Judgment:
Anjaneyulu, J.
1. These two writ appeals can be disposed of together. The Union Bank of India (hereinafter referred to as 'the bank ') is the appellant. The respondent is a partnership firm carrying on the business of a rice and flour mill in Munnangivaripalem village in Guntur district. The respondent is registered as a small scale industry. For the purpose of its business, the respondent applied to the bank for the grant of a loan. The matter was negotiated and the bank agreed to advanced loans on different accounts. According to the agreement, the bank advanced loans to the respondent from time to time under various heads. It is said that amounts aggregating in all to about Rs. 18 lakhs were advanced by way of loans. The respondent failed to pay the instalments of loans taken as per the agreement. It would appear that the mill was not effectively running resulting in rescheduling of the repayment of the advances made by the bank and payable by the respondent in the respective accounts by converting them into a long-term loan by evolving a suitable scheme for repayment in the light of the guidelines issued by the Reserve Bank of India to help sick units under the nursing programme. The learned single judge has also given further directions regarding the conduct of the business under the supervision of the bank. Please see the decision in Venkateswara Rice and Flour Mill v. Union Bank of India [1986] 2 ALT 15;[1988] 63 Comp Cas 483 (AP). The bank is aggrieved by the aforesaid directions given by the learned single judge and consequently filed this writ appeal to set aside the order of the learned single judge.
2. We have heard learned counsel for the appellant-bank and also learned counsel for the respondent at considerable length. We have also perused the records produced before us by learned counsel for the bank. At the threshold, we feel that this is hardly a matter which can be considered by this court in exercise of its jurisdiction under article 226 of the Constitution of India. The grant of loan and the repayment thereof and other matters incidental thereto are governed by the contract between the lender-bank and the borrower. Any dispute between the parties referable to the contract between themselves could hardly be adjudicated upon in writ proceedings. It is not contended by the respondent that there is any violation, as far as the bank is concerned, of any statutory provisions. For the matter of that, there is not even a ground that there is a violation on the part of the bank of the terms of the contract, because it is admitted that, in terms of the contract, the bank had advanced the loans on various accounts from time to time and the extent of the loans thus advanced stood at Rs. 18 lakhs. It is not stated that there was any failure on the part of the bank to discharge its commitments pursuant to the agreement between the parties. The demand of the respondent is that the bank should pump more funds into the respondent's business so that the sick unit could be revived and rehabilitated. For this purpose, the respondent relied on certain guidelines issued by the Reserve Bank of India, as a matter of general policy, to nurse sick units and revive them. It would appear that the Reserve Bank of India issued a circular dated November 5, 1985, to all nationalised banks concerning sick units. The circular contained guidelines to be followed by the constituent banks so that a uniform policy can be adopted by all the banks in the matter. In the absence of guidelines, ad hoc arrangements were being made without any consistency and, in order to remove these anomalies, the Reserve Bank issued guidelines in its circular dated November 5, 1985. We have looked into this circular and we do not think that any specific instructions were given to the banks regarding grant of loans to nurse sick units. The instructions contained in this circular are for the limited purpose of providing guidelines to the constituent banks regarding the policy to be adopted in the matter of rehabilitating the sick units. The instructions of the Reserve Bank contained in this circular dated November 5, 1985, cannot be construed as statutory in character and much less can they be enforced. Indeed, the Reserve Bank has itself clarified this position in its D.O.No, RICK. PS.2347/C.464(A)-86-87,dated December 11,1986, addressed to J.S.Bhatnagar, chairman and managing director of the Union Bank of India, the appellant herein. We may usefully extract the following from the abovementioned D.O.letter :
'It was noticed by the Reserve Bank that, in the absence of guidelines regarding the concept of viability as well as the extent of reliefs/concessions which could be extended by the banks, much time was lost in arriving at mutually acceptable rehabilitation packages and packages were drawn up on ad hoc basis. This situation also resulted in disparities between one case and another and inequitable sharing of sarifices amongst the concerned agencies in rehabilitation packages drawn up for nursing sick units were also observed. Some uniformity in the matter of concessions extended within a broad framework was, therefore, considered essential. The circular IECD. No. IRD. BC. 132/SIU. A-85, dated November 5, 1985, was issued to cut down the delays as also to ensure that the concessions extended under packages were within certain limits on a uniform basis and broad parameters were laid down for grant of reliefs/concessions and additional working capital assistance which can be extended by the banks. However, before extending reliefs and concessions, the banks are required to satisfy themselves about the commercial viability presupposes the capability and integrity of the borrower. The said circular dated November 5,1985, is not integrity of the borrower. The said circular dated November 5, 1985, is not intended to confer any enforceable right on the borrowers/customers of the bank.'
3. In our opinion, the aforesaid D.O. letter addressed by the Reserve Bank of India correctly sums up the purpose of issuing the gulidelines. It was not open to the respondent to treat them as vesting any enforceable rights in him to compel the bank to advance further funds and rescheduled the repayments. While the programme of reviving and rehabilitating sick industrial units is a laudable national objective, it cannot be extended indiscriminately without the banks satisfying themselves about the commercial viability of advancing more funds to the sick units.
