All HC | Does Article 12 of Constitution of India cover ‘Private Financial Institutions’ under its ambit? HC reiterates law laid down by SC

Allahabad High Court: The Division Bench of Naheed Ara Moonis and Vivek Varma, JJ., reiterated the law laid down by the Supreme Court that,

the private financial institutions, carrying of business or commercial activity, may be performing public duties, but cannot be considered to be covered under the definition of “State” under Article 12 of the Constitution of India.

Respondent’s Counsel, Abhinav Gaur submitted that the respondent bank raised a preliminary objection that the instant petition is not maintainable as HDFC Bank is a private bank not covered within the ambit and meaning of ‘State’ under Article 12 of the Constitution of India.

It was stated that the petitioner had taken a commercial loan from the private bank and defaulted in payment of instalments.

Supreme Court’ decision in Federal Bank v. Sagar Thomas, (2003) 10 SCC 733 was referred, wherein it was held that:

“28. …As indicated earlier, share capital of the appellant bank is not held at all by the Government nor is any financial assistance provided by the State, nothing to say which may meet almost the entire since the appellant bank does not enjoy any monopoly status nor can it be said to be an institution having State protection. So far as control over the affairs of the appellant bank is concerned, they are managed by the Board of Directors elected by its shareholders. No governmental agency or officer is connected with the affairs of the appellant bank nor is anyone of them a member of the Board of Directors. In the normal functioning of the private banking company there is no participation or interference of the State or its authorities. The statutes have been framed regulating the financial and commercial activities so that fiscal equilibrium may be kept maintained and not get disturbed by the malfunctioning of such companies or institutions involved in the business of banking. These are regulatory measures for the purposes of maintaining a healthy economic atmosphere in the country.”

Private Financial Institutions

Bench stated that following the law laid down by the Supreme Court in the above decision that the private financial institutions, carrying of business or commercial activity, may be performing public duties, but cannot be considered to be covered under the definition of “State” under Article 12 of the Constitution of India, the writ petition against such entity is not maintainable before the High Court.

Therefore, in view of the above-stated settled principle of law, the instant petition was dismissed. [Kailashi Devi v. Branch Manager, 2020 SCC OnLine All 1415, decided on 26-11-2020]


Advocates who appeared in the matter:

Counsel for Petitioner: Manoj Kumar Mishra

Counsel for the respondent: Abhinav Gaur

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