RBI Decisions Amenable To Writ Jurisdiction Only When Perversity, Non-Application Of Mind Or Natural Justice Violation Is Shown: Calcutta High Court
The High Court has held that decisions of the Reserve Bank of India are amenable to judicial review under Article 226 of the Constitution where such decisions are shown to be perverse, taken without jurisdiction, without considering relevant material, or in violation of principles of natural justice.
Calcutta High Court
The Calcutta High Court has reaffirmed that while the Reserve Bank of India exercises wide statutory discretion in matters governed by foreign exchange and economic regulation, such discretion is not immune from judicial scrutiny where serious legal infirmities are demonstrated.
The Court was hearing an intra-court appeal arising from a challenge to the permission granted by the Reserve Bank of India for the allotment of equity shares in favour of a non-resident investor, which was assailed on grounds including lack of jurisdiction, failure to apply the mind, and violation of the principles of natural justice.
A Division Bench of Justice Madhuresh Prasad and Justice Supratim Bhattacharya, while examining the scope of judicial review over RBI decisions, observed that “in an appropriate case where the decision of a statutory authority is perverse, without any basis, without taking into consideration relevant material and without jurisdiction, it cannot be said that a Constitutional Court exercising judicial review under Article 226 would be powerless to interfere.”
Senior Advocate S. N. Mookherjee appeared for the appellant, while Senior Advocate Debdatta Sen represented the respondents.
Background
The dispute arose from regulatory permission granted by the Reserve Bank of India for the issuance of equity shares to a non-resident individual against the import of capital equipment. The decision had the effect of materially altering the shareholding pattern of the company, which an individual shareholder challenged.
One of the principal objections raised was that the RBI’s decision was contrary to applicable policy and had been taken without due consideration of relevant material. A further objection was raised on the ground of locus standi, contending that an individual shareholder could not maintain a writ petition in respect of a regulatory approval granted to the company, particularly when the company itself had chosen not to pursue the challenge.
The learned Single Judge held that the writ petition was maintainable and declined to interfere with the RBI’s decision on merits, leading to the present intra-court appeal.
Court’s Observation
At the outset, the Division Bench of the Calcutta High Court examined the scope of judicial review over decisions of the Reserve Bank of India. The Court acknowledged that the RBI is a specialised statutory authority vested with discretion under economic and foreign exchange legislation, and that courts ordinarily exercise restraint while reviewing such decisions.
However, the Court made it clear that this restraint does not amount to complete immunity. Relying on Peerless General Finance & Investment Co. Ltd. v. Reserve Bank of India and Life Insurance Corporation of India vs. Escorts Ltd. and Others, the Bench noted that “there are limited class of cases where grant of permission by the RBI may be questioned by an interested party in a proceeding under Article 226 of the Constitution of India.”
The Court further observed that “…an order passed in violation of principles of natural justice, having civil consequences, in an appropriate case, would render the decision of the RBI amenable to writ jurisdiction under Article 226 of the Constitution.”
On the issue of locus standi, whether an individual shareholder could maintain a writ petition challenging an RBI approval granted to the company, the Court upheld the view that where a regulatory decision directly affects the legal or proprietary rights of an individual shareholder, such as dilution of shareholding or loss of control, the shareholder is not barred from invoking writ jurisdiction merely because the company is also affected.
"Being a shareholder in a company, in our opinion cannot be made a basis to contend that even individual rights and injury cannot be raised in appropriate judicial proceeding before a forum/ Court of competent jurisdiction. ...merely because the injury/right sought to be remedied /enforced is in some way also effecting the company, the individual shareholder, in our opinion, cannot be deprived of legal remedies", the Bench further remarked.
Turning to the merits of the RBI decision, the Court examined the material placed before the authority and found that the RBI had acted within its statutory competence, after considering the applicable policy framework and relevant directives. The Court found no material to suggest perversity, mala fides, non-application of mind, or breach of natural justice.
Conclusion
The Calcutta High Court concluded that the writ petition filed by the appellant was maintainable, and rejected the objection that the challenge could be maintained only at the instance of the company and held that the appellant was not barred from invoking writ jurisdiction in his individual capacity.
The Court found that the decision impugned did not suffer from perversity, non-application of mind, or violation of principles of natural justice, and that no case was made out warranting interference in the exercise of writ jurisdiction under Article 226 of the Constitution.
Accordingly, finding no infirmity in the order under challenge, the Court declined to interfere and dismissed the appeal.
Cause Title: Sajal Dutta v. Reserve Bank of India & Ors.
Appearances
Appellant: Senior Advocate S. N. Mookherjee, with Advocates Shounak Mitra, Samriddha Sen, Vishwarup Acharyya
Respondents: Senior Advocate Debdatta Sen, Suchismita Ghosh Chatterjee, Prasun Ghosh, Adv.
