CAN A PARTY FILE A WRIT UNDER ARTICLE 226 BEFORE AVAILNG THE ALTERNATIVE STATUATORY REMEDY?

In SARFESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002)  proceedings if the creditor takes possession over the secured assets of the borrower after the expiry of 60 days from the date of 13(2) notice, Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorized officer [may make an application along with such fee, as may be prescribed,]the aggrieved borrower can avail the remedy available under Section 17 [Application against measures to recover secured debts.] of the SARFESI Act before the DRT against the measures taken by creditor.

The aggrieved borrower instead, tends to file a writ petition under Article 226 for a quicker remedy. This practice has been strongly depreciated by the Supreme Court in its ample of precedents and time and again has opined that hat the legislation 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. ‘the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.’

Despite the court clearly holding that before availing the remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute, the High court in a few case has often held to the contrary hearing writs under 226.

 

LEGAL FOOTING

On, the same footing the Supreme Court while dealing with matters wherein the High Courts had entertained petitions arising out of the DRT Act and the Sarfaesi Act in spite of availability of an effective alternative remedy the court in United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110 : (2010) 3 SCC (Civ) 260 strongly opined that: “It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the Sarfaesi Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.”

Similarly, the Supreme Court in State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85 while considering an appeal against an interim order passed by the High Court in a writ petition under Article 226 of the Constitution staying further proceedings at the stage of Section 13(4) of the Sarfaesi Act. Observed that the

“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.”

 

RECENT RULING.

Similar observation has been made by the Supreme Court recently in PHR Invent Educational Society v. UCO Bank, (2024) 6 SCC 579 that it is more than a settled legal position of law that in such matters, though the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion,  the High Court should not entertain a petition under Article 226 of the Constitution particularly when an alternative statutory remedy is available.” and that A writ petition under 226 cannot be entertained for an effective remedy before taking the statutory recourse and hat 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 same has been opined by the Supreme Court in Varimadugu Obi Reddy v. B. Sreenivasulu [Varimadugu Obi Reddy v. B. Sreenivasulu, (2023) 2 SCC 168. The Apex court also made a strong observation in Celir LLP v. Bafna Motors (Mumbai) (P) Ltd., (2024) 2 SCC that even after surveying many judgments on this issue in the past, despite lapse of more than 10 years and the clear decision laid in Satyawati Tondon(supra), the High Courts still exercise its writ jurisdiction under Article 226 ignoring the statutory remedies under the Rdbfi Act and the Sarfaesi Act.

 

WHEN CAN A HIGH COURT CARVE OUT EXCEPTIONS UNDER ART 226.

Indeed, 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. There are certain exception certain exceptions when a petition under Article 226 of the Constitution could be entertained in spite of availability of an alternative remedy. These exceptions were laid in PHR Invent Educational Society v. UCO Bank, (2024) 6 SCC 579 : (2024) .

i. where the statutory authority has not acted in accordance with the provisions of the enactment in question.

ii. it has acted in defiance of the fundamental principles of judicial procedure

iii. it has resorted to invoke the provisions which are repealed; and

iv. when an order has been passed in total violation of the principles of natural justice.

 

CIVIL COURTS DO NOT HAVE JURISDICTION IN SARFESI.

Section 34 of the SARFESI Act, stipulates that civil court shall not have jurisdiction to entertain any suit or proceeding in respect of any matter which a Tribunal or Appellate Tribunal is empowered to determine. It further lays down that no injunction shall be granted by any court or other authority in respect of any action taken or to be taken under the Sarfaesi Act or the DRT Act. Section 35 of the Sarfaesi Act is substantially similar to Section 34(1) of the DRT Act. It declares that the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law and another legislation procedure cannot be initiated for recovery while SARFESI is in operation. “if it was thought as a matter of policy to have yet speedier legal method to recover the dues, such a policy decision cannot be faulted with nor is it a matter to be gone into by the courts to test the legitimacy of such a measure relating to financial policy.”


Thus, the legal aspect has been clarified, opinionated and reminded time and again by the apex court but despite such strong precedents laid down over the years, some High Courts and also the supreme court in some cases have opined to the contrary, Indeed, all cases are not similar and must be decided looking at its facts and circumstances but the basic legal clarity must be adhered to by the parties and courts while exercising a writ before availing and exhausting the already available alternative statutory remedy.

 

 

Greetings, I am a young legal professional and a proud Gorkha who’s eager as a morning bird, loves poetry and drama, listens to the Floyd and the Beatles, admires the court craft and is passionate about the little things that adds immense value.

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