RBI ‘State’ Under Article 12: Calcutta HC

OVERVIEW

In the case M/s Pearson Drums & Barrels Pvt. Ltd. v. The General Manager, Consumer Education & Protection Cell of Reserve Bank of India and other, the Hon’ble High Court of Calcutta held that the Reserve Bank of India (RBI) is a State under the provisions of Article 12 of the Constitution. 

Since it was under the purview of ‘State’ according to the law of the land, a writ petition made against it would be maintainable, ruled Justice Sabyasachi Bhattacharya in a Single bench Judgement delivered by him.

“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,” commented Justice Bhattacharya while passing such order.

BACKGROUND 

The instant case is concerning a dispute between the Petitioner, a MSME (Micro, Small and Medium Enterprise) and the IndusInd Bank with respect to refund of a processing fee paid pursuant to a prospective loan facility. 

The Bank had assured the petitioner that in case the sanction of such loan did not go through, the processing fee so collected would be refunded. 

The bank refused to uphold its assurance, the counsel for the petitioner brought to the attention of the Court that “it was clearly mentioned in the e-mail demanding processing fees that if the sanction did not go through from the bank’s end, the bank would refund the processing fees.”

After such lack of cooperation from the bank, the petitioner approached the Reserve Bank of India who reiterated that such processing fee was non-refundable as per its understanding of the clause referring to which, such refund was claimed.

The Petitioner approached the High Court of Calcutta subsequent to such reply.

Citing the judgement in the case Federal Bank Limited v. Sagar Thomas and others, the respondent, IndusInd Bank contended that a writ application is not maintainable against private banks. The Court rejected such application.

FURTHER DETAILS

The Court noted that “the functions discharged by the IndusInd Bank are of a public nature and, as such, pertain to the discharge of public duties” and formed it to be the basis, in a way, to turn down the objection regarding maintainability of the Writ filed by the petitioner.

The Court, with regard to this particular case was well-aware that the question of law in this case was broader than this case in particular. The impact of this case extended to all the cases and observed that “the question raised by the petitioner in the present writ petition is not restricted to the grievance of the petitioner solely although such grievance forms the cause of action of the petitioner, but also has a wider connotation insofar as the liabilities of banks in respect of refund of processing fees is concerned.”

CONCLUSION

In order to decide on the maintainability of a writ petition against the Reserve Bank of India under Article 226 of the Constitution of India, the Calcutta High Court observed that the RBI is a ‘State’ under the provisions of Article 12 of the Constitution.
Such writ petition arose in order to determine the lawfulness of claiming refund of processing fees of a loan facility from IndusInd Bank, after the application for such loan had been rejected.

When the Bank rejection for the application of such refund, and the RBI “intimated the petitioner that, as per the understanding of the RBI, the processing fees were non-refundable as per the terms and conditions of the sanction letter of the concerned bank,” the MSME company approached the Calcutta High Court and filed a writ to claim justice from the Hon’ble Court.

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