Supreme Court of India
ZONAL MANAGER, CENTRAL BANK OF INDIAversusM/S. DEVI ISPAT LTD. & ORS.
- Citation
- 2010 INSC 462
- Decided
- 30 July 2010
- Disposal
- Dismissed
- Bench
- P SATHASIVAM
Holding
A writ petition under Article 226 is maintainable against a State instrumentality for the return of title deeds when the instrumentality acts arbitrarily and the relief does not require interpretation of contract terms.
Summary
M/s Devi Ispat Ltd. had obtained various credit facilities from Central Bank of India. After alleged fraud, the bank asked the company to shift its accounts and later to close them. The company settled its dues by receiving a Rs 15 crore cheque from State Bank of India and requested the return of title deeds and issuance of NOC and No‑Due certificates, which the bank refused. The company filed a writ petition under Article 226 seeking a mandamus for the return of the securities; the Calcutta High Court granted it. The bank appealed, arguing that the dispute was purely contractual and should be decided by a civil forum or DRT. The Supreme Court held that when a State instrumentality acts arbitrarily or unfairly, even in contractual matters, a writ petition is maintainable, especially where the relief sought does not involve interpretation of contract terms and the dues were settled. Consequently, the appeal was dismissed and the bank was ordered to return the title deeds.
Issues considered
- Whether a writ petition under Article 226 is maintainable to enforce a contractual obligation of a State instrumentality.
- Whether the relief sought (return of title deeds) involves interpretation of contract terms, thereby precluding writ jurisdiction.
- Whether the existence of alternative remedies (e.g., DRT, arbitration) bars the exercise of writ jurisdiction.
- Whether the date of filing the writ petition, after settlement of dues, is relevant to the court's jurisdiction.
- Whether the bank, as a public sector entity, can be compelled to return securities under the principles of Article 14.
Legislation cited
Subjects
Article 226writ jurisdictioncontractual obligationpublic sector bankState instrumentalitymandamustitle deedsArticle 14public law
Judgment
(201 OJ 9 S.C.R. 417
ZONAL MANAGER, CENTRAL BANK OF INDIA A
v.
M/S. DEVI ISPAT LTD. & ORS.
(Civil Appeal No. 6077 of 2010)
JULY 30, 2010 B
[P. SATHASIVAM AND ANIL R. DAVE JJ.]
Constitution of India, .1950 - Article 226 - Writ petition -
Held: Is maintainable even in contractual matters, if the C
instrumentality of the State acts unfairly and arbitrarily in its
· contractual obligation - On facts, the institution being a 'State'
within the meaning of Article 12, and the relief sought not
relating to interpretation of any terms of contract, the writ
petition is maintainable - Contract.
D
Respondent No. 1-Company was availing various
credit facilities like 'Term Loan', 'Working Capital Demand
Loan', 'Cash Credit' and 'Letter of Credit' with the
appellant, a Public Sector Bank. In view of certain
irregularities, the appellant-Bank asked the respondent- E
company to shift its loan account to some other Bank.
On non-compliance of the direction, the appellant-Bank
called upon the respondent-company to close its
accounts. The respondent-company paid its dues to the
appellant-Bank through another Nationalized Bank;
There after the respondent-company asked the appellant-
Ba n k to return the title deeds and other collateral
securities and to issue 'No Objection Certificate' and 'No
Dues Certificate'. As the same were not returned by the
appellant-Bank, the respondent-company filed a writ G
petition. The Single Judge of the High Court allowing the
writ petition directed the appellant-Bank to release the
security documents. The order was upheld by the
417 H
418 SUPREME COURT REPORTS [2010] 9 S.C.R.
A Division Bench of the High Court in appeal.
In the instant appeal, the appellant-Bank inter alia
contended that writ petition, under Article 226 of the
Constitution, was not maintainable because the plea
s regarding return of the title deed, deposited as security,
was a civil dispute and the appropriate forum for ·such
remedy was Debts Recovery Tribunal or civil court and
not a writ court.
Dismissing the appeal, the Court
c
HELD: 1.1 It is true that the disputes relating to
interpretation of terms and conditions of a contract could
not be examined/challenged or agitated in a petition filed
under Article 226 of the Constitution and it is a matter for
D adjudication by. a civil court or in arbitration, if provided
for in the contract or before the DRT or under the
Securitization Act. But, if the instrumentality of the State
acts contrary to the public good, public interest, unfairly,
unjustly, unreasonably or its actions are discriminatory
E and violative of Article 14 of the Cor.stitution of India, in
its contractual or statutory obligation, writ petition would
be maintainable. However, a legal right must exist and
corresponding legal duty on the part of the State and if
any action on the part of the State is wholly unfair or
F arbitrary, writ courts can exercise their power. [Paras 11
and 15] [430-G-H; 431-A-B; 442-C-D]
1.2 In the instant case, the respondent-company has
demonstrated that based on the advise of the appellant-
G Bank, they shifted their accounts to another Nationalized
Bank and through an arrangement with the State Bank
of India, a cheque of Rs.15 crores was deposited by their
Bank and in token of the same, by statement of accounts,
the appellant-Bank clearly mentioned that there is 'No
H
ZONAL MANAGER,. CENTRAL BANK OF INDIA v. 419
DEVI ISPAT LTD. & ORS.
