BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED : 08/02/2006 CORAM : THE HONOURABLE MR. JUSTICE A. KULASEKARAN and THE HONOURABLE MR. JUSTICE S.K. KRISHNAN Writ Appeal No. 87 of 2005 and W.A.M.P. No. 106 and 167 of 2005 Nadar Mahajana Sangam, Madurai through its General Secretary For and on behalf of shareholders of Tamilnad Mercantile Bank Ltd .. Appellant Versus 1. Reserve Bank of India Central Office Department of Banking Operation Development Centre-I World Trade Centre Cuffee Parade Bombay - 400 005 2. The Tamilnad Mercantile Bank Ltd through its Chairman Registered Office 57, V.E. Road Tuticorin - 628 002 3. V. Gopal Rao 4. RP. Sarathy 5. MK. Srinivasan .. Respondents Appeal under Clause 15 of Letters Patent against the Order dated 28-01- 2005 made in WP No. 3716 of 2004 on the file of this Court. !For Appellant ... Mr. S. Sivashanmugam ^For Respondents ... Mr. V. Karthikeyan for Mr. R. Sankaranarayanan for R2 :JUDGMENT
A. KULASEKARAN, J
The appellant is the petitioner in WP (MD) No. 3716 of 2004 filed for
issuance of Mandamus forbearing the respondents 1 and 2 herein from effecting
transfer or allow the respondents 3 to 5 to deal with 95418 shares of the second
respondent/Bank from in any manner. The said writ petition was dismissed by the
learned single Judge on 28.01.2005, hence the present writ appeal.
2. The learned counsel appearing for the appellant submits as follows:-
The appellant herein is a society registered under the Societies
Registration Act. The second respondent/Bank is a scheduled bank incorporated
under the provisions of Companies Act. It is stated that the writ petition has
been filed by the appellant herein to protect the interest of the members of
their Sangam, who are the main subscribers of the second respondent/Bank, when
attempts were made by the respondents 2 to 5 herein to transfer 95418 shares to
third parties contrary to the guidelines issued by the first respondent and that
the respondents 2 to 5 are violating the guidelines issued by the first
respondent pertaining to transfer of shares; that on 12.03.2004 in the 81st
Annual General Meeting of the second respondent bank, so many shareholders were
prevented from attending the meeting on the ground that only power of attorney
holders are entitled to attend the same; that despite requests made to record
their objections, nothing has been done; that the first respondent/Bank
prevented 33% of the shareholders of the bank from participating and voting in
the said meeting on the other ground that a case in O.S. No. 479 of 1995 on the
file of District Munsif, Tuticorin, filed by the power of attorneys to restrain
the bank from preventing the respondents 3 to 5 from exercising their voting
right in the Annual General Meeting was decreed; that an appeal in C.M.A. No. 3
of 1996 has been filed before the Sub-court, Tuticorin which was later withdrawn
in collusion with the respondents 3 to 5; that the present directors of the
second respondent/Bank are again planning to alienate 95418 shares, which
represents 33% of the total shares to various persons and benamies, if such an
act is allowed, it will cause irreparable loss and hardship to the appellant and
the interest of the depositors, clients and employees of the second
respondent/Bank will be affected; that the first respondent by order dated 13-
08-2004 rejected the transfer of the said shares of seven individuals; that the
respondents 3 to 5 are taking steps to transfer the shares once again; that the
intention of the respondents 3 to 5 to effect transfer of shares is contrary to
the guidelines issued by the first respondent and therefore the appellant finds
no other alternative except to file the above said writ petition, but the
learned single Judge dismissed the same following the decision reported in
Federal Bank Limited vs. Sagar Thomas and others (AIR 2003 Supreme Court 4325,
which has not totally excluded the jurisdiction under Article 226 of the
Constitution of India and prayed for allowing the writ appeal.
