[Cites 26, Cited by 0]
Orissa High Court
Prabhasini Barik vs Mahindra & Mahindra Financial .... Opp. ... on 12 December, 2025
Author: Sanjeeb K Panigrahi
Bench: Sanjeeb K Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Dec-2025 15:04:31
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.13091 of 2025
(In the matter of a petition under Articles 226 and 227 of the
Constitution of India, 1950).
Prabhasini Barik .... Petitioner (s)
-versus-
Mahindra & Mahindra Financial .... Opp. Party (s)
Service Limited, Mumbai & Ors.
Advocates appeared in the case through Hybrid Mode:
For Petitioner (s) : Mr. Beda Prakash Panda, Adv.
For Opp. Party (s) : Mr. Avijit Patnaik, Advocate.
CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-17.10.2025
DATE OF JUDGMENT:-12.12.2025
Dr. Sanjeeb K Panigrahi, J.
1. The present writ proceedings arise from a challenge to the order
dated 22.3.2025 passed in Arbitration Petition No.
MHF/144042/L10/2025 by the Learned Sole Arbitrator, Shri Vinod
Kumar Gandhi.
I. FACTUAL MATRIX OF THE CASE:
2. The factual background reveals that Late Pabitra Barik had
purchased the aforementioned Maruti Swift ZXI vehicle
Location: ORISSA HIGH COURT, CUTTACK
on 28.10.2023, availing a loan of Rs. 8,22,207/- from Opposite Party
No.1, Mahindra & Mahindra Financial Services Limited. The Loan
Agreementdetails the contractual obligations of the borrower,
including repayment over 60 monthly instalments and the governing
clauses, notably Clause 25, which exclusively vests territorial
jurisdiction in the courts at Chennai. The instalment schedule, the
rate of interest, and the security conditions form part of Schedule-1
and Schedule-2 of the agreement, as visible from the loan documents
appended in the petition.
3. It is also pertinent to note that at the time of entering into the loan
agreement, the Petitioner's deceased husband was covered by a
group insurance policy administered by Opposite Party No.3, Max
Life Insurance.In support of this assertion, she relies upon
the Certificate of Insurance which, according to her, assured
payment of death benefits to the nominee upon demise of the
insured. The petitioner highlights that the lender, Opposite Party
No.1, is listed as the Master Policy Holder, thereby enabling it to
claim the insured amount--stated to be approximately Rs. 8,05,000/-
--to cover outstanding liabilities.
4. The petitioner submits that her husband dutifully complied with the
terms of the agreement until his unfortunate demise eight months
later on 11.7.2024.
5. Following this event, the petitioner claims to have duly notified the
lender by submitting an application on 31.7.2024, wherein she
Location: ORISSA HIGH COURT, CUTTACK
informed the Opposite Parties of the demise and requested
appropriate action in view of the insurance coverage aligned to the
loan.
6. However, it appears that the Opposite Party No. 1 has initiated
Arbitration Proceeding vide ARBP No. MHF/144042/L10/2025 before
the Ld. Sole Arbitrator Shri Vinod Kumar Gandhi on account of
default in making payments as per the schedule to the loan
agreement.
7. In the said ARBP No. MHF/144042/L10/2025, Opposite Party No. 1
filed an application u/s 17 of the Arbitration and Conciliation Act
seeking possession of the vehicle, and the Ld. Sole Arbitrator vide
the impugned order dated 22.3.2025 was pleased to direct the
surrender of the vehicle.
8. Aggrieved, the present Petitioner has preferred the present Writ
Petition.
9. Now that the facts leading up to the instant Petition has been laid
down, this Court shall endeavour to summarise the contentions of
the Parties and the broad grounds that have been raised.
II. PETITIONER'S SUBMISSIONS:
10. The Ld. Counsel for the Petitioner challenges the arbitral order dated
22.03.2025 on the ground that the proceedings were unlawfully
initiated and concluded against her deceased husband, Late Pabitra
Barik, who passed away on 11.7.2024. It is asserted that the
arbitration petition was filed months after his death and without any
Location: ORISSA HIGH COURT, CUTTACK
notice to her as legal heir or nominee, thereby vitiating the
proceedings for want of jurisdiction and violation of natural justice.
