2024 (4) TMI 466 - SC - Indian Laws

Sale of mortgaged (scheduled) properties which was to be conducted by the Authorized Officer (Respondent No.2) of the Respondent-Bank - default in repayment of loan by the Borrower - HELD THAT - This Court has clearly held that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person. It has been held 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. The Court clearly observed 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 grievance of any aggrieved person. It has been held that, though the powers of the High Court under Article 226 of the Constitution are of widest amplitude, still the Courts cannot be oblivious of the rules of self-imposed restraint evolved by this Court. In the present case, it can clearly be seen that though it was specifically contended on behalf of the appellant herein that the writ petition was not maintainable on account of availability of alternative remedy, the High Court has interfered with the writ petition only on the ground that the matter was pending for sometime before it and if the petition was not entertained, the Borrower would be left remediless - the High Court has failed to take into consideration the conduct of the Borrower. It is further to be noted that, though the High Court had been specifically informed that, on account of subsequent developments, that is confirmation of sale and registration thereof, the position had reached an irreversible stage, the High Court has failed to take into consideration those aspects of the matter. The High Court ought to have taken into consideration that the confirmed auction sale could have been interfered with only when there was a fraud or collusion. The present case was not a case of fraud or collusion. The effect of the order of the High Court would be again reopening the issues which have achieved finality. Thus, the High Court has grossly erred in entertaining and allowing the petition under Article 226 of the Constitution - impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Maintainability of writ petition under Article 226 of the Constitution when an alternative statutory remedy is available under the SARFAESI Act.
2. Conduct of the Borrower and its impact on the relief sought.
3. Finality of the auction sale and the rights of the auction purchaser.

Summary:

Issue 1: Maintainability of Writ Petition
The Supreme Court emphasized that the High Court should not entertain a writ petition under Article 226 of the Constitution if an effective alternative remedy is available, especially in matters involving recovery of dues by banks and financial institutions. The Court referenced several precedents, including *United Bank of India v. Satyawati Tondon* and others, which held that the rule of exhausting alternative remedies applies with greater rigor in such cases. The Court criticized the High Court for entertaining the writ petition despite the availability of an alternative remedy u/s 18 of the SARFAESI Act, thereby ignoring the statutory mechanism for redressal of grievances.

Issue 2: Conduct of the Borrower
The Borrower's conduct was scrutinized, particularly their failure to comply with the DRT's interim order to deposit 30% of the outstanding dues, and subsequently withdrawing S.A. No. 1476 of 2017 on the pretext of an out-of-court settlement, which was later denied by the Respondent-Bank. The Borrower's actions were found to be inconsistent and did not justify the equitable relief sought. The Court noted that the Borrower's writ petition was filed after the auction purchaser had made the full payment and a Sale Certificate had been issued, which further weakened the Borrower's case.

Issue 3: Finality of Auction Sale
The Court highlighted that once an auction sale is confirmed and a Sale Certificate is issued, certain rights accrue in favor of the auction purchaser which cannot be extinguished except in cases of fraud or collusion, neither of which were present in this case. The Court cited *Valji Khimji and Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and Others*, stating that the confirmed auction sale could only be interfered with in exceptional circumstances. Additionally, the Court referenced *Dwarika Prasad v. State of Uttar Pradesh and Others* to assert that the right of redemption is extinguished upon the execution of a registered sale deed.

Conclusion:
The Supreme Court allowed the appeal, quashed the High Court's order, and dismissed the writ petition filed by the Borrower with costs of Rs.1,00,000/-. The Court reiterated the necessity for High Courts to exercise discretion with greater caution in matters where statutory remedies are available.