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2001 DIGILAW 861 (KAR)

Karnataka Bank Limited v. Rekha Rao

2001-11-29

N.K.PATIL, R.V.RAVEENDRAN

body2001
JUDGMENT R.V. Raveendran, J.—The appellant (also referred to as the 'Bank') is a company incorporated under the Companies Act, 1913. It is a Banking Company in the private sector governed by the Banking Regulation Act, 1949. The Articles of Association of the Bank confer the power of appointment, of clerical staff and subordinate employees, on its the Board of Directors and its Chairman concurrently. The Reserve Bank of India has issued some advisory instructions to the Private Sector Banks, in the matter of recruitment of clerical and other staff. 2. The appellant-bank made recruitments to some posts in clerical cadre during the years 1988, 1993 and 1995. In that behalf it issued advertisements in the newspapers inviting applications from qualified candidates. It also held written tests and on the basis of the performance in the written test, invited candidates for interview and made final selections. 3. The Respondents 1 and 2 in Writ Appeal No. 8549 of 1996 were unsuccessful candidates in regard to the 1988 recruitment. Respondents 1 to 7 in Writ Appeal Nos. 8541-47 of 1996 were the unsuccessful candidates in regard to recruitments in 1993 and 1995. Respondent No. 1 in Writ Appeal No. 8548 of 1996 was an unsuccessful candidate in regard to 1995 recruitment. They filed Writ Petition Nos. 25386 of 1991, 23935-941 of 1995 and 16490 of 1995 respectively for (i) a declaration that the selection process of Appellant for appointments to clerical vacancies were illegal; (ii) for directions to the appellant to make fresh selections strictly in accordance with the norms stipulated by the Reserve Bank of India; and (iii) for a direction to the Reserve Bank of India to hold an enquiry into the alleged irregularities committed by appellant in the matter of selection of candidates to the clerical cadre. They contended that the appellant-bank was an 'Authority' falling within the meaning of in Article 12 of the Constitution of India performing public duties and functions and therefore amenable to the writ jurisdiction of this Court. 4. The petitions were resisted by the appellant-bank contending that the writ petitions were not maintainable against it in regard to the reliefs sought and that there was no irregularities in making the selection. 4. The petitions were resisted by the appellant-bank contending that the writ petitions were not maintainable against it in regard to the reliefs sought and that there was no irregularities in making the selection. The Bank contended that it did not owe any statutory obligation or public duty towards the applicants for employment; that the process of recruitment to the clerical cadre in a private sector bank did not involve any fundamental right or statutory right and therefore applicants for employment, who are not selected did not have legal right enforceable in a writ proceedings. 5. The Reserve Bank of India which was made a Respondent in the writ petitions submitted that recruitment of staff in private Sector Banks was a matter within the exclusive discretion of the respective bank and any guidelines issued by the Reserve Bank in that behalf were only recommendatory and not binding on such Private Sector Banks. 6. Learned Single Judge of this Court disposed of the said petitions by a common order dated 23.8.1996. Having regard to the decisions rendered in Writ Petition No. 26230 of 1991 (decided on 28.7.1994) and Writ Petition No. 32143 of 1995 (decided on 4.3.1996) holding that the Bank was not 'State' under Article 12, it was conceded by writ Petitioners before the learned Single Judge that the Bank was not an 'Authority' under Article 12. Learned Single Judge held that any guidelines issued by Reserve Bank of India, in regard to the matters of employment in private sector banks were not statutory in character and any violation thereof did not give any legal right to the aggrieved applicants to approach the High Court under Article 226 of the Constitution of India. However, purporting to follow the decisions of the Supreme Court in Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust and Others Vs. V.R. Rudani and Others, AIR 1989 SC 1607 and Unni Krishnan, J.P. and others etc. etc. Vs. State of Andhra Pradesh and others etc. etc., AIR 1993 SC 2178 , the learned Single Judge held that though the appellant was not 'State' within the meaning of Article 12, a writ can be issued against it, a Private Sector Bank, in exercise of jurisdiction under Article 226, as such Banks should be deemed to discharge public duties, in view of the provisions of Banking Regulation Act, 1949. On merits, as the posts were already filled, he did not propose to interfere with the appointments already made. He therefore disposed of the petitions with a direction that if there are any vacancies in the Bank, in the clerical cadre, it was open to the Bank to call the writ Petitioners for a written test and follow the procedure in regard to appointment which they normally follow; and that if any of the writ Petitioners had already appeared for a written test, the Bank should call them for interview if they fell under the norms for calling them for interview. The learned Single Judge made it clear that the said direction was issued, not on the proof of allegations of irregularities made by the writ Petitioners, that if the Petitioners are qualified they should be called for written test and interview. 