Karnataka High Court
Smt B S Prema vs M/S Citi Bank N A on 3 November, 2020
Author: P.B.Bajanthri
Bench: P.B.Bajanthri
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 03RD DAY OF NOVEMBER, 2020
BEFORE
THE HON'BLE MR.JUSTICE P.B.BAJANTHRI
WRIT PETITION No.26425/2015 (GM-RES)
BETWEEN
SMT B S PREMA
W/O SRI. P. SOORAJ
AGED ABOUT 35 YEARS
R.AT NO.101-A,
FIRST FLOOR, SHALIMAR AVENUE
DINNUR MAIN ROAD,
R.T.NAGAR POST
BANGALORE-32.
...PETITIONER
(BY SRI SHIVAPRASAD D P, ADV. - ABSENT)
AND
1. M/S CITI BANK. N.A.,
OFFICE AT 9TH FLOOR,
A.R. FOUNDATION,
ACROPOLIS, NO.148,
DR. RADHA KRISHNAN SALAI,
MYLAPORE, CHENNAI-600004
2. THE AUTHORISED OFFICER/
CHIEF MANAGER
M/S CITI BANK
HAVING OFFICE AT NO.91,
PRESTIGE SOUTHEND,
2ND FLOOR, SOUTHEND ROAD,
JAYANAGAR, BANGALORE-04
3. SRI.ANIL K. SACHAR
S/O RAJKUMAR SACHAR
AGED ABOUT 50 YEARS
2
R/AT BANJAR SUMMIT APARTMENTS,
NO.104/A, 1ST FLOOR,
NO.2, WHEELER ROAD,
FRASER TOWN,
BANGALORE-05.
...RESPONDENTS
(BY SRI MANJUNATH B S, ADV. FOR R1 & R2 -ABSENT,
R3 SERVED BUT UNREPRESENTED.)
THIS WP IS FILED UNDER ARTICLES 226 & 227 OF THE
CONSTITUTION OF INDIA, PRAYING TO QUASH THE
POSSESSION NOTICE DATED 28.2.2015 ISSUED BY THE R-1
AND 2 VIDE ANN-A WHICH IS NOT IN ACCORDANCE WITH
LAW ETC.
THIS WP COMING ON FOR "PRELIMINARY HEARING 'B'
GROUP" THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
On 20.10.2020 the following order was passed.
"None appears for the petitioner. On perusal of the records, it is evident that writ petition is not maintainable against the respondent-M/s. City Bank. Further, petitioner has remedy under SARFAESI Act, 2002.
In order to give one opportunity, re-list this matter on 03-11-2020.
If there is no representation on the fixed date, writ petition would be dismissed in terms of the aforesaid issue."
2. Today also none appears. Consequently, the matter is taken up for final disposal. In the present petition, the petitioner has prayed for the following reliefs:-
3"(A) Issue a Writ in the nature of certiorari or any other appropriate writ or order and quash the Possession Notice dated 28.02.2015 issued by the Respondents no 1 and 2 (Annexure :
"A") which is not in accordance with law.
(B) Stay all proceedings thereto by the respondent no.1 and 2 including alleged possession notice (C) Issue any other Writ, order or direction that this Hon'ble Court deems fit in the circumstances of the case and in the ends of justice."
3. The petitioner's grievance is against M/s. Citi Bank which is a private financial institution and it would not fall under definition of Article 12 of Constitution. In view of the Full Bench decision of this Court in the case of K.V.Panduranga Rao Vs. Karnataka Dairy Development Corporation, Bangalore and others reported in 1994 (1) KLJ 149, elaborately discussed while interpretating respondent-Corporation would fall under definition of Article 12 of the Constitution or not? in paragraphs 12 to 22. Paragraphs 12 to 22 reads as under:-
"12. The question for consideration is having regard to the aforesaid factors, the Federation can be said to be an instrumentality or agency of the State and therefore an authority answering the definition of 'State' occurring in Article 12.4
13. Learned counsel appearing for the appellant and the respondents relied on several decisions of the Supreme Court to indicate the tests to determine when an entity can be said to fall under the word 'other authorities' and thus 'State' occurring in Article 12. The earlier cases, namely the decisions of Sabhajit Tewari v. Union of India2, Sukhdeu Singh v. Bhagatram3, Ramana Dayaram Shetty v. The International Airport Authority4 and U.P. Warehousing Corporation v. Vijay Narayan Vajpayee5, were considered by a Constitution Bench of the Supreme Court in the case of Ajay Hasia v. Khalid Mujib Sehravardi6. In that case, the question that arose for consideration was whether the Regional Engineering College, Srinagar, which was sponsored by the Government of India and established and managed by a Society registered under the Societies Registration Act, was an 'authority' falling within the definition of 'State' in Article 12. The Supreme Court culled out and summarised the several relevant tests from the earlier decisions, in particular from the decision in International Air Port Authority case, to determine as to when an entity can be said to be an instrumentality or agency of Government. The tests are:
(a) Whether the entire share capital of the Corporation is held by Government. If so, it would go a long way towards indicating that the Corporation is an instrumentality or agency of the State Government;
(b) Whether the financial assistance of the State to the Corporation is so much as to meet almost the entire expenditure of the corporation. If so, it would afford some indication of the Corporation being impregnated with Governmental character;5
(c) Whether the Corporation enjoys monopoly status, which is State conferred or state protected;
(d) Whether there is a deep and pervasive State control. If so it indicates that the Corporation is a State agency or instrumentality;
(e) Whether the functions of the Corporations are of public importance and closely related to Governmental functions;
(f) Whether any department or unit of the Government is specifically transferred to the Corporation;
(g) Whether any statutory duties are imposed upon the Corporation.