Dues' or 'Nil Balance' from the respondent-company. In A
view of the fact•that the respondent-Company had
cleared the dues which were pending at the relevant
point of time through the State Bank of India, they are
entitled to get their title deeds to enable them to deposit
the same with the State Bank of India as their security for B
the amount advanced. In such circumstances, when the
relief sought for, does not relate to interpretation of any
terms of contract, and the Bank being a Nationalized
Bank, discharging public functions is "State" under
Article 12 of the Constitution, a writ court can issue C
appropriate direction. Thus the High Court was fully
justified in issuing a writ of mandamus for return of its title
deeds. (Paras 8, 11 and 16] (426-C; 431-B-D: 442-F-H]
ABL International Ltd. and Anr. vs. Export Credit D
Guarantee Corporation of India Ltd. and Ors. (2004) 3 SCC
553; Karnataka State Forest Industries Corporation vs. Indian
Rocks (2009) 1 sec 150 - relied on.
State of U. P. and Ors. vs. Bridge and Roof company E
(India) Ltd. (1996) 6 SCC 22; Kera/a State Electricity Board
and Anr vs. Kurien E. Kalathil and Ors. (2000) 6 SCC 293 -
distinguished.
2. Though it has been pointed out that after filing of
F
the writ petition, the respondent-Company owes money
through their relationship with other concerns, the
position on the date of the filing of the writ petition is
relevant to test the direction of the High Court. It is not in
dispute that the writ petition has been filed by the G
respondent-company before the High Court well after
settlement of their dues. [Para 12] [431-E-G]
Rajahmundry Electric Supply Corporation Ltd. vs. A.
Nageshwara Rao ahd Ors. (1955) 2 SCR 1066 - relied on.
H
420 SUPREME COURT REPORTS [2010] 9 S.C.R.
A Case Law Reference:
(1996) 6 sec 22 Distinguished. Para 9
(2000) 6 sec 293 Distinguished. Para 10
B (1955) 2 SCR 1066 Relied on. Para 12
(2004) 3 sec 553 Relied on. Para 13
(2009) 1 sec 150 Relied on. Para 14
C CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6077 of 2010.
From the Judgment & Order dated 05.04.2010 of the High
Court at Calcutta
D Mukul Rohtagi, Jaideep Gupta, N.V. Srinivasan, Dinesh
Mathur, Nishant Menon (for Dua Assoiates) for the Appellant.
C.A. Sundaram, Reshmi Rea Sinha, S.C. Ghosh, Vikram
Ganguly, K.V. Viswanathan, Rohini Musa, Abhishek Gupta,
E Zafar lnayat, Anandh Kanan, Parijat Sinha for the Respondents.
The Judgment of the Court was delivered by
P. SATHASIVAM, J. 1. Leave granted.
F 2. This appeal arising out of SLP (C) No. 11505 of 2010
is directed against the final judgment and order dated
05.04.2010 passed by the High Court at Calcutta in G.A. No.
2441 of 2009 whereby the High Court dismissed the appeal
filed by the appellant-Bank herein against the order of the
G learned single Judge dated 24.08.2009 in W.P. No. 485 of
2009 directing the appellant-Bank to return forthwith the title
deeds deposited by Mis Devi lspat Ltd., the Respondent-
Company herein.
H
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 421
DEVI !SPAT LTD. & ORS. [P. SATHASIVAM, J.]
3. Brief facts : A
a) Respondent No.1 is a Company incorporated under the
name and style of Mis Devi !spat Ltd. The Respondent-
Company carries on the business of manufacturing and trading
in ingots and various other types of steel and for the said B
purpose requires financial support from the financial institutions
like the appellant-Bank. Since the very inception of the
respondent-Company, it has been banking with the appellant-
Bank and availing various 'Credit facilities like Term Loan,
Working Capital· Demand Loan, Cash Credit and Letter of c
Credit facility. On 16.10.2006, the respondent-Company wrote
a letter to the appellant-Bank requesting it to review and
enhance its credit facilities. On 15.12.2006, the appellant-Bank
intimated the respondent-Company of its decision of review and
enhanced credit facilities of the Company's account whereby D
the Company was to enjoy two Term Loans being Term Loan I
for Rs. 360 lacs being Account No. 1103590030, Term Loan II
for Rs. 215 lacs being Account No. 1103590041, Cash Credit
for Rs.300 lacs being Account No. 1103589988, Working
Capital Demand Loan for Rs.1200 lacs being Account No. E
3001640109 and a Letter of Credit in favour of the West Bengal
State Electricity Board for Rs.56 lacs.
b) Due to various irregularities in the account of the
respondent-Company, the appellant-Bank by various letters F
between 15.09.2008 to 24.04.2009, advised the respondent-
Company to shift its loan account to some other Bank. On
12.01.2009, the appellant-Bank sent the Credit Information
Report of the respondent-Company to its new Banker, namely,
the State Bank of India. On 25.02.2009, the appellant-Bank G
received an Internal Audit Report in respect of the fraud
perpetrated in the accounts of Mis Rajco Steel Enterprises and
Mis Kali International Pvt. Ltd., whereby crores of rupees were
siphoned av1ay to the account of the respondent-Company.
