Delhi High Court
Kotak Mahindra Bank Ltd. vs Bank Of Baroda And Anr on 28 January, 2016
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 28th January, 2016.
+ W.P.(C) 9828/2015
KOTAK MAHINDRA BANK LTD. ..... Petitioner
Through: Mr. Sumit Bansal, Mr. Ateev Mathur,
Ms. Richa Oberoi and Mr. A.P.S.
Sehgal, Advs.
Versus
BANK OF BARODA AND ANR ..... Respondents
Through: Ms. Priyadarshini Verma, Adv.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The petition seeks a mandamus to the respondent No.1 Bank of
Baroda (BOB) to release the title documents of property bearing No.KU-62,
Pitampura, Delhi in favour of the petitioner Kotak Mahindra Bank Ltd.
2. Though the petition was listed on three earlier occasions before this
Court and the counsel for the respondent No.1 BOB appeared on advance
notice but was adjourned from time to time on the request of the counsel for
the petitioner Bank and last on the request that the petitioner Bank desires to
move some application. However no application has been filed and the
counsel for the petitioner Bank and the counsel for the respondent No.1 BOB
have been heard.
W.P.(C) No.9828/2015 Page 1 of 18
3. It is the case of the petitioner Bank:
(i) that one M/s Chhavi Textiles of which the respondent No.2 Sh.
Rajat Gulati was / is the sole proprietor was enjoying credit limit from
the respondent No.1 BOB and to secure which had created equitable
mortgage by deposit of title deeds of property No.KU-62, Pitampura,
Delhi;
(ii) that the respondent No.2 Sh. Rajat Gulati approached the
petitioner Bank for an overdraft limit to satisfy the dues of the
respondent No.1 BOB and the petitioner Bank agreed thereto on the
respondent No.2 Sh. Rajat Gulati agreeing to secure the advances of
the petitioner Bank by creating equitable mortgage of his aforesaid
property and the petitioner Bank paid the entire outstanding of the
respondent No.1 BOB from the said M/s Chhavi Textiles / Sh. Rajat
Gulati;
(iii) however, the respondent No.1 BOB notwithstanding having so
closed the credit account of M/s Chhavi Textiles / Sh. Rajat Gulati,
has not released the title documents of the property aforesaid in favour
of the petitioner Bank and which as per the agreement of the petitioner
Bank with the respondent No.2 Sh. Rajat Gulati are to be deposited
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with the petitioner Bank to secure the dues of the petitioner Bank;
(iv) that the respondent No.1 BOB has refused to so release the title
documents (a) on the ground that it has advanced certain monies to
one M/s R.R. Enterprises also and for security of which the respondent
No.2 Sh. Rajat Gulati has given his personal guarantee and since the
said M/s R.R. Enterprises and the respondent No.2 Sh. Rajat Gulati
did not pay the dues of the respondent No.1 BOB, the respondent No.1
BOB approached the Debt Recovery Tribunal (DRT) which has issued
a Recovery Certificate against the respondent No.2 Sh. Rajat Gulati
also; and, (b) claiming a general lien over the subject property for
realisation of the dues crystallised by the DRT.
4. It is the contention of the petitioner Bank that the respondent No.1
BOB has no general lien over the property aforesaid.
5. I have at the outset enquired from the counsel for the petitioner Bank
as to how a writ petition under Article 226 of the Constitution of India is
maintainable for the relief claimed and whether not the dispute if any of the
petitioner Bank with the respondent No.1 BOB is a private lis with no public
law character and for which the appropriate remedy is either by way of
approaching the Banking Ombudsman or by way of a suit or arbitration as
W.P.(C) No.9828/2015 Page 3 of 18
may be applicable.
6. The counsel for the petitioner Bank, post passover sought to cite case
law, has drawn attention to paras 21 and 22 of Kumari Shrilekha Vidyarthi
Vs. State of U.P. (1991) 1 SCC 212 to contend that since the respondent
No.1 BOB is a State within the meaning of Article 12 of the Constitution of
India and its action, of notwithstanding the monies to secure which the title
deeds were kept with it having been repaid not releasing the said title deeds,
is unfair and arbitrary, a writ petition is maintainable.
