Judgement DAS, J. :- A wellknown maxim is often said "honest men dread arbitration more than they dread law suits."Here is a case which has entered this Court in a shape of an appeal arising out of an arbitration matter between the present appellant and the respondents. The appellant herein had challenged the legality and validity of the judgment and order dt. 25-6-83 passed by the Deputy Commissioner, West Siang District, Along refusing to set aside the award dt. 16th April, 1981 passed by the arbitrator (Lt. Col.V. S. Vandari) in an arbitration proceeding between the appellant and the respondent 1. The respondent 2 Union of India is represented by the respondent 1 in this appeal. The learned Deputy Commissioner, West Siang District, Along by the impugned order affirmed the award of the arbitrator and passed the decree by making the same as a rule of the Court. The broad facts leading to this appeal may be summarised hereunder : 2. The appellant, who is a contractor entered into a contract agreement with the Commander 3 BRTF in respect of a contract work for supply of soling stones and broken metal on road side of Along Kaying road between KMO- 14. The total quantity of soling stone required to be supplied by the appellant was 1313 Cft. and broken stone metal 3750 Cft. As per terms of the contract the appellant contractor was to supply the material within a stipulated time which was extended till 3rd April, 1967. The contract work was allotted to the appellant on the basis of his tender dt.28-11-66 for supply of the aforesaid material covering an amount of Rs. 3,41, 894.00 in respect of which the work order dt. 23-12-66 was issued to the appellant contractor. On or about 15-2-67 a letter No. 8062/34/E-8 dt. 15-2-67 was issued by the Commander to the appellant for employing more men and materials for completing the work within time. On or about 11-3-67 the Lt. Commander 3 Border Road Task Force 99 APO informed the petitioner by letter No. 8062/43/E-8 dt. 11-3-67 that no extension would be granted beyond 3rd April, 1967 which was stated to be the last date for completion of the contract work. However, for the best reason known to the Commander 3 Border Road Task Force by his letter No. 8062/146/E-8 dt. 14th Mar. 11-3-67 that no extension would be granted beyond 3rd April, 1967 which was stated to be the last date for completion of the contract work. However, for the best reason known to the Commander 3 Border Road Task Force by his letter No. 8062/146/E-8 dt. 14th Mar. 1967 and without prior intimation to the appellant terminated the contract on the basis of Clause 12 of the agreement. The date of termination was earlier to the date on which the work was executed. On receipt of the order of termination of the contract, however, the appellant submitted his final bill for the work done under the terms of the contract. There was a long silence till 6-11-70 from the side of the respondent No. 1 and only on or about 6-11-70 a letter No. 8062/11/1118 dt. 6th Nov. 1970 was issued by Commander 3 Border Road Task Force to the appellant to agree to refer the matter to the arbitrator as the impugned claim by the appellant was disputed. Therefore, according to the parties a dispute arose which could be referred to a sole arbitrator under Cl.15 of the arbitration agreement. The appellant also agreed to refer the matter as suggested by Commander 3 Border Road Task Force and accordingly the dispute was referred to Lt. Col. R.L. Handa who was appointed as arbitrator to arbitrate the dispute between the parties. On or about 27-2-71 Lt. Col. R.L. Handa who was appointed as a sole arbitrator entered into the reference and issued notice to both the parties, namely, the appellant and the respondent 1, but there was a very little progress in the arbitration proceeding. However, meanwhile, both the parties filed their respective claims and the documents necessary to be referred in the proceeding at the time of hearing the dispute. For more than six years there was no progress in the proceeding and no award was made by the arbitrator. On or about 3rd May, 1977 Lt. Col. R. L. Handa submitted his resignation as arbitrator as he superannuated from the service. Thereafter, on 23rd May, 1977 Lt. Col. D. S. Dogra, Commander 14 BRTF was appointed as arbitrator. Till 12th June, 1980 no progress was made in the arbitration proceeding and no award was passed by Shri Dogra who subsequently on 12th June, 1980 submitted his resignation as arbitrator. Thereafter on 15th July, 1980 Lt. Col. Thereafter, on 23rd May, 1977 Lt. Col. D. S. Dogra, Commander 14 BRTF was appointed as arbitrator. Till 12th June, 1980 no progress was made in the arbitration proceeding and no award was passed by Shri Dogra who subsequently on 12th June, 1980 submitted his resignation as arbitrator. Thereafter on 15th July, 1980 Lt. Col. V.S. Vandari, Commander 14 BRTF was appointed as arbitrator to adjudicate the dispute between the parties. The arbitrator issued notices to the parties about the date of hearing of the arbitration proceeding which was proposed to be taken up in a place at Arunachal Pradesh somewhere in the office premises of the 14 B.R.T.F. On receipt of the letter the appellant contractor wrote to the arbitrator to change the venue of the arbitration sitting and to inform the appellant about the date and place for the sitting of the arbitration proceeding. On receipt of the letter from the appellant, the Officiating Commander by his letter No. ARB/3/BRTF / 25/66-67/146 dt. 13-1-81 informed the appellant about the arbitrators inability to change the venue of the sitting and informed the appellant about the date of holding the arbitration proceeding on 9-2-81. The appellant by his letter dt. 2nd Feb. 1981 addressed to the arbitrator requested the arbitrator to shift the date of hearing of the arbitration proceeding as he was lying ill and bed-ridden and also disclosed the place of hearing with a guideline as to whether it would be necessary for the appellant while attending the arbitration proceeding to obtain any pass or permit and if it so requires to inform the appellant the authority to whom he is to approach for obtaining such pass or permit to enter the place of venue of the arbitration proceeding. However, the appellant did not receive any reply to his letter dt. 2nd Feb.1981 from the arbitrator. Thereafter on 16-4-81the arbitrator passed the award ex parte and issued notices to the parties as required under S.14(1) of the Arbitration Act, 1940 on 3rd May, 1981 intimating both the parties about the passing of the award. It appears from the record that the time for passing of the award was expired long back and till 1-6-81 the arbitrator did not apply to the Court for extension of time to make the award valid. It appears from the record that the time for passing of the award was expired long back and till 1-6-81 the arbitrator did not apply to the Court for extension of time to make the award valid. However, on 1-6-81 the arbitrator made an application to the Court under S.28 of the Arbitration Act for extension of time and also filed the award in the Court of the learned Deputy Commissioner, West Siang District, Along. The learned Deputy Commissioner by his order dated 12-6-81 extended the time for making the award and issued notices on both the parties informing about the filing of the award by the arbitrator. On perusal of the records it appears that no prior notice was issued by the Court before extension of time for making the award valid. On receipt of the notice the appellant appeared before the Court and filed an objection under S.33 read with S.30 of the Arbitration Act, 1940 to set aside the award on various grounds stated therein. The learned Deputy Commissioner upon hearing both the parties by his impugned order dt. 25-6-83 rejected the objection filed by the appellant and made the award a rule of the court and passed a decree to the extent of the amount passed in the award. The learned Deputy Commissioner also issued a direction that the sum of Rs. 26,675.46 paise which is to be paid to the contractor-appellant for cost of the work completed by him shall be deducted from the amount to be realised from the contractor - "appellant. However, there was no such direction in the award of the arbitrator for such deduction. 3. Being aggrieved by the aforesaid judgment and order of the learned Deputy Commissioner in making the award as a rule of the Court and passed a decree with direction to the appellant, the present appeal has been preferred challenging the legality and propriety of the impugned order and also the validity of the award passed by the learned Deputy Commissioner. This is how the dispute arose between the parties. 4. Mr.G.K. Talukdar, the learned counsel for the appellant has challenged the award mostly on two counts, namely, (i) that the award was passed beyond the statutory period of limitation. This is how the dispute arose between the parties. 4. Mr.G.K. Talukdar, the learned counsel for the appellant has challenged the award mostly on two counts, namely, (i) that the award was passed beyond the statutory period of limitation. As per Schedule-I of the Arbitration Act the period of limitation to make an award is prescribed and clause (3) of Schedule -I of the Arbitration Act speaks that the period of making an award by the arbitrator is within 4 months and the arbitrator must complete the award within that period. As no prayer was made for extension of time in Court either by the parties or by the arbitrator himself the award becomes invalid as it was passed beyond the statutory period of limitation. It is further submitted by Mr. Talukdar, the learned counsel for the appellant that the award was passed on 16-4-81 and as soon as the award is passed the arbitrator becomes functus officio. Therefore, he had no jurisdiction to make any application for extension of time almost after two months of the passing of the award. The award was passed on 16-4-81 and the application for extension of time was made on 1-6-81 and the arbitrator being functus officio after the award was made, he had no jurisdiction to make any application for extension of the time for passing of the award or to make the award valid and legal through court process. The learned counsel for the appellant submits that the extension of time as made by the Court under the provision of S.28 of the Arbitration Act being a judicial order, it could not be passed without issuing any notice to the parties on the face of it that the arbitrator became functus officio after passing of the award dt. 16-4-81 and the application for extension of time was made on 1-6-81. According to the learned counsel the order so passed by the Court under the aforesaid circumstances amounts to violation of principles of natural justice and deprived the parties to submit their say in that regard. If that be the position, according to the learned counsel for the appellant, the award must be deemed to be invalid as the order for extension of time was granted without giving any opportunity, to the parties of being heard. If that be the position, according to the learned counsel for the appellant, the award must be deemed to be invalid as the order for extension of time was granted without giving any opportunity, to the parties of being heard. The arbitrator also did not issue any notice to any of the parties as submitted by Mr. Talukdar that such an application was trade in Court on 1-6-81 for extension of time. Therefore, as submitted by Mr. Talukdar, the award made by the arbitrator is invalid in the eye of law being made beyond the statutory period without asking for extension of time during the propess of arbitration or at the time of passing the award. In that context it is further submitted by Mr. Talukdar that the order of the