7. Being aggrieved, the Bank has filed these appeals. On the rival contentions, the following questions arise for consideration: (1) Whether the acts of a private sector Bank, relating to recruitment to its clerical cadre, amount to discharges any public duty or public function and therefore can be subjected to challenge under Article 226 of the Constitution Of India. (2) Whether a Private Sector Bank carrying on Banking activity can be said discharge public duties. (3) Having held that there was no irregularity in the selection process, whether the learned Single Judge was justified in issuing the above directions. 8. We may first refer to the expanded frontiers of Article 226 which provides that writs can be issued to 'any person or authority' for the 'enforcement of any of the fundamental rights and for any other purpose'. 8.1 In P.D. Shamdasani Vs. Central Bank of India Ltd., AIR 1952 SC 59 , the Supreme Court held that the provisions of Article 19 dealing with right to freedom and its setting in part III of the Constitution clearly show that the Article was intended to protect those freedoms against State action (other than in the legitimate exercise of its power to regulate private rights in the public interest) and not intended to prevent wrongful individual acts or to provide protection against merely private conduct. That is, where a fundamental right of a citizen is infringed by a private person or body (as contrasted from the State or its instrumentalities), the remedy of the aggrieved person is by an action under ordinary law in Civil Court and not by initiation of a writ proceedings. 8.2 In The Praga Tools Corporation Vs. Shri C.A. Imanual and Others, AIR 1969 SC 1306 the Supreme Court held: No doubt, Article 226 provides that every High Court shall have power to issue to any person or authority orders and writs including writs in the nature of habeas corpus, mandamus, etc., or any of them for the enforcement of any of the rights conferred by Part III of the Constitution Of India and for any other purpose. But it is well understood that a mandamus lies to secure the performance of a public or statutory duty in the performance of which the one who applies for it has a sufficient legal interest. Thus, an application for mandamus will not lie for an order of reinstatement to an office which is essentially of a private character nor can such an application be maintained to secure performance of obligations owed by a company towards its workmen or to resolve any private dispute.... Therefore, the condition precedent for the issue of mandamus is that there is in one claiming it a legal right to the performance of a legal duty by one against whom it is sought.... It is, however, not necessary that the person or the authority on whom the statutory duty is imposed need be a public official or an official body. A mandamus can issue, for instance, to an official of a society to compel him to carry out the terms of the statute under or by which the society is constituted or governed and also to companies or corporations to carry out duties placed on them by the statutes authorising their undertakings. A mandamus would also lie against a company constituted by a statute for the purpose of fulfilling public responsibilities. A mandamus would also lie against a company constituted by a statute for the purpose of fulfilling public responsibilities. The Company being a non-statutory body and one incorporated under the Companies Act there was neither a statutory nor a public duty imposed on it by a statute in respect of which enforcement could be sought by means of a mandamus, nor was there in its workmen any corresponding legal right for enforcement of any such statutory or public duty. The High Court, therefore, was right in holding that no writ petition for a mandamus or an order in the nature of mandamus could lie against the company. In our view once the writ petition was held to be misconceived on the ground that it could not lie against a company which was neither a statutory company nor one having public duties or responsibilities imposed on it by a statute, no relief by way of a declaration as to invalidity of an impugned agreement between it and its employees could be granted. The High Court in these circumstances ought to have left the workmen to resort to the remedy available to them under the Industrial Disputes Act by raising an Industrial Dispute thereunder. The only course left open to the High Court was therefore to dismiss it. No such declaration against a company registered under the Companies Act and not set up under any statute or having any public duties and responsibilities to perform under such a statute could be issued in writ proceedings in respect of an agreement which was essentially of a private character between it and its workmen. The High Court, therefore, was in error in granting the said declaration. 