7. I am unable to accept the proposition that for resolution / adjudication
of all disputes with the State or with an entity which qualifies as a State
within the meaning of Article 12 of the Constitution of India, a petition
under Article 226 is the remedy. The jurisdiction of the High Court under
Article 226 of the Constitution of India is an extraordinary remedy, to be not
invoked or allowed to be invoked ordinarily, as is found being done
increasingly, leaving very little time for the High Courts to deal under
Article 226 with issues really deserving consideration thereunder. Supreme
Court, as far back as in Rashid Ahmed Vs. Municipal Board, Kairana AIR
1950 SC 163 and Nain Sukh Das Vs. The State of Uttar Pradesh AIR 1953
SC 384 held that prerogative writs are extraordinary remedies intended to be
W.P.(C) No.9828/2015 Page 4 of 18
applied in exceptional cases in which the ordinary legal remedies are not
adequate but in the last over half century the said principle appears to have
been forgotten, with the writ remedy being considered as a cure for all
ordinary ailments also and for which the ordinary legal remedies under the
civil law are adequate. The same has resulted in the High Courts being
inundated with writ petitions, the disposal whereof axiomatically is found to
be taking, in most cases, as much time as the disposal of an ordinary civil lis,
and which has resulted in the High Courts facing difficulty in providing
immediate relief even in deserving cases in writ jurisdiction and / or being
left with little time to ponder over the important constitutional issues coming
before it in the writ jurisdiction. In my humble view, a time has thus come
for the High Courts to send out a clear message of the writ remedy being an
extraordinary remedy not available as an alternative to the remedy already
available under the civil and general laws.
8. Supreme Court in Godavari Sugar Mills Ltd. Vs. The State of
Maharashtra (2011) 2 SCC 439, on a conspectus of the earlier dicta in this
regard reiterated, i) normally a petition under Article 226 of the Constitution
of India will not be entertained to enforce a civil liability arising out of a
breach of contract or a tort to pay an amount of money due to the claimants;
W.P.(C) No.9828/2015 Page 5 of 18
the aggrieved party will have to agitate the question in a civil suit; but an
order for payment of money may be made in a writ proceeding, in
enforcement of statutory functions of the State or its officers; ii) only if a
fundamental right or a statutory right has been infringed and the aggrieved
party comes to the Court for enforcement of the right, the writ Court while
declaring the existence of such right or infringement thereof has the power to
give consequential reliefs by ordering payment of money realized by the
Government without the authority of law; iii) a petition for issue of writ of
mandamus will not normally be entertained for the purpose of merely
ordering a refund of money, to the return of which the petitioner claims a
right; the aggrieved party seeking refund has to approach the Civil Court for
claiming the amount, though the High Courts have the power to pass
appropriate orders in the exercise of power under Article 226 for payment of
money; iv) there is a distinction between cases where a claimant approaches
the High Court seeking a relief of obtaining only refund and those where
refund is sought as a consequential relief after striking down the order of
assessment etc.; while a petition praying for mere issue of a writ of
mandamus to the State to refund the money alleged to have been illegally
collected is not ordinarily maintainable, if the allegation is that the
W.P.(C) No.9828/2015 Page 6 of 18
assessment was without a jurisdiction and the taxes collected were without
authority of law, the High Court has the power to direct refund in a writ
petition; v) it is one thing to say that the High Court has no power under
Article 226 to issue a writ of mandamus for making refund of money
illegally collected and yet another thing to say that such power can be
exercised sparingly depending on the facts and circumstances of the cases;
vi) where the lis has a public law character or involves a question arising out
of the public law functions, access to justice by way of a public law remedy
under Article 226 will not be denied.
9. Supreme Court recently in Joshi Technologies International Inc. Vs.
Union of India (2015) 7 SCC 728, on a consideration of the earlier case law
on the subject including Kumari Shrilekha Vidyarthi supra has held that the
writ petition under Article 226 of the Constitution of India would be
maintainable only in the following situations:
"69. Further legal position which emerges from various judgments
of this Court dealing with different situations/aspects relating to the
contracts entered into by the State/public Authority with private
parties, can be summarized as under:
(i) At the stage of entering into a contract, the State acts
purely in its executive capacity and is bound by the
obligations of fairness.
