[This is a guest post by Rohan Deshpande.]
The Bombay High Court (“Court”) in its order dated April 11, 2020 in Transcon Skycity (“Transcon”) v. ICICI Bank (“ICICI”) was called upon to interpret the Reserve Bank of India’s Statement of Developmental and Regulatory Policies and detailed instructions, both dated March 27, 2020 (collectively, “RBI Directives”). The RBI Directives, inter alia, provide for a moratorium to be applicable from March 01, 2020 to May 31, 2020 in relation to repayment of instalments and classification of accounts as non-performing assets (“NPA/s”). These were issued by the RBI in view of the adverse impact of the novel coronavirus pandemic upon servicing of debt. Prior to Transcon v. ICICI, the RBI Directives were already the subject matter of consideration by the Delhi High Court and the Bombay High Court.
Transcon filed the above case as a writ petition under Article 226 of the Constitution of India, with ICICI as the first respondent and the RBI as the second. It was Transcon’s case that although it had defaulted on certain loan instalments payable to ICICI prior to March 01, 2020, the benefit of the moratorium should be extended to it inter alia in view of the impact of the nationwide lockdown upon its business. The prayers in its petition were:
(a) To issue a writ of mandamus directing that the RBI Directives are applicable to Transcon’s loan account held with ICICI;
(b) To issue a writ of mandamus restraining ICICI from classifying Transcon’s loan account as an NPA;
(c) In the alternative to prayer (a), to declare the RBI Directives as unconstitutional and violative of Articles 14 and 19(1)(g) of the Constitution;
(d) Interim relief restraining ICICI from taking any coercive steps or other measures to alter the status of Transcon’s loan account to an NPA.
The purport of the first prayer may be questionable, but what is beyond doubt is that the second prayer was sought as a mandamus against a private entity not covered within the ambit of Article 12 of the Constitution. Naturally, ICICI raised a preliminary objection to the maintainability of Transcon’s petition. In what constitutes a creative moulding of reliefs in favour of Transcon, the Court proceeded to pass an ad-interim order directing ICICI to exclude the period in which these is an overlap between the moratorium period and the nationwide lockdown from the computation of the 90-day NPA declaration period, thus granting time to Transcon for regularising its defaulted payments after lifting of the lockdown. The question of maintainability of the petition was left open to be decided at a later date. It is the view of the author that such an order passed by the Court is beyond the scope Article 226 of the Constitution of India.
At the outset, the issue of maintainability ought to have been considered by the Court as a precursor to granting ad-interim reliefs which had the effect of allowing in substance what Transcon was seeking under prayer (d) read with prayer clause (b) of its petition. The jurisdiction of the Court to entertain Transcon’s petition was not challenged by ICICI on the basis of some procedural irregularity, but based on a substantial one regarding the Court’s lack of inherent jurisdiction to exercise the public law remedy under Article 226 of the Constitution against ICICI. The Court even noted that,
10. … A mandamus is sought, but without any pleading that justice, though demanded, has been denied. The law on this is well-settled. Similarly, there is not even a whisper of an averment as to how the two Respondents are amenable to the writ jurisdiction of this Court …,
Yet, it proceeded to observe in the same paragraph that:
Those matters, though in my view crucial, are perhaps best left for another day. The Petitioners are put to notice that these are among the questions they will have to deal with at some stage.
It was in this manner that the Court proceeded to undertake no enquiry on the issue of maintainability, apart from merely noting the rival contentions of the parties and deferring this enquiry to a future date. Assume that Transcon takes the benefit of the order, regularises its payments, but subsequently, the regular division bench of the Court concludes that the petition was indeed without jurisdiction – the clock cannot be set back in time. Irreparable injury would thus be caused to ICICI, which could have taken consequential measures in law to proceed against Transcon after declaration of its account as an NPA. Having decided to grant ad-interim reliefs in the petition in the aforesaid manner, a substantial public law defence to exercise of jurisdiction under a discretionary provision has been rendered nugatory by the Court, and is irreconcilable with the maxim actus curiae neminem gravabit, viz., that an act of the court shall prejudice no man.
