SINI RAJU v. FEDERAL BANK LTD.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE V.G.ARUN** **TUESDAY, THE 16[TH] DAY OF AUGUST 2022 / 25TH SRAVANA, 1944** ## **WP(C) NO. 16796 OF 2022** ## **PETITIONER/S:** SINI RAJU AGED 41 YEARS W/O. RAJU J VAYALATT, VAYALATT HOUSE, FORT KOCHI, ERNAKULAM - 682 001. BY ADV AYSHA ABRAHAM ## **RESPONDENT/S:** THE FEDERAL BANK LTD. KOCHI BRANCH, P. B. NO.34, PARVANA JUNCTION, MATTANCHERRY, ERNAKULAM-682 002, REPRESENTED BY BRANCH MANAGER. BY ADV LEO GEORGE THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15.06.2022, THE COURT ON 16.08.2022 DELIVERED THE FOLLOWING: W.P.(C) No.16796 of 2022 -2- ## **JUDGMENT** Dated this the 16[th] day of August, 2022 The petitioner had availed a gold loan from the respondent bank by pledging 927.89 grams of gold ornaments. The loan was initially availed for a period of one year from 29.01.2020 and renewed for one more year. According to the petitioner, she contacted the respondent and requested to release the pledged gold ornaments. Thereupon, the petitioner was informed that the total amount outstanding in the loan account is Rs.25,98,775/-. The petitioner went to the Bank with the amount on 13.01.2022, but the respondent was not willing to release the gold. Hence, the petitioner sent Ext.P2 notice on 21.01.2022 informing the respondent about her willingness to settle the loan account and that the petitioner shall not be held liable for interest from ## W.P.(C) No.16796 of 2022 -3- 13.01.2022, the day on which she had initially approached the bank for settling the loan account. In response, the respondent issued Ext.P3 letter stating that the petitioner is a co-obligant to the loan availed by her husband and an amount of Rs.122.78 lakhs with future interest and cost is due under the said account. Hence, the bank decided to exercise general lien over the pledged loan until all outstanding liabilities, of which the petitioner is a coobligant, are closed/settled. 2. Learned Counsel for the petitioner contended that, action of the bank amounts to economic terrorism against a vulnerable woman. It is submitted that the petitioner’s husband had availed business loans by mortgaging properties worth about Rs.25 Crores and even if an amount of Rs.122.78 lakhs is due from him, that does not justify the refusal to release petitioner’s gold ornaments. It is alleged that the bank’s action W.P.(C) No.16796 of 2022 -4- is also discriminatory since, gold pledged by the petitioner’s husband, as security for a gold loan taken by him, was released by the bank. 3. Learned Standing Counsel for the Bank contended that the writ petition is not maintainable, the respondent Bank being a private company, not falling within the meaning of ‘State’ under Article 12 and the prayer not being for enforcement of any public duty. In support of the contention, the Apex Court decision in _**Federal Bank Ltd v. Sagar Thomas [(2003) 10 SCC**_ _**733]**_ and this Court’s decision in _**Unimoni Financial Services Ltd v. IDBI Banking Ltd [2020**_ ## _**(6) KLT OnLine 1062],**_ are relied on. 4. On merits, it is contended that the petitioner was sanctioned the gold loan on the specific understanding that the respondent bank will have a general lien in respect of all existing and/or future liabilities of the ## W.P.(C) No.16796 of 2022 -5- petitioner. Even otherwise, the respondent bank has the right to retain the pledged gold loan in exercise of the power under Section 171 of the Indian Contract Act, 1872. The petitioner along with her husband as co-obligant, have availed property power loan of Rs.1,60,00,000/- from the respondent Bank and default in repayment to that account has resulted in the account being declared as Non-Performing Asset (NPA) and recovery proceedings being initiated. The gold loans availed by the petitioner’s husband were not linked to the property power loan and the pledged gold happened to be returned due to failure on the part of the staff in noticing the other liabilities. The staff concerned has been alerted about the omission and directed to be more cautious in future. Relying on the decision in _**Syndicate Bank v. Vijay Kumar and others [(1992) 2 SCC 330]**_ , it is contended that the Apex ## W.P.(C) No.16796 of 2022 -6- Court has declared that, having regard to the judicially recognised mercantile custom, the Banker has a general lien over all forms of deposits or securities made or on behalf of the customer in the ordinary course of banking business. 5. In reply, learned Counsel for the petitioner submitted that the dictum in _**Sagar Thomas**_ will not apply to the instant case. As the issue involved therein was with respect to the disciplinary action taken by the Bank against its employees. Reliance is placed on the decision rendered by a learned Single Judge of the High Court of Calcutta in _**M/s.Pearson Drums and Barrels Pvt. Ltd v. the General Manager, Consumer Education and Protection Cell of Reserve Bank of India and others [W.P.A.No.21710 of 2017],**_ wherein a challenge against the refusal to refund the processing fee remitted for sanctioning a ## W.P.(C) No.16796 of 2022 -7- loan, which was later declined, was upheld overruling the challenge against maintainability. Learned Counsel referred the decision in _**Justice**_ ## _**K.S.Puttaswamy v. Union of India [(2017) 10 SCC**_ _**1]**_ to submit that no civilised state can contemplate an encroachment upon life and personal liberty without the authority of law. It is contended that the pledged gold ornaments was gifted to the petitioner by her parents at the time of marriage and other than monetary value it has sentimental value also. Refusal to release the pledged gold, despite the offer to settle the loan account, is an infringement upon the petitioner’s life and liberty and in such circumstances, the writ petition is maintainable. 