The Hon'ble Supreme Court in the case of "Authorized Officer, State Bank of Travancore and Ors. Vs. Mathew K.C.", MANU/SC/0054/2018, whereby, the Appellant / Bank assailed an interim order dated 24.04.2015 passed in a writ petition Under Article 226 of the Constitution, staying further proceedings at the stage of Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred as the 'SARFAESI Act'), held that the Hon'ble high Court ought not to entertain a writ petition Under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person.

Brief facts :

The loan account of the Respondent / borrower was declared a Non-Performing Asset (NPA) on 28.12.2014. Despite repeated notices, the Respondent failed and neglected to pay the dues. Statutory notice Under Section 13(2) of the SARFAESI Act was issued to the Respondent on 21.01.2015. The objections Under Section 13(3A) were considered, and rejection was communicated by the Appellant on 31.3.2015. Possession notice was then issued Under Section 13(4) of the Act read with Rule 8 of The Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'the Rules') on 21.04.2015. Aggrieved against the order passed Under Section 13(3A) of the SARFAESI Act, the Respondent / borrower filed a writ petition Under Article 226 of the Constitution, staying further proceedings at the stage of Section 13(4) of the SARFAESI Act. The outstanding dues of the Respondent on the date of the institution of the writ petition was Rs. 41,82,560/-.

Legal Issue:

Whether a High Court can entertain a writ petition under article 226 of the constitution if an alternative statutory remedy is available?

Submission by the Appellant :

The Appellant / Bank submitted that the SARFAESI Act is a complete code by itself, providing for expeditious recovery of dues arising out of loans granted by financial institutions, the remedy of appeal by the aggrieved Under Section 17 before the Debt Recovery Tribunal, followed by a right to appeal before the Appellate Tribunal under Section 18. The High Court ought not to have entertained the writ petition in view of the adequate alternate statutory remedies available to the Respondent. The interim order was passed on the very first date, without an opportunity to the Appellant to file a reply. Reliance was placed on United Bank of India v. Satyawati Tandon and Ors., 2010 (8) SCC 110, and General Manager, Sri Siddeshwara Cooperative Bank Limited and Anr. v. Ikbal and Ors., 2013 (10) SCC 83. The writ petition ought to be dismissed at the threshold on the ground of maintainability. The Division Bench erred in declining to interfere with the same.

Submission by the Respondent:

It was contended by the Respondent / borrower that it was desirous to repay the loan, and merely sought regularization of the loan account. The inability to service the loan was genuine, occasioned due to market fluctuations causing huge loss in business, beyond the control of the Respondent. The failure of the Bank to consider the request for regularization of the loan account, the absence of a right to appeal Under Section 17 against the order passed Under Section 13(3A), the Respondent was left with no option but to prefer the writ application as the Respondent genuinely desired to discharge the loans.

Decision:

The Hon'ble Supreme Court after considering the submissions on behalf of the parties observed that the discretionary jurisdiction Under Article 226 of the Constitution is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal Rule is that a writ petition Under Article 226 ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well defined exceptions as observed in Commissioner of Income Tax and Ors33., It was held that the pleadings in the writ petition are very bald and contain no statement that the grievances fell within any of the well defined exceptions. The allegation for violation of principles of natural justice is rhetorical, without any details and the prejudice caused thereby. It harps only on a desire for regularization of the loan account, even while the Respondent acknowledges its own inability to service the loan account for reasons attributable to it alone.

The writ petition was clearly not instituted bonafide but patently to stall further action for recovery, as the fact that the Section 13(4) notice was issued on 21.04.2015 and the remedy u/s 17 of the SARFAESI Act was available was not placed before the Court when the impugned interim order came to be passed on 24.04.2015. Also, it is nowhere pleaded why the remedy available Under Section 17 of the Act before the Debt Recovery Tribunal was not efficacious and the compelling reasons for by-passing it.

Lastly, the Hon'ble Supreme Court observed that it is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex-parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payer's expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same.

The Hon'ble Supreme Court observed that the writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the Appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. As such, the impugned order is contrary to law laid down by this court and is unsustainable.

Footnote

33. 2014 (1) SCC 603

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.