LexZONAL MANAGER, CENTRAL BANK OF INDIA versus M/S. DEVI ISPAT LTD. & ORS.
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(201 OJ 9 S.C.R. 417 ZONAL MANAGER, CENTRAL BANK OF INDIA A v. M/S. DEVI ISPAT LTD. & ORS. (Civil Appeal No. 6077 of 2010) JULY 30, 2010 B [P. SATHASIVAM AND ANIL R. DAVE JJ.] Constitution of India, .1950 - Article 226 - Writ petition - Held: Is maintainable even in contractual matters, if the C instrumentality of the State acts unfairly and arbitrarily in its · contractual obligation - On facts, the institution being a 'State' within the meaning of Article 12, and the relief sought not relating to interpretation of any terms of contract, the writ petition is maintainable - Contract. D Respondent No. 1-Company was availing various credit facilities like 'Term Loan', 'Working Capital Demand Loan', 'Cash Credit' and 'Letter of Credit' with the appellant, a Public Sector Bank. In view of certain irregularities, the appellant-Bank asked the respondent- E company to shift its loan account to some other Bank. On non-compliance of the direction, the appellant-Bank called upon the respondent-company to close its accounts. The respondent-company paid its dues to the appellant-Bank through another Nationalized Bank; There after the respondent-company asked the appellant- Ba n k to return the title deeds and other collateral securities and to issue 'No Objection Certificate' and 'No Dues Certificate'. As the same were not returned by the appellant-Bank, the respondent-company filed a writ G petition. The Single Judge of the High Court allowing the writ petition directed the appellant-Bank to release the security documents. The order was upheld by the 417 H 418 SUPREME COURT REPORTS [2010] 9 S.C.R. A Division Bench of the High Court in appeal. In the instant appeal, the appellant-Bank inter alia contended that writ petition, under Article 226 of the Constitution, was not maintainable because the plea s regarding return of the title deed, deposited as security, was a civil dispute and the appropriate forum for ·such remedy was Debts Recovery Tribunal or civil court and not a writ court. c Dismissing the appeal, the Court HELD: 1.1 It is true that the disputes relating to interpretation of terms and conditions of a contract could not be examined/challenged or agitated in a petition filed under Article 226 of the Constitution and it is a matter for D adjudication by. a civil court or in arbitration, if provided for in the contract or before the DRT or under the Securitization Act. But, if the instrumentality of the State acts contrary to the public good, public interest, unfairly, unjustly, unreasonably or its actions are discriminatory E and violative of Article 14 of the Cor.stitution of India, in its contractual or statutory obligation, writ petition would be maintainable. However, a legal right must exist and corresponding legal duty on the part of the State and if any action on the part of the State is wholly unfair or F arbitrary, writ courts can exercise their power. [Paras 11 and 15] [430-G-H; 431-A-B; 442-C-D] 1.2 In the instant case, the respondent-company has demonstrated that based on the advise of the appellant- G Bank, they shifted their accounts to another Nationalized Bank and through an arrangement with the State Bank of India, a cheque of Rs.15 crores was deposited by their Bank and in token of the same, by statement of accounts, the appellant-Bank clearly mentioned that there is 'No H ZONAL MANAGER,. CENTRAL BANK OF INDIA v. 419 DEVI ISPAT LTD. & ORS. Dues' or 'Nil Balance' from the respondent-company. In A view of the fact•that the respondent-Company had cleared the dues which were pending at the relevant point of time through the State Bank of India, they are entitled to get their title deeds to enable them to deposit the same with the State Bank of India as their security for B the amount advanced. In such circumstances, when the relief sought for, does not relate to interpretation of any terms of contract, and the Bank being a Nationalized Bank, discharging public functions is "State" under Article 12 of the Constitution, a writ court can issue C appropriate direction. Thus the High Court was fully justified in issuing a writ of mandamus for return of its title deeds. (Paras 8, 11 and 16] (426-C; 431-B-D: 442-F-H] ABL International Ltd. and Anr. vs. Export Credit D Guarantee Corporation of India Ltd. and Ors. (2004) 3 SCC 553; Karnataka State Forest Industries Corporation vs. Indian Rocks (2009) 1 sec 150 - relied on
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