Private finance company not open to writ jurisdiction: Supreme Court

New Delhi: The Supreme Court has said that a private company carrying on banking business as a scheduled bank cannot be termed as a company carrying on any public function or public duty.

A bench of Justices J B Pardiwala and R Mahadevan said a body, public or private, should not be categorised as “amenable” or “not amenable” to writ jurisdiction as the most important and vital consideration should be the “function” test as regards the maintainability of a writ application.

The court said in exceptional cases a writ of mandamus or a writ in the nature of mandamus may be issued to a private body, but only where a public duty is cast upon such private body by a statute or statutory rule and only to compel such body to perform its public duty.

"If a public duty or public function is involved, anybody, public or private, concerned or connection with that duty or function, and limited to that, would be subject to judicial scrutiny under the extraordinary writ jurisdiction of Article 226 of the Constitution," the bench said in its order on January 24, 2025.

Upholding the High Court's order dismissing a writ petition against Muthoot Finance Ltd, the bench said the High Court is right in taking the view that the company is not a “State” within the meaning of Article 12 of the Constitution and therefore not amenable to writ jurisdiction of the High Court under Article 226 of Constitution.

Petitioner S Shobha's counsel said although the finance company may not be strictly falling within the ambit of the State being a non-banking financial institution is governed by the rules and regulations framed by the RBI.

If rules and regulations framed by the RBI are breached by a non-finance banking company then as a statutory authority such finance company is amenable to writ jurisdiction, the counsel said.

The bench, however, said, "Muthoot Finance Ltd cannot be called a public body. It has no duty towards the public. Its duty is towards its account holders, which may include the borrowers having availed of the loan facility. It has no power to take any action, or pass any order affecting the rights of the members of the public."

The court pointed out that the binding nature of its orders and actions is confined to its account holders borrowers and its employees and its functions are also not akin to governmental functions.

The bench said, that if the petitioner has any grievance to redress against the finance company, it should be open for her to avail of appropriate legal remedy before the appropriate forum in accordance with law including approaching the RBI's Ombudsman.

The court underscored a writ petition may be maintainable against the state government; authority; a statutory body; an instrumentality or agency of the State; a company which is financed and owned by the State; a private body run substantially on State funding; a private body discharging public duty or positive obligation of public nature; and a person or a body under liability to discharge any function under any Statute, to compel it to perform such a statutory function.