ORDER
S. Abdul Nazeer, J.
1. In this case the petitioners have sought for quashing the auction notices bearing Nos. Ref: ADV/1706/MNG, dated 2-1-2007; Ref: ADV/1707/MNG, dated 3-1-2007; Ref: ADV/1704/MNG, dated 4-1-2007 and Ref: ADV/1705/MNG, dated 5-1-2007 issued by the first respondent (Annexures-J1 to J4) and for a writ of mandamus directing the 1st respondent to release the buses belonging to the petitioners, detailed in the schedule to the writ petition in the condition in which they were seized.
2. Petitioners contend that the Central Government enacted an Act called 'Road Transport Corporation Act, 1950' permitting each and every State within the Union of India to constitute a Corporation family to cater to the needs of travelling public. In furtherance of the object of the aforesaid Act the State Government constituted the Transport Department and thereafter on reorganisation of the State in the year 1956 it came to be called as Mysore State Road Transport Corporation (MSRTC) and thereafter Karnataka State Road Transport Corporation (KSRTC). The KSRTC in turn came to be bifurcated and known as KSRTC, BMTC (Bangalore Metropolitan Transport Corporation), NWKRTC (North-West Karnataka Road Transport Corporation) and NEKRTC (North-East Karnataka Road Transport Corporation). Consequent upon the change of policy, the concept of public-private participation came into vogue even in respect of NWKRTC and in furtherance of the same, it announced the scheme to take on hire private buses upon fulfillment of various terms and conditions imposed with regard the type of vehicle, chasis, seating arrangements, etc., on first-cum-first serve basis. Petitioners contend that they gave representations pursuant to which the NWKRTC issued letter of intent. As per the scheme every participant is required to provide at least five buses besides a security deposit of Rs. 10,000/- for each vehicle/bus. Since participating individual will be at liberty to avail credit facility from any of the nationalized/schedule bank, etc., the NWKRTC issues comfort letter. Since the petitioners required financial assistance, they approached various banks and financial institutions, etc., for the facility which ultimately came to be sanctioned and released and thereafter the vehicles were acquired. It is the case of the petitioners that NWKRTC has given a distorted version as a consequence whereof they suffered serious set back during the initial stage. The petitioners could not clear the EMI to the respective banks from where they have availed loan for acquisition of the buses. The petitioners have sustained loss of several lakhs of rupees. Therefore, petitioners filed a writ petition before this Court in W.P. No. 15732 of 2006 seeking directions to the Corporation to give effect to the hiring rate chart and scrupulous implementation of the scheme by ensuring the protections to the petitioners. This Court by the order dated 14-12-2006 directed the respondents to consider the representations in the light of the observations made therein. Petitioners contend that the 1st respondent being a Nationalised Bank was obliged to act fairly and permit the petitioners to ply the buses and repay the 1st respondent. In the meantime, the 1st respondent had seized the buses of the petitioners on 16-11-2006 and 20-11-2006. Petitioners made applications in the said writ petition to implead the 1st respondent and to issue consequential directions to it to return the seized buses. According to the petitioners, the 1st respondent filed a frivolous memo objecting to the same. After the disposal of the matter the respondents have issued notices on 2-1-2007, 3-1-2007, 4-1-2007 and 5-1-2007 threatening to auction the buses within 15 days as per Annexure J1 to J4. Petitioners have called in question the said notices in this writ petition.
