{"id":144166,"date":"2010-07-30T00:00:00","date_gmt":"2010-07-29T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/zonal-manager-central-bank-of-vs-ms-devi-ispat-ltd-ors-on-30-july-2010"},"modified":"2017-06-29T07:02:21","modified_gmt":"2017-06-29T01:32:21","slug":"zonal-manager-central-bank-of-vs-ms-devi-ispat-ltd-ors-on-30-july-2010","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/zonal-manager-central-bank-of-vs-ms-devi-ispat-ltd-ors-on-30-july-2010","title":{"rendered":"Zonal Manager, Central Bank Of … vs M\/S. Devi Ispat Ltd & Ors on 30 July, 2010"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Zonal Manager, Central Bank Of … vs M\/S. Devi Ispat Ltd & Ors on 30 July, 2010<\/div>\n
Author: P Sathasivam<\/div>\n
Bench: P. Sathasivam, Anil R. Dave<\/div>\n
                                                  REPORTABLE\n             IN THE SUPREME COURT OF INDIA\n\n              CIVIL APPELLATE JURISDICTION\n\n               CIVIL APPEAL NO. 6077 OF 2010\n         (Arising out of S.L.P. (C) No. 11505 of 2010)\n\n\nZonal Manager, Central Bank of India          .... Appellant (s)\n\n          Versus\n\nM\/s Devi Ispat Ltd. & Ors.                   .... Respondent(s)\n\n\n\n                       JUDGMENT\n<\/pre>\n
P. Sathasivam, J.\n<\/p>\n
1) Leave granted.\n<\/p>\n
2) This appeal arising out of SLP (C) No. 11505 of 2010 is<\/p>\n
directed against the final judgment and order dated<\/p>\n
05.04.2010 passed by the High Court at Calcutta in G.A.<\/p>\n
No. 2441 of 2009 whereby the High Court dismissed the<\/p>\n
appeal filed by the appellant-Bank herein against the<\/p>\n
order of the learned single Judge dated 24.08.2009 in<\/p>\n
W.P. No. 485 of 2009 directing the appellant-Bank to<\/p>\n
                                                               1<\/span>
\nreturn forthwith the title deeds deposited by M\/s Devi<\/p>\n
Ispat Ltd., the Respondent-Company herein.<\/p>\n
3)    Brief facts :\n\na)    Respondent No.1 is a Company incorporated under\n\nthe   name   and      style   of   M\/s    Devi   Ispat   Ltd.   The\n\nRespondent-Company            carries    on   the   business     of\n\n<\/pre>\n
manufacturing and trading in ingots and various other<\/p>\n
types of steel and for the said purpose requires financial<\/p>\n
support from the financial institutions like the appellant-<\/p>\n
Bank.     Since the very inception of the respondent-<\/p>\n
Company, it has been banking with the appellant-Bank<\/p>\n
and availing various credit facilities like Term Loan,<\/p>\n
Working Capital Demand Loan, Cash Credit and Letter of<\/p>\n
Credit facility. On 16.10.2006, the respondent-Company<\/p>\n
wrote a letter to the appellant-Bank requesting it to review<\/p>\n
and enhance its credit facilities. On 15.12.2006, the<\/p>\n
appellant-Bank intimated the respondent-Company of its<\/p>\n
decision of review and enhanced credit facilities of the<\/p>\n
Company’s account whereby the Company was to enjoy<\/p>\n
                                                                 2<\/span>
\ntwo Term Loans being Term Loan I for Rs. 360 lacs being<\/p>\n
Account No. 1103590030, Term Loan II for Rs. 215 lacs<\/p>\n
being Account No. 1103590041, Cash Credit for Rs.300<\/p>\n
lacs being Account No. 1103589988, Working Capital<\/p>\n
Demand Loan for Rs.1200 lacs being Account No.<\/p>\n
3001640109 and a Letter of Credit in favour of the West<\/p>\n
Bengal State Electricity Board for Rs.56 lacs.<\/p>\n
b)   Due to various irregularities in the account of the<\/p>\n
respondent-Company,     the   appellant-Bank      by   various<\/p>\n
letters between 15.09.2008 to 24.04.2009, advised the<\/p>\n
respondent-Company to shift its loan account to some<\/p>\n
other Bank. On 12.01.2009, the appellant-Bank sent the<\/p>\n
Credit Information Report of the respondent-Company to<\/p>\n
its new Banker, namely, the State Bank of India.           On<\/p>\n
25.02.2009, the appellant-Bank received an Internal Audit<\/p>\n
Report in respect of the fraud perpetrated in the accounts<\/p>\n
of M\/s Rajco Steel Enterprises and M\/s Kali International<\/p>\n
Pvt. Ltd., whereby crores of rupees were siphoned away to<\/p>\n
the account of the respondent-Company.           Therefore, on<\/p>\n
                                                            3<\/span>
\n14.03.2009, the appellant-Bank filed two complaints with<\/p>\n
the   Superintendent     of   Police,     Central   Bureau   of<\/p>\n
Investigation, Kolkata complaining of the fraud and<\/p>\n
requesting the CBI, Kolkata to investigate into the matter.<\/p>\n
c)    On 02.04.2009, Special Audit Team of the appellant-<\/p>\n
Bank submitted its report on the fraud committed by the<\/p>\n
respondent-Company which revealed the transfer of a<\/p>\n
huge amount of funds from the account of M\/s Rajco Steel<\/p>\n
Enterprises and M\/s Kali International Pvt. Ltd. to the<\/p>\n
account of the respondent-Company. On 06.05.2009, the<\/p>\n
respondent-Company requested the appellant-Bank to<\/p>\n
handover the original title deeds of its factory premises<\/p>\n
and all the collateral securities held by it as against the<\/p>\n
Company as well as from Mr. Nirmal Kumar Mandhani,<\/p>\n
Director of the Company (respondent No.2 herein) to the<\/p>\n
State Bank of India, Chowringhee Branch, Kolkata to<\/p>\n
whom     they   had    transferred      their   account.     On<\/p>\n
09.05.2009, the State Bank of India issued a Banker’s<\/p>\n
cheque of Rs. 15 crores to the respondent-Company which<\/p>\n
                                                             4<\/span>
\nthe appellant-Bank had encashed and appropriated in lieu<\/p>\n
of the outstanding balances lying against the respondent-<\/p>\n
Company.    By various letters, the respondent-Company<\/p>\n
requested the appellant-Bank to return the Security<\/p>\n
documents and issuance of `No Objection Certificate’ (in<\/p>\n
short `NOC’) and `No Due Certificate’ (in short `NDC’). On<\/p>\n
29.05.2009, the respondent-Company filed W.P. No. 485<\/p>\n
of 2009 before the High Court at Calcutta. By order dated<\/p>\n
24.08.2009, the learned single Judge of the High court<\/p>\n
allowed the writ petition and directed the appellant-Bank<\/p>\n
to release the security documents. Challenging the said<\/p>\n
judgment, the appellant-Bank filed an appeal before the<\/p>\n
Division Bench of the High Court being G.A. No. 2441 of<\/p>\n
