Writ Petitions against order passed by DRT in exercise of jurisdiction U/s 17 of the SARFAESI Act cannot be entertained #indianlaws

Writ petition under Article 226 of the Constitution should not be entertained when the alternate remedy is available under the Act, unless exceptional circumstances are made out. The writ remedy cannot be permitted to be availed as a routine/ matter of course, but only in exceptional circumstances.Unless the Court is convinced that the case falls under the exceptional categories, the writ petition filed against the order of the Tribunal, passed in exercise of the jurisdiction under Section 17 of the SARFAESI Act, on account of the legislative intent behind the enactment of the SARFAESI Act and RDDB Act and the ratio of law laid down by the Apex Court cannot be entertained.

The instant writ petition was referred to a larger Bench on the question as to ‘whether a writ petition would be maintainable against an order passed by the Debts Recovery Tribunal (DRT), while disposing of an appeal filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), in view of the alternative and efficacious remedy of an appeal provided under Section 18.

In the instant matter, the Petitioners has borrowed loan from the Bank and later the account was treated as Non-performing Asset. The auction had already been conducted and bid as submitted was also accepted. DRT had dismissed the SA filed against Banks’ demand notice on the ground of appeal being devoid of merits and against the said dismissal, the instant writ petition was filed.

Bank contended that writ petition is not maintainable on the ground that a remedy by way of an appeal is provided to the Debts Recovery Appellate Tribunal, under Section18 of the Act.

It was observed that security interest, within the meaning of S.2(zf) of the Act, was created in respect of the relevant property, which is a ‘secured asset’, within the meaning of S.2(zc), in favour of the ‘secured creditor’ – i.e. the Bank, within the meaning of S.2(zd). On failure to repay the loan amount, which was declared as non- performing asset, Bank enforced its security interest over the secured asset.

Section13 of the SARFAESI Act shows that without the intervention of the Court or Tribunal, there can be enforcement of security interest by the secured creditor in accordance with the provisions of the Act. Section 13(4) envisages the ‘measures’ to secure the borrowers’ interest, when secured creditor proposes to proceed against the secured asset. One of the ‘measures’ provided by the statute is to take possession of the secured asset of the borrower, including the right of transfer by way of lease, assignment or realizing the secured asset. Section 17 confers right to any aggrieved person to question the ‘measures’ referred in Section 13(4), when taken by the secured creditor and if any aggrieved person has got any grievance against any ‘measures’ taken, he can approach the Tribunal for the relief.

The SARFAESI Act was enacted to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto.

Court then referred to the decision of Division Bench in the case of Hotel Vandana Palace, correctness of which is also under review in respect of the issue of maintainability of writ petition, despite the availability of an alternative remedy of appeal or the contrary view as was taken in the case of Smt. Lily Joseph.

The Division Bench which decided the Hotel Vandana Palace case, while recording its finding did not notice the binding decision in SATYAWATI TONDON’S case, wherein, the Apex Court while being conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue prerogative writs being very wide and that there can be no express limitation on exercise of that power, has made an observation that it is a matter of serious concern that despite repeated pronouncement of this Court, High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of Banks and other financial institutions to recover their dues. The High Courts were expected to exercise their discretion in such matters with greater caution, care and circumspection.

Again in the case of Smt. Lily Joseph, the Division Bench did not assign reasons, while holding the writ petition as not maintainable, except making reference to the decision in the case of Kanaiyalal Lalchand Sachdev.

When extraordinary writ remedy is invoked, despite the availability of an alternative remedy, the Court should at the threshold, examine, whether the petition can be entertained having regard to the pleading in the petition, more particularly, the reason(s) stated for bypassing of the alternative remedy. Writ petition under Article 226 of the Constitution should not be entertained when the alternate remedy is available under the Act, unless exceptional circumstances are made out. The writ remedy cannot be permitted to be availed as a routine/ matter of course, but only in exceptional circumstances. The Apex Court has recognized some exceptions to the rule of alternative remedy i.e., where the statutory body has not acted in accordance with the provisions of the enactment in question or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of principles of natural justice, or when the vires of the statute is under challenge.

Unless the Court is convinced that the case falls under the exceptional categories, the writ petition filed against the order of the Tribunal, passed in exercise of the jurisdiction under Section 17 of the SARFAESI Act, on account of the legislative intent behind the enactment of the SARFAESI Act and RDDB Act and the ratio of law laid down by the Apex Court cannot be entertained, as the approach of the High Court should be consistent with the provisions of the statutes and also the law laid down by the Apex Court, mandated by Article 141 of the Constitution. Hotel Vandana Palace case was held to be as not laying down the correct position of law.

[M/s Deepak Apparels Private Ltd. vs. City Union Bank Ltd.]

Karnataka HC, 22.03.2016

Writ Petition No. 28182/2013 (GM-DRT)