Despite her written intimation dated 31.7.2024 informing the lender
of the borrower's demise, the arbitrator proceeded ex parte, made no
effort to ascertain the legal representatives, and ordered repossession
and auction of the hypothecated vehicle. The petitioner further
submits that the arbitral proceedings were conducted at Mumbai
contrary to Clause 25 of the Loan Agreement vesting exclusive
jurisdiction in courts at Chennai, rendering the proceedings
territorially incompetent.
11. The petitioner also contends that the loan was covered under a group
insurance policy issued by Max Life Insurance, under which
Opposite Party No.1, as Master Policy Holder, was entitled to claim
the insured amount of approximately Rs. 8,05,000/- upon the
borrower's death. It is submitted that the lender's failure to invoke
the insurance cover and its simultaneous attempt to recover the same
dues through arbitration amounts to impermissible double recovery
and an unconstitutional deprivation of property. The absence of any
invocation notice under the Arbitration and Conciliation Act, 1996,
coupled with the initiation of proceedings against a deceased person,
is asserted to invalidate the impugned order. The petitioner therefore
seeks quashing of the arbitral order, protection against coercive steps
such as repossession or auction of the vehicle, and recognition that
the lender had an alternative remedy through the insured
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mechanism rather than proceeding against the estate of the deceased
borrower.
III. OPPOSITE PARTYS' SUBMISSIONS:
12. Per contra, the Ld. Counsel for the Opposite Parties Company would,
at the outset, raise a preliminary objection regarding the
maintainability of the Writ Petition under Articles 226 and 227 of the
Constitution. It is contended that the dispute arises purely from
a contractual relationship embodied in the Loan Agreement dated
28.10.2023, and that the respondent is a private, non-State entity, not
falling within the definition of "State" or "authority" under Article
12. It is argued that the writ jurisdiction cannot ordinarily be invoked
to challenge actions of a private lender arising out of private
contractual obligations, particularly where the agreement itself
contains an arbitration clause (Clause 24/25) and a mechanism for
resolution of disputes. It is further submitted that the petitioner seeks
to bypass the statutory remedies available under the Arbitration and
Conciliation Act, 1996--such as recourse under Sections 34 or 37--
and therefore the writ petition constitutes an impermissible attempt
to invoke extraordinary jurisdiction in a domain governed by an
alternate efficacious remedy.
13. On merits, it is contended that the initiation of arbitral proceedings
and subsequent measures were undertaken strictly in accordance
with the terms of the Loan Agreement, including the right to appoint
a sole arbitrator and to enforce security upon the borrower's default.
Location: ORISSA HIGH COURT, CUTTACK
The arbitration was invoked due to continuous non-payment of
instalments, and the lender acted under contractual rights that
survive even in the event of the borrower's death, subject to claim
settlement and recovery.
14. It is further submitted that any grievance regarding notice,
jurisdiction, or the arbitrator's conduct must be agitated before the
arbitral forum or through statutory remedies--and that a writ
petition seeking to invalidate arbitral proceedings is neither suitable
nor maintainable in law.
IV. ISSUE FOR CONSIDERATION:
15. Having heard the parties and perused the materials available on
record, this court here has identified the following solitary germane
issue to be determined:
A. Whether the impugned order passed by the Ld. Sole Arbitrator can
be interfered with by this Court in exercise of its writ jurisdiction?
V. ISSUE A: WHETHER THE IMPUGNED ORDER PASSED BY THE
LD. SOLE ARBITRATOR CAN BE INTERFERED WITH BY THIS
COURT IN EXERCISE OF ITS WRIT JURISDICTION?
Scope of this Writ Court's interference in orders passed by an
Arbitral Tribunal
16. The law is well settled that Arbitral Tribunals are a species of
tribunals over which the High Court exercises writ jurisdiction.
Challenge to an order of an arbitral tribunal can be raised by way of
a writ petition. In Union of India v. R. Gandhi, President Madras Bar
Location: ORISSA HIGH COURT, CUTTACK
Association1 the Supreme Court observed on the question as to what
constitutes 'Courts' and 'Tribunals' as under:
"38. The term 'Courts' refers to places where justice is
administered or refers to Judges who exercise judicial
functions. Courts are established by the state for
administration of justice that is for exercise of the judicial
power of the state to maintain and uphold the rights, to
punish wrongs and to adjudicate upon disputes.
