Case: Federal Bank Ltd Vs. Sagar Thomas

1. The respondent no.1 Sagar Thomas was working as a Branch Manager in Karunagappally branch of the appellant Bank, namely, the Federal Bank, having its registered office at Alwaye, Kerala. He was, however, suspended on 29.5.1982, since a disciplinary enquiry was ordered into some charges against him for having exceeded his authority in grant of loans and advances to different parties. The inquiry officer found him guilty of the charges and ultimately punishment of dismissal was awarded to the respondent.2. The respondent no.1 challenged the order of his dismissal by filing a writ petition in the High Court. A preliminary objection about maintainability of writ petition seems to have been taken, in defence by the Federal Bank, saying that it is a private bank and not a State or its agency or instrumentality, within the meaning of Article 12 of the Constitution of India, hence a writ petition under Article 226 of the Constitution is not maintainable against it. The learned single Judge, however, found that the Federal Bank performs public duty and observedper statutes, the Reserve Bank and Central Government exercise all pervading functional, fiduciary and managerial control over the banking industry. Every banking company is duty bound to carry on banking business as per the banking policy under stringent control of the Reserve Bank in the interest of banking system or in the interest of monetary stability of sound economic growth, having due regard to the interest of the depositors. The activities carried on by the bank are vital to public interest and have potential to affect the socio-economic development and growth of the nation. Banking companies are therefore, public institutions, accepting deposits from public, financial assistance, from the State through its agencies/instrumentalities, for the purpose of lending or investment, pursuing banking policy and engaged in matters of high public interest or performing public functions, ensuring monetary stability, sound economic growth, equitable allocation of various funds to efficient use, for the promotion and growth of economy and welfare of the State. The first respondent is, thus, performing a public duty and a positive obligation towards its employees and customers exists. Therefore, it is amenable to writthe order passed by the learned single JudgeIn the light of the above decisions of the Apex Court, I am very well find that the Federal Bank Ltd., is performing public duty and as such it comes under the definition of other authority within the meaning of Article 12 of the Constitution of India and as such the writ petition is maintainable before thisby the aforesaid judgment of the learned single Judge, the appellant preferred a writ appeal but referring to a decision of this Court in U.P. State Co-operative Land Development Bank Ltd. vs. Chandra Bhan Dubey & others, (AIR 1999 SC Page 753), the Division Bench, observed that in an identical fact situation it was held that writ application would be maintainable, minor distinctions on facts, here and there, would not make the aforesaid decision inapplicable to schedule banks. With such observations the appeal was dismissed providing that the learned single Judge shall decide writ petition on merits. The Federal Bank Ltd. has preferred this appeal, against the aforesaid judgment of the High Court.

Court's reasoning:
32. Merely because the Reserve Bank of India lays the banking policy in the interest of the banking system or in the interest of monetary stability or sound economic growth having due regard to the interest of the depositors etc. as provided under Section 5(c)(a) of the Banking Regulation Act does not mean that the private companies carrying on the business of or commercial activity of banking, discharge any public function or public duty. These are all regulatory measures applicable to those carrying on commercial activity in banking and these companies are to act according to these provisions failing which certain consequences follow as indicated in the Act itself. Provision regarding acquisition of a banking company by the Government, it may be pointed out that any private property can be acquired by the Government in public interest. It is now judicially accepted norm that private interest has to give way to the public interest. If a private property is acquired in public interest it does not mean that the party whose property is acquired is performing or discharging any function or duty of public character though it would be so for acquiringour view, a private company carrying on banking business as a scheduled bank, cannot be termed as an institution or company carrying on any statutory or public duty. A private body or a person may be amenable to writ jurisdiction only where it may become necessary to compel such body or association to enforce any statutory obligations or such obligations of public nature casting positive obligation upon it. We dont find such conditions are fulfilled in respect of a private company carrying on a commercial activity of banking. Merely regulatory provisions to ensure such activity carried on by private bodies work within a discipline, do not confer any such status upon the company nor puts any such obligation upon it which may be enforced through issue of a writ under Article 226 of the Constitution. Present is a case of disciplinary action being taken against its employee by the appellant Bank. Respondents service with the bank stands terminated. The action of the Bank was challenged by the respondent by filing a writ petition under Article 226 of the Constitution of India. The respondent is not trying to enforce any statutory duty on the part of the Bank. That being the position, the appeal deserves to be