WP/39793/2015 of Sri Biotech Laboratories India Limited, Vs YES Bank, on 31 December 2015

COMMON ORDER:

Heard.

2. Both these writ petitions are filed by the same petitioner againstdifferent respondents seeking release of mortgaged property covered bydifferent loan agreements by seeking a declaration that the demand foradditional amount by the respondents, as a pre-condition, to release themortgaged properties is illegal, arbitrary and highhanded and seeksconsequential directions against respective respondent banks.

3. For the sake of convenience, the facts in W.P.No.39793 of 2015 arenoticed.

4. The petitioner claims that it was granted credit facility year wise viz.,working capital, demand loan, cash credit and other limits by respondentbank, under a sanction letter. The petitioner claims that it has made regularpayments against the said loans apart from keeping a sum of Rs.3 crores asFDR with the respondent bank and the relation between the petitioner andthe respondent bank is very cordial, as the petitioner has been paying interestin time and also all the dues in time. It is stated that since major shares of thepetitioner are purchased by Foreign Company, the petitioner is required toget the property released.

5. The petitioner claims that though it has cleared the entire liability andrequested the respondent Bank to release mortgaged property and issue ‘NoDue Certificate’, under a letter, dated 23-11-2015, the 1[st] respondent is statedto have been demanding Rs.26,00,000/- towards pre-closure charges, asum of Rs.3,25,000/- towards processing charges and a further sum ofRs.4,24,175/- on the sanctioned amount on the ground that there is no further renewal of loans. The aforesaid demands are stated to be totally illegal andcontrary to law and as there is urgency of getting release the mortgagedproperties offered as a security for the loans aforesaid, the present writpetition is filed.

6. During hearing of the writ petitions, it was noticed that the respondentbanks in both the writ petitions are Private Banks and as such, the remedyunder Article 226 of the Constitution of India being not available againstPrivate Banks, learned counsel for the petitioners was requested to explainthe maintainability of the writ petitions first.

7. It is not in dispute that the Banks in each of these writ petitions arePrivate Banks. Learned counsel for the petitioner cited three decisions viz.,CENTURY SPINNING AND MANUFACTURING COMPANY LIMITED ANDANOTHER Vs. THE ULHASNAGAR MUNICIPAL COUNCIL ANDANOTHER[[1]], U.P.STATE COOPERATIVE LAND DEVELOPMENT BANKLTD. Vs. CHANDRA BHAN DUBEY AND OTHERS[[2]]and ZONALMANAGER, CENTRAL BANK OF INDIA Vs. DEVI ISPAT LIMITED ANDOTHERS[[3]]in support of his plea of maintainability of writ petitions.

8. I have deeply considered the submissions, as aforesaid. However, I am unable to agree with the learned counsel for thepetitioner and in my view, the writ petitions cannot be maintained againstrespective respondents, as the respective respondents do not fall within thedefinition of State as envisaged under Article 12 of the Constitution of India.

9. The reasons for the above conclusions are under:-

10. The case first cited by the learned counsel for the petitioner arises outof a writ petition filed to restrain Ulhasnagar Municipal Council from enforcingOctroi Rules and in that context, there was no controversy in the decision withregard to public body or authority, as the respondent therein, undoubtedlywas a public body falling under Article 12 of the Constitution of India.

11. The decision second cited related to a relief sought for against a Co-operative Land Development Bank registered under the U.P.Co-operativeSocieties Act, 1965, wherein it was held that the control of the StateGovernment on the appellant therein is all pervasive and the business andmanagement of the said Bank was under direct control of the StateGovernment. In that background, it was held that ‘any person or authority’used in Article 226 cannot be confined only to statutory authorities andinstrumentalities of the State but they also cover any other person or bodyperforming public duty.

12. In the decision third cited related to actions of a public sector bank andsince the said Bank had exercised public functions, it was, therefore, heldthat the Bank in that case being a public sector bank and discharging publicfunctions, is a State under Article 12 of the Constitution of India. Hence, thequestion as posed in the present writ petitions did not arise for considerationbefore the Hon’ble the Supreme Court.

13. In the present case, the respondent banks are private banks and theirfunctions are entirely in the nature of commercial transactions between theBank and its customers, which include the petitioner.

14. The terms and conditions of the loan is, therefore, a contractual matterbetween the petitioner and the respective respondent bank. Any disputebetween the two with regard to liability or the mode in which the mortgagedproperties are to be released is squarely covered by the loan agreementsbetween the parties. There is nothing on record at the moment to ascertainwhether such contract provides mode for resolution of the dispute. However,in any case, the jurisdiction of this Court under Article 226 of the Constitutionof India cannot be exercised with regard to private entities and there isnothing to indicate that the said private banks had discharged any publicfunctions and, on the contrary, the facts of the case show that the disputebetween the parties is purely arising out of loan transactions and suchdispute being in the realm of private law and no public law element having been involved, both the writ petitions are liable to be dismissed as notmaintainable.

15. Accordingly, the writ petitions are dismissed. No costs. Miscellaneous petitions, if any, pending shall stand closed. Miscellaneous petitions, if any, pending shall stand closed.

Date: 31-12-2015Prv

_______________________VILAS V.AFZULPURKAR, J

HON’BLE SRI JUSTICE VILAS V.AFZULPURKAR

W.P.Nos.39793 and 39794 of 2015

-12-2015

Prv

[1]1970 (1) Supreme Court Cases 5821970 (1) Supreme Court Cases 582

[2](1999) 1 Supreme Court Cases 741(1999) 1 Supreme Court Cases 741

[3](2010) 11 Supreme Court Cases 186(2010) 11 Supreme Court Cases 186