2009.    By order dated 05.04.2010, the High Court<\/p>\n
dismissed the appeal filed by the appellant herein.<\/p>\n
Aggrieved by the said order, the appellant-Bank has<\/p>\n
preferred this appeal by way of special leave.<\/p>\n
                                                        5<\/span>\n<\/p>\n
4)   Heard Mr. Mukul Rohtagi, learned senior counsel for<\/p>\n
the appellant-Bank and Mr. C.A. Sundaram, learned<\/p>\n
senior counsel for the respondent-Company.<\/p>\n
5)   Mr. Mukul Rohtagi, learned senior counsel for the<\/p>\n
appellant-Bank,   after   taking   us   through   the   entire<\/p>\n
materials, at the foremost, submitted that the direction of<\/p>\n
the learned single Judge affirmed by the Division Bench<\/p>\n
for return of the title deeds deposited by the respondent-<\/p>\n
Company as a security cannot be a subject-matter of<\/p>\n
Article 226 of the Constitution of India.         He further<\/p>\n
submitted that right to retain a mortgage deed is a civil<\/p>\n
dispute and proper forum is Debts Recovery Tribunal (in<\/p>\n
short “DRT”) or civil court. He further submitted that if<\/p>\n
the writ of mandamus issued by the High Court is<\/p>\n
maintained, the right of the nationalized Bank which is<\/p>\n
holding public money would affect its right before the<\/p>\n
DRT.   On the other hand, Mr. C.A. Sundaram, learned<\/p>\n
senior counsel for the respondent-Company, by drawing<\/p>\n
our attention to the relevant terms of the contract<\/p>\n
                                                            6<\/span>
\nsettlement of entire money due to the appellant-Bank by<\/p>\n
an arrangement made through another nationalized Bank,<\/p>\n
submitted that the writ petition before the High Court<\/p>\n
under Article 226 is maintainable and the High Court is<\/p>\n
fully justified in issuing direction for return of the title<\/p>\n
deeds of the Company.\n<\/p>\n
6)   We have carefully considered the rival contentions of<\/p>\n
both the parties and perused the relevant materials.<\/p>\n
7)   In order to answer the above contentions, there is no<\/p>\n
need to narrate all the factual details except which are<\/p>\n
required for the disposal of the above appeal.    It is true<\/p>\n
that the respondent-Company filed a writ petition before<\/p>\n
the learned single Judge of the Calcutta High Court<\/p>\n
praying for issuance of a writ of mandamus directing the<\/p>\n
Bank to forthwith take steps to release the security<\/p>\n
documents and issue `NOC’ and `NDC’ pertaining to their<\/p>\n
company’s accounts without any further delay. It is also<\/p>\n
not in dispute that the respondent-Company carries on<\/p>\n
the business of manufacturing and trading in ingots and<\/p>\n
                                                          7<\/span>
\nvarious other types of steel and for the said purpose, it<\/p>\n
requires financial support from the institution like the<\/p>\n
appellant-Bank.      The appellant-Bank, being a public<\/p>\n
sector Bank, discharging public functions is a `State’ in<\/p>\n
terms of Article 12 of the Constitution of India amenable<\/p>\n
to the writ jurisdiction.    In the earlier part, we have<\/p>\n
adverted to the fact that the respondent-Company had<\/p>\n
availed various facilities such as Term Loan, Working<\/p>\n
Capital Demand Loan, Cash Credit and Letter of Credit<\/p>\n
facility.   During the course of business, on 16.10.2006,<\/p>\n
the respondent-Company wrote to the appellant-Bank<\/p>\n
requesting it to review and enhance its credit facilities.<\/p>\n
The same was also acceded to by the Bank.        After two<\/p>\n
years, between 15.09.2008 to 24.04.2009, the Bank<\/p>\n
advised the Company to shift its borrowings to some other<\/p>\n
Bank due to certain irregularities in the accounts of the<\/p>\n
respondent-Company.         Since the Company had not<\/p>\n
complied with the direction in the letter dated 24.04.2009,<\/p>\n
the Bank called upon the Company to close their<\/p>\n
                                                         8<\/span>
\naccounts. On the other hand, the Company requested the<\/p>\n
Bank to return the title deeds and other collateral<\/p>\n
securities to enable them to entrust the same to other<\/p>\n
Nationalized Bank.   It is seen from the materials placed<\/p>\n
that the Bank had taken such a stand requesting the<\/p>\n
Company to shift their account to some other Bank since<\/p>\n
it came to know that a fraud having been perpetrated by<\/p>\n
M\/s Rajco Steel Enterprises & M\/s Kali International Pvt.<\/p>\n
Ltd., and the respondent-Company is having a connection<\/p>\n
with them.   It is unnecessary to find out the truth or<\/p>\n
otherwise in these proceedings.    However, it is not in<\/p>\n
dispute that in respect of their dues, the respondent-<\/p>\n
Company made an arrangement with the State Bank of<\/p>\n
India and deposited a cheque of Rs.15 Crores from the<\/p>\n
State Bank of India. In fact, the receipt of an amount of<\/p>\n
Rs. 15 Crores from the State Bank of India on and behalf<\/p>\n
of the respondent-Company has not been disputed. The<\/p>\n
letter dated 12.05.2009, addressed to the appellant-Bank,<\/p>\n
make it clear that they received a cheque of Rs. 15 Crores<\/p>\n
                                                        9<\/span>
\nfrom the State Bank of India, Chowringhee Road Branch<\/p>\n
and the Company has also reminded the appellant-Bank<\/p>\n
to return the security documents. The said letter reads as<\/p>\n
under:-\n<\/p>\n
“Devi Ispat Ltd.\n<\/p>\n
85, Netaji Subhas Road, Ist Floor, Kolkata – 700 0001
\nDated: 12th May, 2009
\nThe Zonal Manager
\nCentral Bank of India
\nKolkata
\nDear Sir,<\/p>\n
Ref: Our Account at Barabazar Branch, Kolkata.<\/p>\n
Please refer to our above account which has been taken over by State
\nBank of India, Chowringhee Branch, Kolkata.<\/p>\n
The Chowringhee Branch of State Bank of India had given a Banker’s
\nCheque of Rs. 15.00 crores which have been encashed and appropriated
\nto our outstanding balances.\n<\/p>\n
We regret to inform that inspite of such adjustments on 9th of May, 2009,
\nwe are yet to get our Security documents, NOC, NDC etc.<\/p>\n
We hope that you will appreciate that above documents are utmost
\nimportant and shall be handed over urgently. We request you to
\nimmediately arrange to deliver the documents.
