exercise of any statutory authority it may not have the force of law. But where a general order is issued even by an executive authority which confers power exercisable under a statute, and which thereby in substance modifies or adds to the statute, such conferment of powers must be regarded as having the force of law."..." The issue as regards the statutory force of a circular is no longer res integra. The Supreme Court, in the case of B.O.I. Finance Ltd. v. The Custodian and others, AIR 1997 SC 1952, and Central Bank of India v. Ravindra and others, AIR 2001 SC 3095, has examined such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on two basic principles: (a) Audi alteram partem (b) Nemo judex in causa sua The duty to act fairly is the theme of the principles of natural justice. However, the extent of the duty to act fairly will normally be very limited where the authority exercises a function which does not culminate in a binding decision. The rule generally applies, at least with full force, only to the conduct leading directly to a final act of the decision, and not to the making of a preliminary decision or to an investigation designed to obtain information for the purpose of a report or a recommendation on which a subsequent decision may be founded. (see Halsbury's Laws of England, Vol.1(i), 4th Edition, paras 85 and 94.) The standard of fairness may be different where the proceedings are in inquisitorial form. Bias can be classified under three different heads: (a) a legal interests which mean that the Judge is "in such a position that a bias must be assumed." (b) pecuniary interest. (c) personal bias. Law in this regard has expanded to a great extent. In J.F.Garner's Admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to adopt a very cautious, circumspect, and careful approach. If the evidence led by the parties in such a case is tested by cross-examination, it would be easier to determine where truth lies. But in the absence of cross-examination, appreciating the effect of competing affidavits is hot an easy matter. In such a case, the Court must always enquire on which side the probabilities lie and must scrutinise the affidavits very critically to determine which of them deserves to be believed. Naturally, in dealing with such a question of fact in appeal, we are normally inclined to attach importance to the findings of fact recorded by the High Court itself." Recently, in the case of Union of India v. Vipan Kumar Jain, (2005)9 SCC 579, the Supreme Court held that an officer who had carried out a search under Section 132 of the Income Tax Act, 1961, was competent to act as an assessing officer and there was no inherent infirmity or defect in permitting the assessing officer to gather information and assess the value of the information himself. The Supreme Court referred to a decision of the U.S. Supreme Court in the case of Harold Withrow v. Duane Larken and observed thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not by itself bring into operation the doctrine 'no man can be a judge in his own cause'. Of course, in individual cases bias may be shown against a particular officer but in the absence of any proof of personal bias or connection merely because officers of a particular corporation are named as the authority does not mean that those officers would be biased. As has been held by the Constitution Bench, a Managing Director is a high-ranking officer. He is not personally interested in the transaction. There is no question of any bias or conflict between his interest and his duty. In Gullapalli Nageswara Rao case the Secretary who had framed the Scheme then proceeded to hear the objections and advise the Chief Minister. It is because of the personal involvement of the Secretary that the majority took the view. Even then two Judges held that it did not follow that he was an improper person to hear the objections. Thus, the authorities disclose that mere appointment of an officer of the corporation does not by itself bring into play the doctrine that 'no man can be a judge in his own cause'. For that doctrine to come into play it must be shown that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it was a matter of policy. Once the legislation was passed, the Government had an obligation to exercise all available options to prevent terrorism within the bounds of the Constitution. Moreover, mere possibility of abuse could not be counted as a ground for denying the vesting of powers or for declaring a statute unconstitutional. The Supreme Court in the case of Sushil Kumar Sharma v. Union of India and others, (2005)6 SCC 281, held as under : "16. As observed in Maulavi Hussein Haji Abraham Umarji v. State of Gujarat, Unique Butyle Tube Industries (P) Ltd. v. U.P. Financial Corpn. and Padma Sundara Rao v. State of T.N. while interpreting a provision, the Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of the process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary." In a nine-Judge Bench decision of the Supreme Court in the case of I.R.Coelho (dead) by L.Rs. v. State of T.N., AIR 2007 SC 861, the Supreme Court made the following observations, which are worth noting: "It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am, 2011(9) SCALE 526. The Supreme Court considered the issue as regards Article 19(1)(g) of the Constitution of India although in an altogether different factual background, yet the principle propounded and explained would be applicable to the case at hand. The observations of the Supreme Court in paragraphs 10 to 18 are worth noting: "10. It may be mentioned that to test the reasonability of a restriction we have to see the subject matter, extent of restriction, the mischief which it seeks to check, etc. The reasonableness of the restriction has to be determined in an objective manner and has to be seen from the point of view of the interest of the general public and not merely from the point of view of the persons upon whom the restrictions are imposed vide Hanif Quareshi v. State of Bihar, AIR 1958 SC 731. Moreover, the impugned action of the authorities cannot be said to be unreasonable merely because in a given case, they may operate harshly, vide State of Gujarat v. Shantilal, AIR 1969 SC 634 (vide Para 52). As observed by the Supreme Court in Laxmi Khandsari v. State of UP., AIR 1981 SC 873; Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Bihar, AIR 1958 SC 731, the Court must presume, that the legislature understands and correctly appreciates the need of its own people. The legislature is free to recognize degrees of harm, and may confine its restrictions to those where the need is deemed to be the clearest. In our opinion, the same principle would apply to executive action also, unless there is clear violation of a statute or a constitutional provision. 15. In our opinion, the State should not be hampered by the Court in dealing with evils at their point of pressure. All legislation, including delegated legislation (such as the kind we are examining) and executive action is essentially ad hoc. Since, social problems nowadays are extremely complicated, this inevitably entails special treatment for distinct social phenomena. If legislation or executive action is to deal with realities it must address itself to variations in society. The State must, therefore, be left with wide latitude in devising ways and means of social control and Regulation, and the Court should not, unless compelled by the law, encroach into this field. 16. As Justice Frankfurter of the U.S. Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c, thus laying down the threshold limit for application of the circular. It applies to only those defaulters who can be categorized as "willful" as defined in the circular. It, thus, does not cover those borrowers who are unable to pay the debt without there being any element of willfulness. Surely, no borrower can claim a vested right to seek financial assistance from a bank or a financial institution no matter how willful or chronic his defaults in repayment of past dues may have been. The circular, therefore, in general terms, is not arbitrary. However, the matter does not rest over here. There is a grey area which we have been able to identify so far as the issue of unreasonable restriction and arbitrariness in the policy decision of the Reserve Bank of India is concerned. We have noticed that the Master Circular which provides for the guidelines pertaining to "willful default" and "willful defaulter" embraces within it even the directors of the company. We may, once again, at the cost of repetition, highlight few provisions of the Circular which, in our opinion, deserve consideration. In clause (2.5), which relates to penal measures, sub-clause (d) reads as under: &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he names of directors who are nominees of government or financial institutions should also be reported but a suitable remark 'nominee director' should be incorporated. Therefore, against the names of Independent Directors and Nominee Directors, they should indicate the abbreviations "Ind" and "Nom" respectively in brackets to distinguish them from other directors." Thus, the above makes it clear that all the directors irrespective of their type are brought within the purview of the circular for the purpose of declaring them as willful defaulters. Although in clause (5.2), the Reserve Bank of India has tried to clarify the position as regards the independent and nominee directors, yet a plain reading of clause (5.2) would suggest that even the independent and nominee directors are not spared but it would be within the discretion of the committee of high functionaries headed by the Executive Director to take a decision as regards the role of the independent and nominee directors. The circular speaks about "director" and "independent and nominee director". The classification of the directors under the Companies Act is as under : "A. Classification under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 4. Alternate Director: If so authorized by the Articles or by a resolution passed by the company in general meeting, the Board may appoint an Alternate Director to act for a Director ("Original Director"), who is absent for whatever reason for a minimum period of three months from the State in which the meetings of the Board are ordinarily held. Such Alternate Director will hold office until such period that the Original Director would have held his or her office. However, any provision for automatic reappointment of retiring Directors applies to the Original Director and not to the Alternate Director. 5. 'Shadow' Director: A person, who is not appointed to the Board, but on whose directions the Board is accustomed to act, is liable as a Director of the company, unless he or she is giving advice in his or her professional capacity. Thus, such a 'shadow' Director may be treated as an 'officer in default' under the Companies Act. 6. De facto Director: Where a person who is not actually appointed as a Director, but acts as a Director and is held out by the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Agreement") with such Indian stock exchange. This Agreement is in a standard format (prescribed by the Securities Exchange Board of India ("SEBI")), as amended by SEBI from time to time. The Agreement provides for the following further categories of Directors: Categories under Listing Agreement 1. Executive Director; 2. Non-executive Director; and 3. Independent Director. Executive and non-executive Directors An Executive Director can be either a Whole-time Director of the company (i.e., one who devotes his whole time of working hours to the company and has a significant personal interest in the company as his source of income), or a Managing Director (i.e., one who is employed by the company as such and has substantial powers of management over the affairs of the company subject to the superintendence, direction and control of the Board). In contrast, a non-executive Director is a Director who is neither a Whole-time Director nor a Managing Director. Clause 49 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. he is not less than twenty-one (21) years of age. Nominee directors appointed by an institution that has invested in, or lent money to, the company are also treated as independent Directors." 135. In our opinion, all the directors cannot be held liable for the default in repayment of the loan which might be for varied reasons beyond the control of such directors. We find some element of arbitrariness in the policy of the Reserve Bank of India. 136. We may profitably refer to the decision of the Supreme Court in the case of Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay, reported in (1989) 3 SCC 293, wherein it was held that the State actions are amenable to judicial review only to the extent that the State must act validly for a discernible reason, not whimsically for any ulterior purpose. The observations of His Lordship, Sabyasachi Mukherjee, J. (As the learned Chief Justice then was) made in paragraph 25 are worth noting. "....... Where there is arbitrariness in State action, Article 14 springs in and judicial review strikes such an action down. Every action of the executive autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, cx). Law has reached its finest moments, stated Douglas, J. in United States v. Wunderlich, when it has freed man from the unlimited discretion of some ruler&. Where discretion is absolute, man has always suffered. It is in this sense that the rule of law may be said to be sworn enemy of caprice. Discretion, as Lord Mansfield stated it is classic terms in the case of John Wilkes, 'means sound discretion guided by law. It must be governed by rule, not humour: it must not be arbitrary, vague and fanciful'."" (Emphasis supplied) It is well-settled that a company, be it a private or public, being a juristic person, is different from an individual as a citizen. For all acts of the company each and every director need not be held responsible. It would depend upon the role of each of the directors so far as the day-to-day management and affairs of the company are concerned. We may give one simple example. Even when any penal liability is to be fastened upon the company, provisions have been made in different enactments like the Negotiable Instruments Act, the Prevention of Food Adulteration Act, the Essential Commodities Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of a company: "29. We are dealing here with an incorporated company. The nature of the personality of an incorporated company which arises from a fiction of law, must be clearly under stood before we proceed to determine whether the word 'citizen' used in the Constitution generally or in Article 19 specially, covers an incorporated company. Unlike an unincorporated company, which has no separate existence and which the law does not distinguish from its members an incorporated company has a separate existence and the law recognises it as a legal person separate and distinct from its members. This new legal personality emerges from the moment of incorporation and from that date the persons subscribing to the memorandum of association and other persons Joining as members are regarded as a body corporate or a corporation aggregate and the new person begins to function as an entity. But the members who form the incorporated company do not pool their status or their personality. If all of them are citizens of India the company does not become a citizen of India any more than if all are married the company wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it possible to raise an irrebuttable presumption about the citizenship of the members. I have given detailed reasons already in answer to the first question posed for our decision. If we go by the corporate entity then we must hold that Art. 19 applies to natural persons. On that subject I have said a great deal but what I have said sums up to the following passage from Ducat v. Chicago, (1868) 48 III 172 quoted by Farnsworth (op. cit.) at p. 310 and approved by the United States Supreme Court: "The term citizen can be correctly understood in no other sense than that in which it was understood in common acceptation when the Constitution was adopted, and as it is universally explained by writers on government, without exception. A citizen is of the genus homo, inhabiting, and having certain rights in some State or district........ these privileges attach to him in every State into which he may enter, as to a human being as a person with faculties to appreciate them, and enjoy them, and not to an intangibility, a mere legal entity, an invisible artificial being, but to a man, made in God's image....."" &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m." Directors are not liable for all their mistakes but only for negligence which is in a business sense culpable or gross. Nor is a director liable for untrue representations made to the shareholders if he honestly believed the representations to be true and had at the time reasonable grounds for his belief. In Dovey v. Cory, (1901) AC 477, the House of Lords had before it a case in which Mr.Cory, a director of the company, was being made liable for misfeasance on the ground that he was guilty of neglect of duties. Dealing with the charge of neglect Lord Halsbury observed: "The charge of neglect appears to rest on the assertion that Mr.Cory, like the other directors, did not attend to any details of business not brought before them by the general manager or the chairman, and the argument raises a serious question as to the responsibility of all persons holding positions like that of directors, how far they are called upon to distrust and be on their guard against the possibility of fraud being committed by their subordinates of every degree. It is obvious if there is such a duty it must render anything like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affairs of his company. His duties are of an intermittent nature to be performed at periodical board meetings, and at meetings of any committee of the board upon which he happens to be placed. He is not, however, bound to attend all such meetings, though he ought to attend whenever, in the circumstances, he is reasonably able to do so. (4) In respect of all duties that, having regard to the exigencies of business, and the articles of association, may properly be left to some other official, a director is, in the absence of grounds for suspicion, justified in trusting that official to perform such duties honestly. (5) Directors are not bound to examine entries in the company's books. The principles laid down in the above mentioned cases have been followed by Indian Courts also. Reference may be made by way of example to three cases, which will be found reported in S.C. Mitra v. Nawab Ali Khan, AIR 1926 Oudh 153, National Bank of Upper India, Lucknow v. Dina Nath Sapru, AIR 1926 Oudh 243 and Thinnappa Chettiar v. Rajagopalan, AIR 1944 Mad 536. In our opinion, a director of a company other than the promoter or a direct borrower of the loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahmedabad. It is further stated that the bank proposed to classify them as a willful defaulters for the reasons stated in the notice, mainly default in meeting its payment/repayment obligation and siphoning of the funds by utilizing the same for other purpose rather than for the purpose for which the loan was obtained. Once again, a second show cause notice dated 14th May 2013 was issued, calling upon the petitioners to show-cause as to why they should not be classified as "willful defaulters". The final notice is dated 8th January 2014, wherein it has been stated that the petitioners should appear personally before the Grievances Redressal Committee on 17th January 2014 for personal hearing in the matter. According to Mr.Shah, the learned advocate appearing on behalf of the petitioners, the impugned show cause notice fails to disclose any material against the petitioners. The notice also fails to give clear fifteen days' time by way of an opportunity to meet with the same as stipulated in clause 3(iii) of the Circular. We have perused the show cause notices on record. We may only say that except stating that the accounts have been classified as "NPA" and that the unit has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the manner in which the bank wants to proceed against the petitioners. The bank can definitely proceed in accordance with the policy decision as reflected from the Master Circular, but the same has to be in accordance with law. We are of the view that since the show cause notice is bereft of basic details and material particulars, the same deserves to be quashed and set-aside. It would be open for the bank to once again issue a fresh show cause notice incorporating the necessary materials and details on the basis of which it wants to make good its allegations that the petitioners are willful defaulters within the meaning of the same as explained in the Master Circular. The same is the problem so far as the show cause notice issued to the petitioners of Special Civil Application No.10120 of 2014 is concerned. However, the question is, whether we can look into the same and issue an appropriate writ, order or direction to a Standard Chartered Bank which, although is a scheduled bank figuring in a Second Schedule to the Reserve Bank of India Act, 1934, yet is a private bank. Such being the position, whether the Standard Chartered Bank would be amenable to the writ jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of view of effective business management but behind the formal ownership which is cast in the corporate mould, the reality is very much the deeply pervasive presence of the Government, and it is in fact the Government which acts through the instrumentality or agency of the corporation or the juristic person. If the instrumentality and agency of the Govt. discharges the Governmental functions it must be subject to same limitations in the field of constitutional law as the Government itself, though in the eye of the law it would be a distinct and independent legal entity. In Ajay Hasia's case (supra), the Supreme Court was considering the obligations of instrumentalities and agencies of the Government to respect the fundamental rights of the citizens and they were held to be bound to enforce the fundamental rights guaranteed to the citizens of India under Part III of the Constitution of India. If this binding was not there, the fundamental rights in the opinion of the Supreme Court would then be reduced to an idle dream or a promise of unreality. Because in the constitution philosophy of a democratic socialist public Govt. has to undertake a multitude of socio-economic operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans v. Charles E.Newton, (1966)382 US 296 and Smith v. Allwright, (1943)32 US 649, and observed that the decisions show that the test of public or governmental character of the function is not easy of application and does not invariably lead to the correct inference