Private Financial Institutions May Be Performing Public Duties But Can’t Be Considered ‘State’ Under Article 12 Of Constitution: Allahabad High Court

Under Article 12 of the Constitution private financial institutions that carry commercial activity or business may be performing public duties but they cannot be covered under the definition of ‘State’. This was emphasized by Justices Naheer Ara Moonis and Vivek Verma in the Allahabad High Court on Thursday. It was observed in a writ petition filed against HDFC Bank through Advocate Manoj Kumar Mishra, seeking interest-free extension of the loan period in accordance with the circular issued by the RBI due to COVID-19. The High Court relied on the judgement passed by the Supreme Court in Federal Bank Ltd. v. Sagar Thomas and others, (2003) 10 SCC 733 which stated that even though the businesses have an impact on the economy of the country, they cannot fall under the category of performing public duties or functions. Due to this the Allahabad High Court held that the “writ petition against such entity is not maintainable before the High Court.”. In the case of Ajay Hasia v. Khalid Mujib, (1981) 1 SCC 722 1970 the Supreme Court laid down six factors that are supposed to be fulfilled in the case of a private bank being a Government instrument. The six factors are –

1. The Corporation is an agency of the Government if the Government hold the entire capital.

2. The Corporation is said to have Government character if the it can meet the entire expenditure of the Corporation.

3. The State has persuasive control of the Corporation

4. If the Corporation enjoys state-protected or state-conferred monopoly.

5. If the functions of the Corporation are closely related to the functions of the Government.

6. A strong supporting factor would be if a department of the Government was transferred to the Corporation.

None of these 6 factors were met in this particular case.

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