W.P.(C) No.9828/2015 Page 7 of 18
(ii) State in its executive capacity, even in the contractual
field, is under obligation to act fairly and cannot
practice some discriminations.
(iii) Even in cases where question is of choice or
consideration of competing claims before entering
into the field of contract, facts have to be investigated
and found before the question of a violation of Article
14 could arise. If those facts are disputed and require
assessment of evidence the correctness of which can
only be tested satisfactorily by taking detailed
evidence, Involving examination and cross-
examination of witnesses, the case could not be
conveniently or satisfactorily decided in proceedings
Under Article 226 of the Constitution. In such cases
court can direct the aggrieved party to resort to
alternate remedy of civil suit etc.
(iv) Writ jurisdiction of High Court Under Article 226
was not intended to facilitate avoidance of obligation
voluntarily incurred.
(v) Writ petition was not maintainable to avoid
contractual obligation. Occurrence of commercial
difficulty, inconvenience or hardship in performance
of the conditions agreed to in the contract can provide
no justification in not complying with the terms of
contract which the parties had accepted with open
eyes. It cannot ever be that a licensee can work out the
W.P.(C) No.9828/2015 Page 8 of 18
license if he finds it profitable to do so: and he can
challenge the conditions under which he agreed to
take the license, if he finds it commercially
inexpedient to conduct his business.
(vi) Ordinarily, where a breach of contract is complained
of, the party complaining of such breach may sue for
specific performance of the contract, if contract is
capable of being specifically performed. Otherwise,
the party may sue for damages.
(vii) Writ can be issued where there is executive action
unsupported by law or even in respect of a
corporation there is denial of equality before law or
equal protection of law or if can be shown that action
of the public authorities was without giving any
hearing and violation of principles of natural justice
after holding that action could not have been taken
without observing principles of natural justice.
(viii) If the contract between private party and the
State/instrumentality and/or agency of State is under
the realm of a private law and there is no element of
public law, the normal course for the aggrieved
party, is to invoke the remedies provided under
ordinary civil law rather than approaching the High
Court Under Article 226 of the Constitutional of
India and invoking its extraordinary jurisdiction.
(ix) The distinction between public law and private law
W.P.(C) No.9828/2015 Page 9 of 18
element in the contract with State is getting blurred.
However, it has not been totally obliterated and where
the matter falls purely in private field of contract. This
Court has maintained the position that writ petition is
not maintainable. Dichotomy between public law and
private law, rights and remedies would depend on the
factual matrix of each case and the distinction
between public law remedies and private law, field
cannot be demarcated with precision. In fact, each
case has to be examined, on its facts whether the
contractual relations between the parties bear
insignia of public element. Once on the facts of a
particular case it is found that nature of the activity
or controversy involves public law element, then the
matter can be examined by the High Court in writ
petitions Under Article 226 of the Constitution of
India to see whether action of the State and/or
instrumentality or agency of the State is fair, just
and equitable or that relevant factors are taken into
consideration and irrelevant factors have not gone
into the decision making process or that the decision
is not arbitrary.
(x) Mere reasonable or legitimate expectation of a citizen,
in such a situation, may not by itself be a distinct
enforceable right, but failure to consider and give due
weight to it may render the decision arbitrary, and
W.P.(C) No.9828/2015 Page 10 of 18
this is how the requirements of due consideration of a
legitimate expectation forms part of the principle of
non-arbitrariness.
(xi) The scope of judicial review in respect of disputes
falling within the domain of contractual obligations
may be more limited and in doubtful cases the parties
may be relegated to adjudication of their rights by
resort to remedies provided for adjudication of purely
contractual disputes".
(emphasis added)
10. The counsel for the respondent No.1 BOB appearing on advance
notice has also contended that the petitioner Bank, on the same grounds as
urged before this Court had filed I.A. No.741/2015 for impleadment before
DRT-III before which O.A. No.206/2012 filed by the respondent No.1 BOB
with respect to the dues of M/s R.R. Enterprises was pending, but had after
some hearing withdrawn the said application with a liberty to file a separate
O.A. before the DRT. She, for this reason also contends that the writ remedy
is not available to the petitioner Bank.