because the range of governmental activity is broad and varied and merely because an activity may be such as may legitimately be carried on by Government, it does not mean that a Corporation which is otherwise a private entity, would be an instrumentality or agency of the Government by reason of carrying of such activity. In applying the test, therefore, a further precaution is to be taken and it is to be seen whether the public nature of the function is impregnated with governmental character or "tied or entwined with Government" or fortified by some other additional factor (vide observations in para 18 column 2 at page 641). In our view, therefore, the fifth test is also not satisfied. Thus, so far as the tests laid down by the Supreme Court in the case of Ajay Hasia (supra) is concerned, none of the tests could be said to be fulfilled so as to make the Standard Chartered Bank, a private bank, amenable to the writ ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions to third parties, the disobedience of which would entail penal consequences, yet these corporations (i) set up under statutes, (ii) to carry on business of public importance or which is fundamental to the life of the people ___ can be considered as the State within the meaning of Article 12. Thus, it is the functional test which was devised and utilized by Mathew J. and there he said, "the question for consideration is whether a public corporation set up under a special statute to carry on a business or service which Parliament thinks necessary to be carried on in the interest of the nation is an agency or instrumentality of the State and would be subject to the limitations expressed in Article 13(2) of the Constitution. The State is an abstract entity. It can only act through the instrumentality or agency of natural or juridicial persons. Therefore, there is nothing strange in the notion of the State acting through a corporation and making it an agency or instrumentality of the State". It is pertinent to note that functional tests became necessary because of the State having chosen to entrust its own functions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same constitutional and public law limitations as the State would have been. In different judicial pronouncements, some of which we have reviewed, any company, corporation, society or any other entity having a juridical existence if it has been held to be an instrumentality or agency of the State, it has been so held only on having found to be an alter ego, a double or a proxy or a limb or an off-spring or a mini-incarnation or a vicarious creature or a surrogate and so on __ by whatever name called __ of the State. In short, the material available must justify holding of the entity wearing a mask or a veil worn only legally and outwardly which on piercing fails to obliterate the true character of the State in disguise. Then it is an instrumentality or agency of the State. It is this basic and essential distinction between an 'instrumentality or agency' of the State and 'other authorities' which has to be borne in mind. An authority must be an authority sui juris to fall within the meaning of the expression 'other authorities' under Article 12. A juridical entity, though an authority, may also satisfy the test of being an instrumentality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, and keeping in view the meaning which 'authority' carries, the question whether an entity is an 'authority' cannot be answered by applying Ajay Hasia tests. (2) The tests laid down in Ajay Hasia's case are relevant for the purpose of determining whether an entity is an instrumentality or agency of the State. Neither all the tests are required to be answered in positive nor a positive answer to one or two tests would suffice. It will depend upon a combination of one or more of the relevant factors depending upon the essentiality and overwhelming nature of such factors in identifying the real source of governing power, if need be by removing the mask or piercing the veil disguising the entity concerned. When an entity has an independent legal existence, before it is held to be the State, the person alleging it to be so must satisfy the Court of brooding presence of government or deep and pervasive control of the government so as to hold it to be an instrumentality or agency of the State." (Emphasis supplied) In Jatyapal Singh and others v. Union of India and others, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the definition of other authority, as given in Article 12. The ultimate conclusion of the Constitution Bench are recorded in paragraph 39 and 40 as under :- "39. Fresh off the judicial anvil is the decision in Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers' Assn., (2002)2 SCC 167, which fairly represents what we have seen as a continuity of thought commencing from the decision in Rajasthan Electricity Board in 1967 up to the present time. It held that a company substantially financed and financially controlled by the Government, managed by a Board of Directors nominated and removable at the instance of the Government and carrying on important functions of public interest under the control of the Government is 'an authority' within the meaning of Article 12. 40. 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 financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the definition of a State or legal or other authorities under the control of the Government within the meaning of Article 12 of the Constitution of India. The observations of the Supreme Court as contained in paragraphs 26 to 33 are worth noting: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 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 compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 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 the 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 as the profits. Any business or commercial activity, may be banking, manufacturing units or related to any other kind of business generating resources, employment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 to these provisions failing which certain consequences follow as indicated in the Act itself. Provision regarding acquisition of a banking company by the Government, it may be pointed out that any private property can be acquired by the Government in public interest. It is now judicially accepted norm that private interest has to give way to the public interest. If a private property is acquired in public interest it does not mean that the party whose property is acquired is performing or discharging any function or duty of public character though it would be so for acquiring authority. 