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2022 (9) TMI 1623 - HC - Indian LawsMaintainability of petition - availability of expeditious and effective remedies under the SARFAESI Act - Prayer to issue a Writ of Certiorari, to quash the possession notice and impugned demand notice 13(2) of SARFAESI Act, 2002 - HELD THAT - As per Section 18(1) of the Act, any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefer an appeal along with such fee, as may be prescribed, to an Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal - The first proviso states that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower. The second proviso to Section 18 of the Act states that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less - The third proviso states that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty five per cent of debt referred to in the second proviso. As per Section 18(2) of the Act, save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder. As regards the Non-Maintainability of writ petition under Article 226 against proceedings under SARFAESI Act, reliance placed in the case of United Bank of India v. Satyawati Tondon 2010 (7) TMI 829 - SUPREME COURT where it was held that '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 giievance 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.' As regards non-maintainability of the writ petition against Private financial institutions like asserts re-construction companies in respect of their action under SARFAESI Act, it is relevant to consider the decision of the Hon'ble Supreme Court in Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir 2022 (1) TMI 503 - SUPREME COURT wherein, it has been held 'If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable.' The petitioner is directed to pay the entire outstanding amount, deducting the amount already paid within a period of three months. Till then, respondents are directed not to take any coercive steps. If the petitioner fails to comply with the above said order, it is open to the respondents Bank to proceed further in accordance with law. The petition is disposed off.
Issues Involved:
1. Availability of remedies under the SARFAESI Act. 2. Non-maintainability of writ petitions under Article 226 against proceedings under the SARFAESI Act. 3. Non-maintainability of writ petitions against private financial institutions under the SARFAESI Act. 4. Settlement agreement between the petitioner and the respondents. Issue-wise Detailed Analysis: 1. Availability of Remedies under the SARFAESI Act: The court discussed the provisions of the SARFAESI Act, particularly Section 13, which allows secured creditors to enforce security interests without court intervention. Section 13(2) mandates a notice period of sixty days for borrowers to discharge liabilities, failing which creditors can exercise rights under Section 13(4), including taking possession of secured assets. Section 14 allows creditors to request assistance from the Chief Metropolitan Magistrate or District Magistrate to take possession of assets. Section 17 provides for an appeal to the Debts Recovery Tribunal (DRT) for aggrieved persons, and Section 18 allows for further appeal to an Appellate Tribunal. 2. Non-maintainability of Writ Petitions under Article 226 against Proceedings under the SARFAESI Act: The court cited several judgments to emphasize that writ petitions under Article 226 are generally not maintainable when alternative remedies are available under the SARFAESI Act. In *United Bank of India v. Satyawati Tondon*, the Supreme Court held that the High Court should not entertain writ petitions if an effective remedy is available under the SARFAESI Act. This principle was reiterated in *Kanaiyalal Lalchand Sachdev v. State of Maharashtra* and *ICICI Bank Ltd. v. Umakanta Mohapatra*, where the Supreme Court disapproved of the High Courts entertaining such writ petitions and granting interim orders. 3. Non-maintainability of Writ Petitions against Private Financial Institutions under the SARFAESI Act: The court referred to the Supreme Court's decision in *Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir*, which held that writ petitions against private financial institutions under Article 226 are not maintainable. The court noted that actions taken by Asset Reconstruction Companies (ARCs) under the SARFAESI Act are part of commercial transactions and do not involve public functions typically performed by state authorities. Therefore, borrowers must seek remedies under the SARFAESI Act rather than filing writ petitions. 4. Settlement Agreement between the Petitioner and the Respondents: During the hearing, the petitioner expressed willingness to settle the outstanding amount within three months, which the respondents agreed to. The court recorded this submission and directed the petitioner to pay the entire outstanding amount, deducting any amount already paid, within three months. The respondents were instructed not to take any coercive steps during this period. If the petitioner fails to comply, the respondents are permitted to proceed in accordance with the law. Conclusion: The writ petition was disposed of with the direction for the petitioner to settle the outstanding amount within three months. The court emphasized the availability of alternative remedies under the SARFAESI Act and the non-maintainability of writ petitions under Article 226 when such remedies exist. The court also highlighted the non-maintainability of writ petitions against private financial institutions under the SARFAESI Act. No costs were awarded, and connected miscellaneous petitions were closed.
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