Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELALTE JURISDICTION
CIVIL APPEAL NO. 3303 of 2005
Indian Bank …. Appellant
Versus
Godhara Nagrik Cooperative Credit
Society Ltd. and another …. Respondents
WITH
(C.A. Nos. 3336, 3337, 3338 and 3304-3335 of 2005)
J U D G M E N T
S.B. SINHA, J.
1. These appeals involve an interesting question as regards the power of
judicial review of a Superior Court.
2. Respondents herein are cooperative societies registered under the
Cooperative Societies Act and/or their Members.
2
They deposited certain amounts in cash in fixed deposits of Banks
wherefor Fixed Deposit Receipts (FDRs) were to be issued. Such deposits
were made through some so-called Commission Agents of the Banks on
payment of huge commission which is ordinarily not allowed by the
Nationalized Banks.
3. Applications for grant of loans by various persons were filed before
the prescribed authorities of the banks on the basis of the said FDRs.
Allegedly a large number of officers of the banks were involved in a scam
whereby unofficial investments of the said amount were being made.
4. As and when the FDRs matured, the investors requested the Banks for
their encashment. The banks refused to accede thereto stating that the
amount under the FDRs had already been paid by way of loans and, thus, no
further amount was payable. It was contended that a fraud on the banks has
been practiced to which the depositors and the officers of the banks were
parties.
5. Writ petitions were filed. A learned Single Judge of the High Court
opined that serious disputed questions of fact being involved in the said writ
petitions, no relief can be granted to the writ petitioners.
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6. Despite the same, the learned single judge relying on the provisions
contained in Section 35A of the Banking Regulations Act, 1949 directed
constitution of a Committee under the Chairmanship of the Deputy
Governor of Reserve Bank of India or his nominee to go into the matter in
great details. Various powers were delegated in favour of the Committee
including the one that the decision of the Committee shall be final and
binding upon the parties.
A Division Bench of the said Court in an intra court appeal preferred
thereagainst, however, stayed only the operation of some of the clauses of
the said order. The Committee, however, was allowed to function.
A special leave petition filed thereagainst has been dismissed by this
Court with certain observations.
7. The Committee submitted its report. It was found that principally the
officers of the banks were involved in the matter of commission of the
alleged fraud on the Banks.
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Members of the Committee, however, differed in their opinion as to
whether, having regard to the limited scope of the enquiry, any positive
direction could be issued.
8. Relying on and/or on the basis of the report of the Committee, the
Division Bench of the High Court opined that as the writ petitioners were
not parties to the fraud, subject to any other or further orders that may be
passed in the criminal case, appellant-banks should be directed to pay the
amounts under the FDRs to the depositors.
9. Appellants are, therefore, before us.
th
On 5 April 2004, a limited notice was issued by this Court, which is
to the following effect:-
“ Issue notice on the special leave petition limited to
the question as to whether the High Court should have
directed payment having regard to the fact that the
Committee itself had not finally resolved the question of
liability as far as the disputed amount was concerned.
Issue notice on the prayer for interim relief also.”
5
th
This Court in its order dated 10 December, 2004 explained the said
order stating :-
“ The issue which is now required to be resolved is
a narrow one viz. whether the Committee had finally
decided that the amounts payable by the Bank (a) were
the liability of the Bank and (b) if so, what was the
quantum if any, payable by the Bank to the deposits.
Learned counsel appearing on behalf of the respondent
prays for time till after the vacation.
Let the matter appear two weeks after reopening
on a miscellaneous day.
There will be interim order staying the operation of the
impugned order.”
th
However, by an order dated 9 May, 2005, upon hearing the counsel
for the parties, ‘Leave’ was granted, as a result whereof all the contentions
of the parties are now open.
10. Mr. P.P. Rao, learned Senior Counsel appearing on behalf of Bank of
Baroda would submit :-
(i) In a writ petition involving private dispute, no direction
for payment of money in favour of the writ petitioners
should have been issued by the High Court;
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(ii) As the writ petitions involved serious disputed questions
of fact, the High Court should not have entertained the
same;
(iii) Having regard to the fact that the Central Bureau of
Investigation has since submitted a charge-sheet wherein
not only the officers of the banks but also the
commission agents have been found to be guilty of an
offence of conspiracy in committing fraud on the bank,
the judgment and direction of the High Court should be
set aside.