Tribunals on the other hand are special alternative
institutional mechanisms, usually brought into existence
by or under a statute to decide disputes arising with
reference to that particular statute, or to determine
controversies arising out of any administrative law.
Courts refer to Civil Courts, Criminal Courts and High
Courts. Tribunals can be either private Tribunals
(Arbitral Tribunals), or Tribunals constituted under the
Constitution (Speaker or the Chairman acting under Para
6(1) of the Tenth Schedule) or Tribunals authorized by
the Constitution (Administrative Tribunals under
Article 323A and Tribunals for other matters under
Article 323B) or Statutory Tribunals which are created
under a statute (Motor Accident Claims Tribunal, Debt
Recovery Tribunals and consumer fora). Some Tribunals
are manned exclusively by Judicial Officers (Rent
Tribunals, Motor Accidents Claims Tribunal, Labour
Courts and Industrial Tribunals). Other statutory
Tribunals have Judicial and Technical Members
(Administrative Tribunals, TDSAT, Competition
Appellate Tribunal, Consumer fora, Cyber Appellate
Tribunal, etc)."
17. Similar observations were made by the Supreme Court in SREI
Infrastructure Finance Limited2as under:
(2010) 11 SCC 1
Location: ORISSA HIGH COURT, CUTTACK
"14. Arbitration is a quasi judicial proceeding, equitable
in nature or character which differs from a litigation in a
Court. The power and functions of arbitral tribunal are
statutorily regulated. The tribunals are special arbitration
with institutional mechanism brought into existence by
or under statute to decide dispute arising with reference
to that particular statute or to determine controversy
referred to it. The tribunal may be a statutory tribunal or
tribunal constituted under the provisions of the
Constitution of India. Section 9 of the Civil Procedure
Code vests into the Civil Court jurisdiction to entertain
and determine any civil dispute. The constitution of
tribunals has been with intent and purpose to take out
different categories of litigation into the special tribunal
for speedy and effective determination of disputes in the
interest of the society. Whenever, by a legislative
enactment jurisdiction exercised by ordinary civil court is
transferred or entrusted to tribunals such tribunals are
entrusted with statutory power. The arbitral tribunals in
the statute of 1996 are no different, they decide the lis
between the parties, follows Rules and procedure
conforming to the principle of natural justice, the
adjudication has finality subject to remedy provided
under the 1996 Act. Section 8 of the 1996 Act obliges a
judicial authority in a matter which is a subject of an
agreement to refer the parties to arbitration. The reference
to arbitral tribunal thus can be made by judicial authority
or an arbitrator can be appointed in accordance with the
arbitration agreement under Section 11 of the 1996 Act."
18. Thus, the Apex Court held that arbitral tribunals are private
tribunals unlike those tribunals set up under the statute or
specialized tribunals under the Constitution of India. Thus, a Petition
(2018) 11 SCC. 470
Location: ORISSA HIGH COURT, CUTTACK
under Article 227 challenging orders of an Arbitral Tribunal would
be maintainable.
19. Coming now to the question as to what would be the scope of
interference under Article 226/227 against orders passed by the
Arbitral Tribunals, though, a number of judgments have been cited
by both parties, recent decisions of the Supreme Court and of this
Court have settled the issue.
20. While there is no doubt that the arbitral tribunal is a tribunal over
which writ jurisdiction can be exercised, the said interference by a
writ court is limited in nature. Recently, in Deep Industries
Ltd. v. ONGC Ltd.3 decided on 28th November, 2019, the Supreme
Court considered S.B.P. & Company v. Patel Engineering Ltd.4
and Fuerst Day Lawson Limited v. Jindal Exports Limited5 and
observed as under:
"17. This being the case, there is no doubt whatsoever
that if petitions were to be filed Under Articles 226/227 of
the Constitution against orders passed in appeals Under
Section 37, the entire arbitral process would be derailed
and would not come to fruition for many years. At the
same time, we cannot forget that Article 227 is a
constitutional provision which remains untouched by the
non-obstante Clause of Section 5 of the Act. In these
circumstances, what is important to note is that though
petitions can be filed Under Article 227 against
(2020) 15 SCC 706
(2005) 8 SCC 618
(2011) 8 SCC 333
Location: ORISSA HIGH COURT, CUTTACK
judgments allowing or dismissing first appeals Under
Section 37 of the Act, yet the High Court would be
extremely circumspect in interfering with the same,
taking into account the statutory policy as adumbrated by
us herein above so that interference is restricted to orders
that are passed which are patently lacking in inherent
jurisdiction."
