2011 (2) TMI 1277 - SC - Companies Law

Enforcement of security interest - Respondent No. 3, viz. the State Bank of India had advanced a loan - On default of re-payment of loan amount, respondent No. 3 issued a notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest - High Court by impugned order dismissed said writ petition on ground that an alternative remedy was available to appellant under section 17 Held that - efficacious statutory remedy of appeal under section 17 of the Act was available to the appellants, who ultimately availed of the same. Therefore, having regard to the facts obtaining in the case, the High Court was fully justified in declining to exercise its jurisdiction under Articles 226 and 227 of the Constitution. appeals, being devoid of any merit, are dismissed

Issues Involved:
1. Validity of the notice issued by the Assistant Registrar.
2. Applicability of Rule 8 of the Security Interest (Enforcement) Rules, 2002.
3. Jurisdiction of the Debts Recovery Tribunal (DRT) under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the Act).
4. Availability of alternative remedy and exercise of jurisdiction under Articles 226/227 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued by the Assistant Registrar:
The appellants contended that the notice issued by the Assistant Registrar was vague and not served on them. They argued that they only received a copy of the Magistrate's order during the proceedings before the High Court. Additionally, the appellants claimed that the notice was vitiated due to non-compliance with Rule 8 of the Security Interest (Enforcement) Rules, 2002. The Supreme Court, however, found these appeals to be utterly misconceived. The Court observed that the notice referred to the order passed by the Magistrate, which directed the Assistant Registrar to take possession of the mortgaged properties.

2. Applicability of Rule 8 of the Security Interest (Enforcement) Rules, 2002:
The appellants argued that the notice issued by the Assistant Registrar was vitiated due to non-compliance with Rule 8 of the 2002 Rules. The State of Maharashtra contended that Rule 8, which deals with the sale of secured assets, was inapplicable and that Rule 4, dealing with the possession of movable assets, was applicable. The Supreme Court clarified that Rule 4 has no application to the facts of the instant case, thereby dismissing the appellants' argument regarding Rule 8.

3. Jurisdiction of the Debts Recovery Tribunal (DRT) under Section 17 of the Act:
The High Court dismissed the appellants' writ petition on the ground that an alternative remedy was available under Section 17 of the Act. The Supreme Court affirmed this view, referencing the case of Authorised Officer, Indian Overseas Bank v. Ashok Saw Mill, which held that the DRT has the jurisdiction to consider and adjudicate post Section 13(4) events. The Court emphasized that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4) and thus falls within the ambit of Section 17(1) of the Act. Therefore, the Act contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) by providing for an appeal before the DRT.

4. Availability of Alternative Remedy and Exercise of Jurisdiction under Articles 226/227 of the Constitution of India:
The Supreme Court upheld the High Court's decision to dismiss the writ petition, emphasizing that relief under Articles 226/227 of the Constitution is not ordinarily available if an efficacious alternative remedy exists. The Court cited several precedents, including Sadhana Lodh v. National Insurance Co. Ltd. and State Bank of India v. Allied Chemical Laboratories, to support this principle. The Court also noted that the case involved disputed questions of fact, such as the non-receipt of notice under Section 13(2) and non-communication of the Magistrate's order, which warranted the High Court's decision to decline jurisdiction.

Conclusion:
The Supreme Court dismissed the appeals, affirming the High Court's judgments and orders. The Court found no merit in the appellants' arguments and emphasized the availability of an efficacious alternative remedy under Section 17 of the Act. The appeals were dismissed with costs quantified at Rs. 20,000.

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