Court extending time under S.28 of the Act is a judicial order and in passing any judicial order the parties should be informed by notice and reasons must be recorded with ground in allowing the extension of time in the nature of the present case. This having been not done and no reasons are recorded in the order of the learned Court, the order for extension of time cannot be said to be valid in the eye of law. The next submission of Mr. Talukdar is that prior to holding of the sitting the arbitrator was requested by the appellant to adjourn the date which was fixed on 9-2-81 due to the ailment of the appellant and also to inform the appellant about the date and the venue as well as the opinion for the requirement of any pass or permit to approach the venue of the arbitration proceeding. This not having been done by the arbitrator nor informed the subsequent date of hearing and passed the ex parte award without intimating the appellant amounts to violation of the principle of natural justice and a legal misconduct on the part of the arbitrator. It is, submitted by the learned counsel for the appellant that even the arbitrator did not inform the appellant as to whether in case of his personal appearance in the place of hearing pass or permit, as the case may be, would be necessary and if so how to obtain those and from whom. It is, submitted by the learned counsel for the appellant that even the arbitrator did not inform the appellant as to whether in case of his personal appearance in the place of hearing pass or permit, as the case may be, would be necessary and if so how to obtain those and from whom. It is further submitted that the place of venue being in Arunachal Pradesh inner line pass was necessary under the law and the appellant ought to have been informed by the arbitrator about the aforesaid position so that the appellant could obtain the inner line permit to reach the place or venue of the arbitration proceeding. The failure on the part of the arbitrator even to inform the appellant about the date and place and of taking up the hearing ex parte in absence of the appellant amounts to illegal misconduct on the part of the arbitrator and the award is liable to be set aside. It is further submitted by Mr. Talukdar that on the face of the award it would be apparent that the arbitrator did not apply his mind nor cared to hear the appellant before passing the award and thereby he misconducted himself. It is lastly submitted by Mr. Talukdar that the learned Deputy Commissioner before whom the objection was filed by the appellant for setting aside the award did not even consider the main contentions raised by the appellant before him challenging the legality and validity of the award. Therefore, the impugned order is liable to be set aside. In support of the contention reliance is placed on the decision of the Supreme Court as reported in AIR 1962 SC 78 Hari Shanker Lal v. Shambhu Nath and also of a decision of the Allahabad High Court reported in AIR 1958 All 568 , B. Bhagwan Din v. B. Bisheshwar Nath. 5. Mr. Chetia, the learned Additional Central Govt. Standing Counsel appearing on behalf of both the respondents has submitted that as the contractor appellant had failed to make himself available before the arbitrator at the time of holding the arbitration proceeding even on any day of the sitting in spite of receipt of notice to that effect, no advantage can be taken on those pleas as raised in this Court by the appellant. The appellant had full knowledge about the place and the date of holding the arbitration proceeding and the plea that no such notice was issued to him nor any opportunity was given to him either to appear or to contest the claim of the respondents cannot be available to the appellant. The next submission of Mr. Chetia is that the appellant knew the venue of the sitting of the arbitrator where the proceeding was taken up. But instead of knowing the venue he made certain immaterial queries to the Arbitrator and the letter addressed to the Arbitrator by the appellant on 2-2-81 was nothing but a false query to delay the proceeding of the Arbitrator. It was well within the knowledge of the appellant about the venue of the sitting of the Arbitrator and also the requirement of the pass or permit to attend the proceeding at Arunachal Pradesh. It is further submitted by Mr. Chetia as regards the information relating to location and/or venue of the sitting of the Arbitrator though the place was not mentioned specifically due to strict secrecy normally to be maintained but it was well within the knowledge of the appellant where the arbitration sitting took place. But the appellant did not make any attempt to appear before the arbitrator on the day of the sitting. It is further submitted by Mr. Chetia that the arbitration proceeding being a continuous one since 1970 the appellant knew the venue of the proceeding and other requirements. With regard to extension of time it is submitted by Mr. Chetia that the Court has ample jurisdiction to extend the time even suo motu and the court can exercise its jurisdiction to extend the time even after passing of the award and at any time while dealing with such objection. The learned Court below, as submitted by Mr. Chetia, having rejected the contention raised by the contractor-appellant and having accepted the award to make it a rule of the court, it is implied that the Court extended the period as required under S. 28 of the Arbitration Act. The further submission of the learned counsel is that the appellant having got all opportunities to contest the award in the court below and having failed to obtain any result in his favour cannot raise the plea as advanced by the learned counsel in this Court. According to Mr. The further submission of the learned counsel is that the appellant having got all opportunities to contest the award in the court below and having failed to obtain any result in his favour cannot raise the plea as advanced by the learned counsel in this Court. According to Mr. Chetia as the appellant did not take any interest in the arbitration proceeding, the Arbitrator had no other alternative than to pass the award ex parte and as such, the award cannot be declared invalid on account of violation of principles of natural justice. The learned counsel has referred to us a decision of Kerala High Court as reported in AIR 1983 Ker 162 P.S. Abdulla v. Director, Forest Research Institute. As regards the plea of misconduct as raised by the appellant Mr. Chetia submits that it was obligatory on the part of the appellant to raise the objection even before the Arbitrator alleging misconduct and the ground of misconduct of the Arbitrator taken subsequently in Court of law cannot be sustained as because according to the learned counsel the appellant is not legally entitled to raise such plea of legal misconduct on the part of the Arbitrator. Reliance is placed by Mr. Chetia on a decision of this Court as reported in (1983) 1 Gau LR 276 Union of India v. M/s. Bharat Builders. In this context it is submitted by the learned counsel that considering the facts and circumstances of the present case and adopting the ratio of the aforesaid decision of this Court it cannot be said that there was any legal misconduct on the part of the Arbitrator because the award was made ex parte. As the award was not a speaking award, the court has no jurisdiction to sit as an appellate court to decide the merits and demerits of the award of the Arbitrator. It is further submitted by the learned counsel that the court below though made some elaborate discussions but in substance accepted the award passed by the Arbitrator and therefore there is no legal scope for the appellant to agitate this matter once again in this Court. 6. It is further submitted by the learned counsel that the court below though made some elaborate discussions but in substance accepted the award passed by the Arbitrator and therefore there is no legal scope for the appellant to agitate this matter once again in this Court. 6. On scrutiny of the aforesaid rival contentions made by the respective counsel of the parties it emerges that the challenge in this appeal is two-fold, (1) as to whether there was in fact an ex parte award in violation of the principles of natural justice on the part of the Arbitrator, and (2) whether the award is liable to be set aside on the ground of legal misconduct on the part of the Arbitrator. Now the question arises as to whether the appellant was informed by the Arbitrator with the details as required by him to avoid violation of principles of natural justice and to pass ex parte award. In this context we will have to consider the nature of the arbitration proceeding. 7. The main object of all submissions to the arbitration is to obtain speedy end of the strife. If it is not likely to be attained and the parties are likely to be subjected to multiplied expenses and interminable delays by the action of the Arbitrator in an arbitration proceeding, the court can interfere and even revoke the authority of the arbitrator. Unreasonable delay without any reason or unavoidable cause may amount to legal misconduct but the Arbitrators failure to make his award within 4 months does not automatically result in the cancellation of the arbitration award or agreement. 8. "Misconduct" is often used in a technical sense as denoting irregularity, and not any moral turpitude, but the term also covers cases where there is a breach of natural justice. Much confusion is caused by the fact that the expression is used to describe both these quite separate grounds for setting aside an award, and it is not wholly clear in some of the decided cases on which of these two grounds a particular award has been set aside. The more difficult question, however, is whether the extent of that irregularity is such as to justify interference by the court either by way of setting aside the award or remitting the award. The more difficult question, however, is whether the extent of that irregularity is such as to justify interference by the court either by way of setting aside the award or remitting the award. The determination of that issue depends upon whether the court is satisfied that there may have been - not must have been - or that this irregularity may have caused - not must have caused - a substantial miscarriage of justice that would be sufficient to justify the setting aside or remitting of the award, unless those resisting the setting aside or remission could show that no other award could properly have been made than that which was in fact made, notwithstanding the irregularity. The Court will not normally review the arbitrators discretion, provided he acts within his authority and according to the principles of justice and behaves fairly to each party. Therefore, legal misconduct is a term which is commonly used in reference to awards. It does not necessarily involve any moral turpitude or dishonesty on the part of the Arbitrator. It is misconduct in the judicial sense of the word and has been described generally to mean an enormous breach of duty on the part of the Arbitrator, however, honest which causes miscarriage of justice. The expression misconduct has a wide import and includes many things but does not necessarily involve an imputation of moral turpitude in the Arbitrator. If substantial miscarriage is done for instance where the Arbitrator refuses to hear evidence upon a material issue and the material accepts (aspects ?) which is beyond jurisdiction and if the Arbitrator behind the back of the party receives evidence against him, this would cover the word and expression misconduct. If the Arbitrator behind the back of the party receives evidence against him the evil is not cured by the Arbitrator even informing him about it. The