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CASE NO.: Appeal (civil)  4655 of 2000

PETITIONER: Indian Banks’ Association, Bombay & Ors.

RESPONDENT: M/s Devkala Consultancy Service & Ors.

DATE OF JUDGMENT: 16/04/2004

BENCH: CJI & S.B. Sinha.

JUDGMENT: J U D G M E N T

WITH  

CIVIL APPEAL NO.5218 OF 2000

S.B. SINHA, J :

       The authority of the bankers to round up the existing  interest rates to 0.25% is in question in these appeals  which arise out of a judgment and order dated 18.12.1994  passed by the High Court of Karnataka in Writ Petition  No.3927 of 1994. Civil Appeal No. 5218 of 2000 has been  filed by the Association of Borrowers of Karnataka upon  getting itself impleaded as a party in the connected appeal.  

Appellant No.1 herein is an Association of Bankers.   Appellant Nos.2 to 28 are banks which were created under  respective Parliamentary Acts or nationalized in terms of  provisions of the Banking Companies (Acquisition & Transfer  of Undertakings) Act, 1970 and the Banking Companies  (Acquisition & Transfer of Undertakings) Act, 1980.

FACTUAL MATRIX :   

       Interest Tax Act was enacted by the Parliament w.e.f  1.8.1974 with an object of imposing tax on the total amount  of interest received by Scheduled Banks/Credit Institutions  on loans and advances. It, however, was withdrawn in the  year 1978, but reintroduced in the year 1980; whereafter it  was again withdrawn in the year 1985.  The said tax,  however, was reintroduced w.e.f. 1.10.1991 by reason of  Finance Act, 1991.  The Reserve Bank of India by its  Circular letter dated 2.9.1991 advised all the Scheduled  Commercial Banks that the incidence of interest tax should  pro rata be passed on to the borrowers wherefor a uniform  practice should be followed in consultation with the First  Appellant herein.

The first appellant purported to be acting pursuant to  or in furtherance of the said circular as also with a view  to formulate a structure of uniform interest rate chargeable  after including the interest tax payable, which was passed  on to the borrowers by the concerned banks, advised them  that the rate of interest be loaded with interest tax of 3%  and rounded up to the next higher 0.25%.  Such rounding up  was allegedly found necessary allegedly on account of  grossing up involved in calculating the incidence of tax.   The Reserve Bank of India purportedly gave its approval to

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the proposal of the first appellant in terms of its letter  dated 22.4.1993.  Other appellants herein followed the said  purported policy.

The aforementioned action on the part of the appellants  herein came to be questioned by the respondents in a public  interest litigation filed before the Karnataka High Court,  inter alia, on the ground that such purported rounding up is  illegal and without jurisdiction as thereby the tax element  came to be increased and as a result thereof the banks  collected additional sums of Rs.723.79 crores annually by  way of resorting to rounding up on the basis thereof.   

HIGH COURT JUDGMENT:

The appellants herein inter alia contended that such  rounding up of interest was done by way of enhancement of  the rate of interest which is permissible.  Such a matter,  the appellants, contended, being contractual in nature, the  writ petition was not maintainable.  

The High Court of Karnataka by reason of its impugned  judgment dated 18.12.1998 rejected the said contention and  found the action on the part of the appellants herein  illegal and consequently issued the following directions :             

"...The Writ Petition is allowed.  Rule  issued is made absolute.  The action of  the Respondents-Banks in rounding up  interest rates to the next higher 0.25%  is held illegal, arbitrary and  untenable.  A command is issued to all  the Banks to submit an account of the  excess interest collected by them from  the borrowers and deposit the same with  the Reserve Bank of India to be debited  in the account of the Union of India.   The Reserve Bank of India-Respondent  No.2 is directed to take immediate  effective steps for implementation of  our directions by calculating the excess  interest collected by the Banks and  ensuring the same to be deposited in the  funds of the Union of India."

       The appellants herein are before us questioning the  said judgment.

SUBMISSIONS:

       Mr. Dushyant A. Dave, Senior Counsel appearing on  behalf of the first appellant, Mr. P. Chidambaram, Senior  Counsel appearing for State Bank of India, Mr. Gopal  Subramanium, Senior Counsel appearing for Punjab National  Bank and Mr. Altaf Ahmed, Additional Solicitor General  appearing on behalf of Canara Bank, would submit that :  

(a)     having regard to the provisions contained in  Sections 4 and 5 of the Interest Tax Act read with  Section 26C thereof, as interest tax was payable on  the total chargeable interest which was enhanced on  the loan in terms of Section 26C as also in terms of  contractual provisions of other term loans, a great

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deal of difficulties had arisen as calculations  therefor were required to be made in several steps.