21. Recently, in Surender Kumar Singhal v. Arun Kumar Bhalotia6 the
Delhi High Court, after considering all the decisions, of the Supreme
Court, Deep Industries (supra); Bhaven Construction v. Sardar
Sarovar Narmada Nigam Ltd.7; Punjab State Power Corpn.
Ltd. v. EMTA Coal Ltd.8; Virtual Perception OPC (P)
Ltd. v. Panasonic India (P) Ltd.9 and Ambience Projects &
Infrastructure (P) Ltd. v. Neeraj Bindal10 has laid down
circumstances in which such petitions ought to be entertained. The
relevant portion of the said judgment reads as under:
"24. A perusal of the abovementioned decisions, shows
that the following principles are well settled, in respect of
the scope of interference under Articles 226/227 in
challenges to orders by an Arbitral Tribunal including
orders passed under Section 16 of the Act:
2021 SCC OnLine Del 3708
(2022) 1 SCC 75
(2020) 17 SCC 93
2022 SCC OnLine Del 566
2021 SCC OnLine Del 4023
Location: ORISSA HIGH COURT, CUTTACK
(i) An Arbitral Tribunal is a tribunal against which
a petition under Articles 226/227 would be
maintainable.
(ii) The non obstante clause in Section 5 of the Act
does not apply in respect of exercise of powers under
Article 227 which is a constitutional provision.
(iii) For interference under Articles 226/227, there
have to be exceptional circumstances.
(iv) Though interference is permissible, unless and
until the order is so perverse that it is patently
lacking in inherent jurisdiction, the writ court
would not interfere.
(v) Interference is permissible only if the order is
completely perverse i.e. that the perversity must
stare in the face.
(vi) High Courts ought to discourage litigation
which necessarily interfere with the arbitral process.
(vii) Excessive judicial interference in the arbitral
process is not encouraged.
(viii) It is prudent not to exercise jurisdiction under
Articles 226/227.
(ix) The power should be exercised in "exceptional
rarity" or if there is, "bad faith" which is shown.
(x) Efficiency of the arbitral process ought not to be
allowed to diminish and hence interdicting the
arbitral process should be completely avoided."
26. A perusal of the above would show that it is only
under exceptional circumstances or when there is
bad faith or perversity that writ petitions ought to be
entertained."
Location: ORISSA HIGH COURT, CUTTACK
22. The power of superintendence vested in High Courts under Article
227 of the Constitution of India is a constitutional safeguard
designed to ensure that subordinate courts and tribunals act within
their jurisdiction and adhere to principles of fairness, legality, and
procedural propriety. However, the exercise of this power in the
context of arbitration proceedings governed by the Arbitration and
Conciliation Act, 1996, has been subject to considerable judicial
scrutiny and debate. The Arbitration Act is a self-contained code
aimed at promoting minimal judicial interference and ensuring the
speedy resolution of disputes through a quasi-judicial process.
Section 5 of the Act categorically mandates that judicial authorities
shall not intervene in matters governed by the Act, except where
expressly provided. The Supreme Court in SBP & Co. v. Patel Engg.
Ltd.11 emphasized the autonomy of the arbitral process, affirming
that courts must respect the statutory scheme. While Article 227 is a
constitutional provision and therefore cannot be ousted by statutory
language, the Courts have repeatedly held that this extraordinary
jurisdiction must be exercised with great restraint, especially in
arbitration matters. Any intervention should be confined to cases
where there is a patent lack of jurisdiction or perversity that is
apparent on the face of the record. The overarching goal is to
preserve the integrity and efficiency of the arbitral process.
