Article 226 writs challenging employee termination by private finance companies are not maintainable absent statutory or public duty.

The respondent was employed as a Branch Head with GIC Housing Finance Ltd., a private finance company.

Following disciplinary proceedings, the company passed an order dated 8 September 2011 terminating his services and directing recovery of the financial loss allegedly caused to the company.

The respondent challenged the termination and sought reinstatement with attendant service benefits by filing W.P. No. 25919 of 2011 under Article 226 of the Constitution.

The Single Judge’s order dated 1 June 2023 was challenged by the company in the present writ appeal.

In appeal, the company raised a preliminary objection that the writ petition was not maintainable because it was a private finance company and did not fall within Article 12 or perform a statutory or public duty.

1. Whether a writ petition under Article 226 is maintainable against a private finance company challenging termination from employment and consequential recovery proceedings.

2. Whether regulation of a private finance company by the Reserve Bank of India or other statutory authorities makes the company an instrumentality of the State or a body performing a public function for the purposes of Article 226.

3. Whether the High Court should adjudicate the merits of the disciplinary action after concluding that the writ petition is not maintainable.

Article 226 permits issuance of writs not only against statutory authorities or State instrumentalities but also against private bodies where enforcement of a statutory obligation or a positive obligation of public nature is sought, as recognised in Andi Mukta S.M.V.S.S.J.M.S. Trust v. V.R. Rudani , (1989) 2 SCC 691.

However, a private company carrying on commercial banking or finance activities is ordinarily not amenable to writ jurisdiction merely because it is regulated by the RBI or other statutory authorities.

Federal Bank Ltd. v. Sagar Thomas , (2003) 10 SCC 733, held that regulatory control over private banking activity does not by itself constitute public duty or State control, although a writ may issue to enforce statutory obligations under enactments such as the Industrial Disputes Act, Minimum Wages Act, or other public statutes.

The Court also relied on Praga Tools Corporation v. C.V. Immanuel , AIR 1969 SC 1306, and the Madras High Court decisions in ICICI Bank Ltd. v. Lakshminarayanan and S. Sundaram v. ICICI Bank Ltd. , which hold that employment disputes involving private companies and contractual service conditions are generally not enforceable through writ proceedings.

The principle was further supported by Chanda Deepak Kochhar v. ICICI Bank Ltd. , where the dispute arising from termination by a private bank was held to remain contractual notwithstanding RBI approval requirements.

The respondent’s challenge concerned his termination from service and the consequential recovery order, both arising from the private contractual employment relationship with GIC Housing Finance Ltd.

He was not seeking enforcement of any statutory duty or public obligation imposed on the company.

Applying Federal Bank , the Court held that the company’s regulation by the RBI and the Government, even if intended to protect public or financial interests, was merely regulatory and did not transform the private finance company into a State instrumentality or a body discharging a public function.

The public-duty principle in Andi Mukta was therefore inapplicable because no statutory or public-law obligation owed by the company to the respondent was identified.

Since maintainability failed at the threshold, the Court considered it inappropriate to examine the merits of the disciplinary action, leaving those questions to the competent forum.

Mere RBI or governmental regulation of the company did not satisfy the public-function or statutory-obligation test.

The order dated 1 June 2023 in W.P. No. 25919 of 2011 was set aside, and W.A. No. 1719 of 2023 was allowed without costs.

The parties were left at liberty to approach the competent forum, which was directed to decide the dispute independently on merits and in accordance with law, uninfluenced by the writ proceedings.