       An example in respect thereof has been placed before us  which is as under:

Step 1: * Cum Tax Interest to be earned in an               attempt to retain Rs.10 post  Interest Tax 10.30 * Interest Tax payable on Rs.10.30  (since whole of the amount collected  is assessable to Interest Tax) 0.309 Step II : * Cum Tax Interest to be earned in an  attempt to retain Rs.10 post  Interest Tax 10.309 * Interest Tax payable on Rs.10.309  (since whole of the amount  collected is assessable to Interest  Tax) 0.30427 Step III : * Cum Tax Interest to be earned in an  attempt to retain Rs.10 post  Interest Tax 10.30427 * Interest Tax payable on Rs.10.30427  (since whole of the amount  collected is assessable to Interest  Tax)  0.3092781 Step IV :  * Cum Tax Interest to be earned in an   attempt to retain Rs.10 post  Interest Tax 10.3092781 * Interest Tax payable on  Rs.10.3092781 (since whole of the  amount collected is assessable to  Interest Tax) 0.309278343 Step V : * Cum Tax Interest to be earned in an  attempt to retain Rs.10 post  Interest Tax   10.309278342 * Interest Tax payable on  Rs.10.309278343 (since whole of the  amount collected is assessable to  Interest Tax) 0.30927835026

(b) Such action was necessary with a view to ensure the  retaining of interest at the contractual rate;

(c) At or after Step V; as the amount of post tax interest  earned by banks prior to imposition of interest tax  would not be enough, if banks raised rate of interest  only exactly  by 3%, they necessarily had to increase  the rate of interest by 0.30927835026 so as to continue  to earn pre tax interest @ 10%, the impugned decision

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had been taken;

(d) Since the calculation would come to an impossible  fraction, the revised rate had to be rounded up for  easy calculation in collection; (e) The appellants,  therefore, had not realised any tax de’hors the  provisions of the Act but had realised interest in  terms of Section 26C which was authorised by the  Reserve Bank of India;

(f) In any event, increase in the rate of interest being of  not much significance, the doctrine of de minimus  should be applied;  

(g)     As the appellants have merely collected a higher rate  of interest to which they were entitled to in terms of  the loan agreements, as the Reserve Bank of India only  fixes minimum rate, the same had no nexus with  collection of tax within the meaning of Article 265 of  the Constitution of India and, thus, the finding of the  High Court to the effect that the appellants have  collected excess amount of tax must be held to be bad  in law;  (h)     In any view of the matter, as pursuant to or in  furtherance of the circular letter issued by the  Reserve Bank of India, the borrowers had been given  notice and the terms of the loan agreement having been  altered, no writ application was maintainable;  

(i)     The writ petition suffered from gross delay and laches  on the part of the writ petitioner and, thus, the same  should not have been entertained.   

Reliance in support of the aforementioned contentions  has been placed on Dhanyalakshmi Rice Mills and Others etc.  etc. vs. The Commissioner of Civil Supplies and Another etc.  etc. [(1976) 4 SCC 723]; B.O.I. Finance Ltd. vs. Custodian  and Others [(1997) 10 SCC 488] and Central Bank of India vs.  Ravindra and Others [(2002) 1 SCC 367].

       Mr. K.N. Bhat, learned senior counsel appearing on  behalf of the Reserve Bank of India, would submit that his  client permitted rounding up of interest having regard to  the practical difficulties faced by the banks; but the same  has since been withdrawn in the year 1997.  Keeping in view  the fact that there are five crores borrowers throughout  India, it may not be feasible to comply with the directions  issued by the High Court.

       Mr. L. Nageswara Rao, the learned Additional Solicitor  General, appearing on behalf of the Union of India, however,  would point out that the gross interest rate charged to the  borrowers by the banks being made up of three elements,  namely, (a) interest rate; (b) interest tax on the interest  rate; and (c) element of rounding up interest rate to higher  25 paise; the appellants had not only paid to the Government  interest tax on the gross interest, that is, rounded off cum  tax interest rate collected by them (which would be in  excess of the amount of tax under the Act) but also retained  some parts thereof.  Supporting the judgment of the High  Court, Mr. Nageswara Rao would contend that as the amount  belongs to the ultimate borrowers, it should be returned to  them wherever feasible but in the event the same is not  feasible it should be paid over to the Government.

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As Respondent No.1, writ petitioner, did not appear, we  requested Mr. T.L. Viswanatha Iyer, Senior Advocate, to  assist the Court.  The learned counsel (Amicus Curiae) would  contend that the appellants have construed Section 26C  wrongly and, thus, acted under a confusion.  Mr. Iyer would  submit that Section 26C of the Act, if properly read, would  only mean that the enabling provisions had been made so as  to enable the appellant-banks to recover the amount of tax  from the borrowers under the Act and nothing more.

STATUTORY PROVISIONS :

       The relevant provisions of the Interest Tax Act, 1974  read as under :   "2(5)"chargeable interest" means the  total amount of interest referred to in  section 5, computed in the manner laid  down in section 6;

2(7) "interest" means interest on loans  and advances made in India and includes  -  

(a)     commitment charges on unutilized  portion of any credit sanctioned  for being availed of in India; and

(b)     discount on promissory notes and  bills of exchange drawn or made in  India,

but does not include -

(i)     interest referred to in sub-section  (1B) of section 42 of the Reserve  Bank of India Act, 1934 (2 of  1934);

(ii)    discount on treasury bills;

"Charges of tax. 4(1) Subject to the provisions of this  Act, there shall be charged on every  scheduled bank for every assessment year  commencing on or after the 1st day of  April, 1975, a tax in this Act referred  to as interest-tax in respect of its  chargeable interest of the previous year  at the rate of seven per cent of such  chargeable interest  

Provided that the rate at which  interest-tax shall be charged in respect  of any chargeable interest accruing or  arising after the 31st day of March,  1983 shall be three and a half per cent  of such chargeable interest.

(2) Notwithstanding anything contained  in sub-section (1) but subject to the  other provisions of this Act, there  shall be charged on every credit

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institution for every assessment year  commencing on and from the 1st day of  April, 1992, interest-tax in respect of  its chargeable interest of the previous  year at the rate of three per cent of  such chargeable interest :

Provided that the rate at which  interest-tax shall be charged in respect  of any chargeable interest accruing or  arising after the 31st day of March,  1997 shall be two per cent of such  chargeable interest.    

