Case Note & Summary
The case involves appeals by a lender bank against orders of the Kerala High Court that entertained writ petitions filed by borrowers (respondents) challenging actions taken under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The respondents had obtained two loans from the appellant bank, which were declared non-performing assets (NPA) on 27.05.2021. Notices under Section 13(2) of the SARFAESI Act were issued on 07.08.2021 and 12.08.2021. The respondents replied on 28.10.2021 seeking twelve months' time to repay. However, before the expiry of the statutory period, they filed Writ Petition No. 23940 of 2021 challenging the demand notice. The High Court directed the bank to consider the respondents' proposal, and the bank allowed repayment in five installments instead of twelve, but the respondents did not comply. Subsequently, notices under Section 13(4) were issued on 02.12.2021 and 20.12.2021. The respondents filed two more writ petitions (WP No. 30238 of 2021 and 30450 of 2021) challenging these notices and seeking a direction to accept their unilateral offers. The Debt Recovery Tribunal (DRT) was not functional at the time of filing but became functional from March 2022. The Supreme Court had earlier passed an interim order on 16.12.2021 in SLP No. 10911, allowing High Courts to entertain DRT matters as a stop-gap arrangement until DRTs became functional. Despite this, the High Court decided the writ petitions on merits, allowing the respondents to make deferred payment in 20 installments, which was later modified to 12 months by the Division Bench in writ appeals. The bank appealed to the Supreme Court. The Supreme Court held that the High Court erred in entertaining the writ petitions as the dispute involved private financial transactions and the SARFAESI Act provides an adequate alternative remedy under Section 17 before the DRT. The Court noted that the interim arrangement was only temporary and once the DRT became functional, the High Court should have relegated the matters to the DRT instead of deciding them on merits. The Court also observed that the High Court granted relief beyond what was prayed for, which is impermissible in writ jurisdiction. The Supreme Court set aside the impugned orders and directed that the matters be transferred to the DRT for adjudication in accordance with law. The Court reiterated that writ jurisdiction under Article 226 should not be used to enforce contractual obligations or grant relief in private financial disputes when statutory remedies are available.
Headnote
A) Constitutional Law - Writ Jurisdiction - Article 226 of the Constitution of India - Maintainability - High Court cannot entertain writ petitions involving private financial transactions between lender and borrower, as such disputes are contractual in nature and fall within the domain of civil courts or tribunals - Held that the High Court erred in exercising extraordinary jurisdiction under Article 226 for recovery of dues under SARFAESI Act (Paras 2, 11). B) SARFAESI Act - Alternative Remedy - Sections 13(2), 13(4), 17 - Debt Recovery Tribunal - The SARFAESI Act provides a complete statutory mechanism including appeal to DRT under Section 17, which is an efficacious alternative remedy - High Court should not entertain writ petitions when statutory remedy is available, especially after DRT becomes functional - Held that the High Court's interference was unwarranted (Paras 4-6, 9). C) Interim Arrangement - Supreme Court Order dated 16.12.2021 in SLP No. 10911 - The Supreme Court's interim order allowing High Courts to entertain DRT matters was a stop-gap arrangement only until DRTs become functional - Once DRT became functional in March 2022, the High Court ought to have relegated the matters to DRT instead of deciding them on merits - Held that the High Court exceeded its jurisdiction by continuing to entertain the writ petitions (Paras 7-9). D) Relief - Installment Payment - The High Court granted relief of deferred payment in 20 installments (later modified to 12 months by Division Bench), which was more than what was prayed for - Such relief is beyond the scope of Article 226 in a private financial dispute - Held that the High Court cannot direct a lender to accept unilateral offers or restructure loans in writ jurisdiction (Paras 2, 9).
Issue of Consideration
Whether the High Court could entertain writ petitions under Article 226 of the Constitution of India challenging actions under the SARFAESI Act, particularly after the Debt Recovery Tribunal became functional, and whether the High Court could grant relief by directing deferred payment installments in a private financial dispute.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned orders of the Kerala High Court, and directed that the matters be transferred to the Debt Recovery Tribunal for adjudication in accordance with law. The Court held that the High Court erred in entertaining the writ petitions and granting relief beyond the scope of Article 226.
Law Points
- Writ jurisdiction under Article 226 not maintainable for private financial disputes
- High Court cannot grant relief beyond statutory remedies
- SARFAESI Act provides adequate alternative remedy
- Interim arrangement by Supreme Court does not confer jurisdiction on High Court to decide merits after DRT becomes functional
