RBI is "State" under Article 12, writ petition is maintainable against private bank discharging public functions: Calcutta High Court

The Calcutta High Court recently held that the Reserve Bank of India (RBI) is "State" under Article 12 of the Constitution of India (M/s Pearson Drums & Barrels Pvt. Ltd. v. The General Manager, Consumer Education & Protection Cell of Reserve Bank of India and other)..The case also saw the Court make pertinent observations regarding the maintainability of a writ petition against private banks discharging public functions..Justice Sabyasachi Bhattacharyya made the observations while dismissing objections made to the maintainability of a writ petition filed under Article 226 of the Constitution against the General Manager, Consumer Education and Protection Cell (CEPC) of the RBI and the IndusInd Bank, among other respondents.."Since the Reserve Bank of India is an instrumentality of the State, it comes squarely within the meaning of 'State' as contemplated in Article 12 of the Constitution. Thus, the writ petition is maintainable," the Court noted..The challenged RBI communication was made in relation to a dispute between the IndusInd Bank and an MSME company, Pearson Drums & Barrels Pvt. Ltd over the refund of processing fees for a loan facility extended by the bank to the company. .Relying on Federal Bank Limited v. Sagar Thomas and others, IndusInd Bank contended that a writ petition is not maintainable against private banks..The Court, however, noted that the functions discharged by IndusInd Bank are of a public nature and pertain to the discharge of public duties. Further, the judge opined that the issue raised by the petitioner-company in its writ petition had a wider connotation insofar as the liabilities of banks in respect of refund of processing fees is concerned. .The Court, therefore, rejected the objections made as regards the maintainability of the writ petition. .The Court proceeded to rule in the petitioner company's favour on merits as well. In doing so, it set aside the RBI CEPC's 2017 communications whereby it had recommended IndusInd Bank to refund only 50% of the processing fee paid and closed the case. ."... the decision of the respondent no.4 (IndusInd Bank) and that of the Consumer Education & Protection Cell of the Reserve Bank of India to refuse the petitioner's claim for refund of entire processing fees has to be set aside," the Court concluded, upon examining the facts..The Court, therefore, ordered IndusInd to refund the entire processing fee of Rs. 14,27,850 to the petitioner-company within 30 days. An interest of 6% per annum would be payable per annum if this payment is not made, the Court added..[Read Order]