6. The facts being not in dispute are not reiterated. In order to decide the question of maintainability, it will be apposite to consider the relief sought in the writ petition, which are W.P.(C) No.16796 of 2022 -8- as under; _“(i) To direct the Respondent to release the gold of the petitioner without any interest being charged from 13 January 2022._ _(ii) To order the Respondent bank to pay costs of this proceedings.”_ 7. Going by the relief sought, it is preposterous to contend that the writ petition is filed for enforcement of a public right. The legal position that the writ petition is not maintainable against the respondent, a scheduled bank, is settled by the decision in _**Sagar Thomas**_ , the contextually relevant portion of which is extracted hereunder; _“32. Merely because Reserve Bank of India lays the banking policy in the interest of the banking system or in the interest of monetary stability or sound economic growth having due regard to the interests of the depositors etc. as provided under Section 5(c)(a) of the Banking Regulation Act does not mean that the private companies carrying on the business or commercial activity of banking, discharge any public function or public duty. These are all regulatory_ ## W.P.(C) No.16796 of 2022 -9- _measures applicable to those carrying on commercial activity in banking and these companies are to act according to these provisions failing which certain consequences follow as indicated in the Act itself. As to the provision regarding acquisition of a banking company by the Government, it may be pointed out that any private property can be acquired by the Government in public interest. It is now a judicially accepted norm that private interest has to give way to the public interest. If a private property is acquired in public interest it does not mean that the party whose property is acquired is performing or discharging any function or duty of public character though it would be so for the acquiring authority._ _33. For the discussion held above, in our view, a private company carrying on banking business as a scheduled bank, cannot be termed as an institution or a company carrying on any statutory or public duty. A private body or a person may be amenable to writ jurisdiction only where it may become necessary to compel such body or association to enforce any statutory obligations or such obligations of public nature casting positive obligation upon it. We don't find such conditions are fulfilled in respect of a private company carrying on a commercial activity of banking. Merely regulatory provisions_ W.P.(C) No.16796 of 2022 -10- _to ensure such activity carried on by private bodies work within a discipline, do not confer any such status upon the company nor put any such obligation upon it which may be enforced through issue of a writ under Article 226 of the Constitution. Present is a case of disciplinary action being taken against its employee by the appellant Bank. The respondent's service with the Bank stands terminated. The action of the Bank was challenged by the respondent by filing a writ petition under Article 226 of the Constitution of India. The respondent is not trying to enforce any statutory duty on the part of the Bank. That being the position, the appeal deserves to be allowed._ ## 8. In _**Unimoni Financial Services Ltd**_ , the writ petition was filed against IDBI Bank challenging the demand for processing fee and withholding of title deeds mortgaged with the bank. After elaborate consideration, it was held that providing of credit facility or loan on the strength of title deeds given as security cannot be said to be done in discharge of any public function, even cases involving Public Sector/ W.P.(C) No.16796 of 2022 **==> picture [23 x 8] intentionally omitted <==** Banks, especially when it arises out of contractual transactions entered into between the parties and the bank. 9. The reliance placed by the Counsel for the petitioner on the decision of the High Court of Calcutta is misplaced since the factual circumstances under which the writ petition was filed are entirely different. A perusal of the judgment shows that the petitioner therein had not only claimed refund of the processing fees but had also challenged a communication issued by the Assistant Manager, CEPC, RBI, closing his dispute regarding return of processing fees. It is in that context that the writ petition was held to be maintainable, finding that the Reserve Bank of India falls within the meaning of ‘State’ as contemplated under Article 12. In view of the above legal position I find the challenge against maintainability to be well founded and therefore, refrain from venturing W.P.(C) No.16796 of 2022 -12- into the other contentions raised in the writ petition. In the result, the writ petition is dismissed. Sd/- **V.G.ARUN JUDGE** Scl/ W.P.(C) No.16796 of 2022 -13- ## **APPENDIX OF WP(C) 16796/2022** PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE GOLD LOAN PLEDGE TOKENS DATED 29.01.2020 ISSUED BY THE RESPONDENT. Exhibit P2 TRUE COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE RESPONDENT DATED 21.01.2022. Exhibit P3 TRUE COPY OF THE LETTER ISSUED BY THE RESPONDENT BANK TO THE PETITIONER DATED 02.02.2022. Exhibit P4 TRUE COPY OF THE NOTICE SENT BY THE RESPONDENT BANK TO THE PETITIONER DATED 28.01.2019. Exhibit P5 TRUE COPY OF THE APPLICATION ON WHICH THE RELEASE DATED 11.11.2021 IS SHOWN BY WHICH THE RESPONDENT BANK RELEASED THE GOLD PLEDGED BY THE HUSBAND OF THE PETITIONER.