REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.   1281  OF 2018 (Arising out of SLP (C) No.24610 of 2015)

AUTHORIZED OFFICER, STATE BANK OF  TRAVANCORE AND ANOTHER ..........Appellant(s)

VERSUS

MATHEW K.C. ......Respondent(s)

JUDGMENT

NAVIN SINHA, J.

Leave granted.   

2. The  present  appeal  assails  an  interim  order  dated

24.04.2015 passed in a writ petition under Article 226 of the

Constitution,  staying  further  proceedings  at  the  stage  of

Section  13(4)  of  the  Securitisation  and  Reconstruction  of

Financial  Assets  and  Enforcement  of  Security  Interest  Act,

2002 (hereinafter referred as the ‘SARFAESI Act’), on deposit of

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Rs.3,50,000/-within two weeks.  An appeal against the same

has also been dismissed by the Division Bench observing that

counter affidavit having been filed, it would be open for the

Appellant Bank to seek clarification/modification/variation of

the interim order.

3. Shri H.P. Raval, learned Senior Counsel appearing for the

Appellants, submits that the loan account of the Respondent

was  declared  a  Non-Performing  Asset  (NPA)  on  28.12.2014.

The outstanding dues of the Respondent on the date of  the

institution  of  the  writ  petition  was  Rs.41,82,560/-.  Despite

repeated notices, the Respondent failed and neglected to pay

the  dues.  Statutory  notice  under  Section  13(2)  of  the

SARFAESI Act was issued to the Respondent on 21.01.2015.

The  objections  under  Section  13(3A)  were  considered,  and

rejection was communicated by the Appellant on 31.3.2015.

Possession notice was then issued under Section 13(4) of the

Act read with Rule 8 of  The Security Interest (Enforcement)

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Rules,  2002  (hereinafter  referred  to  as  ‘the  Rules’)  on

21.04.2015.   

4.  The SARFAESI Act is a complete code by itself, providing

for expeditious recovery of dues arising out of loans granted by

financial institutions, the remedy of appeal by the aggrieved

under Section 17 before the Debt Recovery Tribunal, followed

by  a  right  to  appeal  before  the  Appellate  Tribunal  under

Section 18.  The High Court ought not to have entertained the

writ  petition  in  view  of  the  adequate  alternate  statutory

remedies available to the Respondent.  The interim order was

passed on the very first date, without an opportunity to the

Appellant to file a reply.  Reliance was placed on United Bank

of India vs. Satyawati Tandon and others, 2010 (8) SCC

110, and  General Manager, Sri Siddeshwara Cooperative

Bank Limited and another vs. Ikbal and others, 2013 (10)

SCC 83.  The writ petition ought to have been dismissed at the

threshold  on  the  ground  of  maintainability.   The  Division

Bench erred in declining to interfere with the same.  

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5. Shri Roy Abraham, learned Counsel for the Respondent,

submitted that it was desirous to repay the loan, and merely

sought  regularisation of  the  loan account.   The inability  to

service  the  loan  was  genuine,  occasioned  due  to  market

fluctuations causing huge loss in business, beyond the control

of the Respondent.  The failure of the Bank to consider the

request for regularisation of the loan account, the absence of a

right  to  appeal  under  Section  17  against  the  order  passed

under Section 13(3A), the Respondent was left with no option

but to prefer the writ application as the Respondent genuinely

desired to discharge the loans.  The collateral security offered

included  agricultural  lands  also,  which had  to  be  excluded

under  Section  31  of  the  SARFAESI  Act.  There  had  been

violation of the principles of natural justice.  A large number of

similar  writ  applications are  pending before  the  High Court

preferred  by  the  concerned  borrowers,  but  the  Bank  has

singled out the present Respondent alone for a challenge.

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6. We  have  considered  the  submissions  on  behalf  of  the

parties.  Normally this Court in exercise of jurisdiction under

Article 136 of the Constitution is loathe to interfere with an

interim order passed in a pending proceeding before the High

Court,  except  in  special  circumstances,  to  prevent  manifest

injustice or abuse of the process of the court.  In the present

case,  the  facts  are  not  in  dispute.   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,

except in cases falling within the well  defined exceptions as

observed in  Commissioner of Income Tax and Others vs.