Therefore, on 14.03.2009, ~he-appellant-Bank filed two H
422 SUPREME COURT REPORTS [2010] 9 S.C.R.
A complaints with the Superintendent of Police, Central Bureau
of Investigation, Kolkata complaining of the fraud and
requesting the CBI, Kolkata to investigate into the matter.
c) On 02,04.2009, Special Audit Team of the appellant-
B Bank submitted its report on the fraud committed by the
respondent-Company which revealed the transfer of a huge
amount of funds from the account of M/s Rajco Steel
Enterprises and M/s Kali International Pvt. Ltd. to the account
of the respondent-Company. On 06.05.2009, the respondent-
C Company requested the appellant-Bank to handover the
original title deeds of its factory premises and all the collateral
securities held by it as against the Company as well as from
Mr. Nirmal Kumar Mandhani, Director of the Company
(respondent No.2 herein) to the State Bank of India,
o Chowringhee Branch, Kolkata to whom they had transferred
their account. On 09.05.2009, the State Bank of India issued
a Banker's cheque of Rs. 15 crores to the respondent-
Company which the appellant-Bank had encashed and
appropriated in lieu of the outstanding balances lying against
E the respondent-Company. By various letters, the respondent-
Company requested the appellant-Bank to return the Security
documents and issuance of 'No Objection Certificate' (in short
'NOC') and 'No Due Certificate' (in short 'NOC'). On
29.05.2009, the respondent-Company filed W.P. No. 485 of
F 2009 before the High Court at Calcutta. By order dated
24.08.2009, the learned single Judge of the High court allowed
the writ petition and directed the appellant-Bank to release the
security documents. Challenging the said judgment, the
appellant-Bank filed an appeal before the Division Bench of the
G High Court being G.A. No. 2441 of 2009. By order dated
05.04.2010, the High Court dismissed the appeal filed by the
appellant herein. Aggrieved by the said order, the appellant-
Bank has preferred this appeal by way of special leave.
H 4. Heard Mr. Mukul Rohtagi, learned senior counsel for the
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 423
DEVI ISPAT LTD. & ORS. [P. SATHASIVAM, J.]
appellant-Bank and Mr. C.A. Sundaram, learned senior counsel A
for the respondent-Company.
5. Mr. Mukul Rohtagi, learned senior counsel for the
appellant-Bank, after taking us through the entire materials, at
the foremost, submitted that the direction of the learned single B
Judge affirmed by the Division Bench for return of the title
deeds deposited by the respondent-Company as a security
cannot be a subject-matter of Article 226 of the Constitution of
India. He further submitted that right to retain a mortgage deed
is a civil dispute and proper forum is Debts Recovery Tribunal c
(in short "ORT") or civil court. He further submitted that if the
writ of mandamus issued by the High Court is maintained, the
right of the nationalized Bank which is holding public money
would affect its right before the ORT. On the other hand, Mr.
C.A. Sundaram, learned senior counsel for the respondent- o
Company, by drawing our attention to the relevant terms of the
contract settlement of entire money due to the appellant-Bank
by an arrangement made through another nationalized Bank,
submitted that the writ petition before the High Court under
Article 226 is maintainable and the High Court is fully justified E
in issuing direction for return of the title deeds of the Company.
6. We have carefully considered the rival contentions of
both the parties and perused the relevant materials.
7. In order to answer the above contentions, there is no F
need to narrate all the factual details except which are required
for the disposal of the above appeal. It is true that the
respondent-Company filed a writ petition before the learned
single Judge of the Calcutta High Court praying for issuance
of a writ of mandamus directing the Bank to forthwith take steps G
to release the security documents and issue 'NOC' and 'NOC'
pertaining to their company's accounts without any further delay.
It is also not in dispute that the respondent-Company carries
on the business of manufacturing and trading in ingots and
H
424 SUPREME COURT REPORTS (201 OJ 9 S.C.R.
A various other types of steel and for the said purpose, it requires
financial support from the institution like the appellant-Bank. The
appellant-Bank, being a public sector Bank, discharging public
functions is a 'State' in terms of Article 12 of the Constitution
of India amenable to the writ jurisdiction. In the earlier part, we
B have adverted to the fact that the respondent-Company had
availed various facilities such as Term Loan, Working Capital
Demand Loan, Cash Credit and Letter of Credit facility. During
the course of business, on 16.10.2006, the respondent-
Company wrote to the appellant-Bank requesting it to review
C and enhance its credit facilities. The same was also acceded
to by the Bank. After two years, between 15.09.2008 to
24.04.2009, the Bank advised the Company to shift its
borrowings to some other Bank due to certain irregularities in
the accounts of the respondent-Company. Since the Company
D had not complied with the direction in the letter dated
24.04.2009, the Bank called upon the Company to close their
accounts. On the other hand, the Company requested the Bank
to return the title deeds and other collateral securities to enable
them to entrust the same to other Nationalized Bank. It is seen
E from the materials placed that the Bank had taken such a stand
requesting the Company to shift their account to some other
Bank since it came to know that a fraud having been
perpetrated by Mis Rajco Steel Enterprises & Mis Kali
International Pvt. Ltd., and the respondent-Company is having
F a connection with them. It is unnecessary to find out the truth or
otherwise in these proceedings. However, it is not in dispute
that in respect of their dues, the respondent-Company made
an arrangement with the State Bank of India and deposited a
cheque of Rs.15 Crores from the State Bank of India. In fact,
G the receipt of an amount of Rs. 15 Crores from the State Bank
of India on and behalf of the respondent-Company has not been
disputed. The letter dated 12.05.2009, addressed to the
appellant-Bank, make it clear that they received a cheque of
Rs. 15 Crores from the State Bank of India, Chowringhee Road
H
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 425
DEVI ISPAT LTD. & ORS. [P. SATHASIVAM, J.]
Branch and the Company has also reminded the appellant- A
Bank to return the security documents. The said letter reads as
under:-
" Devi lspat Ltd.
85, Netaji Subhas Road, 1st Floor, Kolkata - 700 0001
B
Dated: 12th May, 2009
The Zonal Manager
Central Bank of India
Kolkata
Dear Sir, c
Ref: Our Account at Barabazar Branch, Kolkata.
Please refer to our above account which has been taken
over by State Bank of India, Chowringhee Branch, Kolkata. D
The Chowringhee Branch of State Bank of India had given
a Banker's Cheque of Rs. 15.00 crores which have been
encashed and appropriated to our outstanding balances.