33. For the discussion held above, in our view, a private company carrying on banking business as a scheduled bank, cannot be termed as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferior tribunals which refused to exercise their jurisdiction or against municipal corporation which did not duly hold elections, meetings, and so forth. In modern times, the mandamus is used to enforce statutory duties of public authorities. The courts always retained the discretion to withhold the remedy where it would not be in the interest of justice to grant it. It is also to be noticed that the statutory duty imposed on the public authorities may not be of discretionary character. A distinction had always been drawn between the public duties enforceable by mandamus that are statutory and duties arising merely from contract. Contractual duties are enforceable as matters of private law by ordinary contractual remedies such as damages, injunction, specific performance and declaration. In the Administrative Law (Ninth Edition) by Sir William Wade and Christopher Forsyth, (Oxford University Press) at page 621, the following opinion is expressed: "A distinction which needs to be clarified is that between public duties enforceable by mandamus, which are usually statutory, and duties arising merely from contract. Contractual duties are enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of Administrative Action (Fifth Edn.) by de Smith, Woolf & Jowell in Chapter 3 para 0.24, it is stated thus: "A body is performing a "public function" when it seeks to achieve some collective benefit for the public or a section of the public and is accepted by the public or that section of the public as having authority to do so. Bodies therefore exercise public functions when they intervene or participate in social or economic affairs in the public interest. This may happen in a wide variety of ways. For instance, a body is performing a public function when it provides "public goods" or other collective services, such as health care, education and personal social services, from funds raised by taxation. A body may perform public functions in the form of adjudicatory services (such as those of the criminal and civil courts and tribunal system). They also do so if they regulate commercial and professional activities to ensure compliance with proper standards. For all these purposes, a range of legal and administrative techniques may be deployed, including: rulemaking, adjudication (and other forms of dispute resolution); inspection; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power is the sole test whether a body is subject to judicial review, nor do I so read Lord Diplock's speech. Of course the source of the power will often, perhaps usually, be decisive. If the source of power is a statute, or subordinate legislation under a statute, then clearly the body in question will be subject to judicial review. If at the end of the scale, the source of power is contractual, as in the case of private arbitration, then clearly the arbitrator is not subject to judicial review." 14. In that decision, they approved the observations made by Lord Diplock in Council of Civil Service Unions vs. Minister for the Civil Service (1985) A.C. 374, 409 wherein it was held: "For a decision to be susceptible to judicial review the decision-maker must be empowered by public law (and not merely, as in arbitration, by agreement between private parties) to make decisions that, if validly made, will lead to administrative action or abstention from action by an authority endowed by law with executive powers which have one or other of the consequences mentioned in the preceding paragraph. The ultimate source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orkmen filed a writ petition under Article 226 in the High Court of Andhra Pradesh challenging the validity of an agreement entered into between the employees and the company, seeking a writ of mandamus or an order or direction restraining the appellant from implementing the said agreement. The appellant raised objection as to the maintainability of the writ petition. The learned Single Judge dismissed the petition. The Division Bench held that the petition was not maintainable against the company. However, it granted a declaration in favour of three workmen, the validity of which was challenged before this Court. This Court held at pages 589-590 as under: "....that the applicant for a mandamus should have a legal and specific right to enforce the performance of those dues. Therefore, the condition precedent for the issue of mandamus is that there is in one claiming it a legal right to the performance of a legal duty by one against whom it is sought. An order of mandamus is, in form, a command directed to a person, corporation or any inferior tribunal requiring him or them to do s particular thing therein specified which appertains to his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re subject to private law, e.g., the activities by private bodies may be governed by the standards of public when its decisions are subject to duties conferred by statute or when by virtue of the function it is performing or possible its dominant position in the market, it is under an implied duty to act in the public interest. By way of illustration, it is noticed that a private company selected to run a prison although motivated by commercial profit should be regarded, at least in relation to some of its activities, as subject to public law because of the nature of the function it is performing. This is because the prisoners, for whose custody and care it is responsible, are in the prison in consequence of an order of the court, and the purpose and nature of their detention is a matter of public concern and interest. After detailed discussion, the learned authors have summarized the position with the following propositions: (1) The test of a whether a body is performing a public function, and is hence amenable to judicial review, may not depend upon the source of its power or whether the body is ostensibly a "public" or a "private" body ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was working as a Branch Manager of the appellant Bank. He was suspended and there was a disciplinary enquiry wherein he was found guilty and dismissed from service. The respondent challenged his dismissal by filing a writ petition. The learned Single Judge held that the Federal Bank was performing a public duty and as such it fell within the definition of "other authorities" under Article 12 of the Constitution. The appellant bank preferred an appeal, but the same was dismissed and the decision of the Division Bench was challenged before this Court. This Court observed that a private company carrying on business as a scheduled bank cannot be termed as carrying on statutory or public duty and it was therefore held that any business or commercial activity, whether it may be banking, manufacturing units or related to any other kind of business generating resources, employment, production and resulting in circulation of money which do have an impact on the economy of the country in general, cannot be classified as one falling in the category of those discharging duties or functions of a public nature. It was held that that the jurisdiction of the High Court under Article 226 could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not generally available as a remedy against private wrongs. It is used for enforcement of various rights of the public or to compel the public/statutory authorities to discharge their duties and to act within their bounds. It may be used to do justice when there is wrongful exercise of power or a refusal to perform duties. This writ is admirably equipped to serve as a judicial control over administrative actions. This writ could also be issued against any private body or person, specially in view of the words used in Article 226 of the Constitution. However, the scope of mandamus is limited to enforcement of public duty. The scope of mandamus is determined by the nature of the duty to be enforced, rather than the identity of the authority against whom it is sought. If the private body is discharging a public function and the denial of any right is in connection with the public duty imposed on such body, the public law remedy can be enforced. The duty cast on the public body may be either statutory or otherwise and the source of such power is immaterial, but, nevertheless, there must be the public law element in such action. Sometimes, it is difficult to distinguish between public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emedy is not a writ petition under Article 226. 