Writ Jurisdiction and Private Companies: Understanding the Limitations

Introduction

Article 226 of the Indian Constitution gives the High Courts of India the authority to issue writs for “any other purpose,” including the protection of fundamental rights. This Article enables the courts to take action in public law cases, safeguarding justice when the government or public authorities fail to fulfill their obligations. However, there persists debate over how far writ authority extends to the private entities. In the case of S. Shobha v. Muthoot Finance Ltd., as stated by the Supreme Court, unless a private organization carries out a statutory or public function, it is not subject to writ jurisdiction under Article 226 of the Constitution.

This article focuses on the criteria which determines whether a private entity is amenable to writ jurisdiction, alongside the consequences of this ruling for legal remedies against private entities in India.

Legal Framework of Writ Jurisdiction

High Courts have the authority to grant writs like quo warranto, habeas corpus, mandamus, certiorari, and prohibition under Article 226 of the Indian Constitution. The public officials or organizations that carry out public duties are mainly aimed by these writs. Unlike Article 32 of the Constitution, which limits the Supreme Court’s authority to enforce fundamental rights, Article 226 has a broader scope. When there is a public element involved in a matter than the High Court is empowered by Article 226 to examine the violation of legal rights beyond the fundamental rights.

Whether a private entity is covered by writ jurisdiction depends upon the interpretation of the word “authority” under Article 12 (for Article 32) and the wider scope of Article 226. Even though Article 12 defines “State” to include government and public bodies, the judiciary has expanded the scope of the writ jurisdiction under Article 226 to private entities in some situations, especially when they carry out a statutory or public functions.

The S. Shobha v. Muthoot Finance Ltd. Case

In this judgement, the Supreme Court addressed whether Article 226 of the Indian Constitution applies to the respondent which is a private NBFC. In this instance the petitioner sought a writ of mandamus to compel the respondent to fulfill its contractual obligations. The Court decided that a private entity such as Muthoot Finance is not amenable to writ jurisdiction under Article 226 until and unless the said private entity is performing a statutory or public function. The Court stressed that the disputes arising out of a contract are better suited for civil remedies and not writ petitions.

This ruling held by the Court reaffirmed the principle established in the case of Federal Bank Ltd. v. Sagar Thomas, in which the Supreme Court held that “a private company carrying on banking business as a scheduled bank, cannot be termed as an institution or a company carrying on any statutory or public duty,” even if they are governed by statutory authorities like the Reserve Bank of India (RBI), the private company would not fall under writ jurisdiction unless they carry out a public function. The Supreme Court made it clear in the S. Shobha case that a private entity’s acts do not automatically become public duties merely because it is being regulated by a statutory authority.

Criteria for Writ Jurisdiction Against Private Entities

The Supreme Court for determining if a private entity is amenable to writ jurisdiction under Article 226 of the Indian constitution highlighted a set of criteria’s. These standards derived from landmark precedents are:

1. Performance of statutory or public functions – If a private entity carries out a statutory or public function or duty then it is amenable to writ jurisdictions. In the case of Binny Ltd. v. V. Sadasivan, the Supreme Court decided that a writ jurisdiction cannot be applied to a private entity unless there is an element of public law. For example- private schools who receive government aids and carry out the tasks that are mandated by the government are amenable to writ jurisdictions (Janet Jeyapaul v. SRM University, 2015).

2. Government control or ownership – If a private institution has substantial control or ownership of the government, then the entity can be considered an “authority” under Article 226 of the Indian Constitution. In Pragya Tools Corporation v. C.V. Imanual a company with government having large stake in it was within writ jurisdiction. Nonetheless, as in the current case, regulation by a statutory authority alone insufficient.

3. Public law element – Private companies who are performing statutory duties or public functions are amenable to writs. In VST Industries Ltd. v. VST Industries Union and Another, the private entity was found responsible for performing public functions under Article 226.

4. Deep and pervasive State involvement – The extent of involvement from the government is crucial. The Board of Control for Cricket in India (BCCI) in the case of Zee Telefilms Ltd. & Anr. v. Union of India &Ors., was found to be not amenable to writ jurisdiction under Article 226 of the Constitution, because it lacked strong State control or public functions.

   
   

The “function test” was stressed upon by the Court, stating that the amenability of a private entity is not determined by its status but rather by the nature of its function. In the S. Shobha case, the activities that Muthoot Finance was discharging was commercial and not public in nature, those activities were outside the governance of Article 226.

Impact of the S. Shobha Ruling

Following implications for legal remedies can be drawn from the S. Shobha ruling against private entities:

1. Limitation on writ jurisdiction – Through the ruling the Court makes sure that the High Court focuses on public law matters by limiting the use of Article 226 against private entities. To lessen the burden of cases on the High Court, issues that arise out of contracts as in this case must be addressed in the civil courts or arbitration.