(2005) 8 SCC 618
Location: ORISSA HIGH COURT, CUTTACK
23. In recent judicial pronouncements, including Deep Industries
(supra), the Apex Court has emphasized that although Article 227
cannot be curtailed by any statutory enactment like Section 5 of the
Arbitration and Conciliation Act, the High Courts must exercise self-
restraint while considering interference in arbitral proceedings. The
Court acknowledged the supremacy of the constitutional provision
but cautioned that indiscriminate use of writ jurisdiction would
undermine the legislative objective of speedy and efficient dispute
resolution through arbitration. Importantly, the Court held that only
in instances where the order suffers from a patent lack of jurisdiction
or where there is a manifest miscarriage of justice should the High
Court step in. The rationale was rooted in the principle that arbitral
tribunals, while not civil courts, are adjudicatory bodies that derive
their authority from party autonomy and statutory recognition.
Excessive judicial interference in this sphere would erode the
foundational principles of arbitration and compromise its purpose as
an alternate dispute resolution mechanism. The Court thus laid
down a threshold of "exceptional rarity" as a guiding principle.
Consequently, even if maintainability under Article 227 is
established, the jurisdiction ought not to be exercised merely because
an error of law or fact exists, unless such error amounts to perversity
or a jurisdictional transgression. The Court was particularly wary of
the potential derailment of the arbitral process if supervisory
jurisdiction were exercised routinely over orders passed either by
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arbitral tribunals. Acknowledging the supremacy of the Constitution
and the enduring nature of Article 227, the Court nevertheless
maintained that statutory policy must be respected and judicial
review should not be used as a backdoor appeal mechanism. The
Court held that although the power under Article 227 is untouched
by the non obstante clause in Section 5, such power must be
exercised with utmost circumspection and only in cases where orders
are so patently lacking in inherent jurisdiction or are manifestly
perverse that judicial conscience is shocked. This nuanced stance
balances constitutional principles with statutory purpose.
Consequently, High Courts must tread carefully, ensuring that their
intervention does not undermine the finality and expedition that the
Arbitration Act seeks to promote. This decision thus reinforces the
principle that while constitutional remedies remain available, they
are not to be used as substitutes for appeals explicitly barred by a
self-contained statute such as the Arbitration and Conciliation Act.
24. The decision in Surender Kumar Singhal (supra), further crystallized
the judicial standards governing Article 227 interference in arbitral
matters. After analyzing key Supreme Court precedents, the Delhi
High Court unequivocally held that the supervisory power under
Article 227 can only be exercised when there is demonstrable
perversity or the order of the arbitral tribunal is patently without
jurisdiction. The Court noted that arbitral tribunals, being private
adjudicatory bodies created under the Arbitration and Conciliation
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Act, 1996, are distinct from statutory or constitutional tribunals.
Despite this, given their function of adjudicating legal disputes and
their obligation to adhere to principles of natural justice, they fall
within the scope of judicial review under Article 227.
25. The Court warned that permitting Article 227 challenges as a routine
remedy would effectively create a "second bite at the cherry,"
contrary to the Arbitration Act's policy and purpose. Therefore, only
orders reflecting egregious illegality or mala fides warrant
constitutional scrutiny. The judgment also crystallized the principles
governing the exercise of writ jurisdiction over arbitral orders,
emphasizing that such powers under Article 227 must be exercised
only in the rarest of rare cases. The decision made clear that arbitral
tribunals, though private in nature, are still "tribunals" within the
meaning of Article 227 and therefore subject to the High Court's
supervisory control. However, this supervisory control is not
equivalent to appellate review. Rather, the writ court's role is
confined to correcting manifest illegality, bad faith, or perversity so
glaring that it indicates a patent lack of jurisdiction. The High Court
reiterated that if orders passed by arbitral tribunals were routinely
challenged and overturned under Article 227, it would nullify the
entire purpose of a separate arbitration regime and revert the process
to the very judicial delays it sought to eliminate. The judgment
stressed the necessity of discouraging such litigation unless the
arbitral order offends the basic structure of justice.
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26. While Article 227 cannot be statutorily ousted due to its
constitutional origin, its invocation must be exercised with extreme
caution in arbitration matters. If High Courts were to routinely
entertain petitions under Article 227 against orders passed under the
Arbitration Act, the entire purpose of creating a streamlined arbitral
regime would be frustrated. Arbitration proceedings, by their very
nature, are intended to be quick and efficient alternatives to
traditional litigation. Excessive judicial interference undermines this
objective and delays finality in commercial disputes. Interference of
this Court under Article 227 is not only exceptional but should be
exercised in situations where the order in question is so perverse that
it lacks inherent jurisdiction. It reaffirmed that routine errors of law
or fact, or disagreements on the merits, cannot be grounds for
invoking this extraordinary jurisdiction. Therefore, unless there is an
egregious illegality or an abuse of power that offends basic judicial
conscience, this Court must refrain from invoking Article 227.