Chhabil Dass Agarwal, 2014 (1) SCC 603, as follows:

“15. Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative  remedy  i.e.  where  the  statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance  of  the  fundamental  principles  of judicial  procedure,  or  has resorted to  invoke the provisions which are repealed, or when an

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order has been passed in total violation of the principles  of  natural  justice,  the  proposition laid  down  in  Thansingh  Nathmal  case, Titaghur  Paper  Mills  case  and  other  similar judgments  that  the  High  Court  will  not entertain  a  petition  under  Article  226 of  the Constitution if an effective alternative remedy is  available  to  the  aggrieved  person  or  the statute under which the action complained of has been taken itself contains a mechanism for redressal  of  grievance  still  holds  the  field. Therefore,  when a statutory forum is created by  law  for  redressal  of  grievances,  a  writ petition should not be entertained ignoring the statutory dispensation.”

7. 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

was  filed  in  undue  haste  in  March  2015  immediately  after

disposal  of  objections under Section 13(3A).   The legislative

scheme, in order to expedite the recovery proceedings, does

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not envisage grievance redressal  procedure at this stage, by

virtue of the explanation added to Section 17 of the Act, by

Amendment Act 30 of 2004, as follows :-

“Explanation.—For the removal  of  doubts, it is hereby declared that the communication of the  reasons  to  the  borrower  by  the  secured creditor  for  not  having  accepted  his representation or objection or the likely action of  the  secured  creditor  at  the  stage  of communication  of  reasons  to  the  borrower shall  not  entitle  the  person  (including  the borrower) to make an application to the Debts Recovery Tribunal under this sub-section.”

8. The  Section  13(4)  notice  along  with  possession  notice

under Rule 8 was issued on 21.04.2015.  The remedy under

Section  17  of  the  SARFAESI  Act  was  now  available  to  the

Respondent  if  aggrieved.   These  developments  were  not

brought  on  record  or  placed  before  the  Court  when  the

impugned interim order  came to  be  passed  on 24.04.2015.

The  writ  petition  was  clearly  not  instituted  bonafide,  but

patently  to  stall  further  action  for  recovery.   There  is  no

pleading why the remedy available under Section 17 of the Act

before the Debt Recovery Tribunal was not efficacious and the

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compelling  reasons  for  by-passing  the  same.  Unfortunately,

the High Court also did not dwell upon the same or record any

special  reasons  for  grant  of  interim  relief  by  direction  to

deposit.

9. The statement of objects and reasons of the SARFAESI

Act states that the banking and financial sector in the country

was felt not to have a level playing field in comparison to other

participants  in  the  financial  markets  in  the  world.  The

financial institutions in India did not have the power to take

possession  of  securities  and  sell  them.  The  existing  legal

framework relating to commercial transactions had not kept

pace with changing commercial practices and financial sector

reforms  resulting  in  tardy  recovery  of  defaulting  loans  and

mounting  non-performing  assets  of  banks  and  financial

institutions.  The Narasimhan Committee I and II as also the

Andhyarujina  Committee  constituted  by  the  Central

Government Act had suggested enactment of new legislation

for  securitisation  and  empowering  banks  and  financial

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institutions  to  take  possession  of  securities  and  sell  them

without court intervention which would enable them to realise

long term assets, manage problems of liquidity, asset liability

mismatches and improve recovery.  The proceedings under the

Recovery of Debts due to Banks and Financial Institutions Act,

1993, (hereinafter referred to as ‘the DRT Act’) with passage of

time,  had  become  synonymous  with  those  before  regular

courts  affecting  expeditious adjudication.   All  these  aspects

have not been kept in mind and considered before passing the

impugned order.