4. In the present case, when the respondent made a request for rescheduling the repayment of loans outstanding and also providing facilities in accordance with the nursing programme outlined by the Reserve Bank of India, the matter was referred for enquiry and the Zonal Technical Consultancy cell of the bank which went into it in great detail submitted in its report that measures were already taken to nurse the activities of the respondent sick unit and that they proved futile. It was pointed out that the partners of the respondent firm are not amenable to financial discipline and control, and, therefore, the Committee was of the opinion that further nursing measures may not prove effective. In that view, the Cell recommended calling back the advance granted to the respondent and initiating recovery proceedings. Among other things, it was pointed out in the report that the advances previously made were diverted to outside sources and were not used for business purposes for which the advances were granted. It was also pointed out that the respondent was not in the habit of submitting 'funds utilization statements' every fortnight as required. The amounts were withdrawn by the partners in cash from out of the funds taken by way of loans from the company. On a scrutiny if the accounts, the Committee was of the opinion that some cash sales were diverted outside the account and utilised by the partners without bringing the same into books. The unit was not able to work to its capacity and the technical feasibility report was against the respondent. Finally, the report concluded that the unit's affairs were mismanaged by the partners and, consequently, they are reportedly incurring losses. It was also mentioned that the respondent unit had taken loans from other institutions like the Central Bank of India and the A.P.State Financial Corporation. For all the aforesaid reasons, the Technical Consultancy Cell was of the view that advancing further funds to the respondent-unit is not economically viable and, in view of the grass mismanagement and other allegations against the respondent-unit, no positive result could emerge by taking further measures to nurse the respondent-unit. After taking into consideration the above report, the bank declined to accept the respondent's request for rescheduling the repayments and granting further loans under its nursing programme.
5. We have set out the matter in some great detail in order to emphasize that the question regarding the technical and economical viability of granting further advances is a matter within the expertise of the bank and this court cannot interfere with any decision taken by the bank. If after due enquiry into the matter, the bank is of the opinion that no further advance can be made to nurse the sick unit on grounds of economic non- viability, inefficient management, lack of integrity of the borrower, this court would not interfere with the decision of the bank in a writ proceeding. It is for this reason that we have observed earlier that this is hardly a case which could be entertained by this court in exercise of its jurisdiction under article 226 of the Constitution of India.
6. Referring to the instructions issued by the Reserve Bank of India to various nationalised banks to nurse sick units, learned counsel for the petitioner represents that these instructions have statutory force and are binding on the constituent banks, It is, therefore, urged that there is violation on the part of the appellant-bank of statutory directions. It is also urged that the appellant-bank acted arbitrarily in coming to the conclusion that the respondent-firm cannot be an economically viable unit for the purpose of nursing its sickness. Learned counsel also challenged the various allegations made against the respondent and contended that the appellant-bank acted arbitrarily in the matter of denying relief to the respondent- firm under the sick units nursing programme.
7. We are unable to accept the contention that each and ever instruction of the Reserve Bank issued to its constituent banks has statutory force. It is not shown to us that the instructions issued for the purpose of nursing sick units have reference to any provisions of the Banking Regulation Act, 1949. In view of the supervision and control exercised by the Reserve Bank over the constituent banks, instructions are issued. It is one thing to say that the instructions issued by the Reserve Bank are binding on the constituent banks and quite a different thing to say that the loan transactions entered into by banking institutions in the usual course of their business are statutory agreements. They are just commercial transactions governed by the guidelines laid down by the Reserve Bank. We are fortified in this view by the decision in D. S. Gowda V. Corporation Bank : AIR1983Kant143 .
8. Even otherwise, we had already indicated that the instructions issued by the Reserve Bank in connection with the nursing of sick units do not contain any specific directions. The circular gives only broad guidelines to be borne in mind by the constituent banks while considering the revival and rehabilitation of sick units under the nursing programme. These instructions largely serve the purpose of consistency so that no ad hoc arrangements are made. Eventually, the question whether any particular unit should or should not be nursed is a matter left to the constituent bank upon consideration of a variety of matters. It cannot be said that, in refusing to nurse the respondent-firm, a sick unit, the appellant-bank had committed any violation either of any directive of the Reserve Bank or of any statutory provision.
9. As regards the contention that the appellant-bank acted arbitrarily, it may be pointed out that actions of the State or an instrumentality of the State can be examined if they belong to the public law domain but the same are not liable to be subjected to judicial review if they belong to the private law field. The following observations of the Supreme Court in LIC of India v. Escorts Ltd. [1986] 59 Comp Cas 548, 637, we instructive (headnote of : 1986(8)ECC189 ):
'.... For example, if the action of the State is political or sovereign in character, the court will keep away from it. The court will not debate academic matters or concern itself with the intricacies of trade and commerce. If the action of the State is related to contractual obligations or obligations arising action out of tort, 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 the 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...'
10. We are unable to see in the present case that the action of the appellant bank is related to contractual obligations belonging to public law character. The question whether the respondent-firm should or should not be granted facilities under the sick units nursing programme is a matter pertaining to the private law field and this court will refuse to examine any allegations of arbitrariness. Even so, we have looked into the records produced before us and we are satisfied that the decision of the appellant-bank is based on reasonable grounds and no case for interference is made out.
11. In the result, we allow these appeals and set aside the order of the learned single judge giving directions to the appellant-bank. There shall be no order as to costs.