\nThanking you,<\/p>\n
Yours faithfully,<\/p>\n
For DEVI ISPAT LTD.\n<\/p>\n
SD\/-\n<\/p>\n
Director<\/p>\n
Cc to: The Branch Manager
\n       Central Bank of India
\n        Barabazar Branch
\n        Kolkata.”\n<\/p>\n
\n                                                                      1<\/span>
\nThe contents of this letter reiterates the stand of the<\/p>\n
respondent-Company.\n<\/p>\n
8)    In view of the fact that the respondent-Company had<\/p>\n
cleared the dues which were pending at the relevant point<\/p>\n
of time through the State Bank of India, they are entitled<\/p>\n
to get their title deeds to enable them to deposit the same<\/p>\n
with the State Bank of India as their security for the<\/p>\n
amount advanced. It is also relevant to note that in four<\/p>\n
subsequent letters dated 14.05.2009, the “statement of<\/p>\n
account” furnished by the appellant-Bank clearly show<\/p>\n
that after settling their dues the “uncleared amount” has<\/p>\n
been mentioned as 0.00 (nil) which read as under:<\/p>\n
“STATEMENT OF ACCOUNT                     CENTRAL BANK OF INDIA
\n                                    BARABA_BARABAZAR (KOLKATA)
\n                                     178, MAHATMA GANDHI ROAD,
\n                                                     BARABAZAR
\n                                              Branch Code: 00102
\nDevi Ispat Ltd.\n<\/p>\n
85, Netaji Subhas Road,
\nIst Floor,
\n  2nd Floor, Kolkata – 700 001              Account No. : 1103589988
\nProduct: Medium Enterprises                            Currency: INR
\nDate: 14\/05\/2009          \/tune: 10:58:05          E-mail
\nCleared Balance: 49,82,783.42 Cr.              Uncleared Amount: 0.00<\/p>\n
                                                                   1<\/span>
\nSTATEMENT OF ACCOUNT                        CENTRAL BANK OF INDIA
\n                                      BARABA_BARABAZAR (KOLKATA)
\n                                       178, MAHATMA GANDHI ROAD,
\n                                                        BARABAZAR
\n                                                 Branch Code: 00102
\nDevi Ispat Ltd.\n<\/p>\n
85, Netaji Subhas Road,
\nIst Floor,
\n  2nd Floor, Kolkata – 700 001                Account No. : 3001640109<\/p>\n
Product: Medium Enterprises                              Currency: INR<\/p>\n
Date: 14\/05\/2009            \/tune: 10:59:12          E-mail<\/p>\n
Cleared Balance: 0.00 Cr.                     Uncleared Amount: 0.00 Cr<\/p>\n
STATEMENT OF ACCOUNT                        CENTRAL BANK OF INDIA
\n                                      BARABA_BARABAZAR (KOLKATA)
\n                                       178, MAHATMA GANDHI ROAD,
\n                                                        BARABAZAR
\n                                                 Branch Code: 00102
\nDevi Ispat Ltd.\n<\/p>\n
85, Netaji Subhas Road,
\nIst Floor,
\n  2nd Floor, Kolkata – 700 001                Account No. : 1103590030<\/p>\n
Product: Medium Enterprises                              Currency: INR
\nDate: 14\/05\/2009         \/tune: 11:00:43             E-mail<\/p>\n
Cleared Balance: 0.00 Cr.                       Uncleared Amount: 0.00<\/p>\n
                                                                     1<\/span>
\nSTATEMENT OF ACCOUNT                           CENTRAL BANK OF INDIA
\n                                         BARABA_BARABAZAR (KOLKATA)
\n                                          178, MAHATMA GANDHI ROAD,
\n                                                           BARABAZAR
\n                                                    Branch Code: 00102
\nDevi Ispat Ltd.\n<\/p>\n
85, Netaji Subhas Road,
\nIst Floor,
\n  2nd Floor, Kolkata – 700 001               Account No. : 1103589988
\nProduct: Medium Enterprises                              Currency: INR<\/p>\n
Date: 14\/05\/2009          \/tune: 10:59:52              E-mail
\nCleared Balance: 0.00 Cr.                       Uncleared Amount: 0.00 ”<\/p>\n
The above factual details clearly demonstrate that through<\/p>\n
an    arrangement        with      the    State     Bank     of        India,<\/p>\n
Chowringhee Road Branch, the respondent-Company<\/p>\n
settled a sum of Rs. 15 Crores to the appellant-Bank and<\/p>\n
the statement of accounts prevailing as on 14.05.2009<\/p>\n
clearly reveal that there is no amount outstanding.<\/p>\n
Taking note of these undisputed factual details, the Bank,<\/p>\n
being    a   nationalized        institution,     amenable        to    writ<\/p>\n
jurisdiction, the High Court has rightly issued a writ of<\/p>\n
mandamus for return of the title deeds.\n<\/p>\n
9)    In the light of the above factual scenario, now let us<\/p>\n
consider the decisions relied on by Mr. Rohtagi.               In State<\/p>\n
                                                                           1<\/span>
\nof U.P. and Others vs. Bridge & Roof Company (India)<\/p>\n
Ltd.,<\/a> (1996) 6 SCC 22, this Court, in para 16, held thus:<\/p>\n
     “16. Firstly, the contract between the parties is a
\n     contract in the realm of private law. It is not a statutory
\n     contract. It is governed by the provisions of the Contract
\n     Act or, maybe, also by certain provisions of the Sale of
\n     Goods Act. Any dispute relating to interpretation of the
\n     terms and conditions of such a contract cannot be
\n     agitated, and could not have been agitated, in a writ
\n     petition. That is a matter either for arbitration as
\n     provided by the contract or for the civil court, as the
