Case: Indian Bank  Vs. Godhara Nagrik Cooperative Credit Society Ltd. and Ors.

. We, however, do not think that facts involved in each case and the law laid down therein need to be discussed at length as there does not exist any dispute in regard to basic principles laid down therein. In Hyderabad Commercials v. Indian Bank and Ors. AIR1991SC247 , this Court held: Since the basic facts regarding the unauthorized transfer of the disputed amount from the appellants account as well as the banks liability was admitted, there was no justification for the High Court to direct the appellant to file suit on ground of disputed questions of fact. The respondent bank is an instrumentality of the State and it must function honestly to serve its customers. Would the ratio laid down therein apply in the instant case? We do not think so. The question as to whether fraud has been committed by the officers of the bank is pending consideration before a competent criminal court. There are other various disputed questions which are required to be gone into in the said proceeding. The role played by some of the writ petitioners - respondents is also in issue. Such a seriously disputed questions of fact, in our opinion, could not have been gone into by the writ court. We would accept the proposition of law as propounded by this Court in Guruvayoor Devaswom Managing Committee and Anr. v. C.K. Rajan and Ors. (2003)7SCC546 . In that case it was, inter alia, observed that public interest litigation procedures may be adopted in a case where initially the writ petition was filed as a private interest litigation. (See also Ashok Lanka and Anr. v. Rishi Dixit and Ors. AIR2005SC2821 . We may in this behalf notice development of law in other jurisdiction. Abram Chayes in his article on The Role of the Judge in Public Law Litigation Harv. Law. Rev. Vol. 89 (1976) at Pg. 1281 opines that Traditionally, adjudication has been understood to be a process for resolving disputes among private parties which have not been privately settled. He thus emphasizes the need for a Public Law model wherein the traditional adversary relationship is suffused and intermixed with negotiating and mediating processes at every point. The judge is the dominant figure in organizing and guiding the case, and he draws for support not only on the parties and their counsel, but on a wide range of outsiders-masters, experts and oversight personnel. He goes on to give examples of school desegregation, employment discrimination, and prisoners or inmates rights cases as also antitrust, securities fraud and other aspects of the conduct of the corporate business, bankruptcy and reorganizations, union governance, consumer fraud, housing discrimination, electoral reapportionment, environmental management- fields that display in varying degrees the features of public law litigation. According to him, The public law litigation model inter-alia has the following features: 7. The judge is not passive, his function limited to analysis and statement of governing legal rules; he is active, with responsibility not only for credible fact evaluation but for organizing and shaping the litigation to ensure a just and viable outcome. 8. The subject matter of the lawsuit is not a dispute between private individuals about private rights, but a grievance about the operation of public policy. In Krishna Swami v. Union of India and Anr. AIR1993SC1407 With Raj Kanwar v. Union of India and Anr. AIR1993SC1407 , a constitutional bench of this Court had to decide upon the maintainability of a writ petition filed under Article 32 against the removal of a Supreme Court judge without impleading the judge himself as a party to the proceedings. The court on the role of an investigation committee opined: The investigation done by the Committee, thus is to find whether the alleged misbehavior incapacity has been proved. Undoubtedly, the public law litigation often contradicts the premise behind those of private law. In public law wider public interest it involved over and beyond he contending parties. It concerns the future and private law litigation is retrospective in operation. What the court could do? It could appoint a Committee. But the decision of the Committee would not have been decisive. The Division Bench appears to have applied its mind on the report, but in the absence of any categorical finding that it was the officers of the Banks alone who were liable, no direction as has been done in the instant case should have been issued. It may be that in appropriate cases, the court may find the recommendations made by the Committee acceptable. 18. But it is, in our opinion, not a public interest litigation in that sense of the term. The report, however, was not unanimous. The opinion of the Committee was a divided one on the crucial issue. Two members of the Committee were of the opinion that whether the amount deposited by the cooperative banks was received back by them or not, was yet to be ascertained. We are, therefore, of the opinion that it cannot be said that the fact finding body, assuming that the same could be constituted, made such recommendations which could be accepted by the Court without going into the merit thereof. It is also not a case where any mandatory relief could be granted in favour of the respondents. 19. Having however said so, we must pose unto ourselves a further question. Could those cooperative societies which had absolutely no role to play in the entire episode should suffer in any manner whatsoever? The cooperative societies/cooperative banks for the purpose of their day-to-day functioning, require the amount which they have invested in FDRs on their maturity. Should they wait till the criminal cases are over? Should they be pushed to institute civil suits? They can indisputably be compensated by grant of interest. What, however, happens if in the meanwhile in the absence of the requisite funds being available to them, they find it difficult to run the day-to-day affairs? 