Case Note & Summary
The petitioner, a sole proprietor of a knitwear unit, had availed term loan and cash credit facilities aggregating Rs. 4.55 crores from respondent no.1 bank, secured by factory and house properties. The account was declared a Non‑Performing Asset on 31st May 2019. The bank issued two demand notices under Section 13(2) of the SARFAESI Act on 9th July 2020, to which the petitioner replied and the bank filed a rejoinder. On 19th November 2020, the bank took physical possession of the factory property and symbolic possession of the house property, publishing a public notice under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002. An auction notice published on 16th December 2020 scheduled the sale for 19th January 2021. The petitioner challenged the auction notice by filing Securitisation Application No. 148/2020 under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal, Pune, and also filed a writ petition, W.P.(ST) No. 99895/2020, before the High Court. The High Court disposed of the writ petition on 7th January 2021, holding that the petitioner had an efficacious remedy before the DRT and could request the DRT to consider the matter before the auction date. The DRT, Pune, by order dated 18th January 2021, stayed the auction subject to the petitioner’s depositing Rs. 10 lakhs and clearing 50% of the liability minus Rs. 10 lakhs by 18th February 2021, with the entire liability to be cleared by 31st March 2021. The petitioner did not comply. The bank issued a second auction notice on 20th February 2021, published on 21st February 2021, scheduling auction on 10th March 2021, in which the house property was sold to respondent no.5 and a sale certificate was issued and registered. On 15th August 2021, the District Magistrate, Solapur, passed an order under Section 14(1)(a)(b) of the SARFAESI Act on the bank’s proposal, directing the bank to take physical possession of the house property. A notice dated 18th October 2021 was issued by the Tehsildar for taking possession with police assistance, scheduled for the day of the High Court hearing, 9th November 2021. The petitioner filed the present writ petition under Article 226 of the Constitution, challenging the Section 14 order, the second auction notice, the auction, and the sale. The petitioner contended that the Section 14 order was passed without notice, in gross violation of natural justice, and without application of mind; that the valuation of the three secured properties, as per a table annexed to the petition, far exceeded the outstanding dues; that the auction was fraudulent, malicious, and detrimental during the pandemic; that the Suo Moto order of the High Court in PIL No.1/2021 restrained the bank from taking further steps; and that the bank had not registered its security interest under Section 26-D of the SARFAESI Act on the CERSAI portal, rendering the enforcement void ab initio. The respondent bank opposed the petition, relying on an affidavit and citing the availability of an efficacious alternate remedy under Section 17, which the petitioner had already invoked. The bank argued that the petition was not maintainable under Article 226, that the Section 14 order is administrative and does not require a hearing, that multiple opportunities to repay had been given, and that the petition was a stalling tactic. The High Court heard the matter on 9th November 2021, with rule made returnable forthwith and heard finally by consent. The available excerpt of the judgment does not contain the court’s analysis, findings, or operative order.
Issue of Consideration
Maintainability of writ petition under Article 226 when alternate remedy under Section 17 of SARFAESI Act exists; Validity of District Magistrate's order under Section 14 without notice; Legality of auction and sale during pendency of Securitisation Application; Effect of non-registration under Section 26-D; Compliance with Suo Moto order of High Court
Law Points
- Alternate remedy under Section 17 of SARFAESI Act
- Order under Section 14 is administrative
- No notice required for Section 14 order
- Section 26-D registration not mandatory for enforcement
- Suo Moto COVID-19 order did not bar proceedings
- Valuation disputes not ground for writ
Case Details
2021 LawText (BOM) (11) 33
Writ Petition No. 7486 of 2021
S.J. Kathawalla, Abhay Ahuja
Subhash Jha, Tanmay Malusary, Tushar Bansode, Puneet Gogad, Mayank Bagla, Kushal Sawant
Solapur Janata Sahakari Bank Ltd., The District Magistrate, Tahsildar, Senior Inspector of Police, Trushita Vinayak Racharla
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Writ petition under Article 226 of Constitution challenging order under Section 14 of SARFAESI Act, 2002 and auction sale of secured assets.