\n     case may be. Whether any amount is due to the
\n     respondent from the appellant-Government under the
\n     contract and, if so, how much and the further question
\n     whether retention or refusal to pay any amount by the
\n     Government is justified, or not, are all matters which
\n     cannot be agitated in or adjudicated upon in a writ
\n     petition. The prayer in the writ petition, viz., to restrain
\n     the Government from deducting a particular amount
\n     from the writ petitioner’s bill(s) was not a prayer which
\n     could be granted by the High Court under Article 226.”\n<\/p><\/blockquote>\n
After saying so and in the light of the various terms of the<\/p>\n
contract, the Court further held:\n<\/p>\n
     “18. Accordingly, it must be held that the writ petition
\n     filed by the respondent for the issuance of a writ of
\n     mandamus restraining the Government from deducting
\n     or withholding a particular sum, which according to the
\n     respondent is payable to it under the contract, was
\n     wholly misconceived and was not maintainable in law.”\n<\/p><\/blockquote>\n
10) The next decision relied on by learned senior counsel<\/p>\n
for the appellant in Kerala State Electricity Board and<\/p>\n
Another vs. Kurien E. Kalathil and Others,<\/a> (2000) 6<\/p>\n
                                                                    1<\/span>
\nSCC 293. He heavily placed reliance on paras 10 and 11<\/p>\n
of this judgment which read thus:\n<\/p>\n
    “10. We find that there is a merit in the first contention
\n    of Mr. Raval. Learned counsel has rightly questioned the
\n    maintainability of the writ petition. The interpretation
\n    and implementation of a clause in a contract cannot be
\n    the subject-matter of a writ petition. Whether the
\n    contract envisages actual payment or not is a question
\n    of construction of contract. If a term of a contract is
\n    violated, ordinarily the remedy is not the writ petition
\n    under Article 226. We are also unable to agree with the
\n    observations of the High Court that the contractor was
\n    seeking enforcement of a statutory contract. A contract
\n    would not become statutory simply because it is for
\n    construction of a public utility and it has been awarded
\n    by a statutory body. We are also unable to agree with
\n    the observation of the High Court that since the
\n    obligations imposed by the contract on the contracting
\n    parties come within the purview of the Contract Act,
\n    that would not make the contract statutory. Clearly, the
\n    High Court fell into an error in coming to the conclusion
\n    that the contract in question was statutory in nature.<\/p><\/blockquote>\n
    11. A statute may expressly or impliedly confer power
\n    on a statutory body to enter into contracts in order to
\n    enable it to discharge its functions. Dispute arising out
\n    of the terms of such contracts or alleged breaches have
\n    to be settled by the ordinary principles of law of
\n    contract. The fact that one of the parties to the
\n    agreement is a statutory or public body will not by itself
\n    affect the principles to be applied. The disputes about
\n    the meaning of a covenant in a contract or its
\n    enforceability have to be determined according to the
\n    usual principles of the Contract Act. Every act of a
\n    statutory body need not necessarily involve an exercise
\n    of statutory power. Statutory bodies, like private parties,
\n    have power to contract or deal with property. Such
\n    activities may not raise any issue of public law. In the
\n    present case, it has not been shown how the contract is
\n    statutory. The contract between the parties is in the
\n    realm of private law. It is not a statutory contract. The
\n    disputes relating to interpretation of the terms and
\n    conditions of such a contract could not have been
\n    agitated in a petition under Article 226 of the
\n    Constitution of India. That is a matter for adjudication<\/p>\n
                                                                  1<\/span>
\n     by a civil court or in arbitration if provided for in the
\n     contract. Whether any amount is due and if so, how
\n     much and refusal of the appellant to pay it is justified or
\n     not, are not the matters which could have been agitated
\n     and decided in a writ petition. The contractor should
\n     have relegated to other remedies.”\n<\/p>\n
11) We have gone through the factual details in both the<\/p>\n
decisions. It is not in dispute that a specific mandamus<\/p>\n
was sought for in both the cases for implementation of a<\/p>\n
clause in a contract which was rightly negatived under<\/p>\n
Article 226. It is settled law that the disputes relating to<\/p>\n
interpretation of terms and conditions of a contract could<\/p>\n
not be examined\/challenged or agitated in a petition filed<\/p>\n
under Article 226 of the Constitution. It is a matter for<\/p>\n
adjudication by a civil court or in arbitration, if provided<\/p>\n
for in the contract or before the DRT or under the<\/p>\n
Securitization Act. In the case on hand, the respondent-<\/p>\n
Company has demonstrated that based on the advise of<\/p>\n
the appellant-Bank, they shifted their accounts to another<\/p>\n
Nationalized Bank and through an arrangement with the<\/p>\n
State Bank of India, a cheque of Rs.15 crores was<\/p>\n
deposited by their Bank and in token of the same, by<\/p>\n