Scope of chargeable interest.

5. Subject to the provisions of this  Act, the chargeable interest of any  previous year of a credit institution  shall be the total amount of interest  (other than interest on loans and  advances made to other credit  institutions or to any cooperative  society engaged in carrying on the  business of banking, accruing or arising  to the credit institution in that  previous year :

Provided that any interest in relation  to categories of bad or doubtful debts  referred to in section 43D of the  Income-tax Act shall be deemed to accrue  or arise to the credit institution in  the previous year in which it is  credited by the credit institution to  its profit and loss account for that  year or, as the case may be, in which it  is actually received by the credit  institution, whichever is earlier.

Computation of chargeable interest.

6(1) Subject to the provisions of sub- section (2), in computing the chargeable  interest of a previous year, there shall  be allowed from the total amount of  interest (other than interest on loans  and advances made to credit institution  accruing or arising to the assessee in  the previous year, a deduction in  respect of the amount of interest which  is established to have become a bad debt  during the previous year :

Provided that such interest has been  taken into account in computing the  chargeable interest of the assessee of  an earlier previous year and the amount  has been written off as irrecoverable in  the accounts of the assessee for the  previous year during which it is  established to have become a bad debt.

Explanation - For the removal of doubts,  it is hereby declared that in computing

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the chargeable interest of a previous  year, no deduction, other than the  deduction specified in this sub-section  shall be allowed from the total amount  of interest accruing or arising to the  assessee.

(2) In computing the chargeable interest  of a previous year, the amount of  interest which accrues or arises to the  assessee before the 1st day of March,  1978, and ending with the 30th day of  June, 1980, or during the period  commencing on the 1st day of April,  1985 and ending with the 30th day of  September, 1991 shall not be taken into  account. Power of credit institutions to vary  certain agreements.

26C. Notwithstanding anything contained  in any agreement under which any term  loan has been sanctioned by the credit  institution before the 1st day of  October, 1991, it shall be lawful for  the credit institution to vary the  agreement so as to increase the rate of  interest stipulated therein to the  extent to which such institution is  liable to pay the interest-tax under  this Act in relation to the amount of  interest on the terms loan which is due  to the credit institution.

Explanation.-For the purposes of this  section, "term loan" means a loan which  is not repayable on demand."               

       The relevant provisions of the Banking Regulations Act,  1949 are as under : -  

"35A. Power of the Reserve Bank to give  directions.- (1) Where the Reserve Bank  is satisfied that -

(a)     in the public interest; or

(aa) in the interest of banking policy;  or

(b)     to prevent the affairs of any  banking company being conducted in  a manner detrimental to the  interests of the depositors or in a  manner prejudicial to the interests  of the banking company; or

(c)     to secure the proper management of  any banking company generally;

it is necessary to issue directions to  banking companies, generally or to any  banking company in particular, it may,  from time to time, issue such directions

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as it deem fit, and the banking  companies or the banking company, as the  case may be, shall be bound to comply  with such directions.

(2) The Reserve Bank may, on  representation made to it or on its own  motion, modify or cancel any direction  issued under sub-section (1), and in so  modifying or canceling any direction may  impose such conditions as it thinks fit,  subject to which the modification or  cancellation shall have effect.

       The Reserve Bank is entitled to  give directions to bankers under Section  20(3) of the Foreign Exchange Regulation  Act, 1947 blocking certain accounts.   Section 20(3) does not contemplates the  issue of a prior notice before taking  such action under that section. Mohamed  Ayisha Nachiyar vs. Deputy Director,  Enforcement, (1976) 46 Com Cas 653 (Mad)

       Directions by Reserve Bank cannot  prevent payment of higher bonus in terms  of the agreement.  American Express  International Banking Corp. v. S.  Sundaram, (1978) 1 SCC 101 : 1978 SCC  (L&S) 34."

SECTION 26C OF THE ACT:

       The Parliament by reason of the said Act imposed a tax  on the banks and other financial institutions.  By reason of  the said Act, the appellants were not statutorily empowered  to pass the burden thereof to the borrowers or realise the  same on behalf of the Union of India.  Concededly, in terms  of the agreement of the term loan, the appellants were not  entitled to charge interest at a higher rate than the agreed  one.  Section 26C was, therefore, enacted so as to enable  the bankers to realise the amount of tax which they were  liable to recover on the chargeable interest.  The  appellants have proceeded on the basis that having regard to  definition of ’chargeable interest’ as contained in Section  2(5) of the Act, the additional interest will have also to  be calculated for the said purpose and the rate of tax must  be calculated thereupon which, as noticed hereinbefore,  resulted in adding of interest for the purpose of  calculation of tax ad infinitum.   

