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2008(4) Supreme 66
SUPREME COURT OF INDIA
S.B. Sinha, J.
Indian Bank — Appellant
versus
Godhara Nagrik Cooperative Credit Society Ltd. and another — Respondents
Civil Appeal No. 3303 of 2005
WITH
(C.A. Nos. 3336, 3337, 3338 and 3304-3335 of 2005)
Decided on : 16-05-2008
(b) Constitution of India, 1950 – Article 226 – 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. (Para 10)
(c) Constitution of India, 1950 – Article 226 – Public Sector Banks should discharge their functions keeping in mind the larger public interest – However, in the matter of enforcement of contract, they are to be governed by the terms thereof – Such matters 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. (Para 10)
(d) Corporate Liability – 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 – The employers are constructively liable for acts of negligence on the part of their employees – Therefore Banks are liable to pay the amount under the contract for which the FDRs were issued. (Para 10)
[1915] AC 705 HL; [ 1995] 2 AC 500, [1995] 3 All ER 918 – Relied upon.
(e) Constitution of India, 1950 – Article 226 – Such a seriously disputed question of fact as fraud by officers of the Banks as well as some of the writ petitioners could not be gone into by Writ Court. (Para 17)
(1995) 5 SCC 482; (2005) 8 SCC 242 : 2005(6) Supreme 328; (2004) 3 SCC 553; (1971) 3 SCC 864; 1991 Supp. (2) SCC 340 – Distinguished.
(f) Constitution of India, 1950 – Articles 226, 32 – Public interest litigation procedures may be adopted in a case where initially the writ petition was filed as a private interest litigation. (Para 17)
(2003) 7 SCC 546: 2003(6) Supreme 107; (2005) 5 SCC 598; (1992)4 SCC 605 – Relied upon.
(g) Constitution of India, 1950 – Article 226 – 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 – The respondents were also not entitled to any mandatory relief. (Para 18)
Facts of the case :
1. Respondents herein are cooperative societies registered under the Cooperative Societies Act and/or their Members.
2. They deposited certain amounts in cash in fixed deposits of Banks wherefor Fixed Deposit Receipts (FDRs) were issued.
3. Applications for grant of loans by various persons were filed before the prescribed authorities of the banks on the basis of the said FDRs.
4. As and when the FDRs matured, the investors requested the Banks for their encashment. The banks refused to accede thereto stating that the amount under the FDRs had already been paid by way of loans and, thus, no further amount was payable. It was contended that a fraud on the banks had been practiced to which the depositors and the officers of the banks were parties.
5. Writ petitions were filed. A learned Single Judge of the High Court directed constitution of a Committee under the Chairmanship of the Deputy Governor of Reserve Bank of India or his nominee to go into the matter in great details. Various powers were delegated in favour of the Committee. A Division Bench of the said Court, however, stayed only the operation of some of the clauses of the said order but the Committee was allowed to function.
Findings of the Court :
Such a seriously disputed question of fact as fraud by officers of the Banks as well as some of the writ petitioners could not be gone into by Writ Court.
Result : Appeal allowed.
JUDGMENT
S.B. Sinha, J. —
1. These appeals involve an interesting question as regards the power of judicial review of a Superior Court.
2. Respondents herein are cooperative societies registered under the Cooperative Societies Act and/or their Members. They deposited certain amounts in cash in fixed deposits of Banks wherefor Fixed Deposit Receipts (FDRs) were to be issued. Such deposits were made through some so-called Commission Agents of the Banks on payment of huge commission which is ordinarily not allowed by the Nationalized Banks.
3. Applications for grant of loans by various persons were filed before the prescribed authorities of the banks on the basis of the said FDRs. Allegedly a large number of officers of the banks were involved in a scam whereby unofficial investments of the said amount were being made.
4. As and when the FDRs matured, the investors requested the Banks for their encashment. The banks refused to accede thereto stating that the amount under the FDRs had already been paid by way of loans and, thus, no further amount was payable. It was contended that a fraud on the banks has been practiced to which the depositors and the officers of the banks were parties.
5. Writ petitions were filed. A learned Single Judge of the High Court opined that serious disputed questions of fact being involved in the said writ petitions, no relief can be granted to the writ petitioners.
6. Despite the same, the learned single judge relying on the provisions contained in Section 35A of the Banking Regulations Act, 1949 directed constitution of a Committee under the Chairmanship of the Deputy Governor of Reserve Bank of India or his nominee to go into the matter in great details. Various powers were delegated in favour of the Committee including the one that the decision of the Committee shall be final and binding upon the parties. A Division Bench of the said Court in an intra court appeal preferred thereagainst, however, stayed only the operation of some of the clauses of the said order. The Committee, however, was allowed to function. A special leave petition filed thereagainst has been dismissed by this Court with certain observations.
7. The Committee submitted its report. It was found that principally the officers of the banks were involved in the matter of commission of the alleged fraud on the Banks. Members of the Committee, however, differed in their opinion as to whether, having regard to the limited scope of the enquiry, any positive direction could be issued.
8. Relying on and/or on the basis of the report of the Committee, the Division Bench of the High Court opined that as the writ petitioners were not parties to the fraud, subject to any other or further orders that may be passed in the criminal case, appellant-banks should be directed to pay the amounts under the FDRs to the depositors.
9. Appellants are, therefore, before us.
On 5th April 2004, a limited notice was issued by this Court, which is to the following effect :-
“Issue notice on the special leave petition limited to the question as to whether the High Court should have directed payment having regard to the fact that the Committee itself had not finally resolved the question of liability as far as the disputed amount was concerned. Issue notice on the prayer for interim relief also.”
This Court in its order dated 10th December, 2004 explained the said order stating :-
“The issue which is now required to be resolved is a narrow one viz. whether the Committee had finally decided that the amounts payable by the Bank (a) were the liability of the Bank and (b) if so, what was the quantum if any, payable by the Bank to the deposits. Learned counsel appearing on behalf of the respondent prays for time till after the vacation. Let the matter appear two weeks after reopening on a miscellaneous day.
There will be interim order staying the operation of the impugned order.”
However, by an order dated 9th May, 2005, upon hearing the counsel for the parties, ‘Lea
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