LexINDIAN BANK versus GODHARA NAGRIK COOPERATIVE CREDIT SOCIETY LTD. AND ANOTHER
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A B (2008] 9 S.C.R. 450 INDIAN BANK v. GODHARA NAGRIK COOPERATIVE CREDIT SOCIETY LTD. AND ANOTHER (Civil Appeal No. 3303 of 2005) MAY 16, 2008 [S.B. SINHA AND LOKESHWAR SINGH PANTA, JJ.] CONSTITUTION OF IND/A, 1950: C Articles 12 and 226 - Disputes relating to payment of amounts of Fixed Deposits with Banks - Writ petitions - Main- tainability of - HELD: In matters of enforcement of contracts, Public Sector Banks are governed by terms of contract - Mat- ter involves various disputed questions - Role played by writ D petitioners is also in issue - Such seriously disputed ques- tions of fact could not have been gone into by writ court- Pub- lic Interest Litigation. BANKING: E Amounts deposited with Banks under FDRs - Deposi- tors claiming payment of amounts on maturity - Bank refus- ing payment on ground that fraud was committed by deposi- tors and Bank employees - HELD: Bank cannot refuse to accede to just demand of investors to pay any amount law- F fully due to them on the premise that their officers are guilty of commission of fraud - Employers would be constructively li- able for acts of negligence on part of their employees - Keep- ing in view circumstances of the case, directions issued for release of amounts on conditions as mentioned in judgment G -Negligence - Constructive liability of employer - Constitu- tion of India, 1950 - Articles 12 and 226. The respondent Co-operative Societies made fixed deposits with the appellant Banks wherefor Fixed Deposit Receipts (FDRs) were to be issued. Loans were granted H 450 INDIAN BANK v. GODHARA NAGRIK COOPERATIVE 451 CREDIT SOCIETY LTD. & ANR. to various persons on the basis of the said FDRs. On A maturity of the FDRs, the investors sought its encashment, but the banks declined stating that the amounts under the FDRs had already been paid by way of loans and no further amount was payable. It was stated that a fraud on the banks was practised to which the de- B positors and the officers of the Banks were parties. In the writ petitions filed by the depositors, though the High Court opined that serious disputed questions of fact be- ing involved in the writ petition no relief could be granted to the writ petitioners, it, however, relying upon the provi- c sions of s.35A of the Banking Regulations Act, 1949, di- rected a Committee to be constituted under the Chairman- ship of the Deputy Governor of the Reserve Bank of India or his nominee to go into the matter in greater details. The Committee submitted its report stating that principally of- D ficers of the Banks were involved in the scam. The High Court, accordingly, opined that the writ petitioners were not parties to the fraud and as such subject to any orders that might be passed in the criminal case, the Banks should pay the amounts under the FDRs to the deposi- tors. E In the Instant appeals filed by the Banks it was con- tended for the appellants that in a writ petition involving private dispute, no direction for payment of money in favour of the writ petitioners should have been issued by F the High Court; that as the writ petitions involved serious disputed questions of fact, the High Court should not have entertained the same; and that the Central Bureau of In- vestigation having submitted a charge-sheet wherein not only the officers of the banks but also the commission G agents were found to be guilty of conspiracy in commit- ting fraud on the banks, the judgment and direction of the High Court should be set aside. Partly allowing the appeals, the Court H 452 SUPREME COURT REPORTS [2008] 9 S.C.R. A HELD: 1.1 The propositions of law which are undis- puted are : (i) writ petitions against the banks being 'State' within the meaning of Article 12 of the Constitution of In- dia were maintainable; (ii) writ petitions involving serious disputed questions of fact, ordinarily should not be en- B tertained although the High Court in some cases may enter into disputed questions of fact. [Para 10] [459-A,B] 1.2 A writ petition indisputably would be maintainable ~ even in relation to a matter arising out of contract qua contract. Some cases may start on a private interest but if c the court finds involvement of a public law element therein concerning a large number of people, the writ court may proceed on the basis as if it was public interest litigation and appoint a Committee and then grant relief in favour of the writ petitioners. It may be that i
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