person who is to be breached by the evidence ought to be present to hear it so that he would be able to meet and answer it. Therefore, it is incumbent on the part of the Arbitrator to follow the procedure at the time of enquiry. It is no doubt true that the Arbitrator is ordinarily free from fetters of adjective law, but that does not make him free from the fundamental principles of justice. Therefore, it is incumbent on the part of the Arbitrator to follow the procedure at the time of enquiry. It is no doubt true that the Arbitrator is ordinarily free from fetters of adjective law, but that does not make him free from the fundamental principles of justice. Though the Arbitrator may not be strictly bound by the rules and procedures observed in Court it does not mean that his procedure should be opposed to natural justice. The basic principle seems to be that where there has been an opportunity afforded to one side to get an advantage with the Arbitrator over the other, either by lack of notice or by the absence of the other side and there is even a remote possibility that the advantage so obtained may have unconsciously influenced the mind of the Arbitrator, the proceedings are vitiated by the breach of the principles of natural justice. The Arbitrator misconceives his duty if he listens to the evidence of one party behind the back of the other who might be interested either in controverting or is legally entitled to controvert it. Though the Evidence Act is not applicable to proceedings before an Arbitrator but he is bound by the rules of evidence that have been prescribed by the Act and the Civil Procedure Code which are attracted in the arbitration proceedings. It is true that even in spite of the notice if one of the parties does not voluntarily appear nor it shows the desire to contest the dispute or the claim of the other as the case may be, an ex parte award may be justified. If the parties are not given proper notice either of the venue and the date of sitting by the Arbitrator and the award is passed behind his back, it would clearly amount misconduct on the part of the Arbitrator. In the present case it appears from record that the appellant made a prayer through his letter dt. 2nd Feb. If the parties are not given proper notice either of the venue and the date of sitting by the Arbitrator and the award is passed behind his back, it would clearly amount misconduct on the part of the Arbitrator. In the present case it appears from record that the appellant made a prayer through his letter dt. 2nd Feb. 1981 to fix another date for taking up the arbitration proceeding instead of 9-2-81 on the ground of his bed-ridden illness and also to inform the actual venue for the sitting of the Arbitrator with further information as to whether the appellant was required to obtain any pass or permit as the case may be, the Arbitrator was silent and did not inform the appellant, and instead, passed the award ex parte. To make the rule of the court of an award and to pass a decree on the terms of the award, the following conditions must be fulfilled (a) that the award has been filed in accordance with S.14 of the Arbitration Act, (b) that the Court has jurisdiction to entertain the application for filing of the award, (c) that the court has given notice to the parties under S.14(2) of the Act, (d) that the time for filing of objections against the award has been expired or such application having been made has been refused and (e) that the court sees no cause to set aside or remit the award. If these conditions are fulfilled, the court can pass a decree in terms of the award. 9. We have perused the impugned order of the learned Deputy Commissioner making the award as a rule of the court. We have noticed one important fact that the learned Deputy Commissioner while accepted the award, directed for deduction of an amount which is to be paid to the appellant for cost of the works completed by him from the amount already assessed by the Arbitrator. In the award such direction is not given. Therefore, in our opinion, this direction ought not to have been passed unless the party in whose favour the award was made approaches the Arbitrator at the time of passing the award. It is true that the Arbitrator is not bound to write a reasoned award. The award may not be a speaking award in its true sense. Therefore, in our opinion, this direction ought not to have been passed unless the party in whose favour the award was made approaches the Arbitrator at the time of passing the award. It is true that the Arbitrator is not bound to write a reasoned award. The award may not be a speaking award in its true sense. If that be the position, the Court cannot sit as a court of appeal over the arbitration proceeding. It is admitted by the learned counsel of both the parties that the award is a speaking award nor a reasoned award. It appears that the learned Court below discussed the award from all sides, gave his reason of acceptance and further issued certain directions in the decree relating to the award. Therefore, in that view of the matter also the impugned order is not acceptable. 10. We have considered the submissions of the respective counsel of the parties, examined the records ourselves and the award passed by the Arbitrator. The Arbitrator passed the award without giving a final information to the appellant or a reply to his query as per his letter dt. 2nd Feb. 1981. It amounts to passing an award behind the back of the parties and in violation of the principles of natural justice. Therefore, the Arbitrator has committed legal misconduct in passing the award. If that be the position, the judgment and order of the Court below in accepting the award and making it a rule of the court must be set aside. From the facts and circumstances of the case and also the materials available on record we irresistibly conclude that the award is invalid on the ground of legal misconduct of the Arbitrator in passing the award in violation of principles of natural justice and without giving any opportunity to the appellant of being heard at the time of sitting of the arbitration proceeding before passing any award. We, accordingly, set aside the impugned judgment and order of the learned Deputy Commissioner, West Siang District, Along in making the award as a rule of the court and set aside the award for the reasons as stated above. 11. In the result, the appeal is allowed but we leave the parties to bear their own costs. We, accordingly, set aside the impugned judgment and order of the learned Deputy Commissioner, West Siang District, Along in making the award as a rule of the court and set aside the award for the reasons as stated above. 11. In the result, the appeal is allowed but we leave the parties to bear their own costs. It is, however, open for the parties to settle the dispute afresh by a fresh arbitration in view of the terms of the contract agreement if otherwise it is permissible. 12. S. N. PHUKAN, J. : - I agree. Appeal allowed. AIR 1989 GAUHATI 60 "Jogendra Nama v. Union of India" GAUHATI HIGH COURT Coram : 2 K. N. SAIKIA AND J. M. SRIVASTAVA, JJ. ( Division Bench ) Sri. Jogendra Nama and others, Petitioners v. Union of India and others, Respondents. Civil Rule No. 1400 of 1987, D/- 6 -1 -1988. (A) Reserve Bank of India Act (2 of 1934), S.20, S.21, S.22, S.23, S.24, S.25, S.26, S.27, S.28, S.29, S.30, S.31, S.32, S.33, S.34, S.35, S.36, S.37, S.38, S.39, S.40, S.41, S.42, S.43, S.44, S.45 - Banking Regulation Act (10 of 1949), S.5, S.6, S.21 - RESERVE BANK OF INDIA - BANKING - LOAN - "Loan Mela" - "Cash Credit Delivery Programme " Scheme formulated by United Bank of India in participation with same other banks for granting loans of Rs. 5,000/- to individuals - Validity of - Held, on perusal of Ground Rules and provisions of the Scheme that the Scheme clearly mentions about credit deposit ratio, pre-sanction scrutiny and pre-lending formalities to be followed strictly as per RBI guidelines - Scheme neither violates RBI guidelines nor Commercial Banking Laws and Practices - Mere fact that earlier Schemes were pending at the time of introduction of this new scheme is no ground to invalidate the Scheme. Banking - Law and Practice of Commercial Bank - Grant of Loans - Loan Mela. (Paras 10, 11, 12 and 18, 19, 20, 21, 22, 23) (B) Constitution of India, Art.14 - LOAN - BANKING - "Loan Mela" - Organisation of loans in the form of a "Loan Mela" - Not objectionable - Mere fact the "helpers" belong to a particular political party is not a ground to object. Banking - Loans - "Loan Mela". The organisation of the loans in the form of a Loan Mela" cannot be objected to. Banking - Loans - "Loan Mela". The organisation of the loans in the form of a Loan Mela" cannot be objected to. When banksfunds are available for granting loans and when individuals are not aware of such facility or such source, if a person helps another in obtaining a form and submitting it for obtaining a loan, it could not be objected to, if such services are rendered by a large number of individuals that also cannot be objected to. When there can be no objection to help rendered by a group of individuals, there should be no objection to such help being rendered at a time in the form of a "Loan Mela", which provides the motivation for such action. No objection can be taken on the ground that the "helpers " belong to a particular political party. (Para 25) (C) Constitution of India, Art.14 - BANKING - LOAN - "Loan Mela" - Distribution of loan forms through a particular political party - Whether discriminatory - Apart from newspaper reports there was nothing in the instant case to verify and hold that the Banks gave all the forms to the particular political party Question not answered. Banking - Loans - Grant of - Loan Mela - Distribution of forms through political party. (Para 26) Cases Referred : Chronological Paras AIR 1981 SC 487 : 1981 SCC 722 32 AIR 1980 SC 1992 32 AIR 1979 SC 1628 32 S. N. Chatterjee, D. P. Kundu and U. B. Saha, for Petitioners; S. N. Chetia and Addl. Senior Central Govt. Standing Counsel, for Respondents. Judgement SAIKIA, C.J. :- The three writ petitioners, who are village artisan, blacksmith and craftsman serially, pray for an appropriate writ cancelling the Loan Mela now in operation in the State of Tripura, restraining the respondents from acting upon the loan application forms distributed by the Congress (I) party, and prohibiting the respondents from proceeding further with the Loan Mela and from distributing further loan application forms by the Congress (I) party and/or any other appropriate orders or directions. They have impleaded as respondents, the Union of India, the Reserve Bank of India, the Indian National Congress (Congress-I), hereinafter referred to as Congress (I), and II nationalised commercial banks, which are wholly owned by the Central Government and the Tripura Gramin Bank. 2. They have impleaded as respondents, the Union of India, the Reserve Bank of India, the Indian National Congress (Congress-I), hereinafter referred to as Congress (I), and II nationalised commercial banks, which are wholly owned by the Central Government and the Tripura Gramin Bank. 2. The Reserve Bank of India, shortly the RBI, it is stated, earlier formulated three schemes for advancing loans to the weaker sections of the community for upliftment of their economic standard, namely, (1) Integrated Rural Development Programme (IRDP) ; (2) Self Employment for Urban Poor (Sepup); (3) Self Employment for Educated Unemployed Youth (SEEUY), and they are being implemented by all the bank branches throughout Tripura. About 45,000 sponsored proposals in the schemes are pending for disposal by payment of loans at different banks in Tripura. 