3. The learned counsel appearing for the second respondent submits that
the writ petition is not at all maintainable in law or on facts. The writ
petition seeks to set at naught powers of attorney executed by certain
shareholders appointing the respondents 3 to 5 herein as their duly constituted
agents and such relief is contractual in nature as it is between two
individuals, hence, the writ petition invoking the provisions of Article 226 of
the Constitution of India to either annul or to nullify such contract is not
maintainable; that the appellant is neither a vendor nor the principal who
executed the power of attorney appointing the respondents 3 to 5 as agents,
hence, it is not a aggrieved person; that the petitioner being a stranger to
contract cannot maintain a civil suit, however, writ petition is not at all
maintainable; that the original vendors executed irrevocable powers of attorney
appointing the respondents 3 to 5 as their duly constituted power of attorney
agents and authorised them to deal with the shares as a absolute discretion;
that the respondents 3 to 5 filed a suit in O.S. No. 479 of 1995 for injunction
restraining the second respondent Bank from in any manner preventing them,
jointly or severally, exercising all or any powers including the right to vote
and other anciliary rights at the Annual General Meeting or other meeting of the
bank; that the said suit came to be compromised and a decree dated 03.10.1996
was passed to that effect, which became final and binding on the parties to the
suit; that the bank also filed Civil Suit No. 836 of 1998 before the High Court,
Madras for declaration that seven companies, which have purchased the shares are
neither the legal nor equitable owners of the shareholders and also to declare
that the powers of attorney become inoperative and that the decree passed in
O.S. No. 479 of 1994 is inoperative and not binding as the suit was dismised as
not pressed; that subsequently, the first respondent refused to acknowledge the
transfer of shares in favour of the seven companies, hence, the transfer of the
shares remain unresolved and prayed for dismissal of the writ appeal.
4. The learned single dismissed the writ petition filed by the
appellant herein on the ground that the same is not maintainable in law.
5. It is necessary to find out as to whether the writ petition filed by
the appellant herein is maintainable in law.
6. In this case, the appellant herein alleged that the first
respondent, having refused to acknowledge transfer of the shares, the second
respondent cannot be permitted to effect the transfer. In the normal
functioning of the private banking company, there is no participation or
interference of the State or its authorities. The statutes have been framed
regulating the financial and commercial activities so that the fiscal
equilibrium may be kept maintained and not get disturbed by the malfunctioning
of such companies or institutions involved in the business of banking. These
are all regulatory measures for the purpose of maintaining healthy economic
atmosphere in the Country. Such regulatory measures are provided for other
companies also as well as industries manufacturing goods of importance.
Otherwise, these are purely private commercial activities. It hardly makes any
difference that such supervisory vigilance is kept by the Reserve Bank of India
under a statute or the Central Government. Even if it was with the Central
Government in place of the Reserve Bank of India it would not have made any
difference. It is only in case of malfunctioning of the company that occasion
to exercise such powers arises to protect the interest of the depositors,
shareholders or the company itself or to help the company to be out of the
woods. In the times of normal functioning, such occasions do not arise except
for routine inspections etc., with a view to see that things are moved smoothly
in keeping with fiscal policies in general. Besides taking care of such
interest, as mentioned above, there is no other interest of the State to control
the affairs and management of the private companies. Such private companies
would normally not amenable to the writ jurisdiction under Article 226 of the
Constitution.
7. In this context, it is necessary to refer to the below mentioned
judgments, indeed, one of the judgments was also referred by the learned single
Judge.
8. In the decision reported in (Federal Bank Ltd., vs. V. Sagar Thomas
and others) AIR 2003 Supreme Court 4325, it was held in Para Nos. 25 and 26
thus:-
“25. A company registered under the Companies Act for the purposes of
carrying on any trade or business is a private enterprise to earn livelihood and
to make profits out of such activities. Banking is also a kind of profession
and a commercial activity, the primary motive behind it can well be said to earn
returns and profits. Since time immemorial, such activities have been carried
on by individuals generally. It is a private affair of the company though case
of nationalized banks stands on a different footing. There may, well be
companies, in which majority of the share capital may be contributed out of the
State funds and in that view of the matter there may be more participation or
dominant participation of the State in managing the affairs of the company. But
in the present case, we are concerned with a banking company which has its own
resources to raise its funds without any contribution or shareholding by the
State. It has its own Board of Directors elected by its shareholders. It works
like any other private company in the banking business having no monopoly status
at all. Any company carrying on banking business with a capital of five lacs
will become a scheduled bank. All the same, banking activity as a whole carried
on by various banks undoubtedly has an impact and effect on the economy of the
Country in general. Money of the shareholders and the depositors is with such
companies, carrying on banking activity. The banks finance the borrowers on any
given rate of interest at a particular time. They advance loans as against
securities. Therefore, it is obviously necessary to have regulatory check over
such activities in the interest of the company itself, the shareholders, the
depositors as well as to maintain the proper financial equilibrium of the
national economy. The Banking companies have not been set up for the purposes
of building economy of the State on the other hand such private companies have
been voluntarily established for their own purposes and interest but their
activities are kept under check so that their activities may not go wayward and
harm the economy in general. A private banking company with all freedom that it
has, has to act in a manner that it may not be in conflict with or against the
fiscal policies of the State and for such purposes, guidelines are provided by
the Reserve Bank so that a proper fiscal discipline, to conduct its affairs in
carrying on its business, is maintained. So as to ensure adherence to such
fiscal discipline, if need be, at times even the management of the company can
be taken over. Nonetheless, as observed earlier, these are all regulatory
measures to keep a check and provide guidelines and not a participatory
dominance or control over the affairs of the company. For other companies in
general carrying on other business activities, may be manufacturing other
industries or any business, such checks are provided under the provisions of the
Companies Act, as indicated earlier. There also, the main consideration is that
the company itself may not sink because of its own mismanagement or the interest
of the shareholders or people generally may not be jeopardized for that reason.
