Revisiting J&K Bank Status
Justice Hasnain Masoodi
"Change is all that is constant in the world" observed Chief Justice Thakur while dealing with proceedings related to famous BCCI Case. Justice Thakur quoting Charles Darwin, Benjamin Franklin and Albert Einstein concluded "the truth is that resistance to change stems partly from people getting used to status-quo and partly because any change is perceived to effect their vested interest in terms of loss of ego, status, power or resources."
The proceedings were a sequel to the order dated 22nd January, 2015 holding that BCCI though not "State" within meaning of Article 12, was nonetheless amenable to writ jurisdiction under Article 226 of the Constitution of India as it was discharging important "public functions".
When we speak of change in context of an organization, we don't only mean its structural or organizational aspects but also our perceptions about nature of its operation. Whether an entity, whatever name, is "State" within meaning of Article 12 or otherwise amenable to writ jurisdiction under Article 226 is the question that has engaged higher judiciary from the day coming into force of the constitution. Fundamental rights, we are aware, are enforceable only against the "State" as defined under Article 12. Likewise, the writ jurisdiction under Article 226 and consequent judicial review is restricted to the authorities and persons mentioned therein. An organization can avoid compliance with Fundamental rights and judicial review insisting that it does not fall within purview of Articles 12 or 226 of the Constitution. The superior courts, therefore, are under a constant duty to examine whether case set up to avoid compliance with Part III and block judicial review is to be sustained.
The law has traversed a long, though uneven road from Rajasthan State Electricity Board case where only entity constituted by the government was held to fall within the definition of "States" and amenable to writ jurisdiction, to BCCI Case where even a body created privately and not enjoying powers conferred by the "State" but discharging important public functions has been held to be amenable to the writ jurisdiction. Resultantly, entities that ordinarily would avoid compliance with principles of transparency, fairness and reasonableness, are now subject to judicial review. This has triggered new strides in rights jurisprudence and widened the sweep of writ jurisdiction.
The observation in BCCI Case is most appropriate in context of Jammu & Kashmir government's resistance to change in its perceptions as regards Jammu and Kashmir Bank's status in present context. The government is adamant to see J&K Bank unamenable to writ jurisdiction. Consequently, it has not been possible for the aggrieved to enforce fundamental rights against the Bank or seek judicial review of its actions.
The question whether Jammu and Kashmir Bank Ltd. falls within the definition of the "State" and amenable to writ jurisdiction came before the J&K High Court in Firdous Ahmad Tanki Case. The Full Bench on 5th December, 1995 declared the bank an instrumentality of the State under Article 12 and amenable to writ jurisdiction. The judgment was questioned before the Supreme Court. The Apex Court on 04.03.2003 set aside the judgment, as after the Full Bench judgment the Supreme Court had laid down fresh guidelines on the subject in Pardeep Kumar Biswas case. The Tanki case was remitted to the Full Bench for "examining the matter afresh in light of judgment" in Biswas case.
Full Bench considered the matter afresh and on 3rd April, 2006 the majority judgment held that "Bank is neither the State nor an authority or instrumentality of the State within the meaning of Article 12 of the Constitution of India and the Bank does not perform any public duty or public functions while dealing with its employees or carrying out its normal commercial and business activities as a Banking Company so as to make it amenable to writ jurisdiction." The dissent on the other hand, held the Bank to be an "Authority" within meaning of Article 12 and amenable to writ jurisdiction of the Court.
Whether the status of the Jammu and Kashmir Bank with the advent of time calls for a relook? The answer, against the following backdrop is to be in affirmative.
Fiscal health of the Bank is deteriorating fast. The Bank as per RBI data, with the whopping NPA of Rs 5,983 crore ranks fourth amongst banks of its category in the country. The NPAs are hovering around 10.87% of net loans. Though the real data is suspected to be camouflaged by the bank auditors by change in nomenclature yet the available statistics is alarming even when taken at face value.
b) The bank ignoring the priorities that any FI caught in a like whirlpool would fix has of late allegedly gone for a recruitment spree against till recently unknown positions, and that too denying opportunity to all eligible candidates to compete. In all 2000 or more "backdoor" appointments are alleged to have been made converting the bank crumbling under loss, into a dumping ground for the vested interest. The gross irregularities have been admitted though impliedly, by none else than the Finance Minister by assuring that the bank would be asked to maintain transparency in future. How can he so easily condone gross irregularities that because of their magnitude qualify to be called a scam and in any other state would have sent heads rolling. The Minister pushes Chairman of the Bank to the dock by indirectly suggesting that he succumbed to pressure, though the Minister had encouraged him not to, by reminding him that he was "fortunate to have him as the Finance Minister". The entire blame is being put on Chairman when to everybody's knowledge the "backdoor" appointments have been made to brighten up fortunes of political dispensations.
c) The State Government is stonewalling discussion on Bank affairs. It is not ready to share vital information with shareholders, depositors, let alone the general public. To illustrate, it remains to be known who are the main defaulters of the Bank, skyrocketing NPA to around 6000 crore rupees. Were the rules governing advances observed in breach? Is it true that hundreds of crores were advanced to a business concern that to the knowledge of the authorities was facing bankruptcy on the date the loan was advanced? Who are the officers that made the advances to businessmen already in financial soup and who are the political bosses, if any, under whose orders these advances were made? Nobody is ready to disclose let alone fix the responsibility.
d) The question of alleged "backdoor" appointments in the Bank was raised in the State Assembly. However, effective discussion did not take place as the Finance Minister cautioned that the discussion would impinge on Bank autonomy, result in "costs to the Bank", affect the "interests of institutional investors" and hamper its growth. The argument reflects "neck in sand" mindset. Cover up is not answer to the crisis. Let "skeletons in the cupboard" tumble down "stink bugs" swarm out and market forces have their way. The picture to emerge will give a genuine idea about financial health of the bank and not project a fake image that may spring shock and surprise for the depositors and investors, alike. In any case it was none else than Finance Minister, who in January 2017 disclosed that "there have been some serious lapses in corporate governance and management failures in . . . bank"; that there is " significant under provisioning of impaired assets." and that "to help the bank, an equity infusion of Rs.532 crores" is proposed.
e) The bank taking refuge under the judgment in Tanki case, denies to be "Public Authority" within meaning of Section 2(f) RTI Act and obligated to share information as mandated under the Act. It is shocking that the Bank is keen to keep close to its chest the rot and not ready to share the facts with its own people.
f) Financial Resolution and Deposit Insurance Bill (FDRI) Bill is emerging as a new headache. It provides for "bail-in" - a way to rescue an ailing bank by making, amongst others its depositors take a loss on their deposits. To simplify for the readers, if the Bill becomes law, the depositors may have to pay o from their deposits, the loss suffered by Bank for any reason including " lapses in governance", "management failures "or other "malpractices". The proposed law therefore makes information sharing a real imperative.
(Author a Harvard graduate and former Judge of High Court is a Senior Advocate Supreme Court of India. This article has appeared in Greater Kashmir)