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A writ petition against a State or a State’s instrumentality arising from a contractual obligation is maintainable. :Calcutta High Court

“The following legal principles emerge as to the maintainability of a writ petition: 

(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable. 

(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule. 

(c) A writ petition involving a consequential relief of monetary claim is also maintainable.”  Said Justice Arindam Mukherjee from the Calcutta High Court in the matter of Man Nanda Keshri Rice Mill and Anr. Versus Union of India and ors. [W.P.A. 1998 OF 2020]

This order was passed for the facts where the petitioners claim that the Term Loan of Rs. 108 lakhs was duly repaid to the satisfaction of the Bank. The bank has also issued a certificate declaring the closure of the Term Loan Account on August 16, 2013, upon full payment. On behalf of the petitioners, petitioner no. 2 requested that the said Bank release the two mortgaged properties on the grounds that the Term Loan had already been repaid. According to a letter dated September 15, 2014, the bank has refused to release the mortgaged properties on the grounds that the Cash Credit account has not been closed and that the mortgaged properties cannot be released until the outstanding amount against the same is repaid. In response to the Court’s rejection of the petitioners’ request for the release of the mortgaged properties, the petitioners have filed this writ petition, asking the Court to issue mandatory orders directing the release of the mortgaged properties.

According to the petitioners, the Term Loan has been repaid. Petitioner no. 2 as the personal guarantee given by the proprietor of petitioner no. 1 and one Gayatri Saha secures the Working Capital Loan of Rs.40 Lakhs, also known as Cash Credit limit. Aside from that, and in any case, the Cash Credit Loan is also secured by the Rice Mill’s stock, work in progress, and raw materials.

It is submitted on behalf of the Bank that the sanction granted on September 5, 2005, was a composite one. Both the Term Loan and the Cash Credit facility were mortgaged by the petitioners. The mortgage, because it is a composite one, cannot be released until the outstanding amount in the Cash Credit Account is fully repaid, even if the Term Loan is fully repaid. 

WPA 1998-2020 The said bank has also questioned the viability of the writ petition in light of the nature of the contract under which the equitable mortgage was credited.

The question raised by the bank, in this case, is not whether the respondent bank is an authority under Article 12 of the Indian Constitution and a writ exists against it, but whether this Court will exercise its jurisdiction under Article 226 of the Indian Constitution to entertain the writ petition by passing orders therein taking into account the nature of the contract between the parties and the court.

The contract between the respondent-bank and the petitioner clearly and unambiguously reveals that the petitioner has entered into the realm of the concluded contract, pure and simple, after voluntarily accepting the conditions imposed by the respondent-bank. Unless some statute steps in and confers some special statutory obligations on the part of the bank in the contractual field, the petitioner can only claim the right conferred upon it by the said contract and is bound by the terms of the contract.

In terms of the issue of mortgage release upon repayment of a portion of the aggregate loan, the contract between the petitioner and the respondent bank contains no statutory terms and/or conditions. The petitioner’s remedy, if any, is to redeem the mortgage, rather than to file a writ petition seeking the release of mortgage properties under the contract.

As a result, the writ petition fails and is dismissed on the grounds of maintainability as discussed above, but without any order as to costs. 

The petitioners, on the other hand, will be free to pursue any other legal remedy available to them on the same grounds, as I have not gone into the merits of the case except as necessary to decide the maintainability issue.

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