We regret to inform that inspite of such adjustments on 9th E
of May, 2009, we 'are yet to get our Security documents,
NOC, NOC etc.
We hope that you will appreciate that above documents
are utmost important and shall be handed over urgently. F
We request you to immediately arrange to deliver the
documents.
Thanking you,
Yours faithfully, G
For DEVI ISPAT LTD.
SD/-
Director
H
426 SUPREME COURT REPORTS [2010] 9 S.C.R.,--
A Cc to: The Branch Manager
Central Bank of India
Barabazar Branch
Kolkata."
B The contents of this letter reiterates the stand of the respondent-
Company.
8. In view of the fact that the respondent-Company had
cleared the dues which were pending at the relevant point of
time through the State Bank of India, they are entitled to get
C their title deeds to enable them to deposit the same with the
State Bank of India as their security for the amount advanced.
It is also relevant to note that in four subsequent letters dated
14.05.2009, the "statement of account" furnished by the
appellant-Bank clearly show that after settling their dues the
D "uncleared amount" has been mentioned as 0.00 (nil) which
read as under:
"STATEMENT OF ACCOUNT CENTRAL BANK OF INDIA
BARABA BARABAZAR
E (KOLKATA)
178, MAHATMA GANDHI ROAD,
BARA BAZAR
Branch Code: 00102
Devi lspat Ltd.
F 85, Netaji Subhas Road,
1st Floor,
2nd Floor, Kolkata - 700 001 Account No. : 1103589988
Product: Medium Enterprises Currency: INR
Date: 14/05/2009 /tune: 10:58:05 E-mail
G
Cleared Balance: 49,82,783.42 Cr. Uncleared Amount: 0.00
STATEMENT OF ACCOUNT CENTRAL BANK OF INDIA
BARABA BARABAZAR
(KOLKATA)
H
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 427
DEVI ISPAT LTD. & ORS. [P. SATHASIVAM, J.]
178, MAHATMA GANDHI ROAD, A
BARA BAZAR
Branch Code: 00102
Devi lspat Ltd.
85, Netaji Subhas Road,
1st Floor, B
2nd Floor, Kolkata - 700 001 Account No. : 3001640109
Product: Medium Enterprises Currency: INR
Date: 14/05/2009 /tune: 10:59:12 E-mail
Cleared Balance: 0.00 Cr. Uncleared Amount: 0.00 Cr
c
STATEMENT OF ACCOUNT CENTRAL BANK OF INDIA
BARABA BARABAZAR
(KOLKATA)
178, MAHATMA GANDHI ROAD,
BARABAZAR D
Branch Code: 00102
Devi lspat Ltd.
85, Netaji Subhas Road,
1st Floor,
2nd Floor, Kolkata - 700 001 Account No. : 1103590030 E
Product: Medium Enterprises Currency: INR
Date: 14/05/2009 /tune: 11 :00:43 E-mail
Cleared Balance: 0.00 Cr. Uncleared Amount: 0.00
F
STATEMENT OF ACCOUNT CENTRAL BANK OF INDIA
BARAB,A.
BARA BAZAR (KOLKA TA)
178, MAHATMA GANDHI ROAD,
BARABAZAR G
Branch Code: 00102
Devi lspat Ltd.
85, Netaji Subhas Road,
1st Floor,
H
428 SUPREME COURT REPORTS [2010] 9 S.C.R.
A 2nd Floor, Kolkata - 700 001 Account No. : 1103589988
Product: Medium Enterprises Currency: INR
Date: 14/05/2009 /tune: 10:59:52 E-mail
Cleared Balance: 0.00 Cr. Uncleared Amount: 0.00 "
B The above factual details clearly demonstrate that through an
arrangement with the State Bank of India, Chowringhee Road
Branch, the respondent-Company settled a sum of Rs. 15
Crores to the appellant-Bank and the statement of accounts
prevailing as on 14.05.2009 clearly reveal that there is no
C amount outstanding. Taking note of these undisputed factual
details, the Bank, being a nationalized institution, amenable to
writ jurisdiction, the High Court has rightly issued a writ of
mandamus for return of the title deeds.
D 9. In the light of the above factual scenario, now let us
consider the decisions relied on by Mr. Rohtagi. In State of UP.
and Others vs. Bridge & Roof Company (India) Ltd., (1996) 6
SCC 22, this Court, in para 16, held thus:
E "16. Firstly, the contract between the parties is a contract
in the realm of private law. It is not a statutory contract. It
is governed by the provisions of the Contract Act or,
maybe, also by certain provisions of the Sale of Goods Act.
Any dispute relating to interpretation of the terms and
F conditions of such a contract cannot be agitated, and could
not have beer agitated, in a writ petition. That is a matter .
either for arbitration as provided by the contract or for the
civil court, as th~ case may be. Whether any amount is due
to the respondent from the appellant-Government under
G the contract and, if so, how much and the further question
whether retention or refusal to pay any amount by the
Government is justified, or not, are all matters which cannot
be agitated in or adjudicated upon in a writ petition. The
prayer in the writ petition, viz., to restrain the Government
H from deducting a particular amount from the writ
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 429
DEVI ISPAT LTD. & ORS. [P. SATHASIVAM, J.]
petitioner's bill(s) was not a prayer which could be granted A
by the High Court under Article 226."
After saying so and in the light of the various terms of the
contract, the Court further held:
B
"18. Accordingly, it must be held that the writ petition filed
by the respondent for the issuance of a writ of mandamus
restraining the Government froni deducting o.r withholding
a particular sum, which according to the respondent is
payable to it under the contract, was wholly misconceived C
arid was not maintainable in law."