10. Even  prior  to  the  SARFAESI  Act,  considering  the

alternate remedy available under the DRT Act it was held in

Punjab  National  Bank  vs.  O.C.  Krishnan  and  others,

(2001) 6 SCC 569, that :-

“6. The Act has been enacted with a view to provide  a  special  procedure  for  recovery  of debts  due  to  the  banks  and  the  financial institutions.  There  is  a  hierarchy  of  appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot  be  allowed  to  be  derailed  either  by taking recourse to proceedings under Articles

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226 and 227 of the Constitution or by filing a civil  suit,  which  is  expressly  barred.  Even though  a  provision  under  an  Act  cannot expressly  oust  the  jurisdiction  of  the  court under Articles 226 and 227 of the Constitution, nevertheless,  when  there  is  an  alternative remedy  available,  judicial  prudence  demands that  the  Court  refrains  from  exercising  its jurisdiction  under  the  said  constitutional provisions.  This  was  a  case  where  the  High Court should not have entertained the petition under  Article  227  of  the  Constitution  and should  have  directed  the  respondent  to  take recourse to the appeal mechanism provided by the Act.”

11. In  Satyawati  Tandon (supra),  the  High  Court  had

restrained further proceedings under Section 13(4) of the Act.

Upon a detailed consideration of the statutory scheme under

the SARFAESI Act, the availability of remedy to the aggrieved

under Section 17 before the Tribunal and the appellate remedy

under Section 18 before the Appellate Tribunal, the object and

purpose of the legislation, it was observed that a writ petition

ought not to be entertained in view of the alternate statutory

remedy available holding :-

“43. Unfortunately, the High Court overlooked the  settled  law  that  the  High  Court  will

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ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and 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.  In our  view, 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.  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.

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55.  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.”

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12. In  Union Bank of India and another vs. Panchanan

Subudhi,  2010  (15)  SCC  552,  further  proceedings  under

Section 13(4) were stayed in the writ  jurisdiction subject to

deposit  of  Rs.10,00,000/-  leading  this  Court  to  observe  as

follows :

“7. In our view, the approach adopted by the High Court  was clearly  erroneous.  When the respondent  failed  to  abide  by  the  terms  of one-time settlement, there was no justification for the High Court to entertain the writ petition and  that  too  by  ignoring  the  fact  that  a statutory alternative  remedy was available  to the respondent under Section 17 of the Act.”

13. The same view was reiterated in  Kanaiyalal Lalchand

Sachdev and others vs. State of Maharashtra and others,

2011 (2) SCC 782 observing:

“23. In our opinion, therefore, the High Court rightly  dismissed  the  petition  on the  ground that an efficacious remedy was available to the appellants under Section 17 of  the Act.  It  is well settled that ordinarily relief under Articles 226/227  of  the  Constitution  of  India  is  not available if an efficacious alternative remedy is available  to  any  aggrieved  person.  (See Sadhana Lodh v. National Insurance Co. Ltd.;

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Surya Dev Rai v. Ram Chander Rai and SBI v. Allied Chemical Laboratories.)”

14. In  Ikbal  (supra), it was observed that the action of the

Bank under Section 13(4) of the ‘SARFAESI Act’ available to

challenge by the aggrieved under Section 17 was an efficacious

remedy and the institution directly under Article 226 was not

sustainable,  relying  upon  Satyawati  Tandon (Supra),

observing :

“27. No doubt an alternative remedy is not an absolute  bar  to  the  exercise  of  extraordinary jurisdiction under Article 226 but by now it is well  settled  that  where  a  statute  provides efficacious  and  adequate  remedy,  the  High Court will do well in not entertaining a petition under  Article  226.  On  misplaced considerations, statutory procedures cannot be allowed to be circumvented.

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28…….In our view, there was no justification whatsoever  for  the  learned  Single  Judge  to allow  the  borrower  to  bypass  the  efficacious remedy provided to him under Section 17 and invoke  the  extraordinary  jurisdiction  in  his favour  when  he  had  disentitled  himself  for such relief  by his conduct.  The Single Judge was  clearly  in  error  in  invoking  his extraordinary jurisdiction under Article 226 in light of the peculiar facts indicated above. The

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Division  Bench  also  erred  in  affirming  the erroneous order of the Single Judge.”