14. The Supreme Court pointed out that these tests were neither conclusive nor clinching, but are merely indicative indicia which have to be used with care and caution. The court cautioned that while stressing the necessity of a wide meaning to be placed on the expression "other authorities", it must be realised that it should not be stretched so far as to bring in every autonomous body which has some nexus with the Government within the sweep of the expression. Thereafter the court proceeded to consider the question whether Corporate Bodies create under a Statute and not by a statute, could be considered as 'State' and held as follows:
"We may point out that it is immaterial for this purpose whether the corporation is created by a statute or under a statute. The test is whether it is an instrumentality or agency of the Government and not as to how it is created. The inquiry has to be not as how the juristic person is born but why it has been 6 brought into existence. The Corporation may be a statutory Corporation created by a statute or it may be a Government company or a company formed under the Companies Act, 1956, or it may be a Society registered under the Societies Registration Act, 1860 or any other similar statute. Whatever be its genetical origin, it would be an 'authority' within the meaning of Article 12 if it is an instrumentality or agency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression 'authority' in Article
12."
15. The Supreme Court then added that a juristic entity which may be an 'authority' and therefore 'State' under Article 12 may not be 'State' for the purpose of Articles 309, 310 and 311. In the light of the aforesaid principles and tests the Supreme Court proceeded to consider whether the Regional Engineering College, Srinagar was 'State' under Article 12 and answered the question in the affirmative in the following manner:
"It is in the light of this discussion that we must now proceed to examine whether the Society in the present case is an 'authority' falling within the definition of State in Article
12. Is it an Instrumentality or agency of the Government? The answer must obviously be in 7 the affirmative if we have regard to the Memorandum of Association and the Rules of the Society. The composition of the Society is dominated by the representatives appointed by the Central Government and the Governments of Jammu and Kashmir, Punjab, Rajasthan and Uttar Pradesh with the approval of the Central Government. The monies required for running the college are provided entirely by the Central Government and the Government of Jammu and Kashmir and even if any other monies are to be received by the Society, it can be done only with the approval of the State and the Central Governments. The Rules to be made by the Society are also required to have the prior approval of the State and the Central Governments and the accounts of the Society have also to be submitted to both the Governments for their scrutiny and satisfaction, the Society is also to comply with all such directions as may be issued by the State Government with the approval of the Central Government in respect of any matters dealt with in the report of the Reviewing Committee. The control of the State and the Central Governments is indeed so deep and pervasive that no immovable property of the Society can be disposed of in any manner without the approval of both the Governments. The State and the Central Governments have even the power to appoint any other person or persons to be members of the Society and any member of the Society other than a member representing the State or Central Government can be removed from the membership of the Society by the State Government with the 8 approval of the Central Government. The Board of Governors, which is in-charge of general superintendence, direction and control of the affairs of Society and of its income and property is also largely controlled by nominees of the State and the Central Governments. It will thus be seen that the State Government and by reason of the provision for approval, the Central Government also, have full control of the working of the Society and it would be incorrect to say that the Society is merely a projection of the State and the Central Governments and to use the words of Ray, C.J. in Sukhdev Singh's case,7 supra the voice is that of the State and the Central Governments and the hands are also of the State and the Central Governments. We must, therefore, hold that 'the Society is an instrumentality or the agency of the State and the Central Governments and it is an 'authority' within the meaning of Article 12."
