The petitioners challenged the auction notice and sought time to pay dues under the SARFAESI Act before the High Court. Relying on precedent mandating exhaustion of alternative remedies, the court dismissed the writ petition, directing the petitioners to approach the Debt Recovery Tribunal.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
Court No. - 39
Case :- WRIT - C No. - 3985 of 2021
Petitioner :- M/S R.L. Casting Respondent :- Bank Of Baroda And Another Counsel for Petitioner :- Vijay Tripathi,Rajesh Mishra Counsel for Respondent :- Anadi Krishna Narayana
Hon'ble Naheed Ara Moonis,J. Hon'ble Dinesh Pathak,J.
Heard learned counsel for the petitioner and Shri Sandeep Kumar Singh, learned counsel appearing on behalf of the respondent.
The instant petition has been filed seeking following reliefs :-
"(i) Issue a writ, order or direction in the nature of certiorari quashing impugned auction sale notice dated 01.12.2020 issued by respondents for sale of Immovable Assets under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 read with proviso to Rule 6(2) & 8(6) of the Security Interest (Enforcement) Rules, 2002,
(ii) Issue a writ, order or direction in the nature of mandamus directing the respondents to provide some time to pay entire due amount and fix some installments for payment of the same."
At the very outset, learned counsel for the respondentbank, has submitted that the order dated 20.01.2020 under Section 14 has been passed by the District Magistrate in a proceeding initiated under Section 13(2) and 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the "SARFAESI Act"), the petitioner has remedy to approach the Debts Recovery Tribunal under Section 17 of the SARFAESI Act. However, auction proceeding has not been finalized. The bank is interested to recover the money. The petitioner is under legal obligation to pay the outstanding dues. In view of Section 13(8) of the Act and Rule 8 read with 9(1) of the Security Interest (Enforcement) Rules, 2002, the petitioner is entitled to redeem the secured assets, if he pays the entire due amount before the sale/transfer of the secured assets.
The said contention raised by the learned counsel for the respondent-bank has not been disputed. The learned
counsel for the petitioner submits that the petitioners are ready to deposit the amount in installment.
We have considered the submissions made at the bar.
The Hon'ble Supreme Court in the case of United Bank of India vs. Satyawati Tandon and others , reported in (2010) 8 SCC 110 in paragraphs 42, 43 & 55 has held as under:
" 42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression "any person" used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pas interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective.
43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
***
55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the 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. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
The aforesaid decision in Satyawati Tandon (supra) has been reiterated and followed in various decisions by the Hon'ble Apex Court. The reasons for not entertaining the petition where there is efficacious and alternative remedy available, has been recently dealt with in extenso by the Hon'ble Apex Court in Authorized Officer, State Bank of Travancore and another Vs. Mathew K.C. , (2018) 3 SCC 85 , of which the relevant extract is reproduced as hereunder:
" 9. The statement of objects and reasons of the SARFAESI Act states that the banking and financial sector in the country was felt not to have a level playing field in comparison to other participants in the financial markets in the world. The financial institutions in India did not have the power to take possession of securities and sell them. The existing legal framework relating to commercial transactions had not kept pace with changing commercial practices and financial sector reforms resulting in tardy recovery of defaulting loans and mounting non-performing assets of banks and financial institutions. The Narasimhan Committee I and II as also the Andhyarujina Committee constituted by the Central Government Act had suggested enactment of new legislation for secularization and empowering banks and financial institutions to take possession of securities and sell them without court intervention which would enable them to realise long term assets, manage problems of liquidity, asset liability mismatches and improve recovery. The proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, (hereinafter referred to as 'the DRT Act') with passage of time, had become synonymous with those before regular courts affecting expeditious adjudication. All these aspects have not been kept in mind and considered before passing the impugned order."
" 10. Even prior to the SARFAESI Act, considering the alternate remedy available under the DRT Act it was held in Punjab National Bank vs. O.C. Krishnan and others, (2001) 6 SCC 569 , that:-
6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act."
In the case of Standard Chartered Bank Vs. V. Noble Kumar and others , (2013) 9 SCC 620 , the Supreme Court in paragraph 27 has held as under:
" 27. The "appeal" under section 17 is available to the borrower against any measure taken under section 13(4). Taking possession of the secured asset is only one of the measures that can be taken by the secured creditor. Depending upon the nature of the secured asset and the terms and conditions of the security agreement, measures other than taking the possession of the secured asset are possible under section 13(4). Alienating the asset either by lease or sale, etc. and appointing a person to manage the secured asset are some of those possible measures. On the other hand, section 14 authorises the Magistrate only to take possession of the property and forward the asset along with the connected documents to the borrower (sic the secured creditor). Therefore, the borrower is always entitled to prefer an "appeal" under section 17 after the possession of the secured asset is handed over to the secured creditor. Section 13(4) (a) declares that the secured creditor may take possession of the secured assets. It does not specify whether such a possession is to be obtained directly by the secured creditor or by resorting to the procedure under section 14. We are of the opinion that by whatever manner the secured creditor obtains possession either through the process contemplated under section 14 or without resorting to such a process obtaining of the possession of a secured asset is always a measure against which a remedy under section 17 is available."
