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Public sector undertakings’ actions resulting from contractual agreements between the parties do not constitute “public duties” that would give the court jurisdiction is upheld by the Kerala High Court in the case of Unimoni Financial Services Ltd. v. IDBI Bank Ltd through Justice P.V. Asha

FACTS OF THE CASE

In the instant case, the petitioner said that the requirement for Rs 11,00,000 as a processing charge for a credit facility and the retention of original property documents as security against such a facility constituted violations of his fundamental rights because they were arbitrary and illegitimate.

The petitioner argued that under the RBI’s order, IDBI would only be recognised as a private bank for regulatory purposes and would continue to be a public sector bank for all other purposes. It was also asserted that IDBI is under the direction of the Central Vigilance Commission and that the Central Government controls it.

JUDGEMENT

The writ petition challenging IDBI Bank’s status as a “State” under Article 12 of the Constitution was granted by the Court. The Court further added that public sector undertakings’ actions resulting from contractual agreements between the parties do not constitute “public duties” that would give the court jurisdiction.

The respondent’s legal representative contested the petition’s viability, arguing that the respondent bank lacks any monopoly in the banking industry and does not carry out any public, statutory, or sovereign functions. It was suggested that because its role is limited to commercial activities, the Central Government has little to no influence over how it operates.

The court denied the petition, ruling that it was not possible to say that extending credit or making a loan based on title deeds pledged as collateral fulfilled any public duties. Therefore, it cannot be stated that a request for a processing fee or the withholding of title deeds as security involves any aspect of public duty, even if the bank is a public sector bank. Accordingly, the Court held that the writ jurisdiction under Article 226 is not applicable to IDBI.

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JUDGEMENT REVIEWED BY NISHTHA GARHWAL

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