Calcutta High Court: Writ is Maintainable against Private Bank Performing Public Functions

 The Calcutta High Court (HC) on 10 March 2021, held in the case titled M/s Pearson Drums & Barrels Pvt. Ltd. (Petitioner) v. The General Manager, Consumer Education & Protection Cell of Reserve Bank of India & Ors. (Respondents) that the Reserve Bank of India (RBI) is 'State' under Article 12 of the Constitution of India.

Justice Sabyasachi Bhattacharyya dismissed the objections made to the maintainability of a writ petition filed under Article 226 of the Constitution against the General Manager, Consumer Education and Protection Cell (CEPC) of the RBI and the IndusInd Bank, among other respondents.

The Court clarified that the writ petition is maintainable against private banks discharging public functions and added, "Since the Reserve Bank of India is an instrumentality of the State, it comes squarely within the meaning of 'State' as contemplated in Article 12 of the Constitution."

The factual background of the case is that the petitioner challenged RBI communication made regarding a dispute between the IndusInd Bank and an MSME company named Pearson Drums & Barrels Pvt Ltd (petitioner) over the refund of processing fees for a loan facility extended by the bank to the company.

The IndusInd Bank contended that the writ petition was not maintainable while relying on the judgment of the case Federal Bank Limited v. Sagar Thomas and others.

The Court observed that the functions discharged by IndusInd Bank are of a public nature and pertain to the discharge of public duties. The HC further opined that the issue raised by the petitioner-company in its writ petition had a wider connotation insofar as the liabilities of banks in respect of a refund of processing fees is concerned.

The HC rejected the objections made as regards the maintainability of the writ petition. The Court set aside the RBI communications whereby it had recommended IndusInd Bank to refund only 50 per cent of the processing fee paid and closed the case.

The HC examined the facts in detail and concluded that "The decision of the respondent no.4 (IndusInd Bank) and that of the Consumer Education & Protection Cell of the Reserve Bank of India to refuse the petitioner's claim for refund of entire processing fees has to be set aside."

It ordered IndusInd Bank to refund the entire processing fee of Rs 14,27,850 to the petitioner-company within 30 days. It added that interest of 6 per cent per annum would be payable in addition if this payment is not made within time.