Mr. Sundaram, learned Senior Counsel, appearing on behalf of the
respondents, on the other hand, would contend:
(a) Although the writ petitions were filed for enforcement of a
contract, as the same involved public law character, the writ
petitions were maintainable.
(b) Appellants being ‘State’ within the meaning of Article 12 of
the Constitution of India, they were amenable to writ
jurisdiction of the High Court.
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(c) The writ petitions having not been dismissed in limine, the
High Court was entitled to go into the merit of the matter for
the purpose of arriving at a finding as to whether any case has
been made out for issuance of any writ, direction or order.
(d) In a case of this nature the High Court is entitled to convert a
private dispute into a public interest litigation, the same having
a public ramification by appointing a Committee and act
thereupon, as a consequence whereof, relief in favour of the
writ petitioners/respondents could be granted.
The propositions of law which are undisputed are:-
i) Writ Petitions against the banks being ‘State’ within the
meaning of Article 12 of the Constitution of India were
maintainable;
ii) Writ Petitions involving serious disputed questions of
fact, ordinarily should not be entertained although the
High Court in some cases may enter into disputed
questions of fact.
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The question, however, is as to whether the learned Single Judge,
despite holding that the writ petitions were not maintainable, could have
issued direction for constitution of the Committee.
The powers and functions delegated to the Committee were wide, by
reason whereof for all intent and purport, even judicial power were
delegated.
Let us now consider the question as to whether direction to constitute
such a Committee was legally permissible. Indisputably, the authorities of
the Reserve Bank of India in exercise of their statutory powers conferred
upon them under Section 35A of the Banking Regulation Act could issue
directions for initiating an enquiry into the affairs of the Banks. The Banks
being public sector undertakings could themselves do so and have in fact
done so.
It is one thing to say that the Public Sector Banks having regard to the
provisions of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 should discharge their functions keeping in mind
the larger public interest but ordinarily in the matter of enforcement of
contract, they are to be governed by the terms thereof, which would not be
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amenable to writ jurisdiction of the High Court unless the actions of the
banks are found to be wholly arbitrary and unreasonable.
The core question which arises for consideration in the writ petitions
was as to whether, keeping in view the apprehension in the mind of the
Bank that it has been subjected to fraud by its own officers as also the
apprehension in their mind that the writ petitioners or their agents might
have conspired with the offices of the Banks, was it unfair and unreasonable
in its decision to refuse to make payment? The answer to that question
prima facie must be rendered in the negative. If, however, it is found as of
fact that the writ petitioners-respondents were not parties to the fraud,
whether even in a lis involving private law domain, namely, contract qua
contract, as a trustee of the investors’ money, they may be held to be liable
to refund the amount, is the question?.
Indisputably, whether as a public sector undertakings or otherwise the
banks cannot refuse to accede to the just demand of the investors to pay any
amount lawfully due to them inter alia on the premise that their officers are
guilty of commission of any fraud.
10
It is one thing to say that fraud has been committed by their officers
to cause wrongful loss to the bank but it is another thing to say that the
banks are constructively liable for the acts of their officers.
In given cases, the employors are constructively liable for acts of
negligence on the part of their employees.
The Alter Ego approach adopted in the theory of Corporate liability
which has been applied by the House of Lords in Lennard’s Carrying Co.
Ltd. v.Asiatic Petroleum Co Ltd [1915] AC 705 HL is one such instance.
The facts of the case concerned a cargo claim which Lennards sought to
defend by contending that Section 502 of the Merchant Shipping Act 2894
exonerated the owner from losses arising without his actual fault. The
House of Lords held that they could not rely on that defence since the fault
of the appropriate organ such as the Board of Directors or managing
Director could be attributed to the company.
th
In Farrar’s Company Law, 4 Edn. Page 147, it is stated:
“An employee who acts for the company in the
course of his or her employment will usually bind the
company and his or her knowledge will be attributed to
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the company because he or she is the company for the
purpose of the transaction in question.
This is so even if the employee is acting
dishonestly or against the interests of the company or
contrary to orders but it is not so where the company is
the victimThis is to avoid an obvious contradiction.”