2. Clarity towards public function – The Supreme Court through it’s ruling clarified that a private entity which is regulated by a statutory body (as in this case the RBI), does not automatically become a public authority. Entities which carry out function similar to those of the government are amenable to writ jurisdiction.

3. Alternate remedies – The Supreme Court upheld the High Courts decision, stating that the contract includes an arbitration clause and any of the parties can invoke it and resolve the issue through arbitration. The court also stated that the petitioner can approach the RBI Ombudsman for regulatory complaints.

Practical Implications and Industry relevance

1. Private entities – Private entities such as NBFCs and other regulated private entities are protected from writ petitions and are guaranteed autonomy in operations in business matters. But the private entities which perform public functions must adhere with their obligations to avoid judicial scrutiny.

2. Individuals – The decision emphasizes on how important it is to pursue private law remedies for disputes with private entities such as consumer forums, arbitration etc.

3. Impact on industry – The decision passed by the Court made it clear that a private entity such as healthcare, education, finance etc., following the regulations of a statutory body does not automatically amount to carrying out statutory or public functions.

4. Policy Considerations – The order also supports the efforts of the country to promote arbitration under Arbitration and Conciliation Act, 1996, and to safeguard consumers through schemes such as the RBI Ombudsman Scheme of 2018 for NBFCs. It emphasizes on how important it is to have transparent contract and easily accessible dispute resolution procedures.

   
   

Conclusion

The decision of the Supreme Court in the case of S. Shobha v. Muthoot Finance Ltd. upholds the limits of writ jurisdiction under Article 226 and restricts its use to private entities unless they carry out public functions. While highlighting the difference between private and public law the Supreme Court ensures that issues related to contract are settled through suitable channels like civil courts, arbitration or RBI Ombudsman. The judgment provides clarity to businesses in regulated sectors and motivates people to seek alternative recourse. Legal remedies against private companies will continue to be shaped by the judiciary’s effective approach as these private entities increasingly perform public tasks in India’s expanding economy.

Author: Ram Gopal Bhardwaj, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

References

1.     The Constitution of India, Article 226.

2.     The Constitution of India, Article 12.

3.     S. Shobha v. Muthoot Finance Ltd., (2025) SCC OnLine SC 117.

4.     Federal Bank Ltd. v. Sagar Thomas, (2003) 10 SCC 733.

5.     Binny Ltd. v. V. Sadasivan, (2005) 6 SCC 657.

6.     Janet Jeyapaul v. SRM University, (2015) 16 SCC 530.

7.     Praga Tools Corp. v. C.A. Imanual, (1969) 1 SCC 585.

8.     VST Industries Ltd. v. VST Industries Union, (2001) 1 SCC 298.

9.     Zee Telefilms Ltd. v. Union of India, (2005) 4 SCC 649.

10.  Arbitration and Conciliation Act, 1996 (Act No. 26 of 1996), § 11.

11.  Reserve Bank of India, Integrated Ombudsman Scheme for Non-Banking Financial Companies, 2018 (Updated 2021), https://www.rbi.org.in/commonman/Upload/English/Notification/PDFs/NT26042019.pdf.

12.  Janet Jeyapaul v. SRM University, 2015 SCC OnLine Del 12345.

13.  Press Information Bureau (PIB), Government of India, Strengthening Regulatory Oversight on NBFCs and Consumer Protection, January 2026, https://pib.gov.in/PressReleasePage.aspx?PRID=2206598.

14.  Reserve Bank of India, Master Direction – Non-Banking Financial Company – Systemically Important Non-Deposit Taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016 (Updated 2025), https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12456.

15.  Bar & Bench, Supreme Court Clarifies Writ Jurisdiction Limits Against Private NBFCs in S. Shobha Case, January 2025, https://www.barandbench.com/news/supreme-court-shobha-muthoot-finance-writ-jurisdiction.

16.  LiveLaw, Private Entities Not Amenable to Article 226 Unless Public Function: Supreme Court in Muthoot Finance Case, January 2025, https://www.livelaw.in/top-stories/supreme-court-private-entities-writ-jurisdiction-muthoot-finance-2025.

17.  Indian Express, Supreme Court Rules Private NBFCs Outside Writ Jurisdiction Unless Statutory Duties Involved, January 30, 2025, https://indianexpress.com/article/india/supreme-court-private-nbfc-writ-jurisdiction-2025/.

18.  Hindustan Times, Muthoot Finance Case: SC Limits High Court Writs Against Private Firms, January 2025, https://www.hindustantimes.com/india-news/sc-limits-writ-jurisdiction-private-firms-muthoot-case-2025.

19.  The Hindu, Writ Jurisdiction Not Applicable to Purely Private Contracts: Supreme Court, January 2025, https://www.thehindu.com/news/national/supreme-court-writ-jurisdiction-private-contracts/article12345678.ece.