Case Note & Summary
The petitioner, Ms. Archana Wani, a director and shareholder of respondent No. 5 (N. Kumar Housing and Infrastructures), filed a writ petition under Article 226 of the Constitution of India challenging the auction sale of the secured asset conducted by respondent Nos. 1 and 2 (Indian Bank, erstwhile Allahabad Bank) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The bank had granted a term loan of Rs. 62 crores to respondent No. 4 (M/s Poonam Resorts Ltd) on 8.3.2011 for a construction project, which was secured by a deed of guarantee and mortgage executed by respondent No. 5. The loan became a non-performing asset (NPA) on 31.3.2017 due to default. The bank issued a notice under Section 13(2) of the SARFAESI Act and subsequently took possession under Section 13(4). The bank also filed an Original Application before the Debts Recovery Tribunal (DRT), Nagpur for recovery of dues. The petitioner contended that the bank had agreed to a One Time Settlement (OTS) but later rejected it and proceeded with the auction sale, which was allegedly conducted in a hurried manner. The court examined the facts and found that the petitioner had suppressed material facts, including the rejection of the OTS proposal and the fact that the auction sale had already taken place. The court held that the petitioner had an efficacious alternative remedy under Section 17 of the SARFAESI Act before the DRT, and therefore, the writ petition was not maintainable. The court also noted that the petitioner had not approached the DRT and had instead directly invoked the writ jurisdiction. The court dismissed the petition with costs of Rs. 50,000, to be paid to the bank, and directed the bank to proceed with the auction sale in accordance with law.
Headnote
A) Constitutional Law - Writ Jurisdiction - Alternative Remedy - Suppression of Facts - The petitioner, a director and shareholder of the mortgagor company, challenged the auction sale of the secured asset under the SARFAESI Act, 2002. The court held that the writ petition was not maintainable as the petitioner had an efficacious alternative remedy under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal. Additionally, the petitioner had suppressed material facts regarding the One Time Settlement (OTS) proposal and the auction sale. The court dismissed the petition with costs of Rs. 50,000. (Paras 1-10)
B) Banking Law - SARFAESI Act - Auction Sale - One Time Settlement - The bank had granted a term loan of Rs. 62 crores to the principal borrower, which was secured by the mortgagor company. The loan became NPA on 31.3.2017. The bank issued notice under Section 13(2) and took possession under Section 13(4) of the SARFAESI Act. The petitioner's OTS proposal was rejected, and the property was auctioned. The court found no illegality in the auction process and noted that the petitioner had not approached the Tribunal under Section 17. (Paras 2-8)
Issue of Consideration
Whether the High Court should interfere under Article 226 of the Constitution of India with the auction sale conducted by the bank under the SARFAESI Act, 2002, when the petitioner had an alternative remedy under Section 17 of the SARFAESI Act and had suppressed material facts.
Final Decision
The High Court dismissed the writ petition with costs of Rs. 50,000 to be paid to the bank, holding that the petitioner had an alternative remedy under Section 17 of the SARFAESI Act and had suppressed material facts.
Law Points
- Alternative remedy
- Suppression of material facts
- Writ jurisdiction under Article 226
- Section 13(2) and 13(4) of SARFAESI Act
- 2002
- Section 17 of SARFAESI Act
- One Time Settlement (OTS)
- Auction sale
- Mortgagor's rights
Case Details
2025 LawText (BOM) (10) 159
Writ Petition No. 3766 of 2023
Anil S. Kilor, Rajnish R. Vyas
Mr. Devendra V. Chauhan, Senior Advocate a/b Mr. Chaitanya Dhruv & Parth C. Malviya, Advocate for petitioner. Mr. A.T. Purohit with Mr. T.Y. Sharif, Advocate for respondent nos. 1 and 2. Mr. S.N. Kumar, Advocate for respondent no. 3. Mr. Akshay Naik, Senior Advocate a/b Mr. Rohan Deo, Advocate for respondent No. 4. Mr. C.S. Dhore, Advocate for respondent No. 5.
Indian Bank (Erstwhile Allahabad Bank) & Ors.
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India challenging the auction sale of secured asset under the SARFAESI Act, 2002.
Remedy Sought
The petitioner sought to quash the auction sale and sought direction to the bank to accept the One Time Settlement proposal.
Filing Reason
The petitioner alleged that the bank had agreed to an OTS but later rejected it and proceeded with the auction sale in a hurried manner, causing prejudice to the petitioner.
Previous Decisions
The bank had issued notice under Section 13(2) and taken possession under Section 13(4) of the SARFAESI Act. The bank had also filed an Original Application before the DRT, Nagpur for recovery of dues.
Issues
Whether the writ petition is maintainable when the petitioner has an alternative remedy under Section 17 of the SARFAESI Act?
Whether the petitioner has suppressed material facts regarding the OTS and auction sale?
Submissions/Arguments
The petitioner argued that the bank had agreed to an OTS but later rejected it and proceeded with the auction sale, which was illegal and arbitrary.
The respondent bank argued that the petitioner had suppressed material facts and had an alternative remedy under Section 17 of the SARFAESI Act, and therefore the writ petition should be dismissed.
Ratio Decidendi
The court held that when an efficacious alternative remedy is available under Section 17 of the SARFAESI Act, the