Another instance of the application of the theory of Corporate
Liability is the ‘Attribution Approach’ as adopted by the Judicial Committee
of the Privy Council in Meridian Global Funds Management Asia Ltd. v.
Securities Commission [ 1995] 2 AC 500, [1995] 3 All ER 918.
In that case, two employees of Meridian, had improperly used their
authority to purchase in the name of the company a substantial interest in
Euro-National Corp. Ltd., a New Zealand listed company. Under the New
Zealand Securities Amendment Act 1988, Meridian was required to give
notice of its acquisition to ENC and the Stock exchange. The two
employees knew this but the Board and the managing Director of Meridian
did not. No notice was given. The Privy Council upheld the New Zealand
Court’s in decision holding that Meridian had contravened the law, on the
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premise that the knowledge of the employee would be attributed to
Meridian.
We will, thus, assume for the purpose of this case that the Banks are
constructively liable for acts of their employees. We will also assume that
the Banks are liable to pay the amount under the contract for which the
FDRs were issued.
11. The main question, however, would still remain as to whether in a
case of this nature (which would in turn depend on the finding of fact) as to
whether the petitioners themselves or their agents being party to the fraud,
any direction in the public law domain can be issued. The larger question
would be as to whether the writ petitions having not been found to be
maintainable being purely of private law character, the High Court could
treat it to be one involving a public law domain and could still have private
law remedy available to the writ petitioners?
A writ petition indisputably would be maintainable even in relation to
a matter arising out of contract qua contract.
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12. As has been submitted by Mr. Sundaram that some cases may start on
a private interest but if the court finds involvement of a public law element
therein concerning a large number of people, it may proceed on the basis as
if it was a public interest litigation and appoint a Committee and then grant
relief in favour of the writ petitioners. Whether such an extraordinary case
has been made out herein is the question.
Respondents are cooperative societies. They at the instance of some
agents or the middlemen thought it expedient to invest in Fixed Deposit
Receipts (FDRs) in Bank of Baroda and Indian Bank. The modus operandi
appears to be that the brokers/intermediaries lured a few cooperative
banks/credit societies for placing deposits with the branches of Bank of
Baroda/Indian Bank in and around Surat as also at Bharuch wherefor a
handsome commission/incentive ranging from 3.8 to 25 per cent used to be
given. The Cooperative Societies themselves did not approach the Bank.
All acts were done through the agents. The documents seem to have been
sent through brokers who also delivered to them the Maturity Value
Certificates in lieu of original FDRs or the FDRs/Xeroxed copies, in
addition to delivery of drafts for commission. The commission used to be
paid in cash. In some cases, the original FDRs were retained by the banks.
However, the original documents sent by the cooperative societies to the
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banks in some cases were not available in the offices of the bank but a
different set of documents were replaced in the files. Loans were raised
against FDRs on the basis of such documents mainly for further investment
by private individuals. Funds were withdrawn in cash either directly from
their current accounts or by issuing cheques in favour of some individuals
who reportedly discounted their cheques.
13. The fact that the officers of the banks were involved in the entire
dealings is not in dispute. It is furthermore not in dispute that some
brokers/commission agents were also involved. To what extent, the
authorities of the cooperative banks and/or cooperative societies were
involved and/or in know thereof, however, is not very certain.
Respondents - Cooperative Societies prayed for issuance of a writ of
or in the nature of mandamus or any other appropriate writ, order or
direction quashing and/or setting aside the letter at Annexure A dated 2.4.98
of respondent No. 1. It was furthermore prayed that the respondent Nos. 1
and 2 be directed to honour the FDRs copies of which were annexed thereto
with the interest accrued thereon and to restrain the respondent No. 1 to
appropriate the proceeds of the said FDR and also be further directed to
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honour the FDR with interest accrued thereon on such terms and conditions
which the Hon’ble Court deems fit.
The learned single judge issued the following directions:
“I. A Committee is hereby constituted as under:-
(i) The Deputy Governor of the Reserve Bank of India himself or
his nominee as the Chairman of the Committee.
(ii) One member to be nominated by the Deputy Governor of the
Reserve Bank of India who shall be the officer of the highest
rank in the Reserve Bank of India but subordinate to Dy.