11. The counsel for the petitioner Bank rejoins that though the application
aforesaid was withdrawn with liberty to file O.A. but no O.A. lies before the
DRT for the claim, as is made in this petition. He has further contended that
W.P.(C) No.9828/2015 Page 11 of 18
though it was the claim of the respondent No.1 BOB in O.A. No.206/2012
that it is entitled to recover its dues by sale of the subject property also but in
the final order dated 2nd June, 2015 therein the said contention has not been
accepted and the respondent No.1 BOB has been permitted to recover its
dues from sale of the properties mortgaged to secure those dues and which
do not include the subject property. He has also contended that the
respondent No.2 Sh. Rajat Gulati does not appear to have given a personal
guarantee for the dues of M/s R.R. Enterprises and had only mortgaged two
of his other properties.
12. The counsel for the respondent No.1 BOB controverts that the
respondent No.2 Sh. Rajat Gulati had not given the personal guarantee.
13. I tend to agree with the contention of the counsel for the respondent
No.1 BOB; unless the respondent No.2 Sh. Rajat Gulati had given his
personal guarantee for the dues of M/s R.R. Enterprises, the DRT would not
have issued Recovery Certificate against the respondent No.2 Sh. Rajat
Gulati also, as is shown to have been issued in the order aforesaid of the
DRT. Once the Recovery Certificate has been issued against the respondent
No.2 Sh. Rajat Gulati, the respondent No.1 BOB would in law be entitled to
recover the monies from sale also of his property not mortgaged with the
W.P.(C) No.9828/2015 Page 12 of 18
respondent No.1 BOB.
14. The counsel for the petitioner Bank has also drawn attention to the
letter dated 22nd February, 2013 issued by the respondent No.1 BOB to M/s
Chhavi Textiles / Sh. Rajat Gulati confirming that the documents of title of
the subject property were lying deposited with it by way of equitable
mortgage for availing of CC limits for the said M/s Chhavi Textiles / Sh.
Rajat Gulati. Therefrom, it is contended that the respondent No.1 BOB at
that stage did not claim a general lien over the said documents / property as
is now being claimed for the dues of M/s R.R. Enterprises.
15. However the said letter dated 22nd February, 2013 is shown to have
been written in response to the letter dated 22 nd February, 2013 of M/s
Chhavi Textiles / Sh. Rajat Gulati and which letter is not available. It is
quite probable that M/s Chhavi Textiles / Sh. Rajat Gulati vide their letter of
22nd February, 2013, on the spot requested the respondent No.1 BOB to
confirm that the said documents were lying deposited with it and the
language used in the subject letter was in pursuance thereto. In any case,
from the said letter it is not evident that the respondent No.1 BOB is
precluded for claiming any other right with respect to the documents lying
deposited with it.
W.P.(C) No.9828/2015 Page 13 of 18
16. The counsel for the petitioner Bank has also drawn attention to the
letter dated 25th February, 2013 of M/s Chhavi Textiles / Sh. Rajat Gulati to
the respondent No.1 BOB intimating that they had availed of overdraft
facility from the petitioner Bank and the petitioner Bank would be clearing
the dues of the respondent No.1 BOB. It is contended that the respondent
No.1 BOB at that time also did not say that it would not be releasing the title
documents even inspite of payment of all the dues of M/s Chhavi Textiles.
17. The counsel for the respondent No.1 BOB has on the contrary
contended that the petitioner Bank did not approach the respondent No.1
BOB at any point of time or before releasing monies, asking for a 'No
Objection Certificate' of the respondent No.1 BOB and if had so approached,
would have been informed of the general lien claimed by the respondent
No.1 BOB over the property aforesaid.
18. I have tested the maintainability of the writ petition in the light of
aforesaid principles and contentions.
19. The counsel for petitioner Bank inspite of asking has not shown any
duty or obligation owed by respondent No.1 BOB to, in the facts aforesaid,
release the title documents in favour of petitioner. No Circular / Guideline
of Reserve Bank of India in this regard is shown.
W.P.(C) No.9828/2015 Page 14 of 18
20. It is also not the case of the petitioner Bank that it has any privity of
contract with the respondent No.1 BOB or that the respondent No.1 BOB
had made any representation or promise to the petitioner Bank on which the
petitioner Bank acted.