16. In Somprakash Rekhi v. Union of India8, Krishna Iyer, J. after referring to Sukhdeu's case and Airport Authority's case held that the preponderant Considerations for pronouncing an entity as State agency or instrumentality are (a) financial resources of the State being the chief funding source;
(b) financial character being Governmental in essence;
(c) Plenary control residing in Government; (d) prior history of the same activity having been carried on by Government and made over to the new entity; and (e) some element of authority or command.
17. In P.K. Ramachandra Iyer v. Union of India9, the Supreme Court considered whether Indian Council of Agriculture Research (ICAR) which was a society registered under the Societies Registration Act, an instrumentality of the State. It was found that ICAR 9 came into existence as a department of the Government and continued to be an attached office and in almost inseparable adjunct of the Government; that though it had an outward form of being a Society, it could be styled as a Society set up by the State; that it was wholly financed by the Government of India; that its object was agricultural research, for development of agriculture, which was a responsibility of the Government; that Government of India transferred the Research institutes set up by it to ICAR; that the control of Government of India permeated through all its activities. Applying the principles laid down in International Airport Authority's case and Ajay Hasia's case, ICAR was held to be an instrumentality of the State.
18. In two subsequent decisions the Supreme Court cautioned that mere Governmental control is not sufficient to hold that a Corporation created by or under a statute will be an instrumentality of the State; but it is further necessary to show that either Governmental business had been undertaken by the entity or what was expected to be public obligation of the 'State' should be undertaken to be performed as a part of the entity's function. Tekraj Vasandi v. Union of India and Chander Mohan Khanna v. N.C.E.R.T.
19. In Tekraj Vasandi's case the question that arose for consideration was whether the Institute of Constitutional and Parliamentary Studies (ICPS), a Society registered under the Societies Registration Act was an instrumentality of the State. After referring to the gamut of earlier decisions on the subject and the tests laid down to find out whether an entity is an instrumentality of the State, the Supreme Court observed:
"It is time to turn to the facts of the present case to find out as to what the conclusion 10 should be when the tests formulated by the several cases of this court referred to above are applied. There cannot indeed be a strait jacket formula. It is not necessary that all the tests should be satisfied, for reaching the conclusion either for or against holding an institution to be 'State'. In a given case some of the features may emerge so boldly and prominently that a second view may not be possible. There may yet be other cases where the matter would be on the border line and it would be difficult to take one view or the other outright."
xxxxxx.
"The objects of the Society were not governmental business but were certainly the aspects which were expected to equip Members of Parliament and the State Legislatures with the requisite knowledge and experience for better functioning. Many of the objects adopted by the Society were not confined to the two Houses of Parliament and were intended to have an impact on Society at large."
xxxxxx.
"We have several cases of societies registered under Societies Registration Act which have been treated as 'State' but in each of those cases it would appear on analysis that entire governmental business had been undertaken by the Society or what was expected to be public obligation of the 'State' had been undertaken to be performed as a part of the Society's function. In a Welfare State, as has been pointed out on more than one occasion by this court, Governmental control is very pervasive and in fact touches all aspects of 11 social existence. In the absence of a fair application of the tests to be made, there is possibility of turning every non-governmental society into an agency or instrumentality of the State. That obviously should not serve the purpose and may be far from reality. A broad picture of the matter has to be taken and a discerning mind has to be applied keeping the realities and human experiences in view so as to reach a reasonable conclusion. Having given our anxious consideration to the facts of the case, we are not in a position to hold that ICPS is either an agency or instrumentality of the State so as to come within the purview of 'other authorities' in Article 12 of the Constitution. We must say that ICPS is a case of its type -- typical in many ways and the normal tests may perhaps not properly apply to test its character."
20. In Chander Mohan Khanna's case, the Supreme Court considered whether the National Council of Educational Research and Training (NCERT) a Society registered under the Societies Registration Act was an instrumentality of State. The court held that NCERT did not satisfy the requirements of 'State' under Article 12 and was merely an autonomous body. The relevant portions of the judgment are extracted below:
"Article 12 should not be stretched so as to bring in every autonomous body which has some nexus with the Government within the sweep of the expression 'State'. A wide enlargement of the meaning must be tempered by a wise limitation. It must not be lost sight of that in the modern concept of Welfare State, independent institution, corporation and agency are generally subject to State Control. The State control does not render such bodies 12 as 'State' under Article 12. The State Control, however vast and pervasive, is not determinative. The financial contribution by the State is also not conclusive. The combination of State aid coupled with an unusual degree of control over the management and policies of the body, and rendering of an important public service being the obligatory functions of the State may largely point out that the body is 'State'. If the Government operates behind a corporate veil, carrying out governmental activity and governmental functions of vital public importance, there may be little difficulty in identifying the body as 'State' within the meaning of Article 12 of the Constitution."
xxxxxx.