3. While the above 45,000 sponsored applications are still so pending, the United Bank of India formulated another scheme called Accelerated Credit Programme (ACP) but there is nothing to indicate that the Reserve Bank of India approved it. It was subsequently re-named as Cash Credit Delivery Programme (CCDP) and its contents and procedure were finalised on 21-9-87 in a meeting of several participating banks, namely, United Bank of India, UCO Bank, the State Bank of India. The major issues discussed/decided were as under : "(a) it was informed that UBI as a lead bank would be required to organise Cash Credit Delivery Programme for disbursal of loans to the weaker sections inter alia with the objective of increasing the credit deposit ratio in the State. (b)the ground rules prepared for the programme (enclosed vide Annexure-I) were placed, discussed and evolved through the participation of the bankers present in the meeting. (c) the application forms (separately for farm and non-farm sectors) specially designed for the CCDP, were placed before the participants and were approved. It was the feeling of the bankers present in the meeting that such application forms would serve the banks purpose of lending and would minimise their clerical workload. (d) in order to minimise the workload pertaining to maintaining proposals receiving register for such huge number of applications likely to be submitted by the intending borrowers for the CCDP, it was decided that the perforated receipt portion would be kept in a separate file, which would serve the purpose of recording the proposals in the register. No separate proposals receiving register need be maintained. No separate proposals receiving register need be maintained. (e) it was also decided that there would be no limit for distribution of forms, any body approaching bank branches participating in the programme would be provided with application forms. It was particularly emphasised that in disbursing credit to weaker sections the banks must be demonstratively fair and impartial. (f) bank branches would, however, dispose of the proposals (either sanctioned or rejected), after making pre-sanction scrutiny and observing pre-lending formalities, as per RBI guidelines. Reasons for rejection would, however, need to be recorded and the intending borrowers would be informed of the same in due course. (g) it was also decided that banks operating under the programme would make necessary manpower available for such huge programme in consultation with their Head Office /Zonal Office. (h) it was also decided that government sponsored programmes would be given first priority and attempts would be made to dispose of at least 600 proposals per branch positively by 7-11-87." The following ground rules of the CCDP were also finalised : "Area of Operation : The programme will be implemented in all the three districts of Tripura. Convenor Bank : United Bank of India, as the Lead Bank, will organise the programme. Participation : All banks including the Regional Rural Banks and the Tripura State Co-op. Bank will participate in the programme. Physical Target : It will be decided in a meeting of the bankers having regard to the backlog in attainment of various physical programmes under Government-sponsored schemes and the national targets/sub-targets given to the banks, annual action plans and the resources of the banking institutions. Target Group : Small and marginal farmers, agrl. labourers, non-farm workers, artisans, small businessmen, small transport operators, small-scale industries within the weaker sections as defined by the Ghosh Working Group, self employed persons and backward communities, including SC/ST and those belonging to weaker sections. Identification : The applicants will be identified by BDO/Gram Pradhan/MLA/ MP/Gazetted Officer/Commissioner of the Municipality/Member, Tripura Autonomous Council. Any of the above persons authorised will have to sign the identification certificate with his seal. Scheme : Schemes approved by the DRDA/FFDA/NABARD/DIC/SC/ST/ Corporation/KVIC and other development departments of the State Government. Ceiling of Loan Amt. : Loans under this programme to an individual will not exceed Rs. 5,000/- for proposals not linked with subsidy of the Government. Any of the above persons authorised will have to sign the identification certificate with his seal. Scheme : Schemes approved by the DRDA/FFDA/NABARD/DIC/SC/ST/ Corporation/KVIC and other development departments of the State Government. Ceiling of Loan Amt. : Loans under this programme to an individual will not exceed Rs. 5,000/- for proposals not linked with subsidy of the Government. Distribution of application forms : Applications will be accepted in the application form approved by the bankers. Application forms are available from the branches of banks participating in the CCDP. Applications from adopted area of operation of branches or areas allocated in the meeting will only be accepted. Operational Mechanism : 1. Applications received by the banks branches upto 31-10-87 will be only considered for the purpose of this programme. 2. Applications from SC/ST beneficiaries must be supported by SC/ST certificate, which is to be incorporated in the application forms. 3. Applications sponsored by the agencies of the State Government under various antipoverty programme will be accorded priority and disposed of in terms of RBI guidelines. Applications will be dealt with by banks strictly in terms of RBI guidelines relating to priority sector credit with special reference to weaker sections and will further be subjected to pre-sanction scrutiny. All loans proposals must pass the test of viability and must be considered by banks techno-economically feasible. Further, loans covered under the guarantee schemes of the DICGC will only be considered by commercial banks including RRBS for the purpose of this programme. 4. Sanction lists in quadruplicate giving name, brief address, name of the scheme, amount sanctioned with interest rate, category of borrowers (whether SC/ST) is to be prepared and sent to Regional Office/Controlling Office of the banks. 5. Reasons for rejection are to be recorded properly on the body of the applications. Communication of rejection to the applicants should only be done after getting confirmation from Regional Office/ Controlling Offices." 4. It is the petitionerscase that they have come to know from the news reports published in different newspapers in Tripura, West Bengal and Delhi that the President of Tripura Congress Committee (I), Shri Sudhir Mazumdar disclosed at a press conference, inter alia, that the Tripura Pradesh Congress (I) is gearing up for the Loan Melawhich is . It is the petitionerscase that they have come to know from the news reports published in different newspapers in Tripura, West Bengal and Delhi that the President of Tripura Congress Committee (I), Shri Sudhir Mazumdar disclosed at a press conference, inter alia, that the Tripura Pradesh Congress (I) is gearing up for the Loan Melawhich is . expected to be held before the coming Assembly Election and that the State Congress (I) has received about 4,00,000 loan application forms from the banks which will be distributed among the people in all the 60 constituencies of Tripura; that a 5 (five) member committee in each of the 60 constituencies has been set up by the Congress (I) and has been put in charge of distribution of the forms to the people; that these committees will identify the families and go to each house and distribute the said loan application forms ; that the persons will submit the filled up forms to these committees which shall send up to the State Committee which will tender only approvable forms to the All India Committee at Delhi constituted for this purpose headed by the Union Minister of State for Finance, Shri Janardhana Poojary. That Committee will then select the beneficiaries and forward their loan applications to the banks which will disburse the loans. The petitioners further state that the Union Minister for State for Telecommunication, Shri Santosh Mohan Dev, in a public meeting at Agartala has stated that the Congress (I) is determined to hold Loan Mela in Tripura and if the banks employees do not co-operate the party shall open substituted banks in the Circuit House and distribute the forms. 5. The petitioners grievance is that they and many others similarly situated had already applied for loans from banks under the earlier schemes, namely, IRDP, SEPUP, and SEEUY but have not yet been granted loans. It is their case that while Congress (I) has already started distributing loan application forms for Loan Mela (Annexure - E to the petition ), when they approached different bank branches in Tripura to obtain the forms they were told that the forms were not available and that they (the banks) did not distribute such forms and that if the petitioners desired they could obtain forms from Congress (I) office. When the petitioners went to Congress (I) office, they were put several questions including as to whom they intended to vote at the ensuing Assembly election and being not satisfied with their answers no forms were given to them. Hence this petition. 6. When this petition was moved on 22-12-87 and 23-12-87 considering the nature of the subject matter and the parties involved we issued notices to the respondents returnable by 4-1-88. On that date notices were yet to be served on the respondents 2 to 15. Mr. S.N. Chetia for the Respondent No. 1, Union of India, prayed for time but ultimately agreed with Mr. D.P. Kundu who earnestly prayed that the petition may be taken up at this stage as Mr. Chatterjee had come from Delhi for the day only, and, accordingly, it is being taken up for admission without appearance of Respondents 2 to 15. 7. Mr. D.P. Kundu who earnestly prayed that the petition may be taken up at this stage as Mr. Chatterjee had come from Delhi for the day only, and, accordingly, it is being taken up for admission without appearance of Respondents 2 to 15. 7. Mr. Chatterjee submits that the Loan Melacurrently being held in Tripura is liable to be cancelled and the loan application forms for the Mela already distributed or to be distributed by the Congress (I) are liable to be frozen on the inter alia, grounds, namely, that without completely implementing the earlier schemes, the Respondents had no authority to take up the impugned CCDP Scheme and hold the Loan Mela for its implementation; that the CCDP Scheme is invalid as it has not been approved by the Reserve Bank of India ; that the Respondent banks have been violating the instructions of the Reserve Bank of India and the rules of banking as well as the CCDP Scheme itself by abdicating powers and surrendering their functions of distribution of loan application forms and selection of deserving applicants to the Congress (I ); that the bank employees are also not in favour of the CCDP ; that the procedure of distribution of forms and selection of applications through Congress (I) is discriminatory and arbitrary and as such violative of Art.14 of the Constitution; that the granting of loans which amounts to distribution of largesses by the Respondent-banks, who are instrumentalities of the State, through Congress (I) is violative of Arts.14 and 21 of the Constitution; that the granting of loans by the above procedure described by the Congress (I) President of Tripura Shri Sudhir Mazumdar is violative of all rules and canons of banking and the instructions issued by the Reserve Bank of India; and that the impugned CCDP Scheme and its procedure as described by Tripura Congress (I) President is violative of the rule of law and the basic tenets of democracy; that public funds are being utilised for political benefits of a party ; and that this is a public interest litigation and the newspaper reports can be relied upon as those have not been denied by the respondents and the persons concerned. 