RBI Is 'State' Under Article 12; Private Banks Discharging Public Functions Amenable To Writ Jurisdiction: Calcutta High Court

The Calcutta High Court has held that th Reserve Bank of India (RBI) is "State" under Article 12 of the Constitution and thus, a writ petition is maintainable against it. The judgment delivered by a Single Bench of Justice Sabyasachi Bhattacharyya further states that even private banks cannot seek refuge of being non-State actors, for the purpose of challenging maintainability of a writ petition against them, as their functions pertain to discharge of public duties. The Single Bench ruled, "Since the Reserve Bank of India is an instrumentality of the State, it comes squarely within the meaning of "State" as contemplated in Article 12 of the Constitution. Thus, the writ petition is maintainable." It added, "the functions discharged by the respondent no.4-Bank [IndusInd Bank] are of a public nature and, as such, pertain to the discharge of public duties." The Bench refused to apply the principle laid down by the Supreme Court in Federal Bank Limited v. Sagar Thomas & Ors., (2003) 10 SCC 733, that a writ petition under Article 226 of the Constitution is not maintainable against private banks. The instant case pertained to a dispute between the Petitioner, a MSME and the IndusInd Bank with respect to refund of processing fee paid by the former, to the latter, pursuant to a prospective loan facility. As per the Petitioner, the Bank had assured that in case by any reason the sanction did not go through from its end, it would refund the fee. However, when the Petitioner sought refund of the processing fees against delay and non-receipt of final sanction letter, the Bank claimed that the processing fee was non-refundable. Subsequently, the RBI also intimated the petitioner that as per its understanding, the processing fees were non-refundable. It is against this communication that the Petitioner had approached the High Court. At the outset, the Bench observed that the question raised by the Petitioner in the present writ petition is not restricted to the grievance of the petitioner solely, but also has a wider connotation insofar as the liabilities of banks in respect of refund of processing fees is concerned. On a perusal of the entire material on record, the Bench same to a finding that the IndusInd Bank, while discharging its public duty which is within the domain of the State to discharge, acted de hors its own promise of refund on which the petitioner had acted. It thus held that such actions on part of the Bank debars it by the principle of estoppel from refusing to refund the processing fees. It observed, "The Bank cannot now resile from its stand, which is revealed from a conjoint reading of the in-principle sanction letter and the e-mail asking for processing fees, that the entire processing fees would be refunded in the event the sanction did not go through from the end of the respondent no.4-Bank "by any reason"." Significantly, the Allahabad High Court has taken a contrary view in its previous judgments by relying on the case of Federal Bank (supra). Read the Allahabad High Court ruling here: Private Financial Institutions May Be Performing Public Duties But Can't Be Considered 'State' Under Article 12 Of Constitution: Allahabad High Court Case Title: M/s Pearson Drums & Barrels Pvt. Ltd. v. General Manager, Consumer Education & Protection Cell of Reserve Bank of India & Ors. Click Here To Download Order Read Order

RBI Is 'State' Under Article 12; Private Banks Discharging Public Functions Amenable To Writ Jurisdiction: Calcutta High Court

Akshita Saxena

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