2018 (2) TMI 25 - SC - Indian Laws

Stay of further proceedings at the stage of Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - failure to make payment of dues - SARFAESI Act - Held that - The discretionary jurisdiction under Article 226 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 of the Constitution ought not to be entertained if alternate statutory remedies are available - 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 regularisation 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 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. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Maintainability of the writ petition under Article 226 in the presence of alternate statutory remedies.
2. Violation of principles of natural justice.
3. Legitimacy of the interim order passed by the High Court.
4. Application of SARFAESI Act provisions and the legislative intent behind the Act.

Detailed Analysis:

1. Maintainability of the Writ Petition:
The Supreme Court emphasized that the SARFAESI Act provides a complete code for the expeditious recovery of dues, including the remedy of appeal before the Debt Recovery Tribunal (DRT) under Section 17 and further appeal before the Appellate Tribunal under Section 18. The High Court should not have entertained the writ petition under Article 226 due to the availability of these alternate statutory remedies. The Court cited precedents such as *United Bank of India vs. Satyawati Tandon* and *General Manager, Sri Siddeshwara Cooperative Bank Limited vs. Ikbal*, reinforcing that writ petitions should not be entertained if alternate remedies are available. The interim order was passed without giving the Appellant an opportunity to file a reply, which was a procedural lapse.

2. Violation of Principles of Natural Justice:
The Respondent claimed a violation of natural justice, arguing that the Bank failed to consider the request for regularisation of the loan account. However, the Supreme Court found these allegations to be rhetorical and lacking details. The legislative scheme under the SARFAESI Act, particularly the explanation added to Section 17 by Amendment Act 30 of 2004, clarifies that communication of reasons for rejecting objections does not entitle the borrower to apply to the DRT at that stage.

3. Legitimacy of the Interim Order:
The Supreme Court held that the interim order passed by the High Court was erroneous. The High Court failed to consider the statutory remedies available under Section 17 of the SARFAESI Act and did not provide special reasons for granting interim relief. The Court noted that ex-parte interim orders in financial matters could have a deleterious effect, as public money is involved, and such orders should not be granted without compelling reasons. The High Court's decision to entertain the writ petition and grant interim relief without allowing the Appellant to contest the maintainability was disapproved.

4. Application of SARFAESI Act Provisions:
The Supreme Court reiterated the legislative intent behind the SARFAESI Act, which aims to empower banks and financial institutions to recover dues expeditiously without court intervention. The Act was enacted following recommendations from the Narasimhan and Andhyarujina Committees to address the tardy recovery of defaulting loans and mounting non-performing assets. The Court cited several precedents, including *Punjab National Bank vs. O.C. Krishnan* and *Union Bank of India vs. Panchanan Subudhi*, to emphasize that the statutory remedy under the SARFAESI Act should be exhausted before invoking writ jurisdiction.

Conclusion:
The Supreme Court set aside the impugned orders, holding them contrary to the law laid down under Article 141 of the Constitution. The appeal was allowed, and all questions of law and fact were left open for consideration before the statutory forum under the SARFAESI Act. The Court underscored the importance of adhering to statutory remedies and exercising judicial discretion with caution in financial matters involving public money.

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