20. Answers thereto may be difficult to find but it is not a wholly impossible task.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The propositions of law which are undisputed are:i) Writ Petitions against the banks being `State within the meaning of Article 12 of the Constitution of India were maintainable;ii) Writ Petitions involving serious disputed questions of fact, ordinarily should not be entertained although the High Court in some cases may enter into disputed questions of fact.The powers and functions delegated to the Committee were wide, by reason whereof for all intent and purport, even judicial power were delegated.Indisputably, the authorities of the Reserve Bank of India in exercise of their statutory powers conferred upon them under Section 35A of the Banking Regulation Act could issue directions for initiating an enquiry into the affairs of the Banks. The Banks being public sector undertakings could themselves do so and have in fact done so.It is one thing to say that the Public Sector Banks having regard to the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 should discharge their functions keeping in mind the larger public interest but ordinarily in the matter of enforcement of contract, they are to be governed by the terms thereof, which would not be amenable to writ jurisdiction of the High Court unless the actions of the banks are found to be wholly arbitrary and unreasonable.The core question which arises for consideration in the writ petitions was as to whether, keeping in view the apprehension in the mind of the Bank that it has been subjected to fraud by its own officers as also the apprehension in their mind that the writ petitioners or their agents might have conspired with the offices of the Banks, was it unfair and unreasonable in its decision to refuse to make payment? The answer to that question prima facie must be rendered in the negative. If, however, it is found as of fact that the writ petitioners-respondents were not parties to the fraud, whether even in a lis involving private law domain, namely, contract qua contract, as a trustee of the investors money, they may be held to be liable to refund the amount, is the question?.Indisputably, whether as a public sector undertakings or otherwise the banks cannot refuse to accede to the just demand of the investors to pay any amount lawfully due to them inter alia on the premise that their officers are guilty of commission of any fraud.It is one thing to say that fraud has been committed by their officers to cause wrongful loss to the bank but it is another thing to say that the banks are constructively liable for the acts of their officers.In given cases, the employers are constructively liable for acts of negligence on the part of their employees.We will, thus, assume for the purpose of this case that the Banks are constructively liable for acts of their employees. We will also assume that the Banks are liable to pay the amount under the contract for which the FDRs were issued.A writ petition indisputably would be maintainable even in relation to a matter arising out of contract qua contract.12. As has been submitted by Mr. Sundaram that some cases may start on a private interest but if the court finds involvement of a public law element therein concerning a large number of people, it may proceed on the basis as if it was a public interest litigation and appoint a Committee and then grant relief in favour of the writ petitioners. Whether such an extraordinary case has been made out herein is the question.Respondents are cooperative societies. They at the instance of some agents or the middlemen thought it expedient to invest in Fixed Deposit Receipts (FDRs) in Bank of Baroda and Indian Bank. The modus operandi appears to be that the brokers/intermediaries lured a few cooperative banks/credit societies for placing deposits with the branches of Bank of Baroda/Indian Bank in and around Surat as also at Bharuch wherefor a handsome commission/incentive ranging from 3.8 to 25 per cent used to be given. The Cooperative Societies themselves did not approach the Bank. All acts were done through the agents. The documents seem to have been sent through brokers who also delivered to them the Maturity Value Certificates in lieu of original FDRs or the FDRs/Xeroxed copies, in addition to delivery of drafts for commission. The commission used to be paid in cash. In some cases, the original FDRs were retained by the banks. However, the original documents sent by the cooperative societies to the banks in some cases were not available in the offices of the bank but a different set of documents were replaced in the files. Loans were raised against FDRs on the basis of such documents mainly for further investment by private individuals. Funds were withdrawn in cash either directly from their current accounts or by issuing cheques in favour of some individuals who reportedly discounted their cheques.13. The fact that the officers of the banks were involved in the entire dealings is not in dispute. It is furthermore not in dispute that some brokers/commission agents were also involved. To what extent, the authorities of the cooperative banks and/or cooperative societies were involved and/or in know thereof, however, is not very certain.As per the judgment of the learned single judge, the Committee consisted of three members. When the Committee dealt with the cases of Bank of Baroda, only the representative of Bank of Baroda acted as a member and when the Committee dealt with the cases of Indian Bank, only the representative of the Indian Bank acted in the said capacity. The other members of the Committee were Shri JR Prabhu, Banking Ombudsman, Mumbai and Mr. VS Das, Regional Director, RBI, Ahmedabad.15. We have been taken through the report submitted by the Committee. The Committee did a yeoman job. It went into various aspects of the matter. It tried to cover as much ground as possible. It noticed the facts leading to setting up of the Committee. It considered