Y. Sleebachan Charuvila Veedu v. State of Kerala and The Federal Bank

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **THURSDAY, THE 23RD DAY OF JULY 2020 / 1ST SRAVANA, 1942** ## **WP(C).No.12774 OF 2020(V)** ## **PETITIONER:** **Y. SLEEBACHAN CHARUVILA VEEDU, CHENGAMANAD P.O. KOTTARAKKARA-691 557.** **BY ADV. SRI.B.J.JOHN PRAKASH** ## **RESPONDENTS:** **1 THE STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT, PWD DEPARTMENT, SOUTH BLOCK, SECRETARIAT, THIRUVANANTHAPURAM-695 001. 2 THE FEDERAL BANK, REPRESENTED BY THE BRANCH MANAGER, EDAMON BRANCH, EDAMON P.O., PUNALUR (VIA) KOLLAM-691 307.** **R2 BY ADV. SRI.K.P.SUJESH KUMAR SMT.VINITHA B., GP** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 16-072020, THE COURT ON 23-07-2020 DELIVERED THE FOLLOWING:** **WP(C).No.12774 OF 2020** **2** ## **JUDGMENT** The petitioner, who was an engineering contractor, has approached this Court seeking the following reliefs :- - “(i) Issue a writ in the nature of certiorari or any other appropriate Writ, Order, Direction to the Respondent Bank quashing the decision leading to Exhibit P6 and direct the respondent to consider the application for issue of Solvency Certificate made by the petitioner afresh and pass appropriate orders therein within a reasonable time so as to enable the petitioner duly complete the formalities mandated for renewal of his licence as seen from Exhibit P5. - (ii) Issue a writ in the nature of mandamus or any other appropriate Writ, Order, Direction to the Respondent Bank directing them to re classify the Petitioner's account as per the guidelines issued by the Reserve Bank of India from time to time and not to arbitrarily classify the account of the Petitioner as Non-Performing Asset despite there being no default by the Petitioner as seen from Exhibit P10. - (iii) Issue a writ in the nature of mandamus or any other appropriate Writ, Order, Direction to the 1[st] respondent directing them to grant further time to the Petitioner for submission of application for renewal of licence as contemplated in Exhibit P5, in the event of any delay caused by the Respondent Bank in issuing the Solvency Certificate.” **WP(C).No.12774 OF 2020** **3** 2. Heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the 2[nd] respondent Bank. 3. It is contended by the learned counsel for the petitioner that the partnership firm of which the petitioner is a partner had an account with the 2[nd] respondent Bank, which has been wrongly classified as Non-Performing Asset (NPA). It is stated that substantial amounts had been paid to the 2[nd] respondent to clear the liabilities of the firm as early as in January, 2020 and that the non-issuance of solvency certificate is resulting in the petitioner being unable to renew his licence as a Government contractor. It is stated that solvency certificates are issued even where accounts are classified as NPA and that in the present case, the classification is against the master circular issued by the Reserve Bank of India. 4. The learned Standing Counsel appearing for the 2[nd] respondent would contend that the 2[nd] respondent is only a scheduled bank and that the prayers sought for in the writ petition therefore, cannot be issued as against the 2[nd] respondent. Relying on a decision of the Apex Court in **Federal Bank Ltd.** v. **Sagar Thomas & ors.** [(2003) 10 SCC 733], it is contended that the Apex Court has clearly held that a scheduled bank is only a private body and that the commercial activity of banking does not **WP(C).No.12774 OF 2020** **4** answer the definition of public duty. It is therefore submitted that no writ of mandamus could be issued as against a scheduled bank to enforce a purely commercial duty. It is further submitted that the account had been classified as NPA as early as in January, 2020 and that the facts are perfectly well known to the petitioner. It is contended that the classification of the account is a factual dispute and that this Court is not expected to go into the factual aspects of the matter. 5. The learned counsel for the petitioner places reliance on the decisions of the Apex Court in **Binny Ltd. & Anr.** v. **V. Sadasivan & Ors.** [(2005) 6 SCC 657], in **Central Bank of India** v. **Ravindra and Ors.