8. Mr. 8. Mr. S.N. Chetia demurring submits, inter alia, that this petition is entirely based on newspaper reports and has been filed by a political party as a camouflage in the name of the three petitioners who have no grievance ; that the petition does not disclose the necessary particulars even to make out a prima facie case; that no instruction of the Reserve Bank of India or any rule or practice of banking has been shown to have been violated; that no particular order affecting the petitioners interest has been impugned in the petition; that no loan has been shown to have been granted or distributed in violation of any law and in that sense the petition is premature; that the persons who are reported to have made statements relating to the Loan Melaand distribution of forms have not been impleaded and as such their statements cannot be gone into in their absence; that in the scheme it has nowhere been stated that the loans will be granted only to the members of a political party and not to others; that the CCDP scheme does not suffer from any defect or statutory violation; that the forms distributed before 31-10-87 will alone be considered by the banks ; that the petitioners have failed to show that the respondents have delivered the forms to Congress (I) instead of distributing those by themselves through their branches in Tripura; that loans are not largesses outright and the principles of distribution of largesses are not applicable; and that this is a political petition and in view of the impending Assembly election in Tripura this Court may not entertain it at this stage. 9. We make it clear that we are unable to deal with the political aspect of the subject matter of this petition and we shall confine ourselves to the legal aspect only. Accordingly no observation made herein should be interpreted politically. For deciding the tenability of the rival submissions regarding the validity or otherwise of Loan Mela, which is admittedly a recent development involving the banking system of the country, it is necessary to determine its proper legal category and how the Union of India, the Reserve Bank of India and the other respondent-banks are concerned in the Loan Mela transactions. After its proper categorisation, we may apply the appropriate law to the subject. 10. After its proper categorisation, we may apply the appropriate law to the subject. 10. The CCDP Scheme as agreed by the banks mention credit-deposit ratio, presanction scrutiny and the pre-lending formalities as per RBI guidelines, viability tests, techno-economic feasibility, commercial banks, controlling offices of banks. The first questions to be decided are, does the CCDP Scheme violate RBI guidelines and commercial banking laws and practices as has been submitted by the petitioners? How does Reserve Bank stand in relation to the participating banks in the banking system? What are its guidelines ? The banking systems of different countries, says Sayers, in his Modern Banking gravitate towards central banking systems". These systems fall into three parts : the central bank, the commercial banks, and various ancillary institutions dealing with certain restricted types of credit. There is only one central bank in each country. The Reserve Bank of India is the central bank of the country, and it does little, if any, ordinary banking business for the general public, it restricts itself in the main to controlling the operations of the rest of the banking system. The essential function of a central bank is the maintenance of stability of the monetary system of the country. In the words of M.H.De Kock in his Central Banking, a central bank being generally recognised as a bank which constitutes the apex of the monetary and banking structure of its country and which performs, as best as it can in the national economic interest, the following functions : The regulation of currency in accordance with the requirements of business and the general public for which purpose it is granted the sole right of note issue; the performance of general banking and agency services for the State; the custody of cash reserves of commercial banks ; the custody and management of the nations reserves of international currency; the granting of accommodation, in the form of re-discounts or collateral advances, to commercial banks, bill brokers and dealers, or other financial institutions ; the settlement of clearance balances between the banks; and the control of credit in accordance with the needs of business and with a view to carrying out the broad monetary policy adopted by the State. Thus the central bank does not perform such banking transactions as accepting deposits from the general public and lending to or accommodating commercial customers with discounts or advances. Thus the central bank does not perform such banking transactions as accepting deposits from the general public and lending to or accommodating commercial customers with discounts or advances. Those are functions of the commercial banks. 11. The RBI has been constituted under the provisions of the Reserve Bank of India Act, 1934, hereinafter referred to as the Act ", to regulate the issue of Bank Notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. The general superintendence and direction of the affairs and business of the Bank has been entrusted to a Central Board of Directors. The Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest. The RBI has been authorised to carry on and transact several kinds of business specified in S.17 of the Act. The Central Banking Functions of the Bank have been stated in Chapter-III, Ss.20 to 45 of the Act. 12. As defined in S.45A of the Act "banking company" means a banking company as defined in S.5 of the Banking Regulation Act, 1949 and includes the State Bank of India, and subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, any corresponding new bank constituted by S.3 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, and any other financial institution notified by the Central Government in this behalf. The nationalised banks are "corresponding new banks". Under Chapter III-A of the Act, the RBI has power to collect credit information from banking companies, and from non-banking institutions. It may also call for information from financial institutions and give directions to them. Chapter-IV of the Act contains general provisions. Under S.46, the Central Government shall transfer to the RBI rupee securities of the value of five crores of rupees to be allocated by the Bank to the Reserve Fund. It may also call for information from financial institutions and give directions to them. Chapter-IV of the Act contains general provisions. Under S.46, the Central Government shall transfer to the RBI rupee securities of the value of five crores of rupees to be allocated by the Bank to the Reserve Fund. Under S.46-A the RBI shall contribute every year such sums of money as it may consider necessary and feasible to do so to the National Rural Credit (Long Term Operations) Fund and the National Rural Credit (Stabilisation) Fund established and maintained by the National Bank under Ss.42 and 43, respectively of the National Bank for Agriculture and Rural Development Act, 1981. Under S.46-C the Bank shall establish and maintain a Fund to be known as the National Industrial Credit (Long Term Operations) Fund to be utilised for the purpose stated thereunder. The RBI, under S.49, shall publish the Bank rate from time to time. The Bank rate means the standard rate at which it is prepared to buy or re-discount bills of exchange or other commercial papers eligible for purchase under the Act. From the above provisions and practices in respect of RBI we do not find any material to hold that the CCDP is contrary to guidelines of the RBI. The contention has, therefore, to be rejected. 13. The next question is whether the CCDP is violative of commercial banking law and practice. The commercial banks provide the meeting place for lenders and borrowers. They think primarily of profit making. They face competition between one another in the matter of business and cannot afford altruism beyond those of its competitors. They are subjected to control and guidance of the Reserve Bank of India. The essence of banking is the acceptance of withdrawable deposits of money for the purpose of lending or investment. 7 American Jurisprudence, S.2 says : "Strictly speaking the term bank implies a place for deposit of Money. In its more enlarged sense a bank may be defined as an institution, generally incorporated, authorised to receive deposits of money; to lend money and issue promissory notes, usually known by the name of bank notes or to perform some one or more of these functions". In its more enlarged sense a bank may be defined as an institution, generally incorporated, authorised to receive deposits of money; to lend money and issue promissory notes, usually known by the name of bank notes or to perform some one or more of these functions". 7 Corpus juris says that a bank is an association or corporation whose business it is to receive money or deposit, cash cheques or drafts, discount commercial paper, make loans and issue promissory notes payable to bearer called bank notes. 14. While the above are some of the, functions, in a developing society and economy those cannot remain the same for a long time. Newer functions and changing, emphasis are bound to be there. Mr. Jannan in his Banking Law and Practice in India rightly points out that banking is an evolutionary concept and banks often carry on a number of functions besides that of proper banking. The function of receiving deposits from the customers for the purpose of lending or investment, repayable on demand or otherwise is the one function above all other functions which distinguishes banking business from any other kind of business. Bankers business often entails an advance or loan to the customer. Besides the various securities in its portfolic a bank may grant loans on various terms depending on its liquidity and cash reserves. 15. Ordinary banking business, according to Sayers consists of changing cash for bank deposits and bank deposits for cash; transferring bank deposits from one person or corporation to another; granting of loans; giving bank deposits in exchange for bills of exchange, etc. The commercial banks are to maintain liquidity. Liquidity generally means the capacity to produce cash, on demand for deposits. The depositors have the right to withdraw their deposits according to the nature of their accounts. A bank must, therefore, so conduct its business as to maintain liquidity. Cash, however, is an asset which brings no income to the bank. So a commercial bank must at the same time remain liquid and have sufficient volume of business to utilise its deposits. The lower is the cash reserve the lower is the cost of maintaining liquidity. Thus, there is constant competition for usual types of business. 16. The above principles of commercial banking have been embodied in the Banking Regulation Act, 1949 which is an Act to consolidate and amend the law relating to banking. The lower is the cash reserve the lower is the cost of maintaining liquidity. Thus, there is constant competition for usual types of business. 16. The above principles of commercial banking have been embodied in the Banking Regulation Act, 1949 which is an Act to consolidate and amend the law relating to banking. S.6 of this Act enumerates the forms of business in which banking companies may engage. Sub-sec. (1) (a) includes "the borrowing, raising, or taking up of money; the lending or advancing of money either upon or without security; the drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange," etc. Cl.