Governor.
(iii) One member from the Bank of Baroda/Indian Bank to be
appointed by the Board of Directors of the concerned Bank
preferably a Chief General Manager or an officer not below the
rank of General Manager.
II. The member from Bank of Baroda would
participate in the meeting of this Committee only
when the cases relating to the Bank of Baroda are
taken up and the member from the Indian bank
shall participate in the meeting of the Committee
only when the cases relating to Indian Bank are
taken up.
III. The Committee may evolve and follow its own
procedure and will also have the power to examine
summon or examine the witnesses.
IV. This Committee shall examine each and every case
on its own merits with reference to the records
desired to be made available and will give its
findings with regard to the amount due and
payable to the concerned petitioners/parties and
the rate of interest. The Bank of Baroda and
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Indian Bank shall inform the Committee in writing
about the undisputed amount with full details.
This Committee shall also go into the question of
the rate of interest payable in case of the
undisputed amount, which is directed to be paid
under this order. It will also be open for the
Committee to opine as to who were the
officers/employees/party responsible for this
conspiracy and fraud.
V. The findings as may be given by the Committee
shall be binding on both the sides and shall be
implemented forthwith.
VI. The petitioners/parties on receipt of any amount as
a result of the finding of the Committee as
aforesaid, shall also give an undertaking to the
concerned Bank before the amount is withdrawn,
that in case as a result of CBI inquiry, it is found
and held by the concerned Court after the trial that
any amount had been withdrawn by any such
party, as a part of the aforesaid conspiracy, etc.
they will return such amount to the concerned
Bank.
VII. The Committee shall decide all these cases within
a period of three months from the date the certified
copy of this order is produced before the Dy.
Governor of the Reserve Bank of India.
VIII.
It will be open for the petitioners/parties to agitate
their grievance, if any, against the orders which
may be passed as a result of the findings of the
Committee constituted under this Court’s order as
aforesaid.
IX. These directions are in addition to and not in
derogation of any legal remedy, which any party
may seek after the report of this Committee.
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X. For the time being, the concerned Banks, i.e. Bank
of Baroda/Indian Bank shall disburse the
undisputed amount, if any, with interest at the rate
of Savings Bank Account to the respective
petitioners/parties within 15 days from the date the
copy of this order is produced before the
concerned Bank. The payment shall be made
through Demand Drafts in the name of the
petitioners Societies/Banks/Depositors. However,
if the Committee decides any rate of interest
higher than the Savings bank Account, the
consequences shall follow.”
The learned single judge opined that there existed disputed questions
of fact in respect whereof no definite finding could be arrived at having
regard to the modus operandi of the persons involved.
14. The private dispute between the parties were, thus, sought to be
converted into a public interest litigation for the purpose of making an
enquiry into the affairs of the bank by a Committee.
The Committee was consisted of the following members:
“(a) Mr. JR Prabhu - Chairman
Banking, Ombudsman, Mumbai
(b) Mr. VS Das, Regional - Member
Director, RBI, Ahmedabad
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(c) Mr. RV Tyar - Member
General Manager,
Bank of Baroda
Or
(d) Mr. S. Arunachalam, - Member
General Manager,
Indian Bank.
As per the judgment of the learned single judge, the Committee
consisted of three members. When the Committee dealt with the cases of
Bank of Baroda, only the representative of Bank of Baroda acted as a
member and when the Committee dealt with the cases of Indian Bank, only
the representative of the Indian Bank acted in the said capacity. The other
members of the Committee were Shri JR Prabhu, Banking Ombudsman,
Mumbai and Mr. VS Das, Regional Director, RBI, Ahmedabad.
15. We have been taken through the report submitted by the Committee.
The Committee did a yeoman job. It went into various aspects of the matter.
It tried to cover as much ground as possible. It noticed the facts leading to
setting up of the Committee. It considered the written submissions as also
the oral submissions of the appellant and the submissions made by the
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respective banks, the officers of the banks, the intermediaries as also the
actions taken by the banks concerned.
Whereas general observations and recommendations by all the
members appear to be unanimous, no unanimity however could be reached
in regard to the question as to what direction could be issued in the matter.