10. The next decision relied on by learned senior counsel
for the appellant in Kera/a State Electricity Board and Another
vs. Kurien E. Ka/athil and Others, (2000) 6 SCC 293. He
heavily placed reliance on paras 10 and 11 of this judgment D
which read thus:
"10. We find that there is a merit in the first contention of
Mr. Raval. Learned counsel has rightly questioned the
maintainability of the writ petition. The interpretation and E
implementation of a clause in a contract cannot be the
subject-matter of a writ petition. Whether the contract
envisages actual payment or not is a question of
construction of contract. If a term of a contract is violated,
ordinarily the remedy is not the writ petition under Article F
226. We are also unable to agree with the observations
of the High Court that the contractor was seeking
enforcement of a statutory contract. A contract would not
become statutory simply because it is for construction of
a public utility and it has been awarded by a statutory body. G
We are also unable to agree with the observation of the
High Court that since the obligations imposed by the
contract on the contracting parties come within the purview
of the Contract Act, that would not make the contract
statutory. Clearly, the High Court fell into an error in coming H
430 SUPREME COURT REPORTS [2010] 9 S.C.R.
A to the conclusion that the contract in question was statutory
in nature.
11. A statute may expressly or impliedly confer power on
a statutory body to enter into contracts in order to enable
B it to discharge its functions. Dispute arising out of the terms
of such contracts or alleged breaches have to be settled
by the ordinary principles of law of contract. The fact that
one of the parties to the agreement is a statutory or public
body will not by itself affect the principles to be applied.
c The disputes about the meaning of a covenant in a contract
or its enforceability have to be determined according to
the usual principles of the Contract Act. Every act of a
statutory body need not necessarily involve an exercise of
statutory power. Statutory bodies, like private parties, have
O power to contract or deal with property. Such activities may
not raise any issue of public law. In the present case, it has
not been shown how the contract is statutory. The contract
between the parties is in the realm of private law. It is not
a statutory contract. The disputes relating to interpretation
E of the terms and conditions of such a contract could not
have been agitated in a petition under Article 226 of the
Constitution of India. That is a matter for adjudication by a
civil court or in arbitration if provided for in the contract.
Whether any amount is due and if so, how much and
F refusal of the appellant to pay it is justified o~ not, are not
the matters which could have been agitated and decided
in a writ petition. The contractor should have relegated to
other remedies."
G 11. We have gone through the factual details in both the
decisions. It is not in dispute that a specific mandamus was
sought for in both the cases for implementation of a clause in
a contract which was rightly negatived under Article 226. It is
settled law that the disputes relating to interpretation of terms
H and conditions of a contract could not be examined/challenged
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 431
DEVI !SPAT LTD. & ORS. [P. SATHASIVAM, J.]
or agitated in a petition filed under Article 226 of the A
Constitution. It is a matter for adjudication by a civil court or in
arbitration, if provided for in the contract or before the ORT or
under the Securitization Act. In the case on hand, the
respondent-Company has demonstrated that based on the
advise of the appellant-Bank, they shifted their accounts to B
another Nationalized Bank and through an arrangement with
the State Bank of India, a cheque of Rs.15 crores was
deposited by their Bank and in token of the same, by statement
of accounts dated 14.05.2009 the appellant-Bank clearly
mentioned that there is no due or nil balance from the C
respondent-Company (Emphasis supplied). In such
circumstances, when the relief sought for does not relate to
interpretation of any terms of contract, the Bank being a
Nationalized Bank, a Writ Court can issue appropriate direction
in certain circumstances as mentioned above. In such a factual D
matrix, the reliance placed on these two decisions is not helpful
to the appellant-Bank.
12. Though Mr. Rohtagi has pointed out that after filing of
the writ petition, the respondent-Company owes money through E
their relationship with other concerns, as rightly pointed out by
Mr. Sundaram, the position on the date of the filing of the writ
petition is the relevant date to test the direction of the High
Court. It is not in dispute that the writ petition has been filed by
the respondent-Company before the High Court at Calcutta on F
29.05.2009 that is well after settlement of their dues to the extent
of Rs. 15 Crores by the State Bank of India and the
communication of the appellant-Bank dated 15.05.2009
intimating 'nil' due. In view of the same, we hold that the date
of filing of the writ petition is the relevant date. This is also clear G
from the dictum laid down by this Court in Rajahmundry Electric
Supply Corporation Ltd. vs. A. Nageshwara Rao and Others,
(1955) 2 SCR 1066.
13. In ABL International Ltd. and Another vs. Export Credit H
432 SUPREME COURT REPORTS [201 O] 9 S.C.R.
A Guarantee Corporation of India Ltd. and Others, (2004) 3 SCC
553, Santosh Hegde, J. has exhaustively dealt with the
maintainability of writ petition under Article 226 in contractual
matters. In the said case, contract of insurance was executed
between ABL International ltd. and Another and Export Credit
B Guarantee Corporation of India Ltd. and Others. Having failed
to persuade the first respondent therein, to adhere to the
contract of insurance between it and the appellant, the appellant
filed a writ petition before a learned Single Judge of the Calcutta
High Court, inter alia, praying for quashing of the letters of
C repudiation issued by the first respondent. It also
consequentially prayed for a direction to the first respondent to
make payment of the dues to it under the contract of insurance.