(c) mentions contracting for public and private loans and negotiating and issuing the same. Under sub-clause (2) thereof no banking company shall engage in any form of business other than those referred to in sub-sec.(1). S.11 of the Act prescribes the requirement as to minimum paid up capital and reserves in banking company. Under sub-sec.(2)(b) the banking company shall deposit and keep deposited with the Reserve Bank, either in cash or in the form of unencumbered approved securities, or partly in cash and partly in the form of such securities an amount which shall not be less than the minimum required by cl.(a). S.17 obligates the creation of a reserve fund out of the banks profits. S.18 requires the maintenance of cash reserve. S.20 puts certain restrictions on loans and advances to certain persons on the security of its own shares. S.21 gives power to the Reserve Bank to control advances by banking companies and provides : "21. Power of Reserve Bank to control advances by banking companies - (1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest or in the interests of depositors or banking policy so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as so determined. (2) Without prejudice to the generality of the power vested in the Reserve Bank under sub-sec. (2) Without prejudice to the generality of the power vested in the Reserve Bank under sub-sec. (1), the Reserve Bank may give direction to banking companies, either generally or to any banking company or group of banking companies in particular, as to - (a) the purposes for which advances may or may not be made, (b) the margins to be maintained in respect of secured advances, (c) the maximum amount of advances or other financial accommodation which, having regard to the paid-up capital, reserves and deposits of a banking company and other relevant considerations may be made by that banking company to any one company, firm, association of persons or individual, (d) the maximum amount up to which, having regard to the considerations referred to in cl. (c), guarantees may be given by a banking company on behalf of any one company, firm, association of persons or individual, and (e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given, (3) Every banking company shall be bound to comply with any directions given to it under this section". 17. S.24 obligates the maintenance of a percentage of assets providing that every banking company shall maintain in India in cash, gold or unencumbered approved securities, valued at a price not exceeding the current market price, an amount which shall not at the close of business on any day be less than twenty percent of the total of its time and demand liabilities in India and under sub-sec.(2) thereof vary the percentage. S.35 gives power to inspection of a banking company by the Reserve Bank at any time and on being directed so to do by the Central Government. S.35A empowers the Reserve Bank to give direction where it is satisfied that in the public interest or in the interest of banking policy or to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or to secure the proper management of any banking company generally. S.36 empowers the Reserve Bank to caution or prohibit banking companies generally or any banking company in particular against entering into any particular transaction or class of transaction, and generally give advice to any banking company; to give assistance to any banking company by means of the grant of a loan or advance to it under cl. (3) of sub-sec. (1) of S.18 of the Reserve Bank of India Act, 1934. There is provision for audit of the accounts of banking company. 18. In the welfare State of ours it is natural for the commercial banks to be informed of the social needs. Rural credit is one of the main concerns of the Reserve Bank of India. Indian economy being still predominantly agricultural, rural credit is considered to be important for agricultural economic development of the country. Hence the Reserve Bank has approved various schemes for granting rural credit. There, must, therefore be competition among the different commercial banks for granting loam to the rural agriculturists or petty businessmen of the country. In the matter of granting loans by banks, safety of the money lent as well as the purpose of the loan being achieved are important. The bank has to be satisfied with an intending borrower in these and other relevant respects. There can, therefore, be no question of discrimination between one intending borrower and another if one is rejected on such relevant considerations. A loan granted is not a bounty. 19. The nationalisation of a commercial bank only changes its ownership from private hands to the State; but there is no change in the nature of its business in its essential characteristics. It may be that the nationalised banks may be more informed by the needs of the country at the time but that does not transform the commercial bank into any ancillary financial institution. It will still be concerned with its liquidity, cash reserve ratio, the ratio between its loans and deposits. 20. Loan Melas may help in spreading the message of banking but loans to parties whose credit-worthiness cannot be evaluated is not to be granted. It is common knowledge that banks collect deposits from the depositors and try to deploy these funds in the best possible manner so that the interest of the depositors are safeguarded. 20. Loan Melas may help in spreading the message of banking but loans to parties whose credit-worthiness cannot be evaluated is not to be granted. It is common knowledge that banks collect deposits from the depositors and try to deploy these funds in the best possible manner so that the interest of the depositors are safeguarded. However, the Banks cannot afford to lose sight of their social responsibility thrust on them after nationalisation and the basic principles of banking cannot be allowed to be given a go by. The RBI being the custodian of the countrys financial system should regulate transactions in this regard. 21. The statutory liquidity ratio to be maintained by the scheduled commercial banks is subject to variation by the RBI. This also varies along with the variation in the reserve money owing to variation in the deposits and the need for credit. The CCDPs one of the objections is to maintain the credit-deposit ratio. 22. Granting of loans by the commercial banks irrespective of credit-worthiness of borrowers may result in bad-debts necessitating writing off. According to the form of balance sheet and profit and loss account prescribed in the 3rd Schedule of Banking Regulation Act, 1949 which all banks are required to follow strictly and in accordance with the practices and usages customary among the bankers, the banks are given statutory protection from disclosing the quantum of bad and doubtful debts. All commercial banks including the public sector banks make provisions for writing off bad debts. The Banks are often blamed for falling of credit and deposit ratio and delay in sanction of loans and provision of inadequate working capital. The RBI further expects every commercial bank to advance at least 1% of its total advances during a year to the weakest of the weaker section under "Differential Rate of Interest" (DRI). From the above law and practice of commercial banks we do not find the CCDP to be violative of any of them. The contention is accordingly rejected. 23. The next question is whether the CCDP suffers from any inherent defect resulting in misuse and discriminatory use of public funds to the detriment of the public. From the above law and practice of commercial banks we do not find the CCDP to be violative of any of them. The contention is accordingly rejected. 23. The next question is whether the CCDP suffers from any inherent defect resulting in misuse and discriminatory use of public funds to the detriment of the public. Admittedly, the impugned scheme is agreed upon by the Banks for disbursal of loans with the objective of increasing credit-deposit ratio and the banks are expected to be conscious of their responsibilities and exercise business prudence in the matter of granting loans. As the scheme envisages loans at the rate of Rs. 5000/- only to each individual it is equally to be beneficial to the small artisans and backward sections of the population and this is the avowed purpose of the scheme. Mr. Chatterjee has fairly stated that the scheme itself on its tenor does not show any defect or infirmity. The Ground Rules prepared clearly state that applications received by the banks branches up to 31-10-87 would only be considered for the purpose of this programme, which will be implemented in all the three districts of Tripura. The United Bank of India, as the lead Bank, will organise the programme and all banks including the Regional Rural Banks and the Tripura State Co-op. Bank will participate in the programme. Application will be accepted in the form approved by the bankers. Applicants will be identified according to the procedure laid down in the Ground Rules. The ceiling of loan has been fixed at Rs. 5,000/- for proposals not linked with subsidy of the Government. Applications from Scheduled Caste/ Scheduled Tribes beneficiaries are to be supported by SC/ST certificate. Applications sponsored by the agencies of the State Government under various anti-poverty programmes will be accorded priority and disposed in terms of RBI guidelines. Applications will be dealt with by banks strictly in terms of RBI guidelines relating to priority sector credit with special reference to weaker sections and will further be subjected to pre-sanction scrutiny. All loan proposals must pass the test of viability and must be considered by banks technco-economically feasible. Further, loans covered under the guarantee schemes of the DICGC will only be considered by commerial banks including PRBs for the purpose of this programme. All loan proposals must pass the test of viability and must be considered by banks technco-economically feasible. Further, loans covered under the guarantee schemes of the DICGC will only be considered by commerial banks including PRBs for the purpose of this programme. From the provisions of the CCDP along with the Ground Rules it appears that the Reserve Bank guidelines and control will be very much applicable to the scheme. As we have seen statutorily commercial banks are bound to follow the guidelines and control of the RBI. The Banking Regulation Act also provides for audit of the accounts of the banking companies. If either the banking or financial rules are violated the bank audit will detect those irregularities. There is, therefore, no question of misuse of public funds and discrimination in granting loans. 24. It has been submitted that the loans being granted under the scheme amounted to misuse of public funds for the benefit of a particular political party. However, the scheme nowhere says that loans will be granted to members of one political party only. What has been reported to have been said by Shri Sudhir Mazumdar cannot be verified in his absence. What is reported to have been said by the banks when the petitioners enquired about the forms cannot also be acted upon in absence of the banks themselves. Any violation of any law or statutory provision does not appear to be tenable in view of the fact that the commercial banks, while granting loans, will equally perform the function within the framework and guidelines of the RBI. 25. The next question is whether the organisation of the loans in the form of a Loan Mela itself is objectionable? We are of the view that it would not be so. When banks funds are available for granting loans and when individuals are not aware of such facility or such source, if a person helps another in obtaining a form and submitting it for obtaining a loan, it could not be objected to. If that one cannot be objected to, if such services are rendered by a large number of individuals that also cannot be objected to. If that one cannot be objected to, if such services are rendered by a large number of individuals that also cannot be objected to. When there can be no objection to help rendered by a group of individuals, there should be no objection to such help being rendered at a time in the form of aLoan Mela which provides the motivation for such action. No objection can also be taken on the ground of the helpers being of a political party. 