27. The scope of writ jurisdiction under Articles 226 and 227 of the
Constitution of India is inherently supervisory and discretionary. It
is designed to ensure that lower courts and tribunals act within the
bounds of their jurisdiction and follow the principles of natural
justice. However, when it comes to matters arising from arbitration,
the legislature has created a complete and self-contained mechanism
under the Arbitration and Conciliation Act, 1996, providing specific
remedies against arbitral awards. Writ power, though broad, must be
Location: ORISSA HIGH COURT, CUTTACK
exercised sparingly and only to correct jurisdictional or procedural
errors.
28. This Court has now established that it may interfere with orders
passed by an Arbitral Tribunal if the circumstances so warrant.
However, the next question that emerges for this Court's
consideration is whether a writ may lie at all against the present
Opposite Parties?
On the maintainability of the present Petition
29. The Court has carefully considered the pleadings, annexures, and
arguments presented. The petitioner's grievance centres around the
order dated 22.3.2025 passed in Arbitration Petition No.
MHF/144042/L10/2025 directing repossession and auction of the
hypothecated vehicle. The petitioner challenges the order on several
grounds--primarily that the arbitration proceedings were conducted
against a deceased borrower, that there was no notice, and that the
territorial and contractual stipulations were violated. While these
assertions merit factual appreciation, the threshold issue that arises is
whether a writ under Article 226 is maintainable against the present
respondents, who are admittedly private finance companies, namely
Mahindra & Mahindra Financial Services Limited.
30. The petitioner has not disputed that Opposite Party No.1, the
lending institution, is a private non-banking finance company
incorporated under the Companies Act. Thus, at the outset, the
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maintainability of the writ petition must be examined in the light of
established constitutional jurisprudence.
31. The Apex Court in Federal Bank Ltd. v. Sagar Thomas12, held as
follows:
"18. From the decisions referred to above, the position
that emerges is that a writ petition under Article 226 of
the Constitution of India may be maintainable against (i)
the State (Government); (ii) an authority; (iii) a statutory
body; (iv) an instrumentality or agency of the State; (v) a
company which is financed and owned by the State; (vi) a
private body run substantially on State funding; (vii) a
private body discharging public duty or positive
obligation of public nature; and (viii) a person or a body
under liability to discharge any function under any
statute, to compel it to perform such a statutory
function."
32. This Court considers it necessary to reiterate that the writ jurisdiction
under Article 226 is not a universal remedy available for all
grievances arising out of private commercial arrangements. The
jurisdiction is structured to supervise the performance of public
duties and to ensure that statutory obligations are carried out in
accordance with law. It is not intended to be invoked in disputes that
have their genesis in consensual private contracts, such as loan
arrangements between a borrower and a private financial institution.
A lender advancing money for purchase of a vehicle does so as part
of its commercial operations, not in discharge of any public or
(2003) 10 SCC 733
Location: ORISSA HIGH COURT, CUTTACK
statutory mandate. Therefore, unless a petitioner demonstrates that
the lender is bound by a statutory obligation whose enforcement is
being sought, or that the lender performs a public function attracting
constitutional scrutiny, a writ petition cannot be entertained.
33. This Court notes that private financial institutions, although
operating in a regulated field, remain independent commercial
enterprises whose primary objective is the conduct of business.
Regulatory oversight imposed on them is designed to secure
systemic banking stability, consumer protection, and market
discipline. Such oversight does not convert these entities into public
authorities nor does it clothe their contractual dealings with a public-
law character. Lending under a vehicle loan scheme is a purely
voluntary commercial activity undertaken for profit; it does not
acquire the attributes of a statutory duty merely because the sector is
monitored by regulatory bodies. Consequently, disputes arising from
such lending relationships fall squarely within the realm of private
law.
