Art. 226 | Writ Petition Not Maintainable Against NBFC; Private Company's Banking Business Not 'Public Function' : Supreme Court

The Supreme Court recently stated that an entity being subject to regulatory guidelines under a statute does not automatically make it subject to Writ Jurisdiction. Instead, Writ Jurisdiction applies only when it can be demonstrated that the entity is performing a public duty or function concerning its responsibilities. A bench of Justice JB Pardiwala and Justice R Mahadevan summed up the principles regarding the maintainability of the Writ Petition in the following points: (1) For issuing writ against a legal entity, it would have to be an instrumentality or agency of a State or should have been entrusted with such functions as are Governmental or closely associated therewith by being of public importance or being fundamental to the life of the people and hence Governmental. (2) A writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State Government; (ii) Authority; (iii) a statutory body; (iv) an instrumentality or agency of the State; (v) a company which is financed and owned by the State; (vi) a private body run substantially on State funding; (vii) a private body discharging public duty or positive obligation of public nature; and (viii) a person or a body under liability to discharge any function under any Statute, to compel it to perform such a statutory function. (3) Although a non-banking finance company like the Muthoot Finance Ltd. with which we are concerned is duty bound to follow and abide by the guidelines provided by the Reserve Bank of India for smooth conduct of its affairs in carrying on its business, yet those are of regulatory measures to keep a check and provide guideline and not a participatory dominance or control over the affairs of the company. (4) A private company carrying on banking business as a Scheduled bank cannot be termed as a company carrying on any public function or public duty. (5) Normally, mandamus is issued to a public body or authority to compel it to perform some public duty cast upon it by some statute or statutory rule. In exceptional cases a writ of mandamus or a writ in the nature of mandamus may issue to a private body, but only where a public duty is cast upon such private body by a statute or statutory rule and only to compel such body to perform its public duty. (6) Merely because a statue or a rule having the force of a statute requires a company or some other body to do a particular thing, it does not possess the attribute of a statutory body. (7) If a private body is discharging a public function and the denial of any rights is in connection with the public duty imposed on such body, the public law remedy can be enforced. The duty cast on the public body may be either statutory or otherwise and the source of such power is immaterial but, nevertheless, there must be the public law element in such action. (8) According to Halsbury's Laws of England, 3rd Ed. Vol.30, 12 p.682, “a public authority is a body not necessarily a county council, municipal corporation or other local authority which has public statutory duties to perform, and which perform the duties and carries out its transactions for the benefit of the public and not for private profit”. There cannot be any general definition of public authority or public action. The facts of each case decide the point.Background The bench was hearing an appeal filed against the Karnataka High Court's decision dismissing the Appellant's Writ Petition against the Respondent-Muthoot Finance Ltd. holding that it is not a “State” within the meaning of Article 12 of the Constitution and therefore not amenable to writ jurisdiction of the High Court under Article 226 of Constitution. The Appellant challenged the High Court's decision, arguing that although the Respondent, a Finance Company, may not qualify as a 'State,' it is governed by RBI regulations. Therefore, if a non-banking financial company breaches these rules, it should be subject to writ jurisdiction as a statutory authority. The Court rejected the Appellant's argument and upheld the High Court's decision, stating that the entity's function is the key test for determining writ jurisdiction. An entity can only be subject to writ jurisdiction if it performs a public function or involves a public duty in its functions. “A body, public or private, should not be categorized as “amenable” or “not amenable” to writ jurisdiction. The most important and vital consideration should be the “function” test as regards the maintainability of a writ application. If a public duty or public function is involved, any body, public or private, concerned or connection with that duty or function, and limited to that, would be subject to judicial scrutiny under the extraordinary writ jurisdiction of Article 226 of the Constitution of India.”, the court observed. Applying the 'function test,' the Court observed that since the Respondent had a duty only towards its account holders and not the public, it could not be...

Art. 226 | Writ Petition Not Maintainable Against NBFC; Private Company's Banking Business Not 'Public Function' : Supreme Court

Yash Mittal

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Art. 226 | Writ Petition Not Maintainable Against NBFC; Private Company's Banking Business Not 'Public Function' : Supreme Court

Yash Mittal

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