2012 (4) TMI 723 - HC - Indian Laws

Summary

Issues Involved:
1. Maintainability of Writ Petition under Article 226 against Private Banks/FIs or SRCs
2. Exhaustion of Alternative Remedy

Summary:

Maintainability of Writ Petition under Article 226 against Private Banks/FIs or SRCs:
The primary issue was whether a writ petition u/s Article 226 of the Constitution of India is maintainable against private banks, financial institutions (FIs), or Securitization and Reconstruction Companies (SRCs). The court examined the nature of public functions and the applicability of Article 226. It was emphasized that a writ petition under Article 226 can be issued to any person or body performing public duties, regardless of whether they are a State entity as defined in Article 12. However, the court concluded that private banks do not fall under the definition of 'State' and do not perform public functions that would make them amenable to writ jurisdiction under Article 226. The court cited Federal Bank v. Sagar Thomas and other precedents to support this conclusion. It was held that private banks are primarily commercial entities, and their regulation by the Reserve Bank of India (RBI) does not amount to pervasive State control.

Exhaustion of Alternative Remedy:
The court also addressed whether the petitioners must exhaust the alternative remedies available under the SARFAESI Act before approaching the High Court. The SARFAESI Act provides for an effective and efficacious remedy u/s 17(1) and further appeal u/s 18 to the Debts Recovery Tribunal (DRT) and Debts Recovery Appellate Tribunal (DRAT), respectively. The court cited United Bank of India v. Satyawati Tondon and Kanaiyalal Lalchand Sachdev v. State of Maharashtra, emphasizing that the High Court should not entertain writ petitions when an effective alternative remedy is available. The court reiterated that the petitioners should first approach the DRT/DRAT, as these bodies are equipped to handle grievances related to the enforcement of security interests under the SARFAESI Act.

Conclusion:
The High Court dismissed the writ petitions, holding that they were not maintainable against private banks/FIs or SRCs and that the petitioners must exhaust the alternative remedies provided under the SARFAESI Act before seeking relief under Article 226 of the Constitution.