32. Applying these principles, it can very well be said that a writ of mandamus can be issued against a private body which is not a State within the meaning of Article 12 of the Constitution and such body is amenable to the jurisdiction under Article 226 of the Constitution and the High Court under Article 226 of the Constitution can exercise judicial review of the action challenged by a party. But there must be a public law element and it cannot be exercised to enforce purely private contracts entered into between the parties." 173. Since we are on the issue of public functions, we may also quote with profit a portion of the decision of the Supreme Court in the case of Jatya Pal Singh (supra) as contained in paragraphs 48, 51 and 52, which read thus: "48. Dr. K.S.Chauhan had also relied on the Human Rights Act, 1998 (Meaning of Public Function) Bill which sets out the factors to be taken into account in determining whether a particular function is a public function for the purpose of sub-section (3)(b) of Section 6 of the aforesaid Act. Section (1) enumerates the following factors which may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs in the public interest. Public functions need not be the exclusive domain of the state. Charities, self-regulatory organizations and other nominally private institutions (such as universities, the Stock Exchange, Lloyd's of London, churches) may in reality also perform some types of public function. As Sir John Donaldson M.R. urged, it is important for the courts to 'recognize the realities of executive power' and not allow 'their vision to be clouded by the subtlety and sometimes complexity of the way in which it can be exerted'. Nongovernmental bodies such as these are just as capable of abusing their powers as is Government." 52. These observations make it abundantly clear that in order for it to be held that the body is performing a public function, the appellant would have to prove that the body seeks to achieve some collective benefit for the public or a section of public and accepted by the public as having authority to do so." In Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna Jayanti Mohtsav Smarak Trust v. V.R.Rudani, AIR 1989 SC 1607, on which strong reliance has been pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1607 at pp.1610-1613) : "The essence of the attack on the maintainability of the writ petition under Art. 226 may now be examined. It is argued that the management of the college being a trust registered- under the Public Trusts Act is not amenable to the writ jurisdiction of the High Court. The contention in other words is that the trust is a private institution against which no writ of mandamus can be issued. In support of the contention, the counsel relied upon two decisions of this Court: (a) Executive Committee of Vaish Degree College, Shamli v. Lakshmi Narain, (1976) 2 SCR 1006 : AIR 1976 SC 888 and (b) Deepak Kumar Biswas v. Director of Public Instruction. In the first of the two cases, the respondent institution was a Degree College managed by a registered co-operative society. A suit was filed against the college by the dismissed principal for reinstatement. It was contended that the Executive Committee of the college which was registered under the Co-operative Societies Act and Affiliated to the Agra University (and subsequently to Meerut University) was a statutory body. The importance of this con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, therefore, is not devoid of any public character (See The "Evolving Indian Administrative Law by M.P. Jain (1983) p 266). So are the service conditions of the academic staff. When the University takes a decision regarding their pay scales, it will be binding on the management. The service conditions of the academic staff are, therefore, not purely of a private character. It has superadded protection by University decisions creating a legal right-duty relationship between the staff and the management. When there is existence of this relationship, mandamus cannot be refused to the aggrieved party. The law relating to mandamus has made the most spectacular advance. It may be recalled that the remedy by prerogative writs in England started with very limited scope and suffered from many procedural disadvantages. To overcome the difficulties, Lord Gardiner (the Lord Chancellor) in pursuance of Section 3(l)(e) of the Law Commission Act, 1965, requested the law Commission to review the existing remedies for the judicial control of administrative acts and commissions with a view to evolving a simpler and more effective procedure. The Law Commission made their report i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; Article 226 reads: "226. Power of High Courts to issue certain writs.-- (1) Notwithstanding anything in Art. 32, every High Court shall have power throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority including in appropriate cases, any Government, within those territories directions, orders or writs, including (writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari) or any of them for the enforcement of any of the rights conferred by Part III and for any other purpose." xxxx xxxx xxxx xxxx xxxx" The scope of this article has been explained by Subba Rao, J., in Dwarkanath v. Income-tax Officer, AIR 1966 SC 81 at pp.84-85, This article is couched in comprehensive phraseology and it ex facie confers a wide power on the High Courts to reach injustice wherever it is found. The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al body. A mandamus can issue, for instance, to an official of a society to compel him 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 duties placed on them by the statutes authorising their undertakings. A mandamus would also lie against a company constituted by a statute for the purpose of fulfilling public responsibilities. (See Halsbury's Law of England (3rd Ed. Vol. II p. 52 and onwards)." Here again we may point out that mandamus cannot be denied on the ground that the duty to be enforced is not imposed by the statute. Commenting on the development of this law, Professor De Smith states: "To be enforceable by mandamus a public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter, common law, custom or even contract." (Judicial Review of Administrative Act 4th Ed. p 540). We share this view. The judicial control over the fast expanding maze of bodies affecting the rights of the people should not be put into watertight compartment. It should remain flexible to meet the requirements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an official body. It is further necessary that the person claiming a 'writ of mandamus must have a legal right to the performance of a legal duty by the one against whom the writ is sought." What is discernible from an exhaustive review of the case law, considered and discussed above, may be summed up thus: (1) For issuing writ against a legal entity, it would have to be an instrumentality or agency of a State or should have been entrusted with such functions as are Governmental or closely associated therewith by being of public importance or being fundamental to the life of the people and hence Governmental. (2) A writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State Government; (ii) 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 statutor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reserve Bank of India Act, 1934, very much binding to the Standard Chartered Bank, therefore, while acting under the Master Circular for the purpose of declaring a particular borrower as a willful defaulter, does the bank discharge a public duty. To put it in other words, if a private bank has failed to perform its duty in the sense that it has gone beyond the