Writ Petition and Securitization act: Maintainability
A
Three (3) Judge bench of Supreme Court in a most recent judgment reported as.
2024 INSC 297 and captioned as PHR INVENT EDUCATIONAL SOCIETY VERSUS UCO BANK AND OTHERS has recently emphatically reiterated and laid down law in
respect of maintainability of writ petition under Article 226 of Constitution
of India for matters arising out of the Securitisation and reconstruction of
Financial Assets FINANCIAL and Enforcement of Security Interest act 2002 (In short SARFAESI Act).
Section 17 of the SARFAESI Act is a comprehensive Act and it
clearly provides that any aggrieved person, including borrower , who is
aggrieved because of the action of Secured creditor action of secured creditor
under Section 13 (4) of the SARFAESI Act, may approach Debt Recovery Tribunal (DRT)
by way of an application and as such in the face of clear remedy available to
an aggrieved party and since the Tribunal exercises wide jurisdiction under
Section 17 of the SARFAESI Act, in as much as , even power of setting aside an
auction sale. That being so, writ petition, being extra-ordinary in nature
shall not lie.
The iteration of facts of PHR INVENT (Supra) in brief, may be
relevant in its context.
(1)The Borrower had availed of a loan from the
Respondent- Bank and had mortgaged four properties as collateral security. As
the Borrower defaulted in the repayment of the loan amount, thus, the
Respondent-Bank had initiated proceedings against the borrower under the
SARFAESI Act.
(2) Auction notice was issued for auctioning off the mortgaged properties and
publication by way of auction sale was carried out and date of auction was
notified.
(3) The borrower , aggrieved by the Auction Sale Notice, preferred a securitization
application before Debt Recovery Tribunal (DRT) under Section 17 of the
SARFAESI Act, thereby praying for setting aside of the same.
(4) In the meanwhile, the auction was conducted and the PHR Invent
Educational Society and was declared as the highest bidder and 25% of bid amount
inclusive of earnest money was duly deposited. The fact remains that the
Borrower did not deposit the amount.
(5) On the same day, DRT passed an interim order in S.A. No. 1476 of
2017, thereby refusing to interfere with the sale of the scheduled/mortgaged
properties which was to be conducted on that very day. The Borrower had also
filed an interlocutory application, praying for stay of further proceedings qua
the auction of the scheduled properties, wherein DRT directed the Respondent-Bank
not to confirm the sale of the scheduled properties subject to the Borrower
depositing 30% of the outstanding dues as claimed for in the Auction Sale
Notice in two equal installments. The first installment of 15% amount was to be
deposited within a week from the date of the said order, and the second
installment of 15% amount was to be
deposited within two weeks thereafter. The DRT
further directed that, in the event that the Borrower failed to make the aforesaid
deposits, the interim stay would stand vacated and the Respondent-Bank would be
at liberty to confirm the sale in favor of the highest bidder, although the
sale itself was made subject to the final outcome in S.A. No. 1476 of 2017.
(6) Subsequently, the PHR Invent Educational Society (appellant) deposited the balance auction
price.
(7) In the meanwhile, the Borrower proposed One Time Settlement
(‘OTS’) for all the outstanding loan accounts. However, the Respondent-Bank
refused to accept the same and requested the Borrower to settle all the outstanding
loan accounts with interest payable at the contractual rate, as applicable
thereon.
(8) The DRT passed an order dated 21st September
2020, whereby S.A. No. 1476 of 2017 was dismissed as withdrawn at the behest of
the Borrower who submitted that the matter had been settled out of court. On the
other hand, the Respondent-Bank filed a Memo of Non- Settlement before DRT
thereby informing that no such out-of court settlement had been reached.
(9) Upon S.A. No. 1476 of 2017 being dismissed as withdrawn, the
Respondent-Bank confirmed the sale of the scheduled properties in favor of the
appellant herein. A Sale Certificate was issued by the Respondent-Bank and the
possession of the scheduled properties was accordingly delivered to the
appellant Subsequently and the Sale Certificate came to be registered in favor
of the appellant herein.
(10) The Borrower preferred M.A. No. 97 of 2020 in S.A.
No. 1476 of 2017 before DRT, praying for the restoration of S.A. No. 1476 of
2017 to the file and setting aside the aforesaid order of DRT dated 21st September 2020. However, on 2nd February 2021, DRT passed
an order, thereby, dismissing the said M.A. filed by the Borrower.
In the above backdrop, the Borrower had filed a writ petition before the High Court.
The High Court, by the impugned order, disposed of the said writ petition,
thereby setting aside the order of DRT, and further directing it to proceed
with S.A. No. 1476 of 2017 in accordance with law. The M.A. No. 97 of 2020 in
S.A. No. 1476 of 2017 was thus allowed restoring S.A. No. 1476 of 2017.
The
Auction Purchaser, had approached Supreme Court.
