A single judge bench of the Calcutta High Court comprising of Hon'ble Justice Sabyasachi Bhattacharyya, in the case of M/s Pearson Drums & Barrels Pvt. Ltd. v. General Manager, Consumer Education & Protection Cell of Reserve Bank of India & Ors., has held that RBI is recognized as State under Article 12 of the Constitution and thus the Writ petition is maintainable against it.
Brief Background of the Case
The petitioner, M/s Pearson Drums & Barrels Pvt. Ltd is a company that comes within the purview of the Micro, Small and Medium Enterprises Act, 2006 and is engaged in the business of manufacturing and supply of M.S. Barrels to the Oil Sector and various other sectors.
A dispute arose between the Petitioner, a MSME and the IndusInd Bank regarding discount of preparing charge paid by the previous, to the last mentioned, compliant with a forthcoming loan facility.
The Petitioner said that the Bank assured that in case by any reason the sanction did not go through from its end, it would refund the fee. However, when the Petitioner sought refund of the processing fees against delay and non-receipt of final sanction letter, the Bank claimed that the processing fee was non-refundable.
Submission advanced on Behalf of Petitioner
Learned counsel for the petitioner submited that it was clearly mentioned in the email demanding processing fees that if the sanction did not go through from the bank’s end, the bank would refund the processing fees. Since the fresh sanction issued by the bank was delayed and defeated the purpose of the credit facilities and in view of the several deviations from the in-principle sanction, the petitioner refused to accept such fresh sanction. Thus, it was submitted that in view of the bank having failed to adhere to the terms and conditions of the in-principle sanction, the refusal regarding such sanction was from the bank’s end.
It was submitted further that the clause regarding non-refundability of the processing fees, which found place in the fresh sanction, was subsequently inserted and did not find place in the original in principle sanction. In view of the petitioner having refused to accept such fresh sanction, no question of applicability of such clause to the petitioner can arise.
Submission on Behalf of Respondents
It was submitted by the learned for respondent nos. 1 to 3 that the decision taken by the SLIIC Sub-Committee on November 18, 2016, which recommended that 75 per cent of the processing fee should be refunded to the petitioner, was not binding on the concerned Bank, being respondent no.4. Respondent nos. 1 to 3 contend that the framework for revival and rehabilitation of MSMEs by the Reserve Bank of India, which was constituted to look into the problems of MSMEs, only contemplated suggestive/advisory decisions of the SubCommittee of SLIIC. Such Sub-Committee, by virtue of Memo No. 209/SLB/PS-17 dated March 8, 2017, was subsequently discontinued. That apart, it is submitted that, in the present case, the suggestions of the said Sub-Committee could not be considered on a footing equivalent with RBI guidelines or statutory directions
Learned counsel appearing for the respondent no.4-Bank submitted that it was clearly stipulated in the email dated September 29, 2015, requiring the petitioner to pay processing fees, that the same would be refunded only if the sanction did not go through from the Bank's end. In the present case, however, it is the petitioner who refused to accept the sanction granted by the Bank.
It was argued by the respondent no.4-Bank that the processing fee was an "upfront" payment and was utilized by the petitioner for taking necessary steps to process the application for loan made by the petitioner, getting approval of the relevant credit committee and drawing up and issuing the fresh sanction. Hence, there is no scope of refund of such fees on the petitioner's refusal to accept the fresh sanction
Learned counsel paid reliance on Federal Bank Limited Vs. Sagar Thomas and others, reported at (2003) 10 SCC 733 and it was argued by learned counsel appearing for the respondent no. 4-Bank that a writ petition under Article 226 of the Constitution is not maintainable against private banks.
Reasoning & Decision of the Court
The Court stated that even private banks cannot seek refuge of being non-State actors, for the purpose of challenging maintainability of a writ petition against them, as their functions pertain to discharge of public duties.
It was ruled by the bench that:
"Since the Reserve Bank of India is an instrumentality of the State, it comes squarely within the meaning of "State" as contemplated in Article 12 of the Constitution.Thus, the writ petition is maintainable."
Moreover, while giving the judgement it was ruled that "the functions discharged by the respondent no.4-Bank [IndusInd Bank] are of a public nature and, as such, pertain to the discharge of public duties."
The Bench denied the application of Principle laid down in the case Federal Bank Limited v. Sagar Thomas & Ors., (2003) 10 SCC 733 in present case which concludes that writ petition is not maintainable against private banks under Article 226
On a perusal of the entire material on record, the Bench came to a finding that the IndusInd Bank, while discharging its public duty which is within the domain of the State to discharge, acted de hors its own promise of refund on which the petitioner had acted.
It was thus held that such actions on part of the Bank debars it by the principle of estoppel from refusing to refund the processing fees. It observed,
"The Bank cannot now resile from its stand, which is revealed from a conjoint reading of the in-principle sanction letter and the e-mail asking for processing fees, that the entire processing fees would be refunded in the event the sanction did not go through from the end of the respondent no.4 "by any reason"."
Further it was directed by the Court to refund the entire processing fees of Rs.14,27,850/- to the petitioner within 30 days from date. In default, the respondent no.4 shall pay interest at the rate of 6 per cent per annum on the aforementioned amount, that is, Rs.14,27,850/- till the date of payment of the refund.
Case Details
CaseTitle : M/s Pearson Drums & Barrels Pvt. Ltd. v. General Manager, Consumer Education & Protection Cell of Reserve Bank of India & Ors.
Counsels:
For Petitioner(s) : Mr. Nilendu Bhattacharya, Ms. Arunima Lala, Mr. A.K. Upadhyay
For Respondent(s) : For the respondent nos. 1, 2 and 3 : Ms. Suchismita Chatterjee, Mr. Malay Kumar Seal, For the respondent nos. 4, 5 and 6 : Mr. Snehashis Sen, Mr. Abhishek Banerjee
Bench : Sabyasachi Bhattacharyya, J.
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