       How the Parliament thought of the matter is the  question.  The Union of India does not agree with the  contentions of the Appellants, nor do we.  The action on the  part of the appellants suggests that they had put the cart  before the horse.  The action of taking recourse to Section  26C would arise only when the chargeable interest is  calculated whereupon only the incidence of tax under the  said Act is required to be passed on to the borrowers by way  of additional interest.  The entire approach of the  appellants was based on a wrong premise.  The said Act is a

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taxing statute.  The Union of India under the said Act  cannot direct or permit the bankers or the financial  institutions to raise interest.  The Act must, therefore,  receive purposive construction so as to give effect to the  purport and object it seeks to achieve. [See BBC Enterprises  vs. Hi-Tech Xtravision Ltd. (1990) 2 All ER 118 at 122-3;  Mohan Kumar Singhania and Others vs. Union of India and  Others, AIR 1992 SC 1, Murlidhar Meghraj Loya vs. State of  Maharashtra, (1976) 3 SCC 684, Superintendent and  Remembrancer of Legal Affairs to Govt. of West Bengal vs.  Abani Maity, (1979) 4 SCC 85, Khet Singh vs. Union of India  (2002) 4 SCC 380 and High Court of Gujarat & Anr. Vs.  Gujarat Kishan Mazdoor Panchayat & Ors., JT 2003 (3) SC 50],  Indian Handicrafts Emporium & Ors. V. Union of India & Ors.  [ JT 2003 (7) SC 446], Ashok Leyland Ltd V. State of T.N.  and Anr. [2004 (3) SCC 1 ] and High Court of Gujarat & Anr.  Vs. Gujarat Kishan Mazdoor Panchayat & Ors. [JT 2003 (3) SC  50].       

       In the event, the contention of the appellants is  accepted, the same would give rise to incongruous results.   Such an interpretation, as is well-known, must be avoided,  if avoidable.  Furthermore, a statutory impost must be  definite.  Having regard to Article 265 read with Article  366(28) of the Constitution of India nothing is realizable  as a tax or by way of recovery of tax or any action akin  thereto which is not permitted by law.  

       It is neither in doubt nor in dispute that Section 26C  is an enabling provision.  It has to be so construed, having  regard to the term ’lawful’ used therein.                  It merely prevails over an agreement under which any  term loan has been sanctioned by the credit institution  before the 1st day of October, 1991.  It was ’lawful’ for  the credit institution to vary the agreement as regard rate  of interest only for the purpose of recovering the amount of  tax which was payable by the Appellants and a fortiori - nothing over and above the same.  Such increase in rate of  interest would be (a) to the extent to which such  institution is liable to pay the interest tax; (b) in  relation to the amount of interest on the term loan; and (c)  which is due to the credit institution.   

       Increase in rate of interest in terms of Section 26C of  the Act, thus, has a direct nexus with the statutory impost.   The action on the part of the appellants in rounding up of  the interest, thus, was wholly unjustified.  Once it is held  that increase in interest in a justifiable manner pertains  to passing of the burden of tax, the contention that the  same had been done by the bank in exercise of its  contractual power must be rejected.  A taxing statute must  be construed reasonably.  Nothing can be realised by way of  tax or akin thereto which has not been authroised by the  Parliament.         The Executive cannot levy tax.  It, for the said  purpose, therefore, cannot even take recourse to the process  of interpretation of a statute.

       In Commissioner of Central Excise, Lucknow, U.P. Vs.  M/s Chhata Sugar Co. Ltd. reported in 2004 (3) SCALE 6,  administrative charges levied under U.P. Sheera Niyantran  Adhiniyam, 1964 has been held to be a tax.

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       In Mathuram Agrawal vs. State of Madhya Pradesh [(1999)  8 SCC 667], the law is stated in the following terms :     "...The intention of the legislature in  a taxation statute is to be gathered  from the language of the provisions  particularly where the language is plain  and unambiguous.  In a taxing Act it is  not possible to assume any intention or  governing purpose of the statute more  than what is stated in the plain  language.  It is not the economic  results sought to be obtained by making  the provision which is relevant in  interpreting a fiscal statute.  Equally  impermissible is an interpretation which  does not follow from the plain,  unambiguous language of the statute.   Words cannot be added to or substituted  so as to give a meaning to the statute  which will serve the spirit and  intention of the legislature.  The  statute should clearly and unambiguously  convey the three components of the tax  law i.e. the subject of the tax, the  person who is liable to pay the tax and  the rate at which the tax is to be paid.   If there is any ambiguity regarding any  of these ingredients in a taxation  statute then there is no tax in law.   Then it is for the legislature to do the  needful in the matter."   

                                               (Emphasis Supplied)           If a statute was ambiguous the contemporaneous  construction placed thereon by the officers charged with its  enforcement and administration might be required to be  considered and given due weight but therefor the First  Respondent or the Reserve Bank of India were not competent.  In this case, the stand of the Union of India also runs  counter to the contentions of the Appellants.

                A plain reading of Section 26C of the Act leaves no  manner of doubt that the same was enacted only for a   limited purpose, namely, to pass on the burden of tax to the  borrowers.  The amount of tax must be calculated having  regard to the contractual rate of interest as thence  obtaining and not upon in addition of the purported interest  by way of tax or otherwise.  Once Section 26C is read in a  meaningful way, no difficulty arises in giving effect to  sub-section (2) of Section 4 and Section 5 and 6 of the Act.   If the provisions of the Act are read in a manner in which  we have made an endeavour, for an amount of Rs.100/- charged  and the rate of interest charged by the bank being 10%, the  interest thereon having been earned would come to Rs.10,  and, thus, the borrower would be bound to pay only Rs.10.30  and not Rs.10.50, which is said to be the effect of  calculation at various steps as referred to by the  appellants. The appellants are, thus, not correct to contend  that they have exercised the power to claim a higher rate of  interest only.  They may have a power to claim a higher rate  of interest under the agreement but they did not exercise  the said jurisdiction.  They invoked the enabling provisions

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contained in Section 26C of the Act and/or raised rate of  interest so as to pass on the burden of tax upon the  borrowers.  They, while purporting to exercise their  jurisdiction under a statute were required to act in terms  thereof and not in derogation thereto.          The appellants  sought to achieve the same object indirectly which they  could not do directly.