                                                                   1<\/span>
\nstatement of accounts dated 14.05.2009 the appellant-<\/p>\n
Bank clearly mentioned that there is no due or nil<\/p>\n
balance    from    the    respondent-Company        (Emphasis<\/p>\n
supplied). In such circumstances, when the relief sought<\/p>\n
for does not relate to interpretation of any terms of<\/p>\n
contract, the Bank being a Nationalized Bank, a Writ<\/p>\n
Court     can   issue    appropriate   direction   in   certain<\/p>\n
circumstances as mentioned above.          In such a factual<\/p>\n
matrix, the reliance placed on these two decisions is not<\/p>\n
helpful to the appellant-Bank.\n<\/p>\n
12) Though Mr. Rohtagi has pointed out that after filing<\/p>\n
of the writ petition, the respondent-Company owes money<\/p>\n
through their relationship with other concerns, as rightly<\/p>\n
pointed out by Mr. Sundaram, the position on the date of<\/p>\n
the filing of the writ petition is the relevant date to test the<\/p>\n
direction of the High Court. It is not in dispute that the<\/p>\n
writ petition has been filed by the respondent-Company<\/p>\n
before the High Court at Calcutta on 29.05.2009 that is<\/p>\n
well after settlement of their dues to the extent of Rs. 15<\/p>\n
                                                              1<\/span>
\nCrores by the State Bank of India and the communication<\/p>\n
of the appellant-Bank dated 15.05.2009 intimating `nil’<\/p>\n
due. In view of the same, we hold that the date of filing of<\/p>\n
the writ petition is the relevant date.   This is also clear<\/p>\n
from the dictum laid down by this Court in Rajahmundry<\/p>\n
Electric Supply Corporation Ltd. vs. A. Nageshwara<\/p>\n
Rao and Others,<\/a> (1955) 2 SCR 1066.\n<\/p>\n
13) In ABL International Ltd. and Another vs. Export<\/p>\n
Credit Guarantee Corporation of India Ltd. and<\/p>\n
Others,<\/a> (2004) 3 SCC 553, Santosh Hegde, J. has<\/p>\n
exhaustively dealt with the maintainability of writ petition<\/p>\n
under Article 226 in contractual matters.       In the said<\/p>\n
case,   contract of insurance was executed between ABL<\/p>\n
International   Ltd.   and   Another   and   Export   Credit<\/p>\n
Guarantee Corporation of India Ltd. and Others. Having<\/p>\n
failed to persuade the first respondent therein, to adhere<\/p>\n
to the contract of insurance between it and the appellant,<\/p>\n
the appellant filed a writ petition before a learned Single<\/p>\n
Judge of the Calcutta High Court, inter alia, praying for<\/p>\n
                                                          1<\/span>
\nquashing of the letters of repudiation issued by the first<\/p>\n
respondent. It also consequentially prayed for a direction<\/p>\n
to the first respondent to make payment of the dues to it<\/p>\n
under the contract of insurance. The learned Single<\/p>\n
Judge, after hearing the parties, came to the conclusion<\/p>\n
that though the dispute between the parties arose out of a<\/p>\n
contract, the first respondent being a `State’ for the<\/p>\n
purpose of Article 12, was bound by the terms of the<\/p>\n
contract, therefore, for such non-performance, a writ was<\/p>\n
maintainable and after considering the arguments of the<\/p>\n
parties in regard to the liability under the contract of<\/p>\n
insurance, allowed the writ petition and issued the writ<\/p>\n
and directions as prayed for by the appellants in the writ<\/p>\n
petition. In an appeal filed by the first respondent before<\/p>\n
the Appellate Bench of the same High Court, the Division<\/p>\n
Bench reversed the findings of the learned Single Judge<\/p>\n
and held that the claim of the appellant involving disputed<\/p>\n
questions of fact cannot be adjudicated in a writ<\/p>\n
proceeding under Article 226 of the Constitution, hence,<\/p>\n
                                                         1<\/span>
\nset aside the judgment of the learned Single Judge. In the<\/p>\n
course   of    its   judgment     the   Appellate   Bench     also<\/p>\n
incidentally    came   to   the    conclusion   that   the    first<\/p>\n
respondent had not committed any violation of the clauses<\/p>\n
or the terms of the insurance contract. On the contrary, it<\/p>\n
observed that as per proviso (d) to clause (xi) of the said<\/p>\n
insurance contract, by refusing to accept the barter of<\/p>\n
goods, the first appellant had violated the terms of the<\/p>\n
contract disentitling it to raise any claim on the first<\/p>\n
respondent. It is against this order of the Appellate Bench<\/p>\n
of the Calcutta High Court, the appellants therein filed an<\/p>\n
appeal   before this Court by way of special leave.           After<\/p>\n
adverting to certain factual details, the Court framed<\/p>\n
following question:\n<\/p>\n
     “As could be seen from the arguments addressed in this
\n     appeal and as also from the divergent views of the two
\n     courts below, one of the questions that falls for our
\n     consideration is whether a writ petition under Article
\n     226 of the Constitution of India is maintainable to
\n     enforce a contractual obligation of the State or its
\n     instrumentality, by an aggrieved party.”\n<\/p><\/blockquote>\n
The following discussion and conclusion are apt and<\/p>\n
relevant for our purpose. They are:\n<\/p>\n
                                                                 2<\/span>
\n“9.In our opinion this question is no more res integra
\nand is settled by a large number of judicial
\npronouncements of this Court. In K.N. Guruswamy v.