The learned Single Judge, after hearing the parties, came to
the conclusion that though the dispute between the parties arose
D out of a contract, the first respondent being a 'State' for the
purpose o.f Article 12, was bound by the terms of the contract,
therefore, for such non-performance, a writ was maintainable
and after considering the arguments of the parties in regard to
the liability under the contract of insurance, allowed the writ
E petition and issued the writ and directions as prayed for by the
appellants in the writ petition. In an appeal filed by the first
respondent before the Appellate Bench of the same High
Court, the Division Bench reversed the findings of the learned
Single Judge and held that the claim of the appellant involving
F disputed questions of fact cannot be adjudicated in a writ
proceeding under Article 226 of the Constitution, hence, set
aside the judgment of the learned Single Judge. In the course
of its judgment the Appellate Bench also incidentally came to
the conclusion that the first respondent had not committed any
G violation of the clauses or the terms of the insurance contract.
On the contrary, it observed that as per proviso (d) to clause
(xi) of the said insurance contract, by refusing to accept the
barter of goods, the first appellant had violated the terms of the
contract disentitling it to raise any claim on the first respondent.
H
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 433
DEVI ISPAT LTD. & ORS. [P. SATHASIVAM, J.]
It is against this order of the Appellate Bench of the Calcutta ·A
High Court, the. appellants therein filed an appeal before this
Court by way of special leave. After adverting to certain factual
details, the Court framed following question:
"As could be seen from the arguments addressed in this B
appeal and as also from the divergent views of the two
courts below, one of the questions that falls for our
consideration is whether a writ petition under Article 226 •
of the Constitution of India is maintainable to enforce a
contractual obligation of the State or its instrumentality, by c
an aggrieved party."
The following discussion and conclusion are apt and relevant
for our purpose. They are:
"9.ln our opinion this question is no more res integra and D
is settled by a large number of judicial pronouncements
of this Court. In K.N. Guruswamy v. State of Mysore this
Court held: (AIR pp. 595-96, para 20)
"20. The next question is whether the appellant can E
complain of this by way of a writ. In our opinion, he could
have done so in an ordinary case. The appellant is
interested in these contracts and has a right under the
laws of the State to receive the same treatment and be
given the same chance as anybody else. ... F
We would therefore in the ordinary course have given
the appellant the writ he seeks. But, owing to the time
which this matter has taken to reach us (a consequence
for which the appellant is in no way to blame, for he has G
done all he could to have an early hearing), there is barely
a fortnight of the contract left to go .... A writ would therefore
be ineffective and as it is not our practice to issue
meaningless writs we must dismiss this appeal and leave
the appellant content with an enunciation of the law." H .
434 SUPREME COURT REPORTS [201 O] 9 S.C.R.
A 10. It is clear from the above observations of this Court in
the said case, though a writ was not issued on the facts
of that case, this Court has held that on a given set of facts
if a State acts in an arbitrary manner even in a matter of
contract, an aggrieved party can approach the court by
B way of writ under Article 226 of the Constitution and the
court depending on facts of the said case is empowered
to grant the relief. This judgment in K.N. Guruswamy v.
State of Mysore was followed subsequently by this Court
in the case of D.F.O. v. Ram Sanehi Singh wherein this
C Court held: (SCC p. 865, para 4)
"By that order he has deprived the respondent of a
valuable right. We are unable to hold that merely because
the source of the right which the respondent claims was
D initially in a contract, for obtaining relief against any
arbitrary and unlawful action on the part of a public authority
he must resort to a suit and not to a petition by way of a
writ. In view of the judgment of this Court in K.N.
Guruswamy case 1 there can be no doubt that the petition
E was maintainable, even if the right to relief arose out of an
alleged breach of contract, where the action challenged
was of a public: authority invested with statutory power."
(Emphasis supplied)
F
11. In the case of Gujarat State Financial Corpn. v. Lotus
Hotels (P) Ltd. this Court following an earlier judgment in
Ramana Dayaram Shetty v. International Airport Authority
of India held: (SCC pp. 385-86, paras 9 & 11)
G The instrumentality of the State which would be 'other
authority' under Article 12 cannot commit breach of a
solemn undertaking to the prejudice of the other party which
acted on that undertaking or promise and put itself in a
disadvantageous position. The appellant Corporation,
H
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 435,
DEVI IS~AT LTD. & ORS. [P. SATHASIVAM, J.]
created 1under the State Financial Corporations Act, falls A
within the expression of 'other authority' in Article 12 and
if it backs out from such a promise, it cannot be said that
the only remedy for the aggrieved party would be suing for
damages for breach and that it could not compel the
Corporation for specific performance of the contract under B
Article 226.
~ 2. The learned counsel appearing for the first respondent,
however, submitted that this Court has taken a different
view in the case of UC of India v. Escorts Ltd wherein this c
Court held: (SCC p. 344, para 102)
"If the action of the State is related to contractual
obligations or obligations arising out of the tort, the court
may not ordinarily examine it unless the action has some
D
public law character attached to it. Broadly 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 E