34. In determining amenability to writ jurisdiction, this Court considers
it apposite to emphasise the distinction between statutory
corporations created to fulfil public functions and private companies
incorporated under the general law for commercial purposes. The
latter are neither conceived as instruments of the State nor entrusted
with public responsibilities. The fact that a financial institution may
cater to a large consumer base or that its services indirectly touch the
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public does not, in itself, endow it with the character of a public
authority. Private interest in its operations should not be confused
with public duty. Therefore, a borrower's grievance concerning the
terms, enforcement, or consequences of a loan agreement does not
metamorphose into a public-law dispute.
35. A writ may be issued against a private body only where the
petitioner identifies a statutory obligation that such body is bound to
perform or demonstrates that the respondent exercises powers of a
public nature affecting corresponding legal rights. This Court
observes that the grant of a loan, the enforcement of security, or the
recovery of outstanding dues flow entirely from contractual
stipulations mutually agreed upon between the parties. No statutory
right is created in favour of either party by virtue of entering into
such financial transactions. Absent the presence of a statutory duty,
the extraordinary jurisdiction of this Court cannot be invoked to
adjudicate complaints arising from alleged non-performance or
improper performance of purely contractual terms.
36. The enforcement actions undertaken by a private lender--whether in
relation to repayment defaults, repossession of hypothecated assets,
or invocation of arbitration--are all matters resting upon contractual
authorisation. These actions do not originate in statutory compulsion
nor do they amount to the exercise of sovereign or quasi-sovereign
power. The mere fact that they may bear significant consequences for
the borrower does not transform them into public duties. A party
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aggrieved by such measures has recourse to the remedies provided
in contract law, consumer law, or arbitration law, as the case may be,
but cannot seek constitutional intervention as though the lender
were exercising public authority.
37. This Court further notes that the structure and governance of such
financial companies reinforce their private nature. Their
management is controlled by shareholders; their capital is privately
held; their operations are conducted independently of government
policy except to the limited extent of regulatory compliance. There is
no governmental control, ownership, or deep and pervasive
supervision in the sense relevant for Article 12 analysis. In the
absence of such attributes, it is impermissible to treat the private
lender as a limb of the State merely because the financial sector is
subject to statutory regulation.
38. The obligations between a borrower and lender arise from the loan
agreement and associated documents such as hypothecation deeds
or arbitration clauses. These are voluntary instruments and do not
acquire statutory force. This Court stresses that a writ of mandamus
cannot be issued to enforce privately created obligations, even if they
are formally documented. What can be compelled through writ is the
performance of a duty imposed by law, not the fulfilment of a
contractual promise. Where the borrower alleges arbitrary, unfair, or
oppressive conduct by the lender, the remedy lies in appropriate
civil proceedings or statutory forums specifically established for
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regulating such disputes, not in the extraordinary jurisdiction of this
Court.
39. If every action of a private lender were to be examined under public-
law principles merely because its business is regulated, the result
would be an unwarranted and expansive intrusion of constitutional
courts into ordinary commercial transactions. Such an approach
would distort the boundaries that separate public-law remedies from
private-law obligations.
40. Recently, in S. Sobha v. Muthoot Finance Ltd.13 the Supreme Court
whilst dealing with a matter pertaining to a similar financial
institution was pleased to hold that:
"9. We may sum up thus:
"(1) For issuing writ against a legal entity, it would have
to be an instrumentality or agency of a State or should
have been entrusted with such functions as are
Governmental or closely associated therewith by being of
public importance or being fundamental to the life of the
people and hence Governmental.
(2) A writ petition under Article 226 of the Constitution
of India may be maintainable against (i) the State
Government; (ii) Authority; (iii) a statutory body; (iv) an
instrumentality or agency of the State; (v) a company
which is financed and owned by the State; (vi) a private
body run substantially on State funding; (vii) a private
body discharging public duty or positive obligation of
public nature; and (viii) a person or a body under liability
to discharge any function under any Statute, to compel it
to perform such a statutory function.
2025 SCC OnLine SC 177
Location: ORISSA HIGH COURT, CUTTACK
(3) Although a non-banking finance company like the
Muthoot Finance Ltd. with which we are concerned is
duty bound to follow and abide by the guidelines provided
by the Reserve Bank of India for smooth conduct of its
affairs in carrying on its business, yet those are of
regulatory measures to keep a check and provide guideline
and not a participatory dominance or control over the
affairs of the company.