the written submissions as also the oral submissions of the appellant and the submissions made by the respective banks, the officers of the banks, the intermediaries as also the actions taken by the banks concerned.Whereas general observations and recommendations by all the members appear to be unanimous, no unanimity however could be reached in regard to the question as to what direction could be issued in the matter.Whereas the Chairman and Regional Director, RBI were of the opinion that the banks should refund the disputed amounts of deposit to the depositors; other two members representing the Banks were of the view that the return of the deposits may amount to double payments to the depositors.Unanimity, however, was arrived at that no interest on the amount of deposits would be payable. It opined that the officers of the banks were primarily responsible for perpetration of fraud.16. A writ court exercising the power of judicial review has a limited jurisdiction. A writ petition would lie against a State within the meaning of Article 12 of the Constitution of India. Indisputably, exercise of jurisdiction by the High Court is permissible in a case where action of the State is found to be unfair, unreasonable or arbitrary. The question which should have been posed by the High Court was as to whether the action of the bank was so arbitrary so as to invoke the public law jurisdiction. If the answer to the said question was to be in the negative, the High Court should have refused to exercise its jurisdiction.A fraud has been practiced on the banks. Primary accused may be the bank officers but a conspiracy with them by the outsiders has also been alleged. The original FDRs only in some cases are available; in most of the cases they are not. Even the Committee could not decide for as to which one was the original FDR and which was not. It could not distinguish between an original FDR and the Xerox copy thereof.Opinion of the expert thereon might have been received, but the final verdict thereupon in the cases initiated by the C.B.I. is still awaited.17. The law as regards application of the power of judicial review, inter alia, in the contractual filed stands covered by a large number of decisions. (See LIC of India and Anr. v. Consumer Education & Research Centre and Ors. AIR1995SC1811 , Sanjana M. Wig (Ms) v. Hindustan Petroleum Corpn. Ltd. AIR2005SC3454 , ABL International Ltd and Anr. v. Export Credit Guarantee Corporation of India Ltd and Ors. (2004)3SCC553 , The D.F.O, South Kheri and Ors. v. Ram Sanehi Singh AIR1973SC205 . We, however, do not think that facts involved in each case and the law laid down therein need to be discussed at length as there does not exist any dispute in regard to basic principles laid down therein.In Hyderabad Commercials v. Indian Bank and Ors. AIR1991SC247 , this Court held:Since the basic facts regarding the unauthorized transfer of the disputed amount from the appellants account as well as the banks liability was admitted, there was no justification for the High Court to direct the appellant to file suit on ground of disputed questions of fact. The respondent bank is an instrumentality of the State and it must function honestly to serve its customers.Would the ratio laid down therein apply in the instant case? We do not think so. The question as to whether fraud has been committed by the officers of the bank is pending consideration before a competent criminal court. There are other various disputed questions which are required to be gone into in the said proceeding. The role played by some of the writ petitioners - respondents is also in issue. Such a seriously disputed questions of fact, in our opinion, could not have been gone into by the writ court.We would accept the proposition of law as propounded by this Court in Guruvayoor Devaswom Managing Committee and Anr. v. C.K. Rajan and Ors. (2003)7SCC546 . In that case it was, inter alia, observed that public interest litigation procedures may be adopted in a case where initially the writ petition was filed as a private interest litigation. (See also Ashok Lanka and Anr. v. Rishi Dixit and Ors.AIR2005SC2821 .18. But it is, in our opinion, not a public interest litigation in that sense of the term. The report, however, was not unanimous. The opinion of the Committee was a divided one on the crucial issue. Two members of the Committee were of the opinion that whether the amount deposited by the cooperative banks was received back by them or not, was yet to be ascertained. We are, therefore, of the opinion that it cannot be said that the fact finding body, assuming that the same could be constituted, made such recommendations which could be accepted by the Court without going into the merit thereof. It is also not a case where any mandatory relief could be granted in favour of the respondents.20. Answers thereto may be difficult to find but it is not a wholly impossible task.The learned single judge opined that there existed disputed questions of fact in respect whereof no definite finding could be arrived at having regard to the modus operandi of the persons involved.14. The private dispute between the parties were, thus, sought to be converted into a public interest litigation for the purpose of making an enquiry into the affairs of the bank by a Committee.19. Having however said so, we must pose unto ourselves a further question. Could those cooperative societies which had absolutely no role to play in the entire episode should suffer in any manner whatsoever? The cooperative societies/cooperative banks for the purpose of their day-to-day functioning, require the amount which they have invested in FDRs on their maturity. Should they wait till the criminal cases are over? Should they be pushed to institute civil suits? They can indisputably be compensated by grant of interest. What, however, happens if in the meanwhile in the absence of the requisite funds being available to them, they find it difficult to run the day-to-day affairs?