Whereas the Chairman and Regional Director, RBI were of the
opinion that the banks should refund the disputed amounts of deposit to the
depositors; other two members representing the Banks were of the view that
the return of the deposits may amount to double payments to the depositors.
It was opined:
“The Committee is required to examine each and every
case on its own merits with reference to the records and
its findings in regard to amount due and payable to the
concerned petitioner borrowers in terms of the terms of
reference based on the orders of the Gujarat High Court.
The modus operandi in perpetrating the fraud in respect
of all the petitioner depositors has been the same. There
have been only minor variations here and there. Couple
of petitioner depositors has mentioned during their
deposition before the Committee that some of them had
gone to the banks’ branches along with the
middlemen/intermediaries for placing the deposits. The
photographs and specimen signature of all the authorized
signatories of the cooperative societies/cooperative
banks were not available on the banks’ record. The
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banks records also do not reveal that the authorized
signatories had signed the account opening forms and the
loan documents in the presence of the officials of the
banks. The resolutions purported to have been passed
for the purpose of availing of loans by the cooperative
societies/cooperative banks have not been on their
letterheads in almost all cases. In view of these reasons
it has not been considered necessary to differentiate the
cases of the petitioners and the Committee’s
recommendations are uniformly applicable to all the
petitioner depositors.
A Statement indicating the disputed and undisputed
amounts submitted by the two banks to the Committee is
given in Annexure 3. The undisputed amount deposited
with the Gujarat High Court by Bank of Baroda amounts
to Rs. 3.16 crore and interest thereon at Savings bank
rate Rs.29.02 lakh. An undisputed amount of Rs. 16.20
lakh has been remitted to the Income Tax Authority.
The disputed amount of deposits aggregate Rs. 20.00
crore. In the case of Indian Bank, the undisputed and
disputed amounts of deposits aggregate Rs. 72.85 lakh
and Rs. 4.45 crore respectively. The bank has stated that
it has deposited the undisputed amount of Rs.72.85 lakh
with interest of Rs. 1.66 lakh in the Court.
The refund of the deposits to the petitioner depositors by
the banks should, however, be subject to certain terms
and conditions which are as under:
a)
The cooperative societies/cooperative banks should execute
necessary documents as per the banks’ procedure.
b) The banks could take indemnity bonds from persons acceptable
to them apart from the cooperative societies/cooperative banks
before effecting the refund of the disputed amount of deposits.
c) In case at a later date for any reason the amounts are required to
be refunded to the banks by the cooperative
societies/cooperative banks they will have to pay interest at the
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prime lending rates of the bank concerned compounded at half
yearly rest from the date of refund of the deposits by the banks
till the date of repayment by the cooperative societies/
cooperative banks to the two banks.”
Unanimity, however, was arrived at that no interest on the amount of
deposits would be payable. It opined that the officers of the banks were
primarily responsible for perpetration of fraud.
Mr. Rao had taken us through various parts of the report as also the
charge sheet submitted by the C.B.I. to contend that involvement of the
brokers/commission agents appointed by some of the cooperative societies
has also been found both by the Committee as also by the C.B.I. It was also
submitted that in any event most of them were aware of the illegal
transactions which had been going on and that they had directly or
indirectly connived with the officers of the banks in respect of their
activities, which would be apparent from the fact that they used to get a
large amount by way of interest, a portion of which was paid in cash and
which was not even accounted for.
Our attention has also been drawn to the charge-sheet filed by the
Central Bureau of Investigation, wherein Jyotiben, the agent of the
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cooperative societies/bank has also been made an accused. One of the
cooperative societies, it was pointed out, had even authorized her to enter
into negotiations with the Bank.
In the said charge-sheet, it was stated:
“It has been stated by the executive and office bearers of
the society that, we have appointed Jyotiben as the agent
for the purpose of depositing and withdrawing the F.D.
at Surat and to give loan on the F.D. Receipts etc. It is
the say of this Jyotiben that, since there is a big lobby of
industrialists and builders in Surat city, if they are given
the loans on our deposits receipts, they are paying us
24% interest and on the other side, we are getting 11%
interest, and thus, since we have been getting 35%
interest, the deposits were made through them.”