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 F
the action, the public law or private law character of the
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 . G
shareholder, and dons the robes of a shareholder, with all
the rights available to such a shareholder. There is no
reason why the State as a shareholder should be expected
to state its reasons when it seeks to change the
management, by a resolution of the company, like any H
436 SUPREME COURT REPORTS [201 O] 9 S.C.R.
A other shareholder." (emphasis supplied)
13. We do not think this Court in the above case has, in
any manner, departed from the view expressed in the
earlier judgments in the case cited hereinabove. This Court
B in the case of UC of India proceeded on the facts of that
case and held that a relief by way of a writ petition may
not ordinarily be an appropriate remedy. This judgment
does not lay down that as a rule in matters·of contract the
court's jurisdiction under Article 226 of the Constitution is
c ousted. On the contrary, the use of the words "court may
not ordinarily examine it unless the action has some public
law character attached to it" itself indicates that in a given
case, on the existence of the required factual matrix a
remedy under Article 226 of the Constitution will be
D available. The learned counsel then relied on another
judgment of this Court in the case of State of U.P. v. Bridge
& Roof Co. (India) Ltd wherein this Court held: (SCC p. 31,
para 21)
E Further, the contract in question contains a clause
providing inter alia for settlemerit of disputes by reference
to arbitration. The arbitrators can decide both questions
of fact as well as questions of law. When the contract itself
provides for a mode of settlement of disputes arising from
F the contract, there is no reason why the parties should not
follow and adopt that remedy and invoke the extraordinary
jurisdiction of the High Court under Article 226. The
~xistence of an effective alternative remedy - in this case,
provided in the contract itself - is a good ground for the
G court to decline to exercise its extraordinary jurisdiction
under Article 226.
14. This judgment again, in our opinion, does not help the
first respondent in the argument advanced on its behalf that
in contractual matters remedy under Article 226 of the
H
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 437
DEVI ISPAT LTD. & ORS. [P. SATHASIVAM, J.]
Constitution does not lie. It is seen from the above extract A
that in that case because of an arbitration clause in the
contract, the Court refused to invoke the remedy under
Article 226 of the Constitution. We have specifically
inquired from the parties to the present appeal before us
and we have been told that there is no such arbitration B
clause in the contract in question. It is well known that if
the parties to a dispute had agreed to settle their dispute
by arbitration and if there is an agreement in that regard,
the courts will not permit recourse to any other remedy
without invoking the remedy by way of arbitration, unless C
of course both the parties to the dispute agree on another
mode of dispute resolution. Since that is not the case in
the instant appeal, the observations of this Court in the said
case of Bridge & Roof Co. are of no assistance to the first
respondent in its contention that in contractual matters, writ D
petition is not maintainable.
15. The learned counsel then contending that this Court will
not entertain a writ petition involving disputed questions of
fact relied on a judgment of this Court in the case of State E
of Bihar v. Jain Plastics and Chemicals Ltd wh~rein this
Court held: (SCC p. 218, para 7)
'7. In our view, it is apparent that the order passed by the
High Court is, on the face of it, illegal and erroneous. It F
is true that many matters could be decided after referring
to the contentions raised in the affidavits and counter-
affidavits, but that would hardly be a ground for exercise
of extraordinary jurisdiction under Article 226 of the
Constitution in case of alleged breach of contract. G
Whether the alleged non-supply of road permits by the
appellants would justify breach of contract by the
respondent would depend upon facts and evidence and
is not required to be decided or dealt with in a writ petition.
H
438 SUPREME COURT REPORTS [2010] 9 S.C.R.
A Such seriously disputed questions or rival claims of the
parties with regard to breach of contract are to be
investigated and determined on the basis of evidence
which may be led by the parties in a properly instituted
civil suit rather than by a court exercising prerogative of
B issuing writs."
16. A perusal of this judgment though shows that a writ
petition involving serious disputed questions of facts which
requires consideration of evidence which is not on record,
c will not normally be entertained by a court in the exercise
of its jurisdiction under Article 226 of the Constitution of
India. This decision again, in our opinion, does not lay
down an absolute rule that in all cases involving disputed
questions of fact the parties should be relegated to a civil
D suit. In this view of ours, we are supported by a judgment
of this Court in the case of Gunwant Kaur v. Municipal
Committee, Bhatinda where dealing with such a situation
of disputed questions of fact in a writ petition this Court
held: (SCC p. 774, paras 14-16)
E
"14. The High Court observed that they will not determine
disputed question of fact in a writ petition. But what facts
were in dispute and what were admitted could only be
determined after an affidavit-in-reply was filed by the State.
F The High Court, however, proceeded to dismiss the
petition in limine. The High Court is not deprived of its
jurisdiction to entertain a petition under Article 226 merely
because in considering the petitioner's right to relief
questions of fact may fall to be determined. In a petition
G under Article 226 the High Court has jurisdiction to try
issues both of fact and law. Exercise of the jurisdiction is,
it is true, discretionary, but the discretion must be
exercised on sound judicial principles. When the petition
raises questions of fact of a complex nature, which rnay
H
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 439
DEVI ISPAT LTD. & ORS. [P. SATHASIVAM, J.]
for their determination require oral evidence to pe taken, A
and on that account the High Court is of the view that the
dispute may not appropriately be tried in a writ petition,
the High Court may decline to try a petition·. Rejection of a
petition in limine will normally be justified, where the High
Court is of the view that the petition is frivolous or because B
of the nature of the claim made dispute sought to be
agitated, or that the petition against the party against
whom relief is claimed is not maintainable or that the
dispute raised thereby is such that it would be
inappropriate to try it in the writ jurisdiction, or for C
analogous reasons.
15. From the averments made in the petition filed by the
appellants it is clear that in proof of a large number of
allegations the appellants relied upon documentary D
evidence and the only matter in respect of which conflict
of facts may possibly arise related to the due publication
of the notification under Section 4 by the Collector.
16. In the present case, in our judgment, the High Court E
was not justified in dismissing the petition on the ground
that it will not determine disputed question of fact. The
High Court has jurisdiction to determine questions of fact,
even if they are in dispute and the present, in our
judgment, is a case in which in the interests of both the F
parties the High Court should have entertained the petition
and called for an affidavit-in-reply from the respondents,
and should have proceeded to try the petition instead of
relegating the appellants to a separate suit."