26. The next question is whether distribution of the forms through a particular political party would be discriminatory? To answer this question materials must be there to hold that the lead bank and the other banks gave all the forms to Congress (I) for distribution. Apart from news paper reports, there is no means for verification. The banks and Shri Sudhir Mazumdar are not before us. Not only about the distribution of forms, the entire channel is allegedly being prepared by Congress (I). However, the scheme itself shows that only forms received up to 31-10-87 would be considered by the Bank. If the scheme is faithfully followed only the forms submitted prior to that date would come under the scheme. As regards the statements made by different persons, they having not been impleaded in this case no notice could be served on them and without affording any opportunity to them to state their case, we refrain from expressing any opinion on those statements. 27. The next question is, whether the petitioners have any grievance or whether they are genuinely aggrieved by the CCDP? We categorically asked Mr. Chatterjee whether a direction to the banks to provide loan application forms to the three petitioners would meet the ends of justice; and we have been told that it would not be so as thousands of persons similarly situated are deprived of such forms. Thus, the petition has been filed with altruistic object said to be in the nature of public interest litigation taking the general cause of all such intending borrowers. It is true that public interest litigation is not an adversary type of litigation and social justice has to be done in such cases. However, the fact that the ensuing election in the State of Tripura is impending, has not been denied; and this petition being directed against the Congress (I) has political flavour. It is true that public interest litigation is not an adversary type of litigation and social justice has to be done in such cases. However, the fact that the ensuing election in the State of Tripura is impending, has not been denied; and this petition being directed against the Congress (I) has political flavour. A public interest litigation cannot be equated to a political interest litigation and as the facts stand at present we refrain from considering or expressing anything on the political aspect of the question and we, confine ourselves only to the legal aspect of the matter. 28. The next question is whether there is discrimination in granting largesses? It is true that though loans are not largesses in the strict sense of the term; the granting of loan to an individual does confer some benefit on him and discriminatory granting of loans will be violative of Art.14 of the Constitution. We find no discrimination between individuals or irrelevant or extraneous consideration in this regard. Again, if forms are not available with the banks as stated by the petitioners and they are made available by the banks through extraneous sources and it results in deprivation there may be procedural infirmity in the matter. But in the instant case in the absence of the banks and in the absence of adequate materials it is difficult to hold that the forms were given to the Congress (I) by the banks themselves. Besides, in face of the certificates granted by the Indian Bank, Tripura Gramin Bank, Union Bank of India, UCO Bank, Bank of Baroda, Indian Overseas Bank and the endorsement on the application addressed to Regional Manager of UBI, West Tripura, that no such form could be distributed in this region so far, it appears that these banks have not distributed such forms. However, this does not necessarily mean that forms were supplied either by these banks or by some of her sources to Congress (I). When a form is prescribed it does not necessarily mean the paper on which the form is printed. We cannot hold that it was not possible on the part of the petitioners to prepare and submit such forms as has been prescribed by the Bank. Again, this has to be considered in light of the provision in the scheme itself that only forms received on or before 31-10-87 would be considered under it. We cannot hold that it was not possible on the part of the petitioners to prepare and submit such forms as has been prescribed by the Bank. Again, this has to be considered in light of the provision in the scheme itself that only forms received on or before 31-10-87 would be considered under it. That date is over by now. There is no material to hold that no forms were received before that date. 29. The next question is whether the banks have surrendered their functions? As the banks themselves are not before us and all the certificates produced before us were obtained only on 26-12-87 i.e., after the petition was moved before this Court, we refrain from expressing any opinion on these certificates. There is nothing to show in view of the above certificates that the banks have been surrendering their functions and abdicating their responsibilities under the scheme. As the loans will be granted by the banks and nothing has been shown that the banks have already granted the loans under the extraneous considerations and that they would not grant the loans in accordance with the RBIs instructions, if any, and the rules and practice of banking, no infirmity could be found to the scheme itself on that ground. The contention is to be rejected. 30. As regards the submission that public funds are being utilised for political benefits of certain party, we feel that the loans are meant for the recipients who are the beneficiaries of the scheme and nothing has been shown to indicate that the loans are being granted to the benefit of any political party only. On the other hand, we find that the scheme is likely to be beneficial particularly to the poor and backward sections of the people of Tripura and as such it cannot be attacked on the ground of its benefits being detrimental to any other party. 31. We are also of the view that the fact that earlier schemes were pending while this new CCDP scheme has been accepted by the banks would not invalidate the scheme, inasmuch as it is common knowledge that a bank may have various schemes for granting loans and advances and one would not necessarily exclude the others. No statutory violation has been pointed out in this regard. 32. Next question is whether loans have been granted on extraneous consideration? No statutory violation has been pointed out in this regard. 32. Next question is whether loans have been granted on extraneous consideration? A loan is not largess in the same sense as grant of a contract; inasmuch as the ground of loans is subject to banks rules and practice and the bank has the discretion in the interest of safety and liquidity of the bank and nothing has been shown in this case that discretion has been exercised on extraneous considerations. The decisions in Ramana Dayaram Shetty v. International Airport Authority, AIR 1979 SC 1628 ; M/s Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir, AIR 1980 SC 1992 ; and Ajay Hasia v. Khalid Mujib Sehravardi, (1981) SCC 722 have to be applied to the facts of this case bearing that distinction in mind. The stage for application of this principle has not yet come as the loans admittedly have not yet been granted. On the other hand, we feel that in such matters relating to banking transactions the law and practice of banking and the relevant provisions of the Reserve Bank of India Act, the Banking Regulation Act, and the Companies Act including the provisions for preparation of accounts and their audit, would take sufficient care of the loans granted at the Loan Mela. 33. In the result, for the foregoing reasons, we do not find any merit in this petition and it is, accordingly, rejected at the threshold. Petition dismissed. AIR 1989 GAUHATI 71 "Mahammad Sanoowar Ali v. Asman Ali" GAUHATI HIGH COURT Coram : 1 B. L. HANSARIA, J. ( Single Bench ) Mahammad Sanoowar Ali Majumdar and others, Petitioners v. Asman Ali Majumdar and others, Respondents. Civil Revn. No. 67 of 1981, D/- 18 -2 -1988.* (A) Civil P.C. (5 of 1908), S.115 - REVISION - RES JUDICATA - Revision - Suit dismissed as barred by res judicata -Order is appealable - Revision not maintainable. Even if a suit is dismissed on the ground that it is barred by res judicata, the same has to be regarded as final adjudication of the suit which order would amount to decree and as such an appeal did lie against the impugned order, because of which revisional power of the High Court cannot be invoked. Even if a suit is dismissed on the ground that it is barred by res judicata, the same has to be regarded as final adjudication of the suit which order would amount to decree and as such an appeal did lie against the impugned order, because of which revisional power of the High Court cannot be invoked. (Para 4) (B) Civil P.C. (5 of 1908), O.2, R.2 - CIVIL PROCEDURE - Cause of action in previous suit not forming foundation in subsequent suit - Subsequent suit is not barred. Where the cause of action on the basis of which the previous suit was brought does not form the foundation of the subsequent suit, and in the earlier suit the plaintiff could not have claimed the relief which he sought in subsequent suit, the plaintiffs subsequent suit would not be barred by O.2, R.2. (Para 5) Held on facts that the foundation of two suits being different the suit is not barred under O. 2, R.2. (Para 5) (C) Transfer of Property Act (4 of 1882), S.58(e) - MORTGAGE - English mortgage - No precondition in document that repayment would be on certain date - Transaction is not English mortgage. In a suit for decree of redemption of mortgage relating to land it was averred that the suit land was mortgaged to defendants on 2-3-62 and the contract was embodied in two documents executed on the same date by one of which the properly was absolutely transferred to these defendants and by the second an Ekrarnama was executed by these defendants to re-transfer the suit land. According to the plaintiffs, the transaction was in the nature of an English mortgage. Held that one of the essentials of English mortgage, as would appear from S.58(e) of the T.P. Act, is that the mortgagor has to bind himself to pay the mortgage-money on a certain date. From the facts of the present case it cannot, however, be stated that the plaintiffs had bound themselves to repay the mortgage money on a certain date inasmuch as the Ekrarnama speaks of repayment within a period of 8 years, which originally was five years. It cannot, therefore, be stated that the binding was to repay the debt on a certain date. Hence a decree for redemption of mortgage cannot be allowed. It cannot, therefore, be stated that the binding was to repay the debt on a certain date. Hence a decree for redemption of mortgage cannot be allowed. (Paras 8, 10) Cases Referred : Chronological Paras AIR 1977 SC 1466 : 1977 Lab IC 697 2 AIR 1970 SC 1059 1 AIR 1947 All 334 6 AIR 1944 Lahore 175 6 AIR 1936 Pat 211 7A A.K.A. Laskar, for Petitioners; M.A. Laskar, B.L. Singh and Nur Mahammad, for Respondents. * Against order of A. K. Choudhury, Munsiff No. 1 ,. Hailakandi, D/-30-3-1981. Judgement - The present suit was filed in 1978 praying for a decree of redemption of mortgage relating to the suit land. The case of the plaintiffs, in short, was that the suit land was mortgaged to defendants 1 to 3 on 2-3-62 and the contract was embodied in two documents executed on the same date by one of which the property was absolutely transferred to these defendants and by the second an Ekrarnama was executed by these defendants to re-transfer the suit land. According to the plaintiffs, the transaction was in the nature of an English mortgage. The defendants denied the averments and a plea was also taken that the suit was barred by res judicata in view of the fact that an earlier suit (TS 16/70) filed by the plaintiffs was dismissed on contest which decree was affirmed in an appeal. In the earlier suit the plaintiffs had prayed for specific performance of the agreement relating to re-conveyance of the suit land by relying on the Ekrarnama. The suit was, however, dismissed, so too the appeal arising out of it. 2. The issue relating to res judicata was taken up as a preliminary issue on the prayer of the learned counsel of both the sides. By an order passed on 10-2-81 it was held that the suit was barred by res judicata and the case was fixed for peremptory hearing on 30-3-81. On that date, it was however, felt that in view of the finding relating to res judicata no useful purpose would be served in proceeding with the case. The suit was therefore. dismissed. Feeling aggrieved, the plaintiffs have preferred this revision. 