Nothing prevented the Court from either conclusively dealing with the issue of maintainability or permitting Transcon at the threshold to withdraw the petition and file a civil suit with an accompanying application for interim reliefs, akin to the previous case before the Bombay High Court arising in context of the self-same RBI Directives. Urgency, and/or exceptional circumstances resulting from the coronavirus pandemic would be no defence to deferring the question of maintainability to a future point in time when the exercise, even if successfully determined in favour of the contesting respondent, loses complete relevance. There is certainly potential for abuse associated with this manner of proceeding with a writ petition, as pressing urgency can arise in other petitions in the future, dehors the pandemic, with this decision being cited as a precedent for postponing an enquiry into the otherwise preliminary issue of maintainability, even when the same is an ex facie plausible enquiry like in this case.
In any event, even assuming that Transcon’s petition was indeed maintainable, there is a further point which needs consideration.
What Transcon was seeking through its petition can be prima facie made out from one of the contentions recorded within the order:
9. … What is being assailed here is not any action by the ICICI Bank on its own but a circular issued by the RBI, the 2nd Respondent, which is undoubtedly an instrumentality of the State within the meaning of Article 12 of the Constitution of India. … What the Petitioners, therefore, seek is not that the ICICI Bank should act in any particular manner that violates RBI directives or guidelines but, rather, an interpretation of those circulars and guidelines applicable to the moratorium period so as to bind ICICI Bank. What is being questioned here is a directive or set of directives issued by an instrumentality of the State — the RBI — and what the Petitioners seek is an interpretation of those directives and circulars to bring them into accord with their avowed objective. … (emphasis added)
However, quite contrary to the aforesaid, the Court did not interpret or give a wider construction to the RBI Directives in the manner contended. Rather, it did not interpret or water down the RBI Directives in any manner whatsoever, but proceeded to grant an in personam relief, limited in operation only to Transcon and ICICI, without being binding at all upon the RBI. Certain observations from the order of the Court can be adverted to in this regard:
23. What needs to be done is to fashion a workable order limited to the facts of this particular case ensuring that it sets no precedent for ICICI Bank in other cases and yet ensuring that the Petitioners have enough latitude to be able to service their debt. …
44. It is also clarified that this order will not serve as a precedent for any other case in regard to any other borrower who is in default or any other bank. Each of these cases will have to be assessed on their own merits.
In a writ petition under the Constitution, where the very basis to grant reliefs against ICICI was under challenge and unadjudicated, and where interpretation of the RBI Directives was the only public law element involved, it is disconcerting that the Court has granted ad-interim reliefs as if this were a private lis exclusively between Transcon and ICICI. The caveat that judicial review under Article 226 should not be exercised in a manner which converts the High Court into a mere court of appeal is an old one, but in this case, the High Court seems to have misconstrued its writ jurisdiction with that of a civil court of first instance.
The power under Article 226 may be discretionary, and not confined to granting of prerogative writs. While in personam reliefs can also be granted by the writ court, discretion under Article 226 cannot be exercised in a manner contrary to the mandate of Article 12. In moulding and granting reliefs against a private body, the Court has acted in a manner wholly impermissible in law and expressly contrary to the observations of the Supreme Court, inter alia in Federal Bank v. Sagar Thomas:
… in our view, a private company carrying on banking business as a scheduled bank, cannot be termed as an institution or company carrying on any statutory or public duty. A private body or a person may be amenable to writ jurisdiction only where it may become necessary to compel such body or association to enforce any statutory obligations or such obligations of public nature casting positive obligation upon it. (emphasis added)
In the present case, there was no statutory obligation which the Court called upon ICICI to enforce by way of the order, since the Court expressly shied away from forming any opinion, even a prima facie one in the absence of the RBI being represented by counsel, that the RBI Directives cast a statutory or a positive public obligation in the manner contended by Transcon. It is therefore the author’s view that the said order is beyond the scope of a petition under Article 226 of the Constitution, and is invalid.
Before concluding, it may be noted that even the Delhi High Court order against Yes Bank Ltd. appears to have been similarly passed in a writ petition, that too, without the RBI being arrayed as a party. Despite a challenge as to maintainability not being recorded in the order, in the author’s view, the above observations would apply with equal force. Further, this order would stand vitiated as being contrary to the principles of natural justice as the Delhi High Court interpreted the RBI Directives to arrive at a prima facie view, without any limitation as imposed by the Bombay High Court, in the absence of the RBI being made a party to the petition.
[The author thanks Mihir Naniwadekar for his comments on a draft version of this post.]