The Calcutta High Court has ruled that Axis Bank, being a private entity, does not perform public functions that would subject it to writ jurisdiction. The division bench of Chief Justice T. S. Sivagnanam and Justice Hiranmay Bhattacharyya made this observation while partly allowing an appeal filed by Axis Bank Limited against a single judge order.
Background:
Indian Cable Net Company Limited, a subsidiary of SITI Networks Limited, entered into a Term Loan Agreement with Axis Bank on March 30, 2019. The loan was secured by depositing title deeds of a property and pledge of shares by SITI. After repaying the loan, Indian Cable Net requested Axis Bank to issue a no-dues certificate and release the securities. When the bank failed to do so, Indian Cable Net filed a complaint with the RBI Ombudsman, which was rejected. Subsequently, they approached the Calcutta High Court through a writ petition.
The single judge allowed the writ petition, directing Axis Bank to issue the no-dues certificate and return the securities. Aggrieved by this order, Axis Bank filed an appeal before the division bench.
Key Legal Issues:
1. Whether a writ petition is maintainable against a private bank like Axis Bank
2. Whether retention of securities by the bank after loan repayment constitutes deficiency in service
3. Scope and powers of the Banking Ombudsman under the RBI Integrated Ombudsman Scheme, 2021
Court’s Decision:
1. On maintainability of writ petition:
The court held that Axis Bank, being a private entity, does not perform public functions that would subject it to writ jurisdiction. The bench observed:
“The appellant bank carrying on the business or commercial activity of banking does not discharge any public function or public duty.”
2. On deficiency in service:
The court found that the bank’s failure to return title deeds and issue a no-dues certificate after loan repayment amounted to deficiency in service. It stated:
“Failure on the part of the bank to return the title deeds in respect of the property at Sector V, Bidhannagar, Saltlake and to issue no dues certificate even after repayment of the credit facilities amounts to ‘deficiency in service’ on the part of the appellant bank which is a regulated entity under the 2021 Scheme.”
3. On Banking Ombudsman’s role:
The court emphasized that the Ombudsman, being a quasi-judicial authority, must provide reasoned decisions adhering to principles of natural justice. It found that in this case, the Ombudsman failed to provide a detailed rationale or sufficient opportunity for both parties to be heard.
The division bench partly allowed the appeal, setting aside the single judge’s direction to return the pledge agreement and shares pledged by SITI, while upholding other aspects of the order.
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Case Details:
M.A.T. 483 of 2024 With I.A. No. CAN 1 of 2023
Appellant: Axis Bank Limited
Respondent: Indian Cable Net Company Limited & Ors
Lawyers:
For Axis Bank: Mr. Ratnanko Banerjee, Senior Advocate
For Indian Cable Net: Mr. Sabyasachi Chowdhury
