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Courts can move against state for acts against public good’

Higher courts have the power to issue writ to the state if its acts are contrary to the public good, the Supreme Court has ruled, while holding that a public sector bank also falls within the definition of the state.

‘…if any action on the part of the state is wholly unfair and arbitrary, writ courts (high court and Supreme Court) can exercise their powers,’ the apex court said.

The apex court said that if a state authority or wing acts unfairly and contrary to the public good in discharge of its contractual or statutory obligations then a writ against its wrong doings is maintainable in the high court under article 226 of the constitution.

Under Article 226 of the constitution, the high courts have vast powers in the territory under their jurisdiction and can issue writ to any person or authority, including government, to protect of fundamental rights conferred on the citizens or for any other purpose.

If in a contract ‘there is clause for arbitration, normally, writ court should not invoke its jurisdiction’ and the ‘existence of effective alternative remedy provided in the contract itself is a good ground to decline to exercise its extraordinary jurisdiction under Article 226,’ said the apex court bench of Justice P. Sathasivam and Justice Anil R. Dave.

‘If the instrumentality of the State acts contrary to the public good, public interest, unfairly, unjustly, unreasonably discriminatory and violative of Article 14 of the constitution in its contractual or statutory obligations, writ petition would be maintainable,’ said the apex court judgment delivered July 30.

The court said this while dismissing an appeal by the Central Bank of India challenging the Calcutta High Court verdict directing it to handover the title deeds and other securities to a respondent company Devi Ispat Ltd.

In the instant case, Devi Ispat availed loans and credit facilities from the bank. Subsequently, the bank found frauds in the accounts.

The bank communicated to the company to look for another bank for its financial requirements.

The company started dealing with another bank and cleared all its dues with the Central Bank of India. However, the bank refused to part with the title deeds of its factory premises and other collateral securities of the company.

Against the bank’s stand, the company moved the Calcutta High Court where the single judge decided the matter in its favour and directed the bank to hand over the title deeds and other securities.

The bank challenged the decision before the division bench which upheld the directions of the single judge.

Upholding the concurrent finding of the single judge and that of the division bench, the apex court said: ‘The appellant bank (Central Bank of India), being a public sector bank, discharging public functions is ‘state’ in terms of Article 12 of the constitution of India (thus is) amenable to the writ jurisdiction.’

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