Besides taking care of such interest as indicated above, there is no other
interest of the State to control the affairs and management of the private
companies. The care is taken in regard to the industries under the Industries
(Development and Regulation)) Act, 1951 that their production which is important
for the economy may not go down yet the business activity is carried on by such
companies or corporations which only remains a private activity of the
entrepreneurs/ companies.
26. Such private companies would normally not be amenable to the writ
jurisdiction under Article 226 of the Constitution. But in certain
circumstances a writ may issue to such private bodies or persons as there may be
statues which need to be complied with by all concerned including the companies.
For example, there are certain legislations like the Industrial Disputes Act,
the Minimum Wages Act, the Factories Act or for maintaining proper environment
The Air (Prevention and Control of pollution) Act 1981 or Water (Prevention and
Control of Pollution) Act, 1974 etc., or statues of the like nature which fasten
certain duties and responsibilities statutorily upon such private bodies which
they are bound to comply with. If they violate such a statutory provision a
writ would certainly be issued for compliance of those provisions. For
instance, if a private employer dispense with the service of its employee in
violation of the provisions contained under the Industrial Disputes Act, in
innumerable cases the High Court interfered and have issued the writ to the
private bodies and the companies in that regard. But the difficulty in issuing
a writ may arise where there may not be any non-compliance or violation of any
statutory provisions by the private body. In that event a writ may not be
issued at all. Other remedies, as may be available, may have to be resorted
to.”
9. In the decision rendered by a Division Bench of this Court reported
in (Formation of Indian Network Marketing Association, represented by is
President Mr. P.J. Karthikeyan, Chennai vs. M/s. Apple F.M.C.G. Marketing
Private Limited, represented by its Chief Executive Officer Mr. R. Eric, Chennai
and others), it was held inPara Nos. 5, 7, 9, 10 and 11 thus:-
“5. In our opinion, this writ appeal is not maintainable as the
appellant cannot have any personal grievance in the matter, and at best only its
members can have any grievance.
7. In Indian Sugar Mills Association v. Secretary to Government, AIR
1951 All (FB), a full bench of the Allahabad High Court held (vide paras, 10 and
11)
“para 10. The further argument is that any person, whether his interests
are directly affected or not, can file an application challenging any Act of the
Legislature or the order of the Government on the ground that it is ultra vires.
In this connection we cannot do better than quote the decision of the learned
Judges of the Supreme Court of the United States in Commonwealth of
Massachusetts vs. Andrew W. Mellon, 262 U.S. 447:67 Lawyers Education 1078,
Sutherland, J. who delivered the opinion of the Court quoted with approval the
remarks of Thomson, J. with whom Story, J concurred which were as follows:-
“It is only where the rights of persons or property are involved, and when
such rights can be presented under some judicial form of proceedings, that
Courts of justice can interpose relief.”
Dealing with the question whether a single tax payer can challenge the
enforcement of a Federal Appropriation Act on the ground that it was invalid and
would increase the burden of his taxes, the learned Judge observed:
“His interest in the moneys of the treasury partly realised from taxation
and partly from other sources-is shared with millions of others; is
comparatively minute and indeterminable; and the effect upon further taxation on
any payment out of the funds so remote, fluctuating, and uncertain that no basis
is afforded for an appeal to the preventive powers of a Court of equity… If
one tax-payer may champion and litigate such a cause, then every other tax-payer
may do the same, not only in respect to the statute hereunder review, but also
in respect of every other appropriation Act and Statute whose administration
requires the outlay of public money, and whose validity may be questioned. The
bare suggestion of such a result, with its attendant inconveniences, goes far to
sustain the conclusion which we have reached, that a suit of this character
cannot be maintained.”