The
Supreme Court has perused and reiterated catena of its own judgments. It is
held that, it is a settled proposition in law that when alternate remedy is
available writ petition shall generally not lie as is held in the following
judgments:
(1) United Bank of India v. Satyawati
Tondon and Others 2010) 8 SCC 110 : 2010 INSC 428
(2) Celir LLP v. Bafna Motors (Mumbai)
Private Limited and Others
(2024) 2 SCC 1 : 2023 INSC 838
(3) South Indian Bank Limited and Others v. Naveen
Mathew Philip and Another 2023 SCC OnLine
SC 435 : 2023 INSC 379
However, it is also argued
to the contrary that the rule is not inflexible, in as much as, non
interference under article 226 of Constitution of India is a rule of
self-restraint and in deserving cases, the High Court is not precluded from
entertaining a petition under Article 226 of the Constitution in order to do
justice to the parties as is held in State of U.P. v. Mohammad Nooh AIR 1958 SC 86 : 1957
INSC 81.
The Supreme Court has consistently held 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. It has been held 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. The Court clearly observed that, while dealing with the
petitions involving challenge to the action taken for recovery of the public
dues, etc., It is further observed by the Supreme Court that 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. It has been held that, though the powers of the High
Court under Article 226 of the Constitution are of widest amplitude, still the
Courts cannot be oblivious of the rules of self-imposed restraint evolved by this
Court. The Supreme Court further held that though the rule of exhaustion of
alternative remedy is a rule of discretion and not one of compulsion, still it
is difficult to fathom any reason as to why the High Court should entertain a
petition filed under Article 226 of the Constitution. This is followed in Agarwal Tracom
Private` Limited v. Punjab National Bank and Others (2018) 1 SCC 626 : 2017 INSC 1146.
The Supreme Court has
held in PHR INVENT EDUCATIONAL SOCIETY
(Supra) as under:
14. The law with regard to
entertaining a petition under Article 226 of the Constitution in case of
availability of alternative remedy is well settled. In the case of Satyawati Tondon
(supra), this Court
observed thus:
“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’.
“44. While expressing the
aforesaid view, we are conscious that the powers conferred upon the High Court
under Article 226 of the Constitution to issue to any person or authority,
including in appropriate cases, any Government, directions, orders or writs including
the five prerogative writs for the enforcement of any of the rights conferred
by Part III or for any other purpose are very wide and there is no express
limitation on exercise of that power but, at the same time, we cannot be
oblivious of the rules of self-imposed restraint evolved by this Court, which
every High Court is bound to keep in view while exercising power under Article
226 of the Constitution”.
The Supreme Court in the case of Authorized
Officer, State Bank of Travancore and Another v. Mathew K.C. (2018) 3 SCC 85 :
2018 INSC 71 While considering an appeal
against an interim order passed by the High Court in a writ petition under
Article 226 of the Constitution, staying further proceedings at the stage of
Section 13(4) of the SARFAESI Act. After considering various judgments rendered
by the Supreme Court, the Supreme Court observed thus:
“16. 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.
The opinion of the Division Bench that the counter-affidavit having
subsequently been filed, stay/modification could be sought of the interim order
cannot be considered sufficient justification to have declined interference.”
It will be relevant to refer to the following observations of
Supreme Court in the case of Commissioner of Income Tax and Others
v. Chhabil Dass Agarwal (2014) 1 SCC 603:
15. Thus, while it can be said
that this Court has recognised some
exceptions to the rule of alternative remedy i.e. where the statutory
authority 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 the principles of natural justice, the proposition
laid down in Thansingh Nathmal case [AIR 1964 SC1419] , Titaghur Paper Mills case [Titaghur Paper Mills
Co. Ltd. v. State of Orissa, (1983) 2 SCC 433 : 1983 SCC
(Tax) 131] and other similar judgments that the High Court will not entertain a
petition under Article 226 of the Constitution if an effective alternative
remedy is available to the aggrieved person or the statute under which the
action complained of has been taken itself contains a mechanism for redressal
of grievance still holds the field. Therefore, when a statutory forum is
created by law for redressal of grievances, a writ petition should not be
entertained ignoring the statutory dispensation.”
The Supreme Court, in the case of Dwarika Prasad
v. State of Uttar Pradesh and Others (2018) 5 SCC 491 : 2018 INSC 210 has clearly held that the right of redemption
stands extinguished on the execution of the registered sale deed and allegation
of fraud, if properly dealt with earlier cannot be re-opened.
The Supreme Court, therefore, in PHR
INVENT EDUCATIONAL SOCIETY (Supra) has concluded as under:
29. It could thus clearly be
seen that the Court has carved out certain exceptions when a petition under
Article 226 of the Constitution could be entertained in spite of availability
of an alternative remedy. Some of them are thus:
(i) where the statutory authority has not acted in accordance with the
provisions of the enactment in question;
(ii) it has acted in defiance of the fundamental principles of judicial
procedure;
(iii) it has resorted to invoke the provisions which are repealed; and
(iv) when an order has been passed in total violation of the principles
of natural justice.
The appeal was allowed and impugned order
passed by the High Court in favour of the borrower was set aside.
The basic rule, according to Supreme
Court, therefore, is that the High Court will not entertain a petition
under Article 226 of the Constitution if an effective alternative remedy is
available to the aggrieved person or the statute under which the action
complained of has been taken itself contains a mechanism for redressal of grievance. According to Supreme Court
the High Court ought to have taken into consideration that the confirmed
auction sale could have been interfered with only when there was a fraud or
collusion. The present case was not a case of fraud or collusion. The effect of
the order of the High Court would be again reopening the issues which have
achieved finality.
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Anil
K Khaware
Founder
& Senior Associate
Societylawandjustice.com
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