Mr. Sundaram, on the other hand, submitted that the fact that it was
only the officers of the banks who have been found to be primarily liable
and their modus operandi was to grant loan utilizing the said FDRs.
wherefor the cooperative societies had no role to play.
It was urged that in view of the fact that the officers of the banks have
been found to be liable, the cooperative societies should not be punished.
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16. A writ court exercising the power of judicial review has a limited
jurisdiction. A writ petition would lie against a State within the meaning of
Article 12 of the Constitution of India. Indisputably, exercise of jurisdiction
by the High Court is permissible in a case where action of the State is found
to be unfair, unreasonable or arbitrary. The question which should have
been posed by the High Court was as to whether the action of the bank was
so arbitrary so as to invoke the public law jurisdiction. If the answer to the
said question was to be in the negative, the High Court should have refused
to exercise its jurisdiction.
A fraud has been practiced on the banks. Primary accused may be the
bank officers but a conspiracy with them by the outsiders has also been
alleged. The original FDRs only in some cases are available; in most of the
cases they are not. Even the Committee could not decide for as to which
one was the original FDR and which was not. It could not distinguish
between an original FDR and the Xerox copy thereof.
Opinion of the expert thereon might have been received, but the final
verdict thereupon in the cases initiated by the C.B.I. is still awaited.
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17. The law as regards application of the power of judicial review, inter
alia, in the contractual filed stands covered by a large number of decisions.
(See LIC of India & anr . vs. Consumer Education & Research Centre &
ors., [(1995) 5 SCC 482], Sanjana M. Wig (Ms) vs. Hindustan Petroleum
Corpn. Ltd. [(2005) 8 SCC 242], ABL International Ltd & Anr.. vs. Export
Credit Guarantee Corporation of India Ltd & ors.. [(2004) 3 SCC 553], The
D.F.O, South Kheri & ors. vs. Ram Sanehi Singh [(1971) 3 SCC 864]. We,
however, do not think that facts involved in each case and the law laid down
therein need to be discussed at length as there does not exist any dispute in
regard to basic principles laid down therein.
In M/s Hyderabad Commercials vs . Indian Bank & ors. [1991
Supp. (2) SCC 340], this Court held:
“Since the basic facts regarding the unauthorized
transfer of the disputed amount from the
appellant’s account as well as the bank’s liability
was admitted, there was no justification for the
High Court to direct the appellant to file suit on
ground of disputed questions of fact. The
respondent bank is an instrumentality of the State
and it must function honestly to serve its
customers.
Would the ratio laid down therein apply in the instant case? We do
not think so. The question as to whether fraud has been committed by the
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officers of the bank is pending consideration before a competent criminal
court. There are other various disputed questions which are required to be
gone into in the said proceeding. The role played by some of the writ
petitioners – respondents is also in issue. Such a seriously disputed
questions of fact, in our opinion, could not have been gone into by the writ
court.
We would accept the proposition of law as propounded by this Court
in Guruvayoor Devaswom Managing Committee & anr. vs. C.K. Rajan &
ors. [(2003) 7 SCC 546]. In that case it was, inter alia, observed that public
interest litigation procedures may be adopted in a case where initially the
writ petition was filed as a private interest litigation. (See also Ashok
Lanka & anr. vs. Rishi Dixit & ors . (2005) 5 SCC 598 at page 618).
We may in this behalf notice development of law in other jurisdiction.
Abram Chayes in his article on “The Role of the Judge in Public Law
Litigation” Harv. Law. Rev. Vol. 89 (1976) at Pg. 1281 opines that
“Traditionally, adjudication has been understood to be a process for
resolving disputes among private parties which have not been privately
settled.” He thus emphasizes the need for a “Public Law” model wherein
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“the traditional adversary relationship is suffused and intermixed with
negotiating and mediating processes at every point. The judge is the
dominant figure in organizing and guiding the case, and he draws for
support not only on the parties and their counsel, but on a wide range of
outsiders-masters, experts and oversight personnel.” He goes on to give
examples of school desegregation, employment discrimination, and
prisoners’ or inmates’ rights cases as also antitrust, securities fraud and
other aspects of the conduct of the corporate business, bankruptcy and
reorganizations, union governance, consumer fraud, housing discrimination,
electoral reapportionment, environmental management- fields that display in
varying degrees the features of public law litigation.