21. In this scenario, the right if any of petitioner Bank against the
respondent No.1 BOB or the cause of action, essential for filing writ petition
also, is highly doubtful. The right if any to get back the title documents from
respondent No.1 BOB is of respondent No.2 Sh. Rajat Gulati, who evidently
has not exercised the same, perhaps finding himself not entitled thereto.
22. The reason given by respondent No.1 BOB for not releasing the title
deeds, of having a general lien thereover, is not such which can be called as
totally unfair or mala fide or preposterous or arbitrary or not expected of a
public sector bank as respondent No.1 BOB is. Supreme Court in Syndicate
Bank Vs. Vijay Kumar (1992) 2 SCC 331 held that by mercantile system a
Bank has a general lien over all forms of securities or negotiable instruments
deposited by or on behalf of the customer in the ordinary course of banking
business and that the general lien is a valuable right of the banker judicially
recognised and in the absence of an agreement to the contrary, a banker has a
general lien over such securities or bills received from a customer in the
W.P.(C) No.9828/2015 Page 15 of 18
ordinary course of banking business and has a right to use the proceeds in
respect of any balance that may be due from the customer by way of
reduction of customer's debit balance. The respondent No.1 BOB, as a
custodian of public monies, is found to be fully justified in claiming general
lien over a property of the respondent No.2 Sh. Rajat Gulati against whom it
holds a Recovery Certificate.
23. Rather, it is found that the petitioner Bank did not take due care for
securing the advance made by it to the respondent No.2 Sh. Rajat Gulati and
acted in haste in lending monies to him by payment of his dues to the
respondent No.1 BOB without even making any enquiry from the respondent
No.1 BOB, whether on such re-payment, the respondent No.1 BOB was
willing to deliver title deed lying deposited with it to the petitioner Bank.
The petitioner Bank is found to be now asserting its claim thereto, as made in
this petition, to get over its default. The petitioner Bank having voluntarily
incurred such liability cannot be permitted to redeem itself at the cost and to
the detriment of the respondent No.1 BOB.
24. In any case, the claim even if any of the petitioner Bank against the
respondent No.1 BOB is not such which is free of factual disputes and for
which reason also the writ remedy invoked is not the appropriate remedy.
W.P.(C) No.9828/2015 Page 16 of 18
Also, the petitioner Bank has utterly failed to show any public law character
in the dispute, to be able to maintain a writ petition under Article 226 of the
Constitution of India for adjudication thereof. As aforesaid, the situation in
which the petitioner Bank is, is of its own creation and at best in the nature
of a private dispute between the two Banks, not calling for any adjudication
under the public law remedy mechanism.
25. I say so also because the adjudication may also entail that if both the
Banks are at fault, which of them should suffer. The rule of equity
formulated in this regard in Lickbarrow Vs. Mason (1787) 102 E.R. 1192
and recognized by the Supreme Court in The New Marine Coal Co.
(Bengal) Private Ltd. Vs. Union of India AIR 1964 SC 152 and
Bhagwandas Goverdhandas Kedia Vs. Girdharilal Parshottamdas and Co.
AIR 1966 SC 543 is that whenever one of two innocent parties must suffer
by the act of third, he who has enabled such person to occasion the loss must
sustain it. Another guiding mechanism in this regard is, in pari delicto
potior est conditio defendants i.e. where both the parties are equally at fault,
the position of the defendant is stronger.
26. I therefore find the petition to be not maintainable.
27. Dismissed.
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28. It is however clarified that any of the observations herein would not
come in the way of the Suit Court or any other appropriate authority which
may be approached by the petitioner Bank, on going through all the
documents and material and evidence, returning an independent finding.
29. It is further clarified that this order shall also not come in the way of
the petitioner Bank taking its remedy against the order dated 15th May, 2015
supra of the DRT rejecting its application for impleadment in O.A.
No.206/2012 or availing of appeal against the final order dated 2 nd June,
2015 supra of the DRT.
30. It is yet further clarified that the petitioner Bank shall be entitled to,
before the Debt Recovery Appellate Tribunal (DRAT), seek exclusion of the
time expended in this petition.
No costs.
RAJIV SAHAI ENDLAW, J.
JANUARY 28, 2016 Bs..
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