scope of the regulations of the Master Circular, or in performance of the same, has violated any of the fundamental rights or any other legal rights of the borrower against whom the action is proposed, then whether such a borrower can legitimately maintain a writ-application before this Court under Article 226 of the Constitution of India. A body, public or private, should not be categorized as "amenable" or "not amenable" to writ jurisdiction. The most important and vital consideration should be the "function" test as regards the maintainability of a writ application. If a public duty or public function is involved, any body, public or private, concerned or connection with that duty or function, and limited to that, would be subject to judicial scrutiny under the extraordinary writ jurisdiction of Article 226 of the Consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roadly speaking, the Court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law field. The difficulty will lie in demarcating the frontier between the public law domain and the private law field. It is impossible to draw the line with precision and we do not want to attempt it. The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of then action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a share holder, and dons the robes of a share-holder, with all the rights available to such a share-holder there is no reason why the State as a share-holder should be expected to state its reasons when it seeks to change the management, by a resolution of the Company, like any other shareholder.." Distinction between 'public law' and 'private law& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, are all 'public authorities'. So are members of a statutory tribunal or inquiry, and the board of visitors of a prison. The Criminal Injuries Compensation Board is a public authority. So also, I suggest, is a university incorporated by Royal charter; and the managers of a State School. So is the Boundary Commission: and the Committee of Lloyd's. But a limited liability company incorporated under the Companies Acts is not a 'public authority'; (see Tozer v. National Greyhound Racing Club Ltd. (1983) Times, 16 May). Nor is an unincorporated association like the Jockey Club... ". (see pp. 122, 123, 124) 38. Sir Harry Woolf, a Lord Justice of Court of Appeal, points out the distinction in the following words:- "I regard public law as being the system which enforces the proper performance by public bodies of the duties which they owe to the public. I regard private law as being the system which protects the private rights of private individuals or the private rights of public bodies. The critical distinction arises out of the fact that it is the public as a whole, or in the case of local government the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. The Board awarded compensation, but made certain deductions, which was questioned by way of certiorari. The first question before the Court was "whether the Board are a body of persons amenable to the supervisory jurisdiction of this Court?". For the Board reliance was placed upon the well-known words of Atkin, L.J., in' R.v. Electricity Commissioners (1924) 1 KB 171, at p. 205 to the effect that the body of persons to be amenable to writ jurisdiction must have the legal authority to determine questions affecting the rights of subjects and who are under a duty to act judicially. The Court held that the said words of Atkin. L. J., were not supposed to be exhaustive of the situation where a certiorari may issue, and pointed out that the Board, though not set up under a statute, is set up by the executive Government, i.e., under the prerogative, and that its acts are no less lawful on that account. The Court observed : "Indeed, the writ of certiorari has been issued not only to courts set up by statutes but also to courts whose authority was derived, inter alia, from the prerogative. Once the jurisdiction is extended, as it clearly has been, to tribunals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40. This decision has since been followed and applied in several English decisions. It would suffice to refer to R. v. Panel on Takeovers and Mergers, Ex Parte Datafin (1987) 1 All ER 564. The Panel on Take-overs and Mergers was a self-regulating unincorporated association which devised and operated the City Code on take-overs and mergers prescribing a Code of Conduct to be observed in the takeovers of listed public companies. The panel had no direct statutory, prerogative or common law powers, nor were its powers based solely on consensus; its acts were supported and sustained by certain statutory powers and penalties introduced after the inception of the Panel. A decision of the panel was sought to be questioned by way of certiorari. One of the objections of the respondents was that the supervisory jurisdiction of the Court was confined to bodies whose power was derived solely from legislation or the exercise of the prerogative, and that the power of judicial review did not extend to a body such as the Panel on Takeovers. Overruling this objection, it was held that in determining whether the decisions of a particular body were subject to judicial review, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be exerted...". This rule was reiterated in yet another decision of the Court of Appeal in R. v. Panel on Take-overs and Mergers, ex parte Guinness, (1989) 1 All ER 509. This was indeed the approach indicated by Mathew, J. in Sukhdev v. Bhagatram, AIR 1975 SC 1331, when the learned Judge spoke of "the governing power, wherever located" being subjected to "fundamental constitutional limitations". The learned Judge felt that "the need to subject the power centres to the control of the Constitution requires an expansion of the concept of State action". (see para 93 at p. 1352). Applying the above test, the Bank herein cannot be called a public body. It has no duty towards the public. It's duty is towards its account holders, which may include the borrowers having availed of the loan facility. It has no power to take any action, or pass any order affecting the rights of the members of the public. The binding nature of its orders and actions is confined to its account holders and borrowers and to its employees. Its functions are also not akin to Governmental functions. We may also quote with profit a Full Bench decision of the Bombay High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unctions under the control of the State. But that does not mean that banks which are not so controlled, or banks which are set up by private organisations or co-operative societies become" State" under Article 12. In a welfare State, many activities which are often carried on by private organisations are undertaken by the State. In such cases the Supreme Court has said that we must look at the overall position of the organisation in the light of the other tests also, especially when the function of the organisation is not such as can be carried on only by the State or is not connected with governmental functions." What is complained before us is the procedural arbitrariness on the part of the bank. We have examined the constitutional validity of the Master Circular issued by the Reserve Bank of India at the instance of the petitioners of Special Civil Application No.10120 of 2014, but it is difficult for us to also look into the proposed action on the part of the Standard Chartered Bank on the premise that the show cause notice which has been issued is lacking in material particulars. Such being the position, we hold that the Standard Chartered Bank being a private bank is not am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has