In the case of Kanaiyalal Lalchand Sachdev & others vs. State of Maharashtra and others, 2011 (2) SCC 782 , the Hon'ble Supreme Court in paragraph 20 has held as under:
" 20. We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT."
The Hon'ble Supreme Court in the case of ICICI Bank Ltd. v. Umakanta Mohapatra , Civil Appeal Nos. 1024310250 of 2018, decided on 05.10.2018, has held as under: "Delay condoned. Leave granted.
Despite several judgments of this Court, including a judgment by
Hon'ble Mr. Justice Navin Sinha, as recently as on 30.01.2018, in Authorized Officer, State Bank of Travancore and Another VS Mathew KC., (2018) 3 SCC 85, the High Courts continue to entertain matters which arise under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), and keep granting interim orders in favour of persons who are Non-Performing Assets (NPAs).
The writ petition itself was not maintainable, as a result of which, in view of our recent judgment, which has followed earlier judgments of this Court, held as follows:-
18. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. Vs Prem Heavy Engineering Works (P) Ltd and another, (1997) 6 SCC 450, observing:-
32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops."
The writ petition, in this case, being not maintainable, obviously, all orders passed must perish, including the impugned order, which is set aside.
The appeals are allowed in the aforesaid terms.
Pending applications, if any, shall stand disposed of."
Recently the Hon'ble Apex Court in the case of C. Bright Vs. The District Collector & others , Civil Appeal No. 3441 of 2020 decided on 05.11.2020 has observed as follows:
"21. Even though, this Court in United Bank of India v. Satyawati Tondon & Ors., (2010) 8 SCC 110 held that in cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which will ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Hindon Forge Private Limited has held that the remedy of an aggrieved person by a secured creditor under the Act is by way of an application before the Debts Recovery Tribunal, how- ever, borrowers and other aggrieved persons are invoking the jurisdiction of the High Court under Articles 226 or 227 of the Constitution of India without availing the alternative statutory remedy. The Hon'ble High Courts are well aware of the limitations in exercising their
jurisdiction when effective alternative remedies are available, but a word of caution would be still necessary for the High Courts that interim orders should generally not be passed without hearing the secured creditor as interim orders defeat the very purpose of expeditious recovery of public money.
22. Thus, we do not find any error in the order passed by the High Court. Consequently, the appeal is dismissed."
In case the petitioners have any grievance against the order passed under Section 14 of the "SARFAESI Act" by the respondent no.2, which is an off shoot of the proceeding under Sections 13(2) & 13(4) of the "SARFAESI Act" can also be challenged by them in the case already pending before the Debt Recovery Tribunal. The petitioners cannot be allowed to split up their claim and file writ petition. The petitioners have ignored the availability of the alternative remedy with impunity, hence cannot be permitted to reagitate by filing the present writ petition.
Reserve Bank of India has already announced certain moratorium on loan repayment due to Covid-19 Pandemic. However, the moratorium is only a deferral and not a waiver on payment of loan amount otherwise it would put the financial viability of banks at risk and depositors interest in jeopardy. The petitioners cannot be allowed to sit on the fence and wait and thereafter coming to the writ court for the redressal of their grievances.
In this view of the matter, the petitioners are at liberty to avail their remedy before the Debt Recovery Tribunal under Section 17 of the SARFAESI Act. They shall also be at liberty to submit a fresh OTS proposal before the respondent-Bank.
The writ petition is, accordingly, dismissed.
Order Date :- 8.2.2021 VR/
3 issues framed by the court
Whether the High Court can entertain a writ petition under Article 226 challenging SARFAESI Act proceedings when an effective alternative remedy under Section 17 is available.
Whether the petitioners are entitled to seek installment payments or modification of debt via writ court rather than the Debt Recovery Tribunal.
Whether interim orders should be granted in matters involving recovery of dues from banks and financial institutions.
Colour shows how this judgement treated each authority
Authorized Officer, State Bank of Travancore and another Vs. Mathew K.C., (2018) 3 SCC 85Followed¶18
Standard Chartered Bank Vs. V. Noble Kumar and others, (2013) 9 SCC 620Followed¶22
Kanaiyalal Lalchand Sachdev & others vs. State of Maharashtra and others, 2011 (2) SCC 782Followed¶24
ICICI Bank Ltd. v. Umakanta MohapatraFollowed¶27
Dwarikesh Sugar Industries Ltd. Vs Prem Heavy Engineering Works (P) Ltd and another, (1997) 6 SCC 450Referred¶31
C. Bright Vs. The District Collector & others, Civil Appeal No. 3441 of 2020Followed¶36
6 provisions across 3 enactments
M/S R.L. Casting
Bank Of Baroda
Bank Of Baroda
Naheed Ara Moonis
Dinesh Pathak
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