\nState of Mysore this Court held: (AIR pp. 595-96, para\n<\/p>\n
20)
\n    “20. The next question is whether the appellant can
\ncomplain of this by way of a writ. In our opinion, he
\ncould have done so in an ordinary case. The appellant is
\ninterested in these contracts and has a right under the
\nlaws of the State to receive the same treatment and be
\ngiven the same chance as anybody else. …
\n    We would therefore in the ordinary course have given
\nthe appellant the writ he seeks. But, owing to the time
\nwhich this matter has taken to reach us (a consequence
\nfor which the appellant is in no way to blame, for he has
\ndone all he could to have an early hearing), there is
\nbarely a fortnight of the contract left to go. … A writ
\nwould therefore be ineffective and as it is not our
\npractice to issue meaningless writs we must dismiss
\nthis appeal and leave the appellant content with an
\nenunciation of the law.”\n<\/p>\n
10. It is clear from the above observations of this Court
\nin the said case, though a writ was not issued on the
\nfacts of that case, this Court has held that on a given
\nset of facts if a State acts in an arbitrary manner even in
\na matter of contract, an aggrieved party can approach
\nthe court by way of writ under Article 226 of the
\nConstitution and the court depending on facts of the
\nsaid case is empowered to grant the relief. This
\njudgment in K.N. Guruswamy v. State of Mysore was
\nfollowed subsequently by this Court in the case of
\nD.F.O. v. Ram Sanehi Singh<\/a> wherein this Court held:\n<\/p>\n
(SCC p.      865, para 4)
\n    “By that order he has deprived the respondent of a
\nvaluable right. We are unable to hold that merely
\nbecause the source of the right which the respondent
\nclaims was initially in a contract, for obtaining relief
\nagainst any arbitrary and unlawful action on the part of
\na public authority he must resort to a suit and not to a
\npetition by way of a writ. In view of the judgment of this
\nCourt in K.N. Guruswamy case1 there can be no doubt
\nthat the petition was maintainable, even if the right to
\nrelief arose out of an alleged breach of contract, where
\nthe action challenged was of a public authority invested
\nwith statutory power.”\n<\/p>\n
                                      (Emphasis supplied)<\/p>\n
                                                              2<\/span>\n<\/p>\n
11. In the case of Gujarat State Financial Corpn. v. Lotus
\nHotels (P) Ltd.<\/a> this Court following an earlier judgment
\nin Ramana Dayaram Shetty v. International Airport
\nAuthority of India<\/a> held: (SCC pp. 385-86, paras 9 & 11)
\n   The instrumentality of the State which would be
\n`other authority’ under Article 12 cannot commit breach
\nof a solemn undertaking to the prejudice of the other
\nparty which acted on that undertaking or promise and
\nput itself in a disadvantageous position. The appellant
\nCorporation, created under the State Financial
\nCorporations Act, falls within the expression of `other
\nauthority’ in Article 12 and if it backs out from such a
\npromise, it cannot be said that the only remedy for the
\naggrieved party would be suing for damages for breach
\nand that it could not compel the Corporation for specific
\nperformance of the contract under Article 226.<\/p>\n
12. The learned counsel appearing for the first
\nrespondent, however, submitted that this Court has
\ntaken a different view in the case of LIC of India v.
\nEscorts Ltd wherein this Court held: (SCC p. 344, para\n<\/p>\n
102)
\n    “If the action of the State is related to contractual
\nobligations or obligations arising out of the tort, the
\ncourt may not ordinarily examine it unless the action has
\nsome public law character attached to it. Broadly
\nspeaking, the court will examine actions of State if they
\npertain to the public law domain and refrain from
\nexamining them if they pertain to the private law field.
\nThe difficulty will lie in demarcating the frontier between
\nthe public law domain and the private law field. It is
\nimpossible to draw the line with precision and we do not
\nwant to attempt it. The question must be decided in
\neach case with reference to the particular action, the
\nactivity in which the State or the instrumentality of the
\nState is engaged when performing the action, the public
\nlaw or private law character of the action and a host of
\nother relevant circumstances. When the State or an
\ninstrumentality of the State ventures into the corporate
\nworld and purchases the shares of a company, it
\nassumes to itself the ordinary role of a shareholder, and
\ndons the robes of a shareholder, with all the rights
\navailable to such a shareholder. There is no reason why
\nthe State as a shareholder should be expected to state
\nits reasons when it seeks to change the management, by
\na resolution of the company, like any other
\nshareholder.”      (emphasis supplied)<\/p>\n
13. We do not think this Court in the above case has, in
\nany manner, departed from the view expressed in the<\/p>\n
                                                              2<\/span>
\nearlier judgments in the case cited hereinabove. This
\nCourt in the case of LIC of India proceeded on the facts
\nof that case and held that a relief by way of a writ
\npetition may not ordinarily be an appropriate remedy.
\nThis judgment does not lay down that as a rule in
\nmatters of contract the court’s jurisdiction under Article
\n226 of the Constitution is ousted. On the contrary, the
\nuse of the words “court may not ordinarily examine it
\nunless the action has some public law character
\nattached to it” itself indicates that in a given case, on
\nthe existence of the required factual matrix a remedy
\nunder Article 226 of the Constitution will be available.