The purported difficulties faced by the appellants were  their own creations.  The borrowers cannot suffer on account  of wrong interpretation of law by the appellants or by the  Reserve Bank of India.  Section 26C of the Act, therefore,  must be held to have wrongly been applied and consequently  the action taken by the appellants herein in grossing up and  rounding the rate of interest must be held to be  illegal.

It is well-settled that when a procedure has been laid  down  the statutory authority, it must exercise its power in  the manner prescribed or not at all.  

DE MINIMIS:

       The principle of de minimis, as contended by Mr.  Chidambaram, has no application in the instant case.   

       In Black’s Law Dictionary ’De minimus’ has been defined  as follows:

"The law does not care for, or take  notice of, very small or trifling  matters.  The law does not concern  itself about trifles."

       It is not a matter which would not receive the  attention of anybody.  Not only a public interest litigation  was filed but also the association of borrowers of Karnataka  has also filed a Special Leave Petition.  The amount  collected from the borrowers may be negligible for the  appellant banks but the amount they have realised from five  crores of borrowers is not a small one.  By reason of a  self-created confusion, misconception as regard application  of a statute and misapplication and misconstruction thereof  by the appellants herein had resulted in an illegal action;  as a result whereof the borrowers have been deprived of a  huge amount.  Consequently the Union of India and the  appellants have unjustly enriched themselves.  When such an  unjust enrichment takes place, the doctrine of de minimis,  in our view, should not be applied in equity or otherwise.  

LOCUS OF THE RESPONDENT:

       The writ petitioner before the High Court was a firm of  the Chartered Accountant.  As an expert in accountancy and  auditing, it must have come across several cases where its  client had to pay a higher amount of interest to the banks  pursuant to or in furtherance of the impugned action of the  appellants.  By reason of such an action on the part of the  appellants as also the Reserve Bank of India, as noticed  hereinbefore, the citizens of India had to pay a higher  amount of tax as also a higher amount of interest for no  fault on their part.  The same had been recovered from them

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without any authority of law.  While entertaining a public  interest litigation, this Court in exercise of its  jurisdiction under Article 32 of the Constitution of India  and the High Courts under Article 226 thereof are entitled  to entertain a petition moved by a person having knowledge  in the subject matter of lis and, thus, having an interest  therein as contradistinguished from a busy body, is the  welfare of the people.  The rule of locus has been relaxed  by the courts for such purposes with a view to enable a  citizen of India to approach the courts to vindicate legal  injury or legal wrong caused to a section of people by way  of violation of any statutory or constitutional right.

       In fact the Courts had even been treating a letter or  telegram sent to them as a public interest litigation by  relaxing the procedural laws especially the law relating to  pleadings.  We need not dilate further on this subject as a  Bench of this Court in Guruvayur Devaswom Managing Committee  & Anr. Vs. C.K. Rajan & Others [JT 2003 (7) SC 312]  observed:

"The Courts exercising their power of  judicial review found to its dismay that  the poorest of the poor, depraved, the  illiterate, the urban and rural  unorganized labour sector, women,  children, handicapped by ’ignorance,  indigence and illiteracy’ and other down  trodden have either no access to justice  or had been denied justice.  A new  branch of proceedings known as ’Social  Interest Litigation’ or ’Public Interest  Litigation’ was evolved with a view to  render complete justice to the  aforementioned classes of persons.  It  expanded its wings in course of time.   The Courts in pro bono publico granted  relief to the inmates of the prisons,  provided legal aid, directed speedy  trial, maintenance of human dignity and  covered several other areas.   Representative actions, pro bono publico  and test litigations were entertained in  keeping with the current accent on  justice to the common man and a  necessary disincentive to those who wish  to by pass the real issues on the merits  by suspect reliance on peripheral  procedural shortcomings. (See Mumbai  Kamgar Sabha, Bombay Vs. M/s. Abdulbhai  Faizullabhai & Others (1976) 3 SCR 591).

       The Court in pro bono publico  proceedings intervened when there had  been callous neglect as a policy of  State, a lack of probity in public life,  abuse of power in control and  destruction of environment.  It also  protected the inmates of prisons and  homes.  It sought to restrain  exploitation of labour practices.   

       The court expanded the meaning of  life and liberty as envisaged in Article  21 of the Constitution of India.  It

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jealously enforced Article 23 of the  Constitution. Statutes were interpreted  with human rights angle in view.   Statutes were interpreted in the light  of international treatises, protocols  and conventions.  Justice was made  available having regard to the concept  of human right even in cases where the  State was not otherwise apparently  liable. (See Kapila Hingorani Vs. State  of Bihar reported in JT 2003 (5) SC 1)

       The people of India have turned to  courts more and more for justice  whenever there had been a legitimate  grievance against the States statutory  authorities and other public  organizations.  People come to courts as  the final resort, to protect their  rights and to secure probity in public  life.    

       Pro bono publico constituted a  significant state in the present day  judicial system.  They, however,  provided the dockets with much greater  responsibility for rendering the concept  of justice available to the  disadvantaged sections of the society.   Public interest litigation has come to  stay and its necessity cannot be  overemphasized.  The courts evolved a  jurisprudence of compassion.  Procedural  propriety was to move over giving place  to substantive concerns of the  deprivation of rights.  The rule of  locus standi was diluted. The Court in  place of disinterested and dispassionate  adjudicator became active participant in  the dispensation of justice."   