3. On that date, it was however, felt that in view of the finding relating to res judicata no useful purpose would be served in proceeding with the case. The suit was therefore. dismissed. Feeling aggrieved, the plaintiffs have preferred this revision. 3. The revision came up for hearing on 30-8-84 on which date it was stated that the view taken by the Court below that the suit was barred by res judicata could not be upheld. The matter was nonetheless not remanded to the trial Court because both the sides desired that this Court itself should go into the merits to put an end to the litigation between the parties reging at least from 1970. The case was, therefore, fixed for further hearing after four weeks. Further hearing took place on 23-11-84 and by an order passed on that date, the case was remanded to the learned trial Court for reasons given in that order to decide the nature of the transaction in the light of the observations made in the order. The learned trial Court thereafter heard the parties and has come to the conclusion vide his order dt. 15-1-86 that the transaction must be regarded as "mortgage of simple nature". 4. I have heard the learned counsel of both the sides further. It is contended by Shri Nur Mohammad appearing for the opposite parties that the revision itself is not maintainable inasmuch as the suit having been dismissed, though on the ground of res judicata, an appeal lay against the order of dismissal. Shri Laskar however submits that as the learned trial Court had held that the suit was barred by res judicata the revision is maintainable. The submission of Shri Laskar cannot be accepted inasmuch as even if a suit is dismissed on the ground that it is barred by res judicata, the same has to be regarded as final adjudication of the suit which order would amount to decree and as such an appeal did lie against the impugned order, because of which revisional power of this Court cannot be invoked. 5. 5. Despite the fact that the revision is not maintainable, I have deemed it proper to express the views of this Court on the merits of the case also inasmuch as the parties were heard at length on this aspect of the case on many occasions and the matter had even been remanded to the trial court whereafter the parties had led evidence. Before adverting to the merits of the case, an objection taken by Shri Nur Mohammad that the present suit is barred by O.2, R.2 of the Civil P.C. may be disposed of. Though this plea was not taken before the learned trial Court, nonetheless the same being a pure point of law, I have heard Shri Nur Mahammad on this aspect as well. In support of his submission Shri Nur Mahammad has referred to Sidramappa v. Raja Shetty, AIR 1970 SC 1059 . As per this decision, the requirement of O.2, R.2 is that every suit should include the whole of the claim which the plaintiff is entitled to make in respect of a cause of action. If a cause of action enables a person to ask for a larger and wider relief than that to which he limits his claim, he cannot, afterwards seek to recover the balance by independent proceedings. It was, however, observed in this decision that where the cause of action on the basis of which the previous suit was brought does not form the foundation of the subsequent suit, and in the earlier suit the plaint if could not have claimed the relief which he sought in subsequent suit, the plaintiffs subsequent suit would not be barred by O.2, R.2. In the present case, the foundation of the two suits being different, it cannot be held that the present suit was barred by O.2, R.2. The observations made in para 22 of the State of Madhya Pradesh v. State of Maharashtra, AIR 1977 SC 1466 which too are pressed into service by Shri Nur Mohammad do not also show that the present suit was barred by O.2, R.2 inasmuch as what has been stated in that para is that the plaintiff would be barred under this provision only when he omits to sue for or relinquished the claim in a suit with knowledge that he has his right to sue for that relief as well. This principle has no application to the facts of the present case. 6. We now come to the important question as to whether the two documents executed on 2-3-62 read combinedly could be said to constitute an English mortgage instead of an outright sale with an added agreement of reconveyance. Shri Laskar has contended that (1) low consideration for which the property was sold; (2) both the contracts having taken place on the same date; and (3) the agreement to reconvey the land at the same price at which it was purportedly sold would go to show that the transaction was not really a sale outright with an added agreement to reconvey but was in the nature of English mortgage. Learned counsel submits that in finding out the true purport of the two documents the Court must look into the intention of the parties. He has referred in this connection to Thakar Dass v. Tek Chand, AIR 1944 Lahore 175. There is no doubt that in such a matter the intention of the parties would be a very relevant circumstance. In so far as this aspect is concerned, the earlier suit (TS 16/70) filed by the plaintiffs would itself show that according to them the transaction was one of outright sale with an added rider of reconveyance. Shri Laskar, however, urges that the fact that the Ekrarnama was also executed on 2-3-62 would show that the two transactions together constituted a mortgage and he refers to Prag Dutt v. Hari Bahadur, AIR 1947 All 334. In that decision it was held that the two documents with which the Court was seized were evidence of one transaction and the transaction was mortgage by conditional sale and not a sale. The present transaction cannot, however, be regarded as mortgage by conditional sale in view of the proviso added to S. 58(c) of the T.P. Act by Act 20 of 1929 which states that no transaction shall be deemed to be mortgage unless the condition is embodied in the document which effects or purport to effect the sale. As in the present case the condition of reconveyance is not embodied in the document purporting to effect sale, the present transaction cannot be regarded as a mortgage by conditional sale. It is perhaps realisation of this difficulty which had led the plaintiffs to take the stand that the present transaction was an English mortgage. As in the present case the condition of reconveyance is not embodied in the document purporting to effect sale, the present transaction cannot be regarded as a mortgage by conditional sale. It is perhaps realisation of this difficulty which had led the plaintiffs to take the stand that the present transaction was an English mortgage. 7. Shri Laskar has stated that as the reconveyance was agreed at the amount at which the land was sold, the same would show that the transaction was not really an outright sale, as, in case of sale with condition of re-sale after lapse of sometime, the consideration for re-sale would ordinarily be higher. There is undoubtedly some force in this contention. But this factor by itself may not be decisive of the controversy inasmuch as there may be agreements to re-sale property and the price at which it was purchased if the purchaser be in a position to realise some advantage out of the land in the meantime by its usufruct. 7A. As the management of the property was handed over to defendants 1 to 3, Shri Laskar referred to Janaki v. Asad Reza, AIR 1936 Patna 211, wherein it was held that the provision in a mortgage deed for management of the property by mortgagee is a provision which is not inconsistent with English mortgage. This decision cannot assist the petitioner inasmuch as the transaction therein was admittedly a mortgage, the question for determination was regarding the type of mortgage. In the case at hand, what is really required to be decided in the first instance is whether the transaction was of sale outright with a rider to repurchase, or it was one of mortgage. 8. Shri Laskar has contended that the low price at which the transaction took place would support his case of mortgage. In this connection he has referred to the finding of the learned Court below wherein it was stated that the price of per bigha of land on 2-3-62 would have been more than Rs. 334/- per bigha whereas the suit land was sold at R. 303/- per bigha. Of course, the valuation of Rs. 334/- per bigha was in 1956 as it would appear from Exhibit-2 whereas in 1961 it was Rs. 486/- as evidenced by Exhibit-5. It would thus appear that the valuation per bigha in the present case was definitely on the low side. Of course, the valuation of Rs. 334/- per bigha was in 1956 as it would appear from Exhibit-2 whereas in 1961 it was Rs. 486/- as evidenced by Exhibit-5. It would thus appear that the valuation per bigha in the present case was definitely on the low side. But from this factor alone it cannot he held that the present was a case of English mortgage, though this is one of the relevant circumstances for determining the nature of a transaction like the one at hand. What has however, stood in the way of the petitioners in regarding the present transaction as English mortgage is that one of the essentials of English mortgage, as would appear from S.58(e) of the Transfer of Property Act, is that the mortgagor has to bind himself to pay the mortgage-money on a certain date. From the facts of the present case it cannot, however, be stated that the plaintiffs had bound themselves to repay the mortgage money on a certain date inasmuch as the Ekrarnama speaks of repayment within a period of 8 years, which originally was five years. It cannot, therefore, be stated that the binding was to repay the debt on a certain date. 9. Shri Laskars another and final submission is that defendants 1 to 3 were allowed to retain possession of the land to enable them to adjust the usufruct towards interest. Even if this was so, it would speak of the transaction being a usufructuary mortgage, and not an English mortgage, as is the case of the plaintiffs. 10. In view of all that has been stated above, it cannot be held that the present was a case of English mortgage. So the prayer of the plaintiff claiming a decree of redemption of mortgage cannot he allowed. The revision, therefore, stands dismissed. Petition dismissed.