\nThe learned counsel then relied on another judgment of
\nthis Court in the case of State of U.P. v. Bridge & Roof
\nCo. (India) Ltd<\/a> wherein this Court held: (SCC p.    31,
\npara 21)
\n   Further, the contract in question contains a clause
\nproviding inter alia for settlement of disputes by
\nreference to arbitration. The arbitrators can decide both
\nquestions of fact as well as questions of law. When the
\ncontract itself provides for a mode of settlement of
\ndisputes arising from the contract, there is no reason
\nwhy the parties should not follow and adopt that
\nremedy and invoke the extraordinary jurisdiction of the
\nHigh Court under Article 226. The existence of an
\neffective alternative remedy — in this case, provided in
\nthe contract itself — is a good ground for the court to
\ndecline to exercise its extraordinary jurisdiction under
\nArticle 226.\n<\/p>\n
14. This judgment again, in our opinion, does not help
\nthe first respondent in the argument advanced on its
\nbehalf that in contractual matters remedy under Article
\n226 of the Constitution does not lie. It is seen from the
\nabove extract that in that case because of an arbitration
\nclause in the contract, the Court refused to invoke the
\nremedy under Article 226 of the Constitution. We have
\nspecifically inquired from the parties to the present
\nappeal before us and we have been told that there is no
\nsuch arbitration clause in the contract in question. It is
\nwell known that if the parties to a dispute had agreed to
\nsettle their dispute by arbitration and if there is an
\nagreement in that regard, the courts will not permit
\nrecourse to any other remedy without invoking the
\nremedy by way of arbitration, unless of course both the
\nparties to the dispute agree on another mode of dispute
\nresolution. Since that is not the case in the instant
\nappeal, the observations of this Court in the said case of
\nBridge & Roof Co. are of no assistance to the first
\nrespondent in its contention that in contractual
\nmatters, writ petition is not maintainable.<\/p>\n
                                                             2<\/span>\n<\/p>\n
15. The learned counsel then contending that this
\nCourt will not entertain a writ petition involving
\ndisputed questions of fact relied on a judgment of this
\nCourt in the case of State of Bihar v. Jain Plastics and
\nChemicals Ltd<\/a> wherein this Court held: (SCC p. 218,
\npara 7)
\n    “7. In our view, it is apparent that the order passed
\nby the High Court is, on the face of it, illegal and
\nerroneous. It is true that many matters could be decided
\nafter referring to the contentions raised in the affidavits
\nand counter-affidavits, but that would hardly be a
\nground for exercise of extraordinary jurisdiction under
\nArticle 226 of the Constitution in case of alleged breach
\nof contract. Whether the alleged non-supply of road
\npermits by the appellants would justify breach of
\ncontract by the respondent would depend upon facts
\nand evidence and is not required to be decided or dealt
\nwith in a writ petition. Such seriously disputed
\nquestions or rival claims of the parties with regard to
\nbreach of contract are to be investigated and determined
\non the basis of evidence which may be led by the parties
\nin a properly instituted civil suit rather than by a court
\nexercising prerogative of issuing writs.”\n<\/p>\n
16. A perusal of this judgment though shows that a writ
\npetition involving serious disputed questions of facts
\nwhich requires consideration of evidence which is not
\non record, will not normally be entertained by a court in
\nthe exercise of its jurisdiction under Article 226 of the
\nConstitution of India. This decision again, in our
\nopinion, does not lay down an absolute rule that in all
\ncases involving disputed questions of fact the parties
\nshould be relegated to a civil suit. In this view of ours,
\nwe are supported by a judgment of this Court in the
\ncase of Gunwant Kaur v. Municipal Committee, Bhatinda<\/a>
\nwhere dealing with such a situation of disputed
\nquestions of fact in a writ petition this Court held: (SCC
\np.     774, paras 14-16)
\n    “14. The High Court observed that they will not
\ndetermine disputed question of fact in a writ petition.
\nBut what facts were in dispute and what were admitted
\ncould only be determined after an affidavit-in-reply was
\nfiled by the State. The High Court, however, proceeded
\nto dismiss the petition in limine. The High Court is not
\ndeprived of its jurisdiction to entertain a petition under
\nArticle 226 merely because in considering the
\npetitioner’s right to relief questions of fact may fall to be
\ndetermined. In a petition under Article 226 the High
\nCourt has jurisdiction to try issues both of fact and law.
\nExercise of the jurisdiction is, it is true, discretionary,<\/p>\n
                                                                2<\/span>
\nbut the discretion must be exercised on sound judicial
\nprinciples. When the petition raises questions of fact of
\na complex nature, which may for their determination
\nrequire oral evidence to be taken, and on that account
\nthe High Court is of the view that the dispute may not
\nappropriately be tried in a writ petition, the High Court
\nmay decline to try a petition. Rejection of a petition in
\nlimine will normally be justified, where the High Court
\nis of the view that the petition is frivolous or because of
\nthe nature of the claim made dispute sought to be
\nagitated, or that the petition against the party against
\nwhom relief is claimed is not maintainable or that the
\ndispute raised thereby is such that it would be
\ninappropriate to try it in the writ jurisdiction, or for
\nanalogous reasons.\n<\/p>\n
    15. From the averments made in the petition filed by
\nthe appellants it is clear that in proof of a large number
\nof allegations the appellants relied upon documentary
\nevidence and the only matter in respect of which conflict
\nof facts may possibly arise related to the due publication
\nof the notification under Section 4 by the Collector.\n<\/p>\n
    16. In the present case, in our judgment, the High
\nCourt was not justified in dismissing the petition on the
\nground that it will not determine disputed question of
\nfact. The High Court has jurisdiction to determine
\nquestions of fact, even if they are in dispute and the
\npresent, in our judgment, is a case in which in the
\ninterests of both the parties the High Court should have
\nentertained the petition and called for an affidavit-in-
\nreply from the respondents, and should have proceeded
\nto try the petition instead of relegating the appellants to
\na separate suit.”\n<\/p>\n
17. The above judgment of Gunwant Kaur finds support
\nfrom another judgment of this Court in the case of
\nCentury Spg. and Mfg. Co. Ltd. v. Ulhasnagar Municipal
\nCouncil<\/a> wherein this Court held: (SCC p. 587, para 13)
\n    “Merely because a question of fact is raised, the High
\nCourt will not be justified in requiring the party to seek
\nrelief by the somewhat lengthy, dilatory and expensive
\nprocess by a civil suit against a public body. The
\nquestions of fact raised by the petition in this case are
\nelementary.”\n<\/p>\n
18. This observation of the Court was made while
\nnegating a contention advanced on behalf of the
\nrespondent Municipality which contended that the
\npetition filed by the appellant Company therein<\/p>\n
                                                              2<\/span>
\n    apparently raised questions of fact which argument of
\n    the Municipality was accepted by the High Court
\n    holding that such disputed questions of fact cannot be
\n    tried in the exercise of the extraordinary jurisdiction
\n    under Article 226 of the Constitution. But this Court
\n    held otherwise.\n<\/p>\n
    19. Therefore, it is clear from the above enunciation of
\n    law that merely because one of the parties to the
\n    litigation raises a dispute in regard to the facts of the
\n    case, the court entertaining such petition under Article
\n    226 of the Constitution is not always bound to relegate
\n    the parties to a suit. In the above case of Gunwant Kaur
\n    this Court even went to the extent of holding that in a
\n    writ petition, if the facts require, even oral evidence can
\n    be taken. This clearly shows that in an appropriate
\n    case, the writ court has the jurisdiction to entertain a
\n    writ petition involving disputed questions of fact and
\n    there is no absolute bar for entertaining a writ petition
\n    even if the same arises out of a contractual obligation
\n    and\/or involves some disputed questions of fact.”<\/p>\n
After holding so, this Court has concluded as under:<\/p>\n
    “53. From the above, it is clear that when an
\n    instrumentality of the State acts contrary to public good
\n    and     public    interest,    unfairly,   unjustly     and
\n    unreasonably, in its contractual, constitutional or
\n    statutory obligations, it really acts contrary to the
\n    constitutional guarantee found in Article 14 of the
\n    Constitution. Thus if we apply the above principle of
\n    applicability of Article 14 to the facts of this case, then
\n    we notice that the first respondent being an
\n    instrumentality of the State and a monopoly body had
\n    to be approached by the appellants by compulsion to
\n    cover its export risk. The policy of insurance covering
\n    the risk of the appellants was issued by the first
\n    respondent after seeking all required information and
\n    after receiving huge sums of money as premium
\n    exceeding Rs. 16 lakhs. On facts we have found that the
\n    terms of the policy do not give room to any ambiguity as
\n    to the risk covered by the first respondent. We are also
\n    of the considered opinion that the liability of the first
\n    respondent under the policy arose when the default of
\n    the exporter occurred and thereafter when the
\n    Kazakhstan Government failed to fulfil its guarantee.
