The Calcutta High Court recently comprising of a bench of Justice Arindam Mukherjee observed that writ petition not maintainable for a contract breach when an alternative civil redress is available. (Maa Nandi Keshri Rice Mill v Union of India)
The bench further stated that no writ lies or order can be issued under Article 226 of the Constitution of India to compel the authorities to remedy such breach of contract.
Facts of the Case
The petitioner is a rice mill. On or about 22th July, 2005, the petitioner no. 1 made an application for sanction of a Term Loan amounting to Rs.108 Lakhs and a Working Capital Loan amounting to Rs.40 lakhs to the United Bank of India, a nationalized bank at its Sainthia Branch (hereinafter referred to as the said bank). The said two facilities were given to the petitioner no. 1 on 5th September, 2005. To avail the credit facilities, the petitioner created an equitable mortgage of a land with building. The petitioners said that the Term Loan of Rs. 108 lakhs has been duly repaid by the petitioners to the satisfaction of the Bank. The Bank has also issued a certificate declaring closure of the Term Loan Account on 16th August, 2013 upon full payment having been made.
Contention of the Parties
The petitioners contended that the said bank could neither refuse to release the mortgaged properties nor can contend that the mortgaged properties will be released only upon repayment of the entire outstanding against the Cash Credit limit. The petitioners also say that by refusing to release the mortgaged properties, the bank has infringed the rights guaranteed under Article 300 A of the Constitution of India.
On behalf of the Bank, it was submitted that the sanction granted on 5th September, 2005 was a composite one. The petitioners had mortgaged the properties both for the Term Loan and the Cash Credit facility. The mortgage, being a composite one cannot be released unless the outstanding amount in the Cash Credit Account is fully repaid even if the Term Loan has been fully repaid. The said bank has also raised an issue as to the maintainability of the writ petition in view of the nature of the contract pursuant to which the equitable mortgage was credited.
The respondent bank says that no relief in the facts and circumstances of the case can be granted by this Court in exercise of its jurisdiction under Article 226 of the Constitution of India as the petitioners are seeking enforcement of the terms of a Contract simplicitor entered by the bank while carrying out commercial activities.
Courts Observation & Judgment
The bench observed that the contract between the respondent-bank and the petitioner clearly and unambiguously reveals that the petitioner after voluntarily accepting the conditions imposed by the respondent-bank have entered into the realm of concluded contract, pure and simple. The petitioner can only claim the right conferred upon it by the said contract and bound by the terms of the contract unless some statute steps in and confers some special statutory obligations on the part of the bank in the contractual field. The contract between the petitioner and the respondent-bank, so far as the issue of release of mortgage upon repayment of a portion of the aggregate loan, does not include any statutory terms and/or conditions.
In the light of the ratio laid down in ABL International Ltd. v Export Credit Guarantee Corporation of India Ltd (2004) 3 SCC 553 if it was assumed without admitting that the valuation of the mortgaged properties done by the Bank in 2018 relied upon by the petitioner to be a disputed question of fact and that a Civil proceeding is the alternative remedy available to the petitioner to redress his grievances does not create an impediment in exercising the writ jurisdiction, even then the contract in question would be non-statutory in nature wherein remedy for a breach of contract pure and simple has been sought for.
The court observed, “There is no public interest element involved in the matter, no case to attract the provisions of Article 14 of the Constitution of India has also been made out. There is no mala fide or ulterior motive attributed to the bank which can compel interference under judicial review. The rejection to release the mortgaged properties does not involve any favouritism for which interference is required to prevent arbitrariness in the instant case. The bank has only said that unless the entire loan is repaid, the mortgage cannot be released. This does not mean that the bank has acted mala fide or with an ulterior motive. It has only conveyed its view on an appreciation of the contract between itself and the petitioner. Merely because the respondent bank acts in compliance with the Reserve Bank of India (RBI Guidelines) as held in Sagar Thomas (supra), the respondent petitioner though may be a nationalized bank, cannot be said to have failed in discharging any public function or public duty while carrying on business or commercial activity of Bank. Even if, a writ petition is maintainable against the respondent bank then also the facts of the instant case does not permit interference in the matter by this Court in exercise of its jurisdiction under Article 226.”
The court remarked, “The writ petition therefore, fails and the same is dismissed on the ground of maintainability as discussed above, however, without any order as to costs. The petitioners will, however, be free to avail any other remedy that may be available to them in law on the selfsame cause as I have not gone into the merits of the matter save as required for adjudicating the maintainability point.”
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