"The object of the NCERT as seen from the above analysis is to assist the advice the Ministry of Education of Social Welfare in the implementation of the Governmental policies and major programmes in the field of education particularly school education. The NCERT undertakes several kinds of programmes and activities connected with the co-ordination of research extension services and training, dissemination of improved educational programmes. It also undertakes preparation and publication of books, materials, periodicals and other literature. These activities are not wholly related to governmental functions. The affairs of the NCERT are conducted by the Executive Committee comprising of Government servants and educationists. The Executive Committee would enter into arrangements with Government, public or private organisations or individuals in furtherance of the objectives for 13 implementation of programmes. The funds or NCERT consist of: (i) grants made by the Government, (ii) contribution from other sources, and (iii) income from its own assets. It is free to apply its income and property towards the promotion of its objectives and implementation of the programmes. The Government control is confined only to the proper utilisation of the grant. The NCERT is thus largely an autonomous body."
21. Reference may also be made to a Full Bench decision of this court in Rudrappa v. State of Karnataka12, wherein this court considered the question whether a Primary Co-operative Agricultural and Rural Development Bank governed by Chapter XI of the Karnataka Co-operative Societies Act, 1959, is 'State' under Article 12. This court held that as the funds used by such Bank are Governmental funds, and as the Bank discharges governmental functions for the benefit of the Society and is thus an instrumentality through which the developmental activities are sought to be accelerated and as substantial control of the Bank vests in the State Government or its Officers, such a Bank is 'State' under Article 12.
22. Applying these aforesaid principles, let us consider the position of the Federation. It is true that the entire share capital is not met by the State Government; that the membership is open not only to the State and Central Governments, but also to the Co- operative Milk Producers' Unions; that provision is made for obtaining finances from sources other than the Government; that the power of management lies in a Board which consists not only the Government nominees and officers, but Chairman of affiliated Milk Producers' Unions; and that provision is made for distribution of profits among the members, by way of 14 dividend on the paid up share capital. But these answers in the negative, to some of the tests do not mean that the federation is not 'State'. It is not necessary that all the tests laid down by the Supreme Court should be satisfied to reach the conclusion as to whether a given entity is a State."
4. The Hon'ble Apex court in the following three decisions hold that the writ petition is not maintainable in so far as remedy under SARFAESI Act, 2002.
"(ii) United Bank of India Vs. Satyawati Tondon and Ors reported in (2010) 8 SCC 110 and the relevant para No.45 reads as under:
45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.
(ii) Authorized Officer, State Bank of Travancore and Ors Vs. Mathews K.C. and the relevant para Nos.11 and 17 reads under:
11. In Satyawati Tandon (supra), the High Court had restrained further proceedings Under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under the SARFAESI Act, the availability of remedy to the aggrieved Under Section 17 before the Tribunal and the appellate remedy Under Section 18 before the Appellate Tribunal, the object and purpose of the legislation, it was observed that a writ petition ought not to be entertained in view of the alternate statutory remedy available holding:
43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not 15 entertain a petition Under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this Rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions.
In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves in as much as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi- judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy Under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction Under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.
17. The writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the Appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. The opinion of the Division Bench that the counter affidavit having subsequently been filed, stay/modification could be sought of the interim order cannot be considered sufficient justification to have declined interference.
16(iii) ICICI Bank Ltd., Etc. Vs. Umakanta Mohapatra Etc. in Civil Appeal Nos.10243-10250/2018."
On these two counts, the petitioner has not made out a case so as to entertain the present writ petition. Apex Court in the case of Radhey Sham and Another vs. Chhabi Nath, (2015) 5 SCC 423 held writ does not lie against a private person not discharging any public duty. Even on this principle writ is not maintainable. Accordingly, writ petition stands dismissed reserving liberty to the petitioner to approach appropriate forum. In the event of petitioner approaching the jurisdictional forum, in such an event, time spent in the present petition, be taken note of for the purposes of condonation of delay in approaching the forum.
Accordingly, the petition stands dismissed.
Sd/-
JUDGE Chs CT-HR