3. The 1st respondent has filed a detailed statement of objections to the writ petition. It is contended that the Bank has extended financial assistance to the petitioners to acquire the buses. To secure the loan petitioners have created hypothecation of the buses in favour of the Bank. Petitioners have entered into an agreement with respondent 2 to which agreement the 1st respondent is not a party. Under the said agreement petitioners are obliged to carry out several things and the agreement provided for levy of penalty, cancellation of the agreements, etc. The agreement between the petitioners and respondent 2 specifically provided that the passenger tax in respect of the user of the buses in the routes provided by the respondent 2 only is to be borne by the respondent 2 and all other taxes are to be borne by the owners. Thus, the taxes payable under the Karnataka Motor Vehicles Taxation Act, 1957, is on the petitioners. The dispute between the petitioners and the 2nd respondent pertains to escalation of the rates per running kilometer on the routes allotted to the petitioners. The respondent 2 had issued letters of comfort in favour of the 1st respondent at the request of the petitioners agreeing to pay certain amounts directly to the respondent 1-Bank towards discharge of the loan of the petitioners in the escrow account. No third party rights are created by such letter of comfort, but the same has been at the request of the owners. Since the respondent 2 did not pay the amounts on the ground that the petitioners have defaulted the terms of the agreement, the loan amount of the petitioners became overdue and rendered non-performing asset. Petitioners did not care to pay the installments. Petitioners were personally responsible to discharge the liability of the respondent-Bank in respect of the loan amount. After accumulation of huge arrears and after affording reasonable time to the owners to discharge the debt due to the Bank, it took prudent steps to seize the security, namely, the buses hypothecated in favour of the respondent-Bank. The hypothecated buses were seized between 16-11-2006 and 22-11-2006 in the ordinary course by the respondent-Bank through seizing agents. During the first week of November 2006, the remaining buses were found abandoned at various places by the person-in-charge. It was also found that certain important parts of such buses had been removed and in some cases, stolen on account of such abandonment. Since the buses were found in such condition, the Bank having special property in such buses on account of the hypothecation, seized under due inventory and arranged to park these buses in a ground hired by the seizing agents for the said purpose for their safe custody. It is stated that if the buses are detained in the possession Bank, the Bank will be saddled with the liability to pay the tax and the arrears of tax due from the owner in respect of the vehicles. Further, the buses are likely to be deteriorated. Therefore, the respondent-Bank has decided to dispose off the buses on as is where is basis in public auction exercising its rights under Section 176 of the Contract Act, 1872 and has issued the notices at Annexures-J1 to J4.
4. I have heard the learned Counsel for the parties.
5. Learned Counsel for the petitioners submit that the auction notices issued by the respondent-Bank are illegal, arbitrary and opposed to law. It is contended that the Bank has tried to frustrate the order of this Court dated 14-12-2006 in W.P. No. 15732 of 2006. It is contended that the Bank is a contracting party to the tripartite transaction. Comfort letter was issued in favour of the Bank as per Annexure-B by the Corporation. It is further contended that unless the buses are available to the petitioners, the consideration of their representations by the Corporation becomes infructuous and that the Bank has acted in a vindictive manner.
6. On the other hand, learned Counsel appearing for the respondent-Bank submits that the Bank is not a contracting party between the petitioners and the 2nd respondent-Corporation. It is pointed out that Annexure-B does not create any contract between the Bank and the petitioners and the Corporation. It is argued that the petitioners have availed credit facilities from the Bank and that the petitioners have violated the terms of credit facility agreement. The dispute between the petitioners and the Bank arises out of a contractual obligation. Petitioners have not contended the violation of any breach of statutory duty by the Bank. Therefore, the petitioners cannot maintain the writ petition. Petitioners do not dispute the right to seizure of buses by the Bank. Despite grant of sufficient indulgence, the petitioners have failed to discharge the loan amount to the Bank.
7. I have carefully considered the arguments of the learned Counsel at the Bar and perused the materials placed on record.
8. It is undisputed that the respondent 1 is a Nationalised Bank and it is an instrumentality of the State within Article 12 of the Constitution of India. During the course of its business the Bank has extended financial assistance to the petitioners to acquire the buses described in the schedule to the writ petition. It is also not in dispute that to secure the loan the petitioners have created hypothecation of the buses in favour of the Bank. Therefore, the petitioners are bound by the terms of the hypothecation deed. Since the petitioners did not refund the amount the first respondent-Bank has seized the buses in the ordinary course through the seizing agents. The relationship between the petitioners and the Bank has arisen out of the contract between the creditor and debtor. It is not the case of the petitioners that the 1st respondent has violated any statutory duty. Admittedly, the petitioners have committed violation of the terms and conditions of the hypothecation deed.