\n    There is no allegation that the contracts in question
\n    were obtained either by fraud or by misrepresentation.<\/p><\/blockquote>\n
\n    In such factual situation, we are of the opinion, the
\n    facts of this case do not and should not inhibit the High<\/p>\n
                                                                  2<\/span>
\n     Court or this Court from granting the relief sought for
\n     by the petitioner.”\n<\/p>\n<\/p>\n
14) In a recent decision in Karnataka State Forest<\/p>\n
Industries Corporation vs. Indian Rocks,<\/a> (2009) 1 SCC<\/p>\n
150, while considering the similar issue, S.B. Sinha, J.<\/p>\n
speaking for the Bench reiterated thus:<\/p>\n
  “38. Although ordinarily a superior court in exercise of its
\n  writ jurisdiction would not enforce the terms of a contract
\n  qua contract, it is trite that when an action of the State is
\n  arbitrary or discriminatory and, thus, violative of Article 14
\n  of the Constitution of India, a writ petition would be
\n  maintainable. (See ABL International Ltd. v. Export Credit
\n  Guarantee Corpn. of India Ltd.)<\/a>\n<\/p>\n
  39. There cannot be any doubt whatsoever that a writ of
\n  mandamus can be issued only when there exists a legal
\n  right in the writ petition and a corresponding legal duty on
\n  the part of the State, but then if any action on the part of
\n  the State is wholly unfair or arbitrary, the superior courts
\n  are not powerless.”\n<\/p>\n<\/p>\n
15) It is clear that, (a) in the contract if there is a clause<\/p>\n
for arbitration, normally, writ court should not invoke its<\/p>\n
jurisdiction;         (b) the existence of effective alternative<\/p>\n
remedy provided in the contract itself is a good ground to<\/p>\n
decline to exercise its extraordinary jurisdiction under Art.<\/p>\n
226; and        (c)    if the instrumentality of the State acts<\/p>\n
contrary to the public good, public interest, unfairly,<\/p>\n
                                                                   2<\/span>
\nunjustly, unreasonably discriminatory and violative of Art.<\/p>\n
14 of the Constitution of India in its contractual or<\/p>\n
statutory obligation, writ petition would be maintainable.<\/p>\n
However, a legal right must exist and corresponding legal<\/p>\n
duty on the part of the State and if any action on the part<\/p>\n
of the State is wholly unfair or arbitrary, writ courts can<\/p>\n
exercise their power.\n<\/p>\n
16) In the light of the legal position, writ petition is<\/p>\n
maintainable    even    in   contractual   matters,   in   the<\/p>\n
circumstances mentioned in the earlier paragraphs.          In<\/p>\n
the case on hand, it is not in dispute that the appellant-<\/p>\n
Bank, being a public sector Bank, discharging public<\/p>\n
functions is “State” under Article 12.       In view of the<\/p>\n
settlement of the dues on the date of filing of the writ<\/p>\n
petition   by   arrangement      made      through    another<\/p>\n
Nationalized Bank, namely, State Bank of India and the<\/p>\n
statement of accounts furnished by the appellant-Bank<\/p>\n
subsequent to the same i.e. on 14.05.2009 is 0.00 (nil)<\/p>\n
outstanding, we hold that the High Court was fully<\/p>\n
                                                             2<\/span>
\njustified in issuing a writ of mandamus for return of its<\/p>\n
title deeds. In the light of the above conclusion, we are<\/p>\n
unable to accept the claim of the appellant-Bank and on<\/p>\n
the other hand, we are in entire agreement with the<\/p>\n
direction issued by the learned Single Judge affirmed by<\/p>\n
the Division Bench. Consequently, the appeal of the Bank<\/p>\n
is dismissed. The appellant-Bank is directed to return the<\/p>\n
title deeds deposited by the respondent-Company within a<\/p>\n
period of two weeks from today. With the above direction,<\/p>\n
the civil appeal is dismissed. No order as to costs.<\/p>\n
                               ……………………………………J.
\n                               (P. SATHASIVAM)<\/p>\n
                              ……………………………………J.
\n                               (ANIL R. DAVE)<\/p>\n
NEW DELHI;\n<\/p>\n
JULY 30, 2010.\n<\/p>\n
                                                                          2<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Zonal Manager, Central Bank Of … vs M\/S. Devi Ispat Ltd & Ors on 30 July, 2010 Author: P Sathasivam Bench: P. Sathasivam, Anil R. Dave REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6077 OF 2010 (Arising out of S.L.P. (C) No. 11505 of 2010) […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-144166","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nZonal Manager, Central Bank Of ... vs M\/S. Devi Ispat Ltd & Ors on 30 July, 2010 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/zonal-manager-central-bank-of-vs-ms-devi-ispat-ltd-ors-on-30-july-2010\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Zonal Manager, Central Bank Of ... vs M\/S. 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