** [(2002) 1 SCC 367] and of the Madhya Pradesh High Court in **Pt. Girija Shankar Sharma** v. **Collector, Hoshangabad** [AIR 1974 MP 83]. It is contended that the decision in **Sagar Thomas's case** was issued in the factual backdrop where a service dispute was sought to be raised in a writ petition by an employee of the Federal Bank and it was in the said circumstances that the Apex Court held that a private company carrying on banking business as a scheduled bank cannot be termed to be an institution carrying on any statutory or public duty and that as such a writ petition is not maintainable. It is contended that the rules and conditions for registration of **WP(C).No.12774 OF 2020** **5** contractors as contained in the Government Order dated 17.7.2013 makes it incumbent on contractors who require registration to produce a solvency certificate from any nationalised or scheduled bank. It is stated that the rejection of the solvency certificate would entail the inability of the petitioner to renew his licence and would thus be to the detriment of the petitioner. It is contended that a Division Bench of this Court in similar situations has held that the refusal to issue solvency certificate in violation of the guidelines issued by the Reserve Bank of India for classification of NPAs is illegal and that financial institutions cannot be permitted to classify assets as NPAs at their whims and fancies without following the guidelines. It is further contended that the petitioner would have no remedy as against the refusal of solvency certificate and that as such, this Court is duty bound to issue a writ as sought for. 6. I have considered the contentions advanced. The Apex Court in **Sagar Thomas's case** has specifically held that a private company carrying on banking business as a scheduled bank is not carrying out any statutory or public duty and that it cannot be compelled to perform its commercial obligations through the issue of a writ under Article 226 of the Constitution of India. The Madhya Pradesh High Court in **Pt. Girija Shankar** **WP(C).No.12774 OF 2020** **6** **Sharma's case** was considering the refusal of a solvency certificate by the District Collector and it was held that though the issuance of solvency certificate is not regulated by any statutory provision, a government officer, who is entrusted with the duty of considering applications for solvency certificates has to exercise his administrative functions bona fide and with a fair mind. On a finding that the decision to refuse solvency certificate taken by the District Collector was vitiated by malafidies , the High Court interfered and directed the issuance of the certificate. The decision relied on by the learned counsel for the petitioner with regard to the classification of accounts as NPA was also issued in the backdrop of the fact that the financial institution in question was a nationalised bank, which answers the definition of 'State' under Article 12 of the Constitution. Though it may be perfectly true that the master guidelines issued by the RBI in respect of classification of assets as NPA is liable to be followed by the 2[nd] respondent, it is equally true that the petitioner has not approached the RBI, the Banking Ombudsman or any other authority empowered to consider the factual aspects of such a complaint. The petitioner has directly approached this Court seeking the setting aside of a decision taken by the Bank not to issue the solvency certificate and seeks a reconsideration of the **WP(C).No.12774 OF 2020** **7** matter on the basis of the RBI guidelines. Having considered the contentions advanced and having given anxious consideration to the decisions relied on, I am of the opinion that the prayers as sought for cannot be granted since the 2[nd] respondent is not 'State' under Article 12 and is not entrusted with any public duty in the matter of its commercial banking operations. The writ petition therefore fails and the same is accordingly, dismissed. ## **Sd/-** ## **ANU SIVARAMAN** **JUDGE** Jvt/17.7.2020 **WP(C).No.12774 OF 2020** **8** ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** ## **EXHIBIT P1** - **TRUE COPY OF THE REGISTRATION OF THE PETITIONER** **EXHIBIT P2** **TRUE COPY OF THE JUDGMENT DATED 25.10.2019 IN WPC NO 26060/2019** - **EXHIBIT P3 EXHIBIT P4** - **TRUE COPY OF THE LETTER DATED 28.1.2020** - **TRUE COPY OF THE EMAIL DATED 16.3.2020** - **EXHIBIT P5** **TRUE COPY OF THE GO (RT) NO 510/2020/PWD DATED 8.6.2020 ISSUED BY THE 1ST RESPONDENT** - **EXHIBIT P6 TRUE COPY OF THE LETTER DATED 29.5.2020** - **EXHIBIT P7** **TRUE COPY OF THE EXTRACT OF THE AWARD DATED 21.2.2008 ALONG WITH THE ORDER DATED 29.10.2014 OF THE PRINCIPAL DISTRICT JUDGE TIRUNELVELI** **EXHIBIT P8** **TRUE COPY OF THE EXTRACT OF THE AWARD DATED 7.11.2009 AND THE ORDER DATED 29.10.2014 OF THE PRINCIPAL DISTRICT JUDGE TIRUNELVELI** - **EXHIBIT P9** - **TRUE COPY OF THE AWARD DATED 26.8.2019** - **EXHIBIT P10** - **TRUE COPY OF THE STATEMENT OF ACCOUNTS OF THE PETITIONER** **EXHIBIT P11** **TRUE COPY OF THE RELEVANT PAGES OF THE MASTER CIRCULAR DATED 1.7.2015 ON INCOME RECOGNITION ASSET CLASSIFICATION ETC, ISSUED BY THE RESERVE BANK OF INDIA** **RESPONDENT'S/S EXHIBITS: NIL**