9. In Radhakrishna Agarwal and Ors. v. State of Bihar and Ors. : [1977]3SCR249 , the Apex Court has held that where the contracts did not contain any statutory terms or obligations and no statutory power or obligation which could attract the application of Article 14 was involved, no writ or order could issue under Article 226 in such cases to compel the authorities to remedy a breach of contracts pure and simple. It has been held thus:
It was the contract and not the executive power regulated by the Constitution, which governed the relations of the parties on the facts apparent in the instant cases. They involved questions of pure alleged breaches of contract. No writ or order could issue under Article 226 in such cases to compel the authorities to remedy a breach of contracts pure and simple.
10. In Har Shankar and Ors. v. Deputy Excise and Taxation Commissioner and Ors. : [1975]3SCR254 , the Apex Court has held that writ jurisdiction of the High Courts under Article 226 of the Constitution of India is not intended to facilitate avoidance of obligations voluntarily incurred. Those who contract with their open eyes must accept the burden of contract along with the benefits. It has been held as under:
Those who contract with open eyes must accept the burdens of the contract along with its benefits. The power of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a binding force.
11. In Life Insurance Corporation of India v. Escorts Limited and Ors. : 1986(8)ECC189 , the Apex Court has held as under:
If the action of the State is related to contractual obligation or obligations arising out of the Court, the Court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the Court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law field. The difficulty will lie in demarcating the frontier between the public law domain and the private law field. It is impossible to draw the line with precision and it may not be attempted. The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate World and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reasons when it seeks to change the management; by a resolution of the company, like any other shareholder.
12. In Sham Lal and Ors. v. State of Punjab and Ors. : AIR1976SC2045 , the Apex Court after referring to a previous decisions in Har Shankar's case, has held as under:
In Har Shankar v. Deputy Excise and Taxation Commissioner : [1975]3SCR254 , this Court disapproved the conduct of such liquor licensees who offer bids with full knowledge of the terms and conditions attaching to the auctions and thereafter try to wriggle out of the contractual obligations arising out of the acceptance of their bids by resorting to Article 226 of the Constitution.
13. In Bareilly Development Authority and Anr. v. Ajay Pal Singh and Ors. : [1989]1SCR743 it has been held thus:
When the contract entered into by the State is non-statutory and purely contractual the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter se. In this sphere, the parties can only claim rights conferred upon them by the contract in the absence of any statutory obligations on the part of the authority in the said contractual field. It is also settled that no writ or order can be issued under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract pure and simple.
14. It is thus clear that right that can be enforced under Article 226 of the Constitution of India is either a fundamental right or a legal right. No writ lies to enforce a right which is founded purely on a contract unless it is shown that the action initiated is arbitrary in nature. When the rights are not purely contractual and are partly contractual and partly statutory, writ jurisdiction can be invoked. No writ order can be issued to compel the authorities to remedy a breach of contract pure and simple. Writ jurisdiction is not intended to facilitate avoidance of obligations voluntarily incurred.
15. It is no doubt true that in ABL International Limited and Anr. v. Export Credit Guarantee Corporation of India Limited and Ors. : (2004)3SCC553 , the Apex Court has held that the writ Court has jurisdiction to entertain a writ petition involving disputed questions of fact and there is no absolute bar in regard thereto. However, it has been further held that a writ petition involving serious disputed questions of facts which requires consideration of evidence which is not on record will not normally be entertained under Article 226 of the Constitution.
16. In the present case admittedly the petitioners have failed to refund the amount in terms of the contract. Therefore, in exercise of the power vested in the Bank under the deed of hypothecation, it has seized the buses. This is a case where the petitioners have violated the terms and conditions of the contract. The petitioners have not contended that the Bank has committed breach of any statutory duty nor is it shown that the action initiated is arbitrary. The respondent 1 is not a party to any tripartite agreement as contended by the petitioners. Therefore, I decline to entertain this writ petition. It is accordingly dismissed. However, liberty is reserved to the petitioners to approach the Competent Civil Court for appropriate reliefs in accordance with law. No costs.