Remedy Sought
Petitioner sought quashing of District Magistrate's order dated 15.08.2021 and auction notice dated 20.02.2021, declaration of auction as null and void, and injunction against taking physical possession.
Filing Reason
Petitioner alleged that the Section 14 order was passed without notice and in violation of natural justice, the auction was held despite pending DRT proceedings and Suo Moto COVID-19 order, property valuation far exceeded dues, and the bank failed to register security interest under Section 26-D on CERSAI.
Previous Decisions
Petitioner had filed Securitisation Application No. 148/2020 under Section 17 before DRT, Pune, which is pending; DRT had passed an interim conditional stay order on 18.01.2021; earlier writ petition bearing WP(ST) 99895/2020 was disposed of by High Court on 07.01.2021 directing petitioner to approach DRT.
Issues
Whether the writ petition under Article 226 is maintainable when an alternate remedy under Section 17 of the SARFAESI Act is available?
Whether the order dated 15.08.2021 under Section 14 of the SARFAESI Act violated principles of natural justice?
Whether the auction and sale were valid despite pendency of Securitisation Application and interim orders?
Whether the bank's actions violated the Suo Moto order of Bombay High Court in PIL No.1 of 2021?
Whether non-registration of security interest under Section 26-D renders enforcement void?
Whether the valuation of properties indicated excessive security, making the enforcement actions disproportionate?
Submissions/Arguments
Petitioner: The Section 14 order was passed without notice, in gross violation of natural justice, and without application of mind; the order is cryptic and does not justify taking over possession; the auction and sale are fraudulent and malicious, especially considering the pandemic; the property values far exceed the loan amount as per valuation table; the Suo Moto order stopped further steps; non-registration under Section 26-D renders the enforcement void ab initio.
Respondent: The writ petition is not maintainable due to efficacious alternate remedy under Section 17; the petitioner has already approached DRT; several opportunities were given to repay but failed; the order under Section 14 is administrative and no notice is required; the petition is an attempt to stall due process; reliance on Supreme Court and High Court decisions.
Judgment Excerpts
Rule. Rule made returnable forthwith. By consent of counsel for the parties, the petition is heard finally.
On 15.08.2021 respondent no.2-District Magistrate, Solapur passed an order under Section 14(1)(a)(b) of the SARFAESI Act ... directing respondent no.1-bank to take possession of the house property of the petitioner after recording his satisfaction.
the value of the properties which are secured in favour of the respondent no.1 bank far exceed the said amount.
the Petitioner has a remedy in law to approach the Debt Recovery Tribunal and in fact the Petitioner has already approached the Debt Recovery Tribunal.
Procedural History
31.05.2019: Bank declared account as NPA. 09.07.2020: Bank issued two Section 13(2) notices. 14.09.2020: Petitioner replied. 28.09.2020: Bank filed rejoinder. 19.11.2020: Bank took physical/symbolic possession and published Rule 8(1) notice. 15.12.2020: Auction notice for 19.01.2021 published. Petitioner filed Securitisation Application No.148/2020 under Section 17 before DRT, Pune, and W.P.(ST) 99895/2020 in High Court. 07.01.2021: High Court disposed of writ petition, directing petitioner to approach DRT. 18.01.2021: DRT granted conditional stay of auction; petitioner did not comply. 20.02.2021: Second auction notice for 10.03.2021 issued; house property sold to respondent no.5. 15.08.2021: District Magistrate passed order under Section 14. 18.10.2021: Tehsildar issued notice for physical possession on 09.11.2021. 09.11.2021: High Court heard writ petition.
Acts & Sections
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: 13(2), 14, 14(1)(a)(b), 17, 26-D
- Security Interest (Enforcement) Rules, 2002: 8(1)
- Constitution of India, 1950: 226