15. A similar view was taken in Punjab National Bank and

another vs. Imperial Gift House and others, (2013) 14 SCC

622, observing:-

“3. Upon receipt of notice, the respondents filed representation  under  Section  13(3-A)  of  the Act, which was rejected. Thereafter, before any further  action  could  be  taken  under  Section 13(4) of the Act by the Bank, the writ petition was filed before the High Court.

4. In our view, the High Court was not justified in  entertaining  the  writ  petition  against  the notice  issued  under  Section 13(2)  of  the  Act and quashing the proceedings initiated by the Bank.”

16. It is the solemn duty of the Court to apply the correct law

without  waiting  for  an  objection  to  be  raised  by  a  party,

especially when the law stands well settled.  Any departure, if

permissible, has to be for reasons discussed, of the case falling

under a defined exception, duly discussed after noticing the

relevant  law.  In  financial  matters  grant  of  ex-parte  interim

orders can have a deleterious effect and it is not sufficient to

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say that the aggrieved has the remedy to move for vacating the

interim order.  Loans by financial institutions are granted from

public money generated at the tax payers expense.  Such loan

does not become the property of the person taking the loan,

but retains its character of public money given in a fiduciary

capacity as entrustment by the public.  Timely repayment also

ensures  liquidity  to  facilitate  loan  to  another  in  need,  by

circulation  of  the  money  and  cannot  be  permitted  to  be

blocked  by  frivolous  litigation  by  those  who  can  afford  the

luxury of  the same.  The caution required,  as expressed in

Satyawati Tandon  (supra), has also not been kept in mind

before passing the impugned interim order:-  

“46. It  must  be  remembered that  stay  of  an action  initiated  by  the  State  and/or  its agencies/instrumentalities  for  recovery  of taxes,  cess,  fees,  etc.  seriously  impedes execution of projects of public importance and disables  them  from  discharging  their constitutional and legal obligations towards the citizens.  In  cases  relating  to  recovery  of  the dues  of  banks,  financial  institutions  and secured  creditors,  stay  granted  by  the  High Court  would have  serious adverse  impact  on the  financial  health  of  such bodies/institutions,  which (sic will)  ultimately prove detrimental to the economy of the nation.

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Therefore, the High Court should be extremely careful  and  circumspect  in  exercising  its discretion  to  grant  stay  in  such  matters.  Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in  Baburam Prakash Chandra Maheshwari v.  Antarim  Zila  Parishad,  Whirlpool  Corpn. v. Registrar  of  Trade  Marks and  Harbanslal Sahnia v. Indian Oil Corpn. Ltd. and some other judgments,  then  the  High  Court  may,  after considering  all  the  relevant  parameters  and public  interest,  pass  an  appropriate  interim order.”

17. 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.  

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18. We cannot help but disapprove the approach of the High

Court  for  reasons  already  noticed  in  Dwarikesh  Sugar

Industries Ltd. vs. Prem Heavy Engineering Works (P) Ltd.

and Another, 1997 (6) SCC 450, observing :-

“32. When a position, in law, is well settled as a  result  of  judicial  pronouncement  of  this Court, it would amount to judicial impropriety to  say  the  least,  for  the  subordinate  courts including the High Courts to ignore the settled decisions  and  then  to  pass  a  judicial  order which is  clearly  contrary  to  the  settled  legal position. Such judicial adventurism cannot be permitted  and  we  strongly  deprecate  the tendency  of  the  subordinate  courts  in  not applying the settled principles and in passing whimsical  orders  which  necessarily  has  the effect  of  granting  wrongful  and  unwarranted relief to one of the parties. It is time that this tendency stops.”

19. The impugned orders are therefore contrary to the law

laid down by this Court under Article 141 of the Constitution

and  unsustainable.  They  are  therefore  set  aside  and  the

appeal is allowed.  

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20. All  questions  of  law  and  fact  remain  open  for

consideration in any application by the aggrieved before the

statutory forum under the SARFAESI Act.  

……………………………….J.  (Rohinton Fali Nariman)        

…….………………………..J.    (Navin Sinha)   

New Delhi, January 30, 2018

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