8.3 In Ajay Hasia and Others Vs. Khalid Mujib Sehravardi and Others, AIR 1981 SC 487 and Central Inland Water Transport Corporation Limited and Another Vs. Brojo Nath Ganguly and Another, AIR 1986 SC 1571 it was held that even a private body or a corporation may however be included within the definition of 'State' under Article 12, if it acts as an 'agency' or 'instrumentality' of the State. Brojo Nath Ganguly and Another, AIR 1986 SC 1571 it was held that even a private body or a corporation may however be included within the definition of 'State' under Article 12, if it acts as an 'agency' or 'instrumentality' of the State. 8.4 In Rudani's case (Supra), the Supreme Court considered the question whether the management of a College receiving aid from Government, being a trust registered under the Public Trusts Act was amenable to the writ jurisdiction of the High Court and held as follows: If the rights are purely of a private character no mandamus can issue. If the management of the college is purely a private body with no public duty mandamus will not lie.... Article 226 confers power on the High Courts to issue writs for enforcement of the fundamental rights as well as non-fundamental rights. The words "Any person or authority" used in Article 226 are, therefore, not to be confined only to statutory authorities and instrumentalities of the State. They may cover any other person or body performing public duty. The form of the body concerned is not very much relevant. What is relevant is the nature of the duty imposed on the body. The duty must be judged in the light of positive obligation owed by the person or authority to the affected party. No matter by what means the duty is imposed, if a positive obligation exists mandamus court be denied...we may point out that mandamus cannot be denied on the ground that the duty to be enforced is not imposed by the statute. Commenting on the development of this law, professor De Smith states: "To be enforceable by mandamus is public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter, common law, custom or even contract. (Judicial Review of Administrative Action 4th Edition Page 540). We share the view. The judicial control over the fast expanding maze of bodies affecting the rights of the people should not be put into water tight compartment. It should remain flexible to meet the requirements of variable circumstances. Mandamus is a very wide remedy which must be easily available to reach injustice wherever found. We share the view. The judicial control over the fast expanding maze of bodies affecting the rights of the people should not be put into water tight compartment. It should remain flexible to meet the requirements of variable circumstances. Mandamus is a very wide remedy which must be easily available to reach injustice wherever found. (emphasis supplied) The Supreme Court held that employment in educational institutions receiving aid from the Government is not devoid of public character, as such employment were not purely of a private character, but has a super-aided protection by University decisions creating a legal right-duty relationship between the staff and the management; and therefore a mandamus can be issued to the Trust to pay arrears of salary, PF and gratuity in accordance with the Rules framed by the University. The above was reiterated in Unnikrishnan's case, by Mohan J, in his concurring judgment. 8.5 In LIC of India and Another Vs. Consumer Education and Research center and Others, AIR 1995 SC 1811 , the Supreme Court held: The arms of the High Court is not shackled with technical rules of procedure. The actions of the State, its instrumentality, any public authority or person whose action bear insignia of public law element or public character are amenable to judicial review and the validity of such an action would be tested on the anvil of Article 14. (emphasis supplied) 9. The decision in RUDANI was clarified in several decisions. We may refer to a few of them. 9.1 In Sri Konaseema Co-operative Central Bank Ltd., Amalapuram and Anr. Vs. N. Seetharama Raju, ( AIR 1990 AP 171 ) the Full Bench of the Andhra Pradesh High Court held thus: We are, therefore, of the opinion that paragraph 21 in Rudani cannot be understood as laying down a general proposition that a mandamus lies to enforce a non-statutory contract. Indeed, in paragraph 14 it was affirmed that, if the rights sought to be enforced are purely of private character, no mandamus can issue. It was also observed that where there is no public duty imposed upon a body, a mandamus would not lie. Indeed, in paragraph 14 it was affirmed that, if the rights sought