       Furthermore, even where a writ petition has been held  to be not entertainable on the ground or otherwise of lack  of locus, the court in larger public interest has  entertained a writ petition.  In an appropriate case, where  the petitioner might have moved a Court in his private  interest and for redressal of the personal grievance, the  Court in furtherance of public interest may treat it a  necessity to enquire into the state of affairs of the  subject of litigation in the interest of justice.  Thus, a  private interest case can also be treated as public interest  case. (See Shivajirao Nilangekar Patil v. Mahesh Madhav  Gosavi AIR 1987 SC 294)

       We, therefore, do not agree with the submissions of the  learned counsel of the appellants that the respondent had no  locus to maintain the public interest litigation or the writ  petition filed by him pro bono publico before the High Court  was not maintainable.

AUTHORITY OF THE APPELLANTS AND THE RESERVE BANK OF INDIA:

The appellants have filed additional documents before  us to show that the borrowers had been given due notice but

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such notice/information had been given by applying wrong  legal principles.  The appellants are State within the  meaning of Article 12 of the Constitution of India.  They,  as noticed hereinbefore, acted in an arbitrary and whimsical  manner.   

The submission of the learned counsel for the  appellants to the effect that they had been permitted to  enhance the rate of interest by the Reserve Bank of India is  equally misconceived.  The Reserve Bank of India apparently  proceeded on the basis that the mode of calculation of rate  of interest vis-‘-vis the tax under the Act, as contended by  the Appellant No. 1, was correct.  The Reserve Bank of India  was not an authority for construction of a statute.  Its  functions are confined only to the provisions of the Reserve  Bank India Act and the Banking Regulation Act and not any  other statute.

Section 35A of the Banking Regulation Act empowers the  Reserve Bank of India to issue directions in relation to   matters specified under Section 35A and not for any other  purpose.  The contention of the appellants to the effect  that rate of interest had been enhanced by them pursuant to  or in furtherance of the directions issued by the Reserve  Bank of India must be held to be self-contradictory inasmuch  as according to them the Reserve Bank of India fixes only  the minimum rate of interest leaving a determination thereof  in a case of each individual borrower upon the bank  concerned.  If the matter relating to increase in the rate  of the interest was within power of the appellants, we fail  to understand as to why the Reserve Bank of India was  approached at all.  The same being not permissible under the  Act, any approval given by the Reserve Bank of India for the  satisfaction of the members of the first appellant herein  was futile.          It is not in dispute that action on the part of the  appellants in grossing up of interest was not at all  

relevant.  The appellants could not have suo motu taken  recourse to rounding up of interest for the purpose of  obtaining a higher amount of interest or otherwise.  The  purported practical difficulty sought to have been put forth  by the appellants is a self created one.  If such practical  difficulty existed there was apparently no reason as to why  the Reserve Bank of India refused to grant such approval  since 1997.   

       In any view of the matter, the purported directions  contained in the letter dated 2.9.1991 of the Reserve Bank  of India are not even in the nature of executive  construction under the said Act.  It was not binding on the  banks, far less on the borrowers.  In any event by reason of  a misplaced and misapplied construction of statute, a third  party cannot suffer.

       Furthermore, having regard to the provisions contained  in Article 265 of the Constitution of India read with  Article 366(28) thereof the purported demand from the  borrower for a higher amount of tax and consequently a  higher amount of interest by way of rounding up was wholly  illegal and without jurisdiction.  We also fail to  understand as to why in this modern electronics age, this  difficulty would be encountered while calculating the exact  amount of tax.  

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       We, therefore, are of the opinion that the purported  approval granted by the Reserve Bank of India was wholly  without jurisdiction and ultra vires the provisions of the  said Act.

CASE LAWS:

       In Dhanyalakshmi Rice Mills (supra), this Court merely  held that in triable issues of limitation, disputed  questions of fact may not be gone into by the High Court in  exercise of its writ jurisdiction.  Therein the appellants  had been claiming refund in terms of Section 72 of the  Indian Contract Act.  Under the export scheme involved  therein the payment made was voluntary in nature.  The  appellant did not enter into any contract under mistake of  law or under coercion.  In the fact situation obtaining  therein, this Court held that the remedy under Article 226  was not appropriate in the said cases, stating :

"...First, several petitioners have  joined.  Each petitioner has individual  and independent cause of action.  A suit  by such a combination of plaintiffs  would be open to misjoinder.  Second,  there are triable issues like  limitation, estoppel and questions of  fact in ascertaining the expenses  incurred by the Government for  administrative surcharges of the scheme  and allocating the expenses with regard  to quality as well as quantity of rice  covered by the permits."

       The aforesaid decision is not applicable in the instant  case.          However, we may notice that in ABL International Ltd. &  Anr. Vs. Export Credit Guarantee Corporation of India Ltd.   [JT 2003 (10) SCC 300], this Court recently observed:          "Merely because the first respondent  wants to dispute this fact, in our  opinion, it does not become a disputed  fact.  If such objection as to disputed  questions or interpretations are raised  in a writ petition, in our opinion, the  courts can very well go into the same  and decide that objection if facts  permit the same as in this case."

In B.O.I. Finance Ltd. (supra), the question which  arose for consideration was as to whether the transaction  arising out of agreement to do an illegal act could be  enforced.  In that case certain circulars were issued by the  Reserve Bank of India in terms of 36(1) of the Banking  Regulation Act which had not been published.  It was held :

"It was then submitted that even if  it is held that the said circulars were  binding they could only bind the banks  and not the third parties.  The

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submission was that by contravening the  direction contained in the said  circulars, the contracts which were  entered into between the banks and the  third parties could not be invalidated  and the only result of such  contravention would be the levy of  penalty under Section 46 of the said  Act."