Para.11: Those remarks are with reference to a suit. They are much more
applicable to proceedings under Article 226 which are of a summary and of a
coercive nature without providing for a normal trial or a right of appeal except
in those cases where a substantial question of interpretation of the
constitution arises. This Court is being flooded with applications under
Art.226 of the Constitution which is seriously affecting the normal work of the
Court. We feel that the time has come when we may point out that Art. 226 of
the Constitution was not intended to provide an alternative method of redress to
the normal process of a decision in an action brought in the usual courts
established by law. The powers under this Article should be sparingly used and
only in those clear cases where the rights of a person have been seriously
infringed and he has no other adequate and specific remedy available to him.
9. In Vinoy Kumar vs. State of Uttar Pradesh, AIR 2001 SC 1739, the Supreme
Court observed (vide para-2):
“para-2: Generally speaking, a person shall have no locus standi to file a
writ petition if he is not personally affected by the impugned order or his
fundamental rights have neither been directly or substantially invaded nor is
there any imminent danger of such rights being invaded or his acquired interests
have been violated ignoring the applicable rules. The relief under Art.226 of
the Constitution is based on the existence of a right in favour of the person
invoking the jurisdiction. The exception to the general rule is only in cases
where the writ applied for is a writ of habeas corpus or quo warranto or filed
in public interest. It is a matter of prudence, that the Court confines the
exercise of writ jurisdiction to cases where legal wrong or legal injuries
caused to a particular person or his fundamental rights are violated, and not to
entertain cases of individual wrong or injury at the instance of third party
where there is an effective legal aid organization which can take care of such
cases. Even in cases filed in public interest, the Court can exercise the writ
jurisdiction at the instance of a third party only when it is shown that the
legal wrong or legal injury or illegal burden is threatened and suchperson or
determined class of persons is, by reason or poverty, helplessness or disability
or socially or economically disadvantaged position, unable to approach the Court
for relief.
10. In State of Orissa v. Ram Chandra Dev and another, AIR 1964 SC 685,
the Supreme Court observed (vide para;8)
“But though the jurisdiction of the High Court under Art.226 is wide in
that sense, the concluding words of the article clearly indicate that before a
writ or an appropriate order can be issued in favour of a party, it must be
established that the party has a right and the said right is legally invaded or
threatened. The existence of a right is thus the foundation of a petition under
Art. 226”.
11. Similarly, in Gadde Venkateswara Rao vs. Government of Andhra Pradesh,
(1996) 2 MLJ (SC) 87: (1966) 2 An.W.R (SC) 87: AIR 1966 SC 828 (vide para.8) the
Supreme Court observed:
“The right that can be enforced under Art. 226 also shall ordinarily be
the personal or individual right of the petitioner himself though in the case of
some of the writs like habeas corpus or Quo warranto this rule may have to be
relaxed or modified.”
10. The writ petition filed by the appellant cannot have any personal
grievance in the matter and at best only its members can have any grievance. It
is well settled that ordinarily a writ petition can only be filed by someone who
is personally aggrieved. The powers under Article 226 of the Constitution of
India should be sparingly used and only in those clear cases where the rights of
a person have been seriously infringed and he has no other adequate and specific
remedy available to him. The relief under Article 226 of the Constitution of
India is based on the existence of a right in favour of a person invoking the
writ jurisdiction. The exception to the General Rule is only in cases where the
writ applied for is Writ of Habeas Corpus or Quo warranto or filed in public
interest. Even assuming the members of the appellant’s association is affected
by an act of the second respondent, but for the purpose of enforcing the rights
of the members, writ petition at the instance of the association is not
maintainable. Ordinarily, the personal or individual right of the petitioner
himself be enforced under Article 226 of the constitution of India. Merely
because the first respondent/Reserve Bank of India has been arrayed as a party,
the Court does not get jurisdiction to hear the writ petition since the main
writ petition is against the second respondent, which is a private bank.
11. In view of the above discussion, we confirm the findings of the
learned single Judge that the appellant herein has no locus standi to file the
writ petition. Accordingly, the Writ Appeal is dismissed. No costs. Connected
WAMPs are closed.
rsh