Punjab-Haryana High Court
M/S Gautam Trading Co And Others vs Idbi Bank Limited And Another on 30 January, 2025
Author: Anupinder Singh Grewal
Bench: Anupinder Singh Grewal
Neutral Citation No:=2025:PHHC:013903-DB
CWP No.2586 of 2025 (O&M)
118 IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
CWP No.2586 of 2025 (O&M)
Date of Decision: 30.01.2025
M/S GAUTAM TRADING CO. AND OTHERS .....Petitioners
Versus
IDBI BANK LIMITED AND ANOTHER ........Respondents
CORAM : HON'BLE MR. JUSTICE ANUPINDER SINGH GREWAL
HON'BLE MR. JUSTICE DEEPAK MANCHANDA
Present: Mr. Mukesh Rao, Advocate and
Mr. Shubham Aneja, Advocate for the petitioners.
Mr. Tajender Joshi, Advocate and
Mr. Rampal Kohli, Advocate for the respondent-Bank.
*****
ANUPINDER SINGH GREWAL, J. (Oral)
The petitioners are seeking a direction to the respondents to
upgrade the loan account of the petitioners to a standard loan account. They
have also challenged the demand notice dated 16.10.2024 (Annexure P-5)
issued by respondent No.1 under Section 13(2) of the SARFAESI Act,
2002.
2. Learned counsel for the petitioners submits that the action of
the respondents in not accepting the request of the petitioners for up-
gradation of the loan account is unreasonable and in violation of Clause
4.2.5 of the Master Circular-Prudential norms on Income Recognition, Asset
Classification and Provisioning pertaining to Advances, issued by the
Reserve Bank of India in exercise of its power under Sections 21 & 35-A of
the Banking Regulation Act, 1949.
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3. After hearing learned counsel for the petitioners, we are of the
considered view that this petition challenging the action of respondent No.1
in initiating the proceedings under the SARFAESI Act would not be
maintainable as respondent No.1 is a private bank and does not fall under
the definition of 'State' as set out in Article 12 of the Constitution of India.
Reference can be made to the judgment of the Supreme Court in the case of
Federal Bank Ltd. vs. Sagar Thomas, (2003) 10 SCC 733, wherein it was
held that a merely because a private company is carrying on commercial
activity of banking, that by itself would not make it a statutory obligation or
public in nature so as to bring it within the scope of writ jurisdiction. The
relevant extract thereof is set out hereunder:-
"32. Merely because the 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 of or commercial
activity of banking, discharge any public function or public duty.
These are all regulatory 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. 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 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 acquiring authority. 33. For the discussion held
above, in our view, a private company carrying on banking
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business as a scheduled bank, cannot be termed as an institution
or 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
to ensure such activity carried on by private bodies work within a
discipline, do not confer any such status upon the company nor
puts 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. 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."
4. Furthermore, the petitioners have an alternative remedy of
approaching the DRT, which has not been availed by them. It is settled law
that where an efficacious remedy under a statute is available, the High Court
ordinarily should not exercise its writ jurisdiction. Reference can be made to
the judgment of the Supreme Court in the case of Phoenix ARC Private
Limited vs. Vishwa Bharati Vidya Mandir & Ors., (2022) 5 SCC 645,
wherein it has been held that writ petition would not be maintainable against
the action of the private financial institution. The relevant extract of the
judgment is reproduced hereunder:
"12. Even otherwise, it is required to be noted that a writ petition
against the private financial institution - ARC - appellant herein
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under Article 226 of the Constitution of India against the proposed
action/ actions under Section 13(4) of the SARFAESI Act can be
said to be not maintainable. In the present case, the ARC proposed
to take action/ actions under the SARFAESI Act to recover the
borrowed amount as a secured creditor. The ARC as such cannot
be said to be performing public functions which are normally
expected to be performed by the State authorities. During the
course of a commercial transaction and under the contract, the
bank/ ARC lent the money to the borrowers herein and therefore
the said activity of the bank/ ARC cannot be said to be as
performing a public function which is normally expected to be
performed by the State authorities. If proceedings are initiated
under the SARFAESI Act and/or any proposed action is to be taken
and the borrower is aggrieved by any of the actions of the private
bank/ bank/ ARC, borrower has to avail the remedy under the
SARFAESI Act and no writ petition would lie and/or is
maintainable and/or entertainable. xxx xxx xxx."
5. It is trite that in the event of alternative remedy, the writ
jurisdiction would be exercisable only under exceptional circumstances.
Consequently, we are dismissing this petition as it is not maintainable. We
are not expressing any opinion on the merits of the controversy. However,
the petitioners shall be at liberty to seek recourse to the alternative remedy
in accordance with law.
(ANUPINDER SINGH GREWAL)
JUDGE
(DEEPAK MANCHANDA)
30.01.2025 JUDGE
sandeep Whether Speaking/Reasoned : Yes/No
Whether Reportable : Yes/No
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