       The question which arose for consideration therein does  not arise in the instant case.

       In Central Bank of India (supra), this Court, inter  alia, held that Sections 21 and 35-A of the Banking  Regulation Act confers a power coupled with duty to act.   The question which arose for consideration related to many  phrases, namely, "The principal sum adjusted", "such  principal sum" and "such" occurring in Section 34 of the  Code of Civil Procedure.  This Court held that a long- established banking practice of charging interest at  reasonable rates on periodical rests and capitalizing the  same on remaining unpaid should not be found fault with and  in that context the circular letter issued by the Reserve  Bank of India under Sections 21 and 35A was commented upon :

"...The Reserve Bank of India is the  prime banking institution of the country  entrusted with a supervisory role over  banking and conferred with the authority  of issuing binding directions, having  statutory force, in the interest of the  public in general and preventing banking  affairs from deterioration and prejudice  as also to secure the proper management  of any banking company generally.  The  Reserve Bank of India is one of the  watchdogs of finance and economy of the  nation.  It is, and it ought to be,  aware of all relevant factors, including  credit conditions as prevailing, which  would invite its policy decisions.  RBI  has been issuing directions/circulars  from time to time which, inter alia,  deal with the rate of interest which can  be charged and the periods at the end of  which rests can be struck down,   interest calculated thereon and charged  and capitalized.  It should continue to  issue such directives.  Its circulars  shall bind those who fall within the net  of such directives.  For such  transaction which are not squarely  governed by such circulars, the RBI  directives may be treated as standards  for the purpose of deciding whether the  interest charged is excessive, usurious  or opposed to public policy."

       We have noticed hereinbefore that the Reserve Bank of  India could not have interpreted the provisions of the said  Act nor thereby could have empowered the banks to charge

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something more from the borrowers by the process of rounding  up of interest.  The appellants and the Reserve Bank of  India with a view to touching the end of their own shadows  in the guise of exercise of their contractual powers vis-a- vis Banking Regulation Act exceeded their jurisdiction in  recovering the tax imposed on them by way of interest under  the Parliamentary Act.

CONCLUSION:

       For the reasons aforementioned, we are of the opinion  that the impugned judgment cannot be faulted with. However,  the matter does not end there.  The question which looms  large is what effective order can be passed by this Court.   More than five crores of borrowers are involved.  A huge sum  of money is to be recovered from Union of India as also a  large number of banks.  Directions may be issued for refund  of the amount to the borrowers, but implementation thereof  would take a long time.  The court may not be able to  effectively monitor such recovery.   

       The Union of India, as noticed hereinbefore, had  proposed that the banks concerned be directed to deposit the  excess recovered by it, if no direction is issued by us that  the same be returned to the borrowers.  Interestingly, the  Union of India has not volunteered, which as ’a State’ it  should have done, to suo motu undertake the exercise of  identifying the borrowers and refund the excess amount  recovered, a part whereof had been deposited by way of  interest tax by the concerned banks.  Furthermore, directing  the Union of India to refund the excess amount collected  through the banks and consequently ask the banks to refund  the same to the borrowers whether with the amount retained  by them by way of rounding up of interest invariably would  take a long time.   

       We, therefore, are of the opinion that a fund may be  created for the benefit of the disadvantaged people.   

       The Parliament has enacted "The Persons with  Disabilities (Equal Opportunities, Protection of Rights and  Full Participation) Act, 1995" (the 1995 Act).  The Chapter  V of the 1995 Act deals with education.  Section 28 provides  for research for designing and developing new assistive  devices, teaching aids, etc. for the disabled persons.   Section 29 mandates appropriate governments to set up  teachers’ training institutions to develop trained man power  for schools for children with disabilities.  Chapter IX of  the said Act provides for research and manpower development  which includes grant of financial incentives to universities  to enable them to undertake research.  Chapter XI provides  for institution for persons with severe disabilities whereas  Chapter XIII provides for social security.  It is no  gainsaying that despite the 1995 Act came into force on or  about 1st January, 1996 only a beginning has been made to  implement the beneficient provisions thereof but a lot lot  more is required to be done.   

       In India, the number of disabled people is around  100  million, and there are approximately 160 million victims,  direct and vicarious, of disablement. National as also  international efforts to combat this situation are on but  the task is a gigantic one.  The  General Assembly of the  United Nations has passed several Resolutions dealing with  the rights of the mentally and physically disabled

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emphasising that the disabled persons have the rights as  regard human dignity, civil and political rights,  entitlement to measures to ensure their self-reliance, the  right to treatment, education and rehabilitation, the right  to economic and social security, the right to live with  their families, the right to have their special needs taken  into account in economic and social planning and the right  against discrimination, abuse and exploitation, apart from  the fact that the disabled persons enjoy all rights  available to other human beings.

       It may not be necessary for us to delve deep into the  non-implementation or part implementation of the provisions  of the 1995 Act at the hands of the State but we are not  oblivious of the fact that it may not be possible to achieve  the legislative target for the Central Government or State  Government alone.