G
17. The above judgment of Gunwant Kaur finds support
from another judgment of this Court in the case of Century
Spg. and Mfg. Co. Ltd. v. Ulhasnagar Municipal Council
wherein this Court held: (SCC p. 587, para 13)
H
440 SUPREME COURT REPORTS [2010] 9 S.C.R.
A "Merely because a question of fact is raised, the High
Court will not qe justified in requiring the party to seek relief
by the somewhat lengthy, dilatory and expensive process
by a civil suit against a public body. The questions of fact
raised by the petition in this case are elementary."
B
18. This observation of the Court was made while negating
a contention advanced on behalf of the respondent
Municipality which contended that the petition filed by the
appellant Company therein apparently raised questions of
c fact which argument of the Municipality was· accepted by
the High Court holding that such disputed questions of fact
cannot be tried in the exercise of the extraordinary
jurisdiction under Article 226 of the Constitution. But this
Court held otherwise.
D
19. Therefore, it is clear from the above enunciation of law
that merely because one of the parties to the litigation
raises a dispute in regard to the facts of the case, the court
entertaining such petition under Article 226 of the
Constitution is not always bound to relegate the parties to
E
a suit. In the above case of Gunwant Kaur this Court even
went to the extent of holding that in a writ petition, if the
facts require, even oral evidence can be taken. This clearly
shows that in an appropriate case, the writ court has the
jurisdiction to entertain a writ petition involving disputed
F
questions of fact and there is no absolute bar for
entertaining a writ petition even if the same arises out of
a contractual obligation and/or involves some disputed
questions of fact."
G After holding so, this Court has concluded as under:
"53. From the above, it is clear that when an instrumentality
of the State acts contrary to public good and public
interest, unfairly, unjustly and unreasonably, in its
H
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 441
DEVI ISPAT LTD. & ORS. [P. SATHASIVAM, J.]
contractual, constitutional or statutory obligations, it really A
acts contrary to the constitutional guarantee found in Artiele
14 of the Constitution. Thus if we apply the above principle
of applicability of Article 14 to the facts of this case, then
we notice that the first respondent being an instrumentality
of the State and a monopoly body had to be approached B
by the appellants by compulsion to cover its export risk.
The policy of insurance covering the risk of the appellants
was issued by the first respondent after seeking all required
information and after receiving huge sums of money as
premium exceeding Rs. 16 lakhs. On facts we have found C
that the terms of the policy do not give room to any
ambiguity as to the risk covered by the first respondent.
We are also of the considered opinion that the liability of
the first respondent under the policy arose when the default
of the exporter occurred and thereafter when the D
Kazakhstan Government failed to fulfil its guarantee. There
is no allegation that the contracts tn question were
obtained either by fraud or by misrepresentation. In such·
factual situation, we are of the. opinion, the facts of this
case do not and should not inhibit the High Court or this E
Court from granting the relief sought for by the petitioner."
14. In a recent decision in Karnataka State Forest
Industries Corporation vs. Indian Rocks, (2009) 1 SCC 150,
while considering the similar issue, S. B. Sinha, J. speaking F
for the Bench reiterated thus:
-
"38. Although ordinarily a superior court in exercise of its
writ jurisdiction would not enforce the terms of a contract
qua contract, it is trite that when an action of the State is G
arbitrary or discriminatory and, thus, violative of Article 14
of the Constitution of India, a writ petition would be
maintainable. (See ABL International Ltd. v. Export Credit
Guarantee Corpn. of India Ltd.)
H \
442 SUPREME COURT REPORTS [2010] 9 S.C.R.
A 39. There cannot be any doubt whatsoever that a writ of
mandamus can be issued only when there exists a legal
right in the writ petition and a corresponding legal duty on
the part of the State, but then if any action on the part of
the State is wholly unfair or arbitrary, the superior courts
B are not powerless."
15. It is clear that, (a) in the contract if there is a clause for
arbitration, normally, writ court should not invoke its jurisdiction;
(b) the existence of effective alternative remedy provided in the
c contract itself is a good ground to decline to exercise its
extraordinary jurisdiction under Art. 226; and (c) if the
instrumentality of the State acts contrary to the public good,
public interest, unfairly, unjustly, unreasonably discriminatory and
violative of Art. 14 of the Constitution of India in its contractual
D or statutory obligation, writ petition would be maintainable.
However, a legal right must exist and corresponding legal duty
on the part of the State and if any action on the part of the State
is wholly unfair or arbitrary, writ courts can exercise their power.
E 16. In the light of the legal position, writ petition is
maintainable even in contractual matters, in the circumstances
mentioned in the earlier paragraphs. In the case on hand, it is
not in dispute that the appellant-Bank, being a public sector
Bank, discharging public functions is "State" under Article 12.
F In view of the settlement of the dues on the date of filing of the
writ petition by arrangement made through another Nationalized
Bank, namely, State Bank of India and the statement of
accounts furnished by the appellant-Bank subsequent to the
same i.e. on 14.05.2009 is 0.00 (nil) outstanding, we hold that
G the High Court was fully justified in issuing a writ of mandamus
for return of its title deeds. In the light of the above conclusion,
we are unable to accept the claim of the appellant-Bank and
on the other hand, we are in entire agreement with the direction
H issued by the learned Single Judge affirmed by the Division
ZONAL MANAGER, CENTRAL BANK OF INDIA v. 443
DEVI !SPAT LTD. & ORS. [P. SATHASIVAM, J.]
Bench. Consequently, the appeal of the Bank is dismissed. The A
appellant-Bank is directed to return the title deeds deposited
. by the respondent-Company within a period of two weeks from
today. With the above direction, the civil appeal is dismissed.
No order as to costs.
B
K.K.T Appeal dismissed.
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Article 226"Sign in to search