to be enforced are purely of private character, no mandamus can issue. It was also observed that where there is no public duty imposed upon a body, a mandamus would not lie. The statement in paragraphs 21 must, therefore, be read consistent with what is stated in paragraphs 14, and if the judgment is read as a whole and consistent with the decisions specifically referred to, and affirmed therein, it only means that for a mandamus to issue, there must be a public duty. All that was stated was that such public duty need not necessarily be imposed by a statute; it can be imposed by common law, custom, or even a statutory contract. (emphasis supplied) 9.2 In Pesi Shroff Vs. State of Maharashtra and Others, AIR 1993 Bom 384 a Division Bench of the Bombay High Court held thus: This takes up to the second face of the preliminary objection viz., whether, even though the Turf Club is not a "State", writ would lie against it under Article 226. It is true that Article 226 does not restrict the ambit of writ jurisdiction to the State but extends also to "any person" and that too not only for the enforcement of right conferred by Part III but also for "any other purpose". The law on the point of writ jurisdiction under Article 226 is crystalised due to judicial pronouncements made from time to time, Writ under Article 226 can be issued for the enforcement of (i) fundamental rights and so also (ii) general legal rights. The expression 'for any other purpose' does not mean any purpose which the High Court pleases. It means the purpose for which any of the writs could, as per the well established principles, issued.... "Any other purpose" means enforcement of legal rights and performance of any legal duty. Legal rights mean legally enforceable rights and not purely personal rights and/or personal contract having no statutory force. 9.3 The decision of the Supreme Court in VST Industries Ltd., Vs. VST Industries Worker's Union ( AIR 2000 SCW 4566 ) related to a case where the workers union filed a writ petition seeking a writ of mandamus to treat the employees working in the canteen of the Appellant's factory as employees of the Appellant, which was a company incorporated under the Companies Act, 1956. VST Industries Worker's Union ( AIR 2000 SCW 4566 ) related to a case where the workers union filed a writ petition seeking a writ of mandamus to treat the employees working in the canteen of the Appellant's factory as employees of the Appellant, which was a company incorporated under the Companies Act, 1956. The High Court held that writ petition would lie against a management of a private company, as establishment of a canteen and its maintenance was a statutory requirement; and when the employees of the canteen seek a direction to the company to treat them as the employees of the company, they are calling upon the company to discharge a public duty. The Supreme Court negatived the said decision, after considering the principles laid down in RUDANI, holding that a public duty is one that is owed to the public in general and not specific to any person. The following observations of the Supreme Court are relevant: ...If merely what can be considered a part of the conditions of service of a workman is violated then there is no justification to hold that such activity will amount to public duty. Thus, we are of the view that the High Court fell into error that appellant is amenable to writ jurisdiction. 9.4 In State Bank of India Vs. Antony, ( 2001 (2) KLT 316 ), a Division Bench of the Kerala High Court followed the decision in VST Industries while considering the question whether the orders passed in the course of disciplinary proceedings by a private sector banks could be challenged in writ proceedings. The Court held, that such Banks are not "Authorities" within the meaning of Article 12 of the Constitution Of India and even if a writ would against the said Bank in the discharge of any public function, disputes relating to disciplinary proceedings cannot be said to relate to a public duty and therefore a writ petition is not maintainable. 10. Though no limits are placed on the powers of the High Court under Article 226 (except territorial), the power should be exercised in accordance with well established principles. 10. Though no limits are placed on the powers of the High Court under Article 226 (except territorial), the power should be exercised in accordance with well established principles. They are in this context, are as under: (a) A writ petition under Article 226 of the Constitution is maintainable, where a person's fundamental or legal right is infringed by (i) State or its instrumentalities; or (ii) a private person or private body, in exercise of a public duty [imposed either by Statute or contract or custom] or in the performance of a public function. (b) An aggrieved cannot seek any remedy under Article 226 against a private person or private body, alleging infringement of a fundamental right or legal right, if (i) the private person or private body against whom the grievance is made, does not discharge any public duty or perform any public function; or (ii) the act complained of is by a private person or private body, not in the course of performance of a public duty or a public function (even though such a private person or private body may at other times or in other capacities may exercise public duties or perform public functions). In a nutshell, a writ petition can be maintained against a private individual or a private body, if the grievance is against the action of such private person or body, in exercise of a public duty or performance of a public function, and not otherwise. 