According to him, The public law litigation model inter-alia has the
following features:
“7. The judge is not passive, his function limited to
analysis and statement of governing legal rules; he is
active, with responsibility not only for credible fact
evaluation but for organizing and shaping the litigation
to ensure a just and viable outcome.
8.The subject matter of the lawsuit is not a dispute
between private individuals about private rights, but a
grievance about the operation of public policy.”
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In Krishna Swami v. Union of India and another With
Raj Kanwar v. Union of India and Another (1992) 4 SCC 605, a
constitutional bench of this court had to decide upon the maintainability of a
writ petition filed under Article 32 against the removal of a Supreme Court
judge without impleading the judge himself as a party to the proceedings.
The court on the role of an investigation committee opined:
“The investigation done by the Committee, thus is to find
whether the alleged misbehavior incapacity has been
proved. Undoubtedly, the public law litigation often
contradicts the premise behind those of private law. In
public law wider public interest it involved over and
beyond he contending parties. It concerns the future and
private law litigation is retrospective in operation.
What the court could do? It could appoint a Committee. But the
decision of the Committee would not have been decisive. The Division
Bench appears to have applied its mind on the report, but in the absence of
any categorical finding that it was the officers of the Banks alone who were
liable, no direction as has been done in the instant case should have been
issued. It may be that in appropriate cases, the court may find the
recommendations made by the Committee acceptable.
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18. But it is, in our opinion, not a public interest litigation in that sense of
the term. The report, however, was not unanimous. The opinion of the
Committee was a divided one on the crucial issue. Two members of the
Committee were of the opinion that whether the amount deposited by the
cooperative banks was received back by them or not, was yet to be
ascertained. We are, therefore, of the opinion that it cannot be said that the
fact finding body, assuming that the same could be constituted, made such
recommendations which could be accepted by the Court without going into
the merit thereof. It is also not a case where any mandatory relief could be
granted in favour of the respondents.
19. Having however said so, we must pose unto ourselves a further
question. Could those cooperative societies which had absolutely no role to
play in the entire episode should suffer in any manner whatsoever? The
cooperative societies/cooperative banks for the purpose of their day-to-day
functioning, require the amount which they have invested in FDRs on their
maturity. Should they wait till the criminal cases are over? Should they be
pushed to institute civil suits? They can indisputably be compensated by
grant of interest. What, however, happens if in the meanwhile in the
absence of the requisite funds being available to them, they find it difficult
to run the day-to-day affairs?
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20. Answers thereto may be difficult to find but it is not a wholly
impossible task. We think that the appellant Bank being a ‘State’ within the
meaning of Article 12 of the Constitution of India with the assistance of
officer(s) of the Central Bureau of Investigation should make all attempts to
ascertain as to which of the cooperative societies/cooperative banks are in
no way involved with the scam, and subject to such precautions as may be
found necessary to be taken, release the amount in their favour.
21. In any event, the quantum of the amount which all the depositors
would have otherwise received, in the event their investment in FDRs is
found to be genuine, should be informed thereabout. Once the liability of
the bank is determined, the bank may invest the said amount in its own
account and issue fresh FDRs therefor. Whereas the bank may keep the
original FDRs with itself, it may issue the duplicate copies thereof to the
eligible cooperative bank. Such an exercise should be completed within a
period of four weeks from date.
22. In the event, the cooperative society intending to avail loan facilities
from the banks for running their business, may approach them which may
apart from usual conditions release the same on a further condition that the
amount of FDR would remain with them and on that basis, loans may be
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granted of such amount. The usual precautions in regard thereto may also
be taken by the Bank(s).
23. We, while saying so, do not intend to lay down any law. These
directions should not be treated to be precedent. We are issuing these
directions keeping in view that the factual scenario obtaining in the case and
that non-release of the amount is likely to enure hardships that may be faced
by the cooperative societies. We would also direct the criminal court to
dispose of the criminal cases pending before them with utmost expedition.
These appeals are allowed with the aforementioned directions. There shall,
however, be no order as to costs.
……………….…..………….J.
[S.B. Sinha]
..………………..……………J.
[Lokeshwar Singh Panta]
New Delhi;
May 16, 2008