no application to the case at hand for more than one reasons. In the case before the Supreme Court, there were two parties. One was the contractor and the second Union of India who assigned the contract in favour of the contractor. The disputes arose between the two parties regarding amounts to be claimed. Thus, it could be seen that the contractor had its own grievances. Both were interested in their respective claims. In such circumstances, the Supreme Court observed that whether the other party committed breach cannot be decided by the party alleging breach. Such observations of the Supreme Court should be read in context with the factual situation which was before the Supreme Court. In the case at hand, it is not a dispute as such between the petitioners and the bank by way of claims and counter-claims arising from a public works contract. In the case of Sadashiv Prakash Brahmachari (supra), five petitions under Article 32 of the Constitution of India by the heads of five Madhs in the State of Orissa were filed challenging certain provisions of the Orissa Hindu Religious Endowments Act, 1951, as amended by the Orissa Act 18 of 1954, as unconstitutional and ultra vires. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the initial stage of the framing of the scheme under the provisions of the Act, there was, first of all, something in the nature of a preliminary inquiry by the judicial officer of the rank of the Munshiff followed by a regular and the full inquiry before the Commissioner who was of the rank of the subordinate judge. The Inquiry before the Commissioner was assimilated to and was governed by the provisions relating to the trial of suits by enjoining that as far as may be, the same had to be in accordance with the provisions of the Code of the Civil Procedure relating to the trial of suits. The Supreme Court further observed in the said case that, while under the prior Act, the inquiry before the Commissioner might well have been of the nature of an executive inquiry by an Executive Officer, the inquiry under the Amended Act by itself is in the nature of a judicial inquiry by the judicial officers followed up by right of regular appeal to the High Court. In the case at hand, there is no question of any judicial inquiry in accordance with the provisions of the Civil Procedure Code. In the case of State of Karnataka (supra), the respondent entered into an agreement with the State o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. 1st October, 1991, by reason of the Finance Act, 1991. The Reserve Bank of India, vide its circular letter dated 2nd September 1991, advised all the Scheduled Commercial Banks that the Incident or Interest tax should prorate be passed on to the borrowers where for a uniform practice should be followed in consultation with the appellant before the Supreme Court, viz. Indian Banks' Association. The Indian Banks' Association acted pursuant to the circular, as also with a view to formulate a structure of uniform interest rate chargeable after including interest tax payable, which was passed on to the borrowers by the bank concerned, advised them that the rate of interest be loaded with the interest tax of 3% and rounded-up to the next higher 0.25%. The Reserve Bank of India gave its approval to the proposal of the first appellant before the Supreme Court. Such action on the part of the appellants therein was questioned by the respondents in a public interest litigation filed before the Karnataka High Court, inter alia, on the ground that purported rounding up was illegal and without jurisdiction as thereby the tax elements came to be increased and as a result thereof the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hotropic Substances Act, 1985. The Supreme Court, in view of the few draconian provisions under the Act, considered the right to privacy as embodied in Article 21 of the Constitution of India. The Supreme Court was considering the provisions of Sections 42 and 43 of the Act, 1985, which empowered the officers under the Act to make search and seizure of a person at all hours and at all places. Considering the draconian provisions which may lead to a harsh sentence, the Supreme Court explained the doctrine of "due process" as adumbrated under Article 21 of the Constitution of India which requires striking of balance between the need of law and enforcement thereof, on the one hand, and protection of a citizen from oppression and injustice, on the other. The Supreme Court, while interpreting the provisions of Sections 42 and 43 of the Act, 1985, observed that the interpretation which directs a balance between the enforcement of law and protection of the valuable human rights of the accused must be resorted to. A balance, thus, must be struck in regard to the mode and manner in which the statutory requirements are to be complied with vis-a-vis the place of search and seizure. This decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents as regards the maintainability of the writ petition against a private bank. In support of such preliminary objection, reliance was placed on the decision of the Supreme Court in the case of Federal Bank Limited (supra). The Division Bench overruled the objection as regards the maintainability of the petition and took the view that the petition was maintainable even against a private bank. The Division Bench considered various decisions of the Supreme Court on the subject. However, what weighed with the Division Bench in taking the view that a petition against a private bank would be maintainable was that under Section 17 of the SARFAESI Act, an appeal would lie to the Debts Recovery Tribunal against the action of the bank, and against any order passed thereunder, an appeal is maintainable under Section 18 of the said Act to the Debts Recovery Appellate Tribunal. The Court took the view that an order passed by the DRAT is amenable to the writ jurisdiction of a High Court. The Court also considered Section 34 of the SARFAESI Act, which is significant in deciding the issue relating to the writ jurisdiction of a High Court. Section 34 bars the jurisdiction of a civil court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raphs 12 and 13 of the said judgment are relevant, and are quoted below:- "12. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. 13. The following words of Lord Denning in the matter of applying precedents have become locus classicus: "Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. *** *** *** Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular, so far as it is sought to be made applicable to all the directors of the company, is arbitrary and unreasonable. To this limited extent, we declare that part of the Master Circular as ultra vires the powers of the Reserve Bank of India and is violative of Article 19(1)(g) of the Constitution of India. However, as held in sub-para (6) above, these observations will not apply to the promoters/ entrepreneurs. (8) The Master Circular seeks to paint all the directors with the same brush. The provisions in the circular shatter the concept of identity of a company being different and distinct from its directors without providing any safeguards. (9) The show cause notice issued to the petitioners of Special Civil Application No.645 of 2014 is held to be bad as it is bereft of the basic details and material particulars. (10) The Standard Chartered Bank although has been included as one of the Scheduled Banks in the Second Schedule to the Reserve Bank of India Act, 1934, yet, being a private bank, is not amenable to the writ jurisdiction of this Court. Mer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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