[SARFAESI Act] Courts Must Not Interfere Under Writ Jurisdiction When Alternative Statutory Remedies Are Available: Rajasthan HC

The Jaipur bench of the Rajasthan High Court dismissed a plea by the purchaser of a property–in relation to which proceedings were initiated under the SARFAESI Act, on the ground that the purchaser had already availed the statutory remedy before the Debt Recovery Tribunal. Justice Avneesh Jhingan, while referring to a Supreme Court decision on this issue, observed that the "self-imposed restriction of non-interference in writ petitions where statutory remedies were available" has to be rigorously applied in cases covered under the SARFAESI Act.The petitioner had purchased the property in question from his brother who had availed a loan by keeping this property as security. This loan was taken over by ICICI Home Finance. ICICI in turn initiated proceedings under SARFAESI Act for recovery of the due amount as the borrower failed to maintain financial discipline and the account was declared Non Performing Asset. In continuation of the recovery proceedings, physical possession of the property in question was taken over.Aggrieved by the same, the petitioner filed a securitization application before the DRT along with an application for stay which was rejected. He thereafter moved the high court. It was the case of the petitioner that he was the bonafide purchaser of the property, and he not being the borrower, could not avail the remedy of appeal under the Act. Furthermore, it was submitted that filing of appeal against the order before the DRT required a pre-deposit of 50% of the due amount. On the contrary, it was argued that the seller and the petitioner were brothers, and the property in question was transferred to the petitioner only to deceive the financial institutions after the loan account was declared NPA. Furthermore, it was submitted that the petitioner had already availed the statutory remedy of securitization appeal under the Act which was still pending. After hearing the contentions, the Court rejected petitioner's argument that he was a bonafide purchaser and hence could not have filed the appeal. It was held that Section 18 of the SARFAESI Act was widely worded and provided for the remedy of appeal to any person aggrieved of any order by DRT. Reference was made to the Supreme Court's decision in Union of India v Satyawati Tondon and Ors. (2010) in which it was held that “any person” used in Section 17 of SARFAESI Act was wide enough to include not only the borrower but any other person who may be affected by action taken under Section 13(4) or 14 of the Act.The petitioner had also argued that did not avail the alternative remedy on the ground that a pre-requisite of deposit of 50% of the amount due.Observing that the petitioner is blowing hot and cold in the same breath the court said, "On one hand the case set is that petitioner is not a borrower and cannot avail remedy of appeal and at the same time reliance is placed on second proviso to Section 18 of the Act to argue that appeal of borrower cannot be entertained without pre-deposit. These contrary contention may not hold this court for long". It observed that the applicability of the pre-deposit is to dealt by the appellate authority. It said that remedy of appeal was neither an inherent nor a natural right but a statutory right. "The statute can embargo the right of appeal with a precondition of making a pre-deposit," it added. Furthermore, the Court elaborated on its limitation to entertain the writ when statutory appeal was available. The court again referred to the Supreme Court's decision in Satyawati Tondon in which it was held that, “High Court will ordinarily not entertain a petition under Article 226 of the Constitution in 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 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 (sic 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.”The high court noted that the Supreme Court had in PHR Invent Education Society v UCO Bank and Ors., carved certain exceptions wherein such a petition could be entertained despite availability of alternative remedy. Some of these exceptions were:“(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 high court observed that the Supreme Court had while...

[SARFAESI Act] Courts Must Not Interfere Under Writ Jurisdiction When Alternative Statutory Remedies Are Available: Rajasthan HC

Nupur Agrawal

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