11. 'A public duty' is one in the discharge of which the public i.e., the community at large is interested, as affecting their legal rights and liabilities. Of course, 'public' or 'community' does not necessarily or always mean all the citizens of the Country or the State, but may also refer to a defined class of citizens. A duty will not be a 'public duty' if it is to be performed to the benefit of a specified person or persons. On the other hand, a 'public function' is a function traditionally reserved for the State. A private person is said to discharge a public function, if the private person performs a function that is so traditionally reserved for the State. Carrying on trade or business or profession or employing persons or doing acts in connection with or incidental to any trade or business or profession, is not performance of a public duty or a public function. 12. Carrying on trade or business or profession or employing persons or doing acts in connection with or incidental to any trade or business or profession, is not performance of a public duty or a public function. 12. In this case, the appellant is a private sector bank. It carries on business of banking. The recruitment of clerical cadre is in connection with the business of the bank. Neither its business nor its activities relating to the recruitment of any clerk or other staff is in exercise of a public duty or performance of a public function. They are purely private in nature. 13. The writ Petitioners in filing the writ petitions, wrongly assumed that (a) the appellant is an authority; (b) that the suggested guidelines by Reserve Bank to private sector banks are binding statutory directions; and (c) that the fundamental rights guaranteed under Articles 14 to 16 of the Constitution Of India is available to them as against the appellant-Bank. The first two assumptions have been negatived by the learned Single Judge and they are not re-agitated in these appeals. The correctness of the third assumption was not specifically considered by the learned Single Judge. But he has recorded a finding that the appellant-Bank discharges a public duty in making recruitment, without any discussion. Thus we have to infer that he has also assumed, if we may say so with respect, wrongly, that the writ Petitioners can enforce the fundamental rights enshrined in Articles 14 to 16 against the appellant. The fundamental rights enshrined in the conditions are of two kinds. The first kind is the natural fundamental rights which are recognised in any civilised society (e.g., right to life, personal liberty and freedoms) which if infringed, can be enforced against the State in a writ proceedings, and against private persons, in the Civil Courts. The second kind is the special fundamental rights conferred by the Constitution which are available and enforceable only against the 'State' as defined in Article 12 (for e.g., rights in matters of public employment). The learned Single Judge has overlooked the fact that fundamental rights conferred by Articles 14 to 16 are not enforceable against a private person and body and discrimination is prohibited only in State action and not in actions of private citizens. The learned Single Judge has overlooked the fact that fundamental rights conferred by Articles 14 to 16 are not enforceable against a private person and body and discrimination is prohibited only in State action and not in actions of private citizens. Therefore, even if there is any irregularity in selection by the appellant, the remedy of writ Petitioners is not by a writ proceedings alleging discrimination, but by action in a Civil Court based on contract, statute or the principles of estoppel, if available. 14. As no public duty or public function is involved, in regard to selection of persons by the appellant to its clerical cadre, and as the appellant is not a 'State' under Article 12 of the Constitution Of India, the only inescapable conclusion is that the writ petitions filed by the private Respondents are not maintainable against the appellant-bank. 15. In view of our answer to the first and second questions, the third question does not survive for consideration. These appeals are allowed. The order dated 23.8.1996 in Writ Petition Nos. 23935-941 of 1995, 16490/1995 and 25386 of 1991 is set aside. The said petitions are dismissed as not maintainable. Parties to bear their respective costs.