Withholding Of Title Deeds Towards Security By PSU Bank Doesn't Involve Any Element Of Public Duty: Kerala High Court

The Bench of Justice P. V. Asha further held that even if the Bank is a public sector bank, demand for processing fee or withholding of title deeds towards security cannot be said to be one involving any element of public duty.

The matter before the Court

In the instant case, the petitioner challenged the demand made by the respondents (IDBI) towards processing fee of an alleged credit facility and also relating to withholding of the title deeds of the properties which were mortgaged/given in security.

A Writ Petition under Article 226 of the Constitution of India was filed seeking the declaration that demand made by the IDBI Bank from the petitioner for payment of an amount of Rs.11,00,000/- towards the alleged processing fee for the return of original property documents belonging to the petitioner, as arbitrary and illegal.

It was prayed that IDBI Bank be directed to return the Petitioner, the original documents in respect of the petitioner's land without insisting on the payment of Rs.11, 00,000/-, to return the Petitioner, the original documents in respect of the Petitioner's office building and to cancel and return to the Petitioner the personal guarantee provided as security for the credit facilities.

Arguments put forth

The petitioner claimed that the respondent Bank comes under the purview of State under Article 12 of the Constitution of India and is hence amenable to writ jurisdiction on the ground that 47.11% of shares are held by the President of India and 51% of the shares are held by the Life Insurance Corporation of India and therefore that would indicate the deep and pervasive control of the Government over the affairs of the respondent.

The respondents, on the other hand, argued that IDBI is not a State or an instrumentality of State or a body which falls within the purview of Article 12 of the Constitution of India.

It was stated that the respondent bank does not perform any public or statutory or sovereign function and hence writ petition isn't maintainable against it.

It was stated that after the majority of its shareholding was divested from the Central Government, it is now categorized as a private sector bank w.e.f 21.01.2019 for regulatory purpose.

Lastly, it was contended that in the absence of any administrative or functional control by the Central Government, it couldn't be said that the respondent bank is a State or an instrumentality of State and therefore not amenable to the writ jurisdiction of this Court.

Court's findings

Importantly, it was held by the Apex Court in the celebrated case of Pradeep Kumar Biswas v. Indian Institute of Chemical Biology [(2002) 5 SCC 111] that in order to arrive at a finding that a body is a State under Article 12, it should be financially, functionally and administratively dominated by or under the pervasive control of the Government.

It was held that when the control is merely regulatory whether under statute or otherwise, it would not serve to make the body a State.

The Court cited the Apex Court's ruling in the case of Federal Bank v. Sagar Thomas (2003)10 SCC 733 wherein it was held that the business of banking does not fall within the expression "public duty" and hence a Writ Petition would not lie under Article 226 of the Constitution of India.

It may further be noted that the Kerala High Court, in its judgment in Sleebachan v. State of Kerala: 2020 (4) KLT online 1024: 2020 (5) KLT SN.11 has held that Bank is not performing any public duty and hence a Writ Petition is not maintainable against it.

The Court in the instant matter also noted,

"Providing of credit facility or providing of loan on the strength of title deeds given in security cannot be said to be done in discharge of any public function, even in a case where it is made by a Public Sector undertaking/Bank and especially when it arises out of contractual transactions entered into between the parties and the bank."

In the above circumstances, the Court came to the conclusion that the Writ Petition was not maintainable under Article 226 of the Constitution of India and thus, the Writ Petition was dismissed.

Case title - Unimoni Financial Services Ltd v. IDBI Bank Limited & Another [WP(C).No.17635 OF 2020(D)]

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