The writ petition challenging action under SARFAESI Act was dismissed. The Court held that borrowers must exhaust statutory remedy under Section 17 of SARFAESI Act. Citing Supreme Court precedent, the Court found that filing writ petitions against such actions, especially when a civil suit is pending, amounts to an abuse of process of court.
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.
W.P.No.23555 of 2024
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 20.08.2024
CORAM :
THE HON'BLE MR. D.KRISHNAKUMAR, ACTING CHIEF JUSTICE
and
THE HONOURABLE MR.JUSTICE P.B.BALAJI
W.P.No.23555 of 2024 and
WMP No.25765 of 2024
Vs.
... Respondents
PRAYER : Writ Petition filed under Article 226 of Constitution of India seeking to issue a writ of mandamus, directing the respondents 3 and 4
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W.P.No.23555 of 2024
from dealing with the petitioners' properties and machineries with other landed properties was once owned by the petitioners' family into to including the 2/3 share of the petitioners pursuant to the memorandum of deposit of title deeds dated 20.12.2018.
For Petitioners : Mr. P.Ganesan For respondents : Mr.M.A.Abdul Wahab for fourth respondent
ORDER
(Order of the Court was made by the Hon'ble Acting Chief Justice) This writ petition has been filed to direct the respondents 3 and 4
from dealing with the properties and machineries with other landed properties, including the 2/3 share of the petitioners thereon, pursuant to the memorandum of deposit of title deeds dated 20.12.2018.
their parents, namely first and second respondents have obtained loan by mortgaging the joint family properties with the third and fourth respondents
to purchase the machineries for their business. Subsequently, inview of the default committed by them in paying the loan amounts, the respondents 3 and 4 have taken steps to take possession of the properties under the
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W.P.No.23555 of 2024
SARFAESI Act. According to the petitioners, the respondents 1 and 2 have no right to mortgage the properties, including the shares of the minor petitioners and for the same, the respondents have no legal right to deal with the properties, in pursuant to the memorandum of title deeds. Further, they filed a suit in O.S.No.57 of 2023 for partition of the properties and the same is pending before the District Court, Namakkal. While so, the respondents 3 and 4 have obtained order under Section 14 of SARFAESI Act to take possession of the properties and hence this writ petition has been filed.
4.The Writ petitioners, aggrieved by the proposed action to be taken by the respondents 3 and 4 under SARFAESI Act, have filed the present writ petition. At this juncture, it is useful to refer the decision of the Hon'ble Supreme Court in Phoenix ARC Private Limited Vs. Vishwa Bharati
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W.P.No.23555 of 2024
Vidya Mandir & Ors. reported in 2022 Live Law SC 45, wherein, it is observed as follows.
13.2 Applying the law laid down by this Court in the case of Mathew K.C. (supra) to the facts on hand, we are of the opinion that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the Court. The writ petitions have been filed against the proposed action to be taken under Section 13(4). As observed herein above, even assuming that the communication dated 13.08.2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with
respect to the possession of the secured properties on payment of Rs.1 crore only (in all Rs.3 crores) is absolutely unjustifiable. The dues are to the extent of approximately Rs.117 crores. The adinterim relief has been continued since 2015 and the secured creditor is deprived of proceeding further with the action under the SARFAESI Act. Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of Court. It appears that the High Court has initially granted an ex-parte adinterim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced. The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted
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W.P.No.23555 of 2024
by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed.
The petitioners are having alternative remedy and they can approach the Debt Recovery Tribunal under the Provisions of the SARFAESI Act, however, without availing the statutory remedy before the appellate forum, have filed the writ petition under Article 226 of the Constitution of India. As such, in the light of the decision of the Hon'ble Supreme Court, as stated supra and also considering the fact that a civil suit with regard to the properties in question is pending before the District Court, Namakkal, we are not inclined to entertain this writ petition.
as to costs. No costs. Connected W.M.P.No.25765 of 2024 is closed.
(D.K.K., A.CJ.) (P.B.B.J.)
Internet: Yes/No Index : Yes/No mst
20.08.2024
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W.P.No.23555 of 2024
To
The Authorized officer cum principal Manager, Canara Bank, Mid Corporate Branch, Salem.
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THE HON'BLE ACTING CHIEF JUSTICE and P.B.BALAJI, J.
mst
W.P.No.23555 of 2024
20.08.2024
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2 issues framed by the court
Whether the High Court can entertain a writ petition under Article 226 against action under SARFAESI Act when statutory remedy under Section 17 is available and a civil suit is pending?
Whether filing a writ petition to stay proceedings under SARFAESI Act constitutes an abuse of process of court?
Colour shows how this judgement treated each authority
Phoenix ARC Private Limited Vs. Vishwa Bharati Vidya Mandir & Ors.Relied on¶40
Phoenix ARC Private Limited Vs. Vishwa Bharati Vidya Mandir & Ors. reported in 2022 Live Law SC 45
Mathew K.C.Referred¶40
Mathew K.C. (supra)
4 provisions across 2 enactments
S.Sibhe
Minor V.S.Varsiya
S.P.Suresh Kumar
C.Vanitha
The Authorized officer cum principal Manager, Canara Bank, Mid Corporate Branch, Salem
Canara Bank, Mid Corporate Branch, Salem
D.Krishnakumar
P.B.Balaji
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