We are also not oblivious that the Parliament enacted  the The National Trust for Welfare of Persons with Autism,  Cerebral Palsy, Mental Retardation and Multiple Disabilities  Act, 1999 providing for constitution of a National Trust  which would provide for maintenance allowance for persons  with disabilities; the object being to enable the disabled  persons to live independently within the community, to deal  with problems of such persons who do not have family  support, to facilitate the realisation of equal  opportunities; protection of rights, full participation of  such persons; to evolve a procedure for appointment of  guardians or trustees for such persons requiring protection.

       We are, furthermore, aware that the Ministry of Social  Justice and Empowerment had taken the following actions to  implement the provisions of the aforementioned Acts:

(i)     Notification of Central Co-ordination Committee as  per Section 3 of the Act (ii)    Notification of Central Executive Committee as per  Section 9 of the Act (iii)   Creation of post of Chief Commissioner, Deputy Chief  Commissioner, and Staff for Office of Chief  Commissioner (iv)    Five core groups of experts and officials of  relevant Ministries have been set up to make  recommendations and formulate schemes to give effect  to various provisions of the Act. These are (a)   Group on Prevention, Early Detection and  Intervention; (b) Vocational training and  employment; (c) Education, including pre-school  education; (d) Barrier free environment; (e) Women  and children with disabilities (v)     National Fund for People with Disabilities set up on  11/08/1983 has been activated and assistance has  been sanctioned to non-government agencies. 17  projects have been sanctioned under the scheme (vi)    A new scheme \026 the Viklang Bandhu has been  formulated to provide training t disabled volunteers (vii)   A National Programme for Rehabilitation of Persons  with Disabilities has been submitted to the Planning  Commission for establishment of infrastructure for  realizing the Act. The Programme contemplates the  establishment of a District Level Rehabilitation  Centre, two multi-purpose rehabilitation workers at  the Block/PHC level; two community based  rehabilitation workers at the Gram Panchayat level

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(viii)  To support entrepreneurial activity by the disabled,  the National Handicapped Finance and Development  Corporation has been operationalised with effect  from 24/10/1997 (ix)    The proposal for the National Trust for Welfare of  Persons with Autism, Cerebral Palsy, Mental  Retardation and Multiple Disabilities with a corpus  fund of Rs. 100 crores has been approved by the  Cabinet

       This Court as also the High Courts have taken pro- active views in the matter of implementation of the rights  of the disabled.  

In National Federation for the Blind v. Union Public  Service Commission [(1993) 2 SCC 411], the Court directed  the Government and the UPSC to permit blind and partially  blind eligible candidates to compete and write the Civil  Services Examination in Braille script or with the help of a  scribe. It also recommended to the Government to decide the  question of providing reservations to visually handicapped  persons in Group ’A’ and ’B’ posts in the Government and  Public Sector Enterprises.           In Javed Abidi v. Union of India [(1999) 1 SCC 467],  the Court directed Indian Airlines to give concessions to  orthopaedically handicapped persons suffering from locomotor  disability to the extent of 80% for traveling by air in  India. The Court was mindful of the financial position of  Indian Airlines and yet felt that this direction was in  keeping with the objectives of the Disabilities Act and was  in consonance with the concession already given by Indian  Airlines to visually disabled persons.           Kunal Singh v. Union of India [(2003) 4 SCC 524] saw  the Court interpreting the Disabilities Act in a manner so  as to further its objective. The Court opined that Section  47 of the Act mandates that an employee who acquires a  disability during service must be protected. If such an  employee is not protected, he would not only suffer himself,  but all his dependants would also undergo suffering.  Therefore, merely granting him pension would not suffice,  but there must also be an attempt to secure him alternative  employment.           Despite the progressive stance of the Court and the  initiatives taken by the Government, the implementation of  the Disabilities Act is far from satisfactory. The disabled  are victims of discrimination in spite of the beneficial  provisions of the Act.

       We are, therefore, of the opinion that in a larger  interest a fund for the aforementioned purpose should be  created with the amount at the hands of the Union of India  and the Appellants and other concerned Banks, which may be  managed by the Comptroller and Auditor General of India.

       We would request the Comptroller and Auditor General of  India to effect recoveries of all the excess amount realised  by the Union of India by way of interest tax and interest by  the banks and other financial institutions and create the  corpus of such fund therefrom.  The appellant and other  concerned banks are also hereby directed to contribute to  the extent of Rs. 50 lakhs each in the said fund.  

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       The Comptroller and Auditor General of India would be  the Chairman of the said Trust and the Finance Secretary and  the Law Secretary of the Union of India would be the ex- officio members thereof.  The corpus so created may be  invested in such a manner so as to enable the trustees to  apply the same for the purpose of giving effect to the  aforementioned provisions of the 1995 Act.   

       The Union of India, the Reserve Bank of India, the  appellant Banks, other scheduled banks and financial  institutions are directed to render all cooperation and  assistance to the trustees.   

       The Committee as also the Committees set up by the  Central Government should act in close cooperation with each  other.  The Committee may, if it thinks proper, invest any  amount in the Trust set up by the Central Government under  the 1999 Act or any other scheme framed by the Central  Government, as noticed hereinbefore.

       The trustees aforementioned with a view to give effect  to this order may frame an appropriate scheme.  In case of  any difficulty they may approach this Court for any other or  further order/orders or direction/directions.   

       The Central Government, however, with a view to  implement the aforementioned provisions may by amending the  1995 Act provide for creation of such a fund and in such an  event, the statutory authority, if any, would be entitled to  take over the corpus of the fund but so long no legislative  step is taken in this behalf, this order shall remain in  force.   

       These appeals are dismissed with the aforementioned  terms.  There shall be no order as to costs.