Page 15 - Banking Finance September 2023

LEGAL UPDATE

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Phoenix ARC (P) Ltd. v. Vishwa Bharati Pradeep Kumar v. Postmaster General
Vidya Mandir (Delivered on February 7, 2022)
(Delivered on January 12, 2022) Coram: 3-Judge Bench HM Justices L. Nageshwara Rao,
Sanjiv Khanna and B.R. Gavai
Coram: 2-Judge Bench of HM Justices M.R. Shah and
B.V. Nagarathna Authored by: HM Justice Sanjiv Khanna
Authored by: HM Justice M.R. Shah The petitioner had laid a challenge to the dismissal order
of the National Consumer Dispute Redressal Court (for short
Issue before the court was maintainability of writ petition
"NCDRC") rejecting the claim of the petitioner for the grant
under Article 226 of the Constitution of India against an as-
of compensation under various heads along with interest
set reconstruction company (for short "ARC") and passing of
for illegal encashment of Kisan Vikas Patra (for short "KW")
interim orders protecting the interest of the secured credi-
purchased by them. The said 10/Ps were illegally encashed
tor. Referring to the longline of judgments of United Bank of
through the post office concerned at the instance of one
India v. Satyawati Tondon,2 Kanaiyalal Lalchand Sachdev v.
agent Ruksana, who was employed by the State of U.P. The
State of Maharashtra,3 Sri Siddeshwara Cooperative Bank
entire payment outstanding on the date of encashment was
Ltd. v. Ikba1,4 City and Industrial Development Corpn. v. Dosu
paid in cash, which was siphoned off and misappropriated
Aardeshir Bhiwandiwala,5 and Sadhana Lodh v. National In-
surance Co. Ltd.,6 Court held that interim orders stalling/ by the said agent to her personal benefit.
restricting the proceedings of the SARFAESI Act cannot be The agent was eventually convicted for various offences
passed, especially when a large sum amount is involved. under IPC for cheating, misappropriation, etc. Question
It was further held that ARC is a "private financial institu- arose about the vicarious liability of the post office for the
tion", and thus writ petition against such entities is not faults attributable to its employees. The court examined
maintainable, since they cannot be stated to be perform- various provisions of Negotiable Instruments Act, 1881 (for
ing public functions, normally expected to be performed by short "NI Act"), especially the definitions of "banker",
the State authorities. The court disallowed the judgments "holder", "endorse", "holder in due course" and "payment
of J. Rajiv Subramaniyan v. Pandiyas,7 Praga Tools Corpn. v. in due course", along with Sections 78 and 82 providing for
C.A. Imanual,8 and Ramesh Ahluwalia v. State of Punjab,9 the liability of the acceptor/endorser of the negotiable in-
relied upon by the borrowers as mentioning the writ peti- strument concerned. It was further held that to saddle the
tion to be maintainable. The filing of writ petitions was thus bank with the liability of payment to an incorrect entity/
held to be an abuse of the process of the court and interim person, what must be seen is the compliance of the stan-
orders passed in favour of the borrowers set aside. dard bank practices. Whether the person to whom the pay-

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