(4) A private company carrying on banking business as a
Scheduled bank cannot be termed as a company carrying
on any public function or public duty.
(5) Normally, mandamus is issued to a public body or
authority to compel it to perform some public duty cast
upon it by some statute or statutory rule. In exceptional
cases a writ of mandamus or a writ in the nature of
mandamus may issue to a private body, but only where a
public duty is cast upon such private body by a statute or
statutory rule and only to compel such body to perform
its public duty.
(6) Merely because a statue or a rule having the force of a
statute requires a company or some other body to do a
particular thing, it does not possess the attribute of a
statutory body.
(7) If a private body is discharging a public function and
the denial of any rights is in connection with the public
duty imposed on such body, the public law remedy can be
enforced. The duty cast on the public body may be either
statutory or otherwise and the source of such power is
immaterial but, nevertheless, there must be the public law
element in such action.
(8) According to Halsbury's Laws of England, 3rd Ed.
Vol.30, p.682, "a public authority is a body not
necessarily a county council, municipal corporation or
other local authority which has public statutory duties to
perform, and which perform the duties and carries out its
Location: ORISSA HIGH COURT, CUTTACK
transactions for the benefit of the public and not for
private profit". There cannot be any general definition of
public authority or public action. The facts of each case
decide the point."
41. Applying these principles, this Court concludes that a dispute arising
from the grant of a vehicle loan, its repayment terms, enforcement
actions, or invocation of arbitration remains a private commercial
matter. The borrower does not complain of breach of any statutory
duty, nor is the lender shown to be exercising public functions. The
grievance concerns the manner in which contractual rights were
exercised, which cannot, by itself, ground a writ petition. Article 226
cannot be utilised to restructure or supervise private financial
arrangements.
42. Accordingly, this Court holds that the writ petition is not
maintainable in respect of grievances flowing exclusively from the
contractual relationship between the petitioner's husband and the
private lending institution. The constitutional remedy is not intended
to regulate private commercial conduct nor to serve as an appellate
forum over contractual enforcement mechanisms. In the absence of a
public duty or statutory infraction, this Court cannot intervene in
what is essentially a dispute of private law. Parties must pursue
remedies available under the ordinary civil and statutory framework
governing financial transactions. The writ jurisdiction, being
extraordinary, must remain confined to public-law wrongs and
Location: ORISSA HIGH COURT, CUTTACK
cannot be extended to private lending disputes lacking any public
element.
43. Applying these settled principles, this Court finds that Opposite
Party No.1 is neither a State agency nor an authority discharging
public functions. The loan transaction with the petitioner's deceased
husband was entirely private, contractual, and commercial.
Enforcement of contractual remedies as to whether through
arbitration or recovery measures falls squarely within the domain of
private law.
44. Once it is found that the respondent is not amenable to writ
jurisdiction, grievances relating to alleged procedural irregularities
in an arbitral process cannot be adjudicated under Article 226. The
Arbitration and Conciliation Act, 1996 provides statutory remedies,
including remedies under Sections 16, 34, and 37. The existence of
such alternate efficacious remedies is an additional ground militating
against the exercise of extraordinary jurisdiction.
45. The petitioner's argument that the arbitration was conducted against
a deceased borrower, while serious if true, remains a contractual and
procedural objection that must be raised before the arbitral forum or
in proceedings under the Arbitration Act, not through a writ
petition.
46. Hence, this Court is of the opinion that the Petitioner's grievance, if
any, must be agitated before the appropriate forum in accordance
with law.
Location: ORISSA HIGH COURT, CUTTACK
VI. CONCLUSION:
47. In view of the well-settled position of law and applying the same to
the facts of the present case, where the Opposite Party is a private
finance company, the dispute is purely contractual, alternate
remedies exist, and no public law element is demonstrated herein,
this Court finds no grounds to entertain the Writ Petition.
Accordingly, the Writ Petition is dismissed, leaving it open to the
Petitioner to pursue appropriate remedies under civil law or the
Arbitration and Conciliation Act, 1996.
48. All pending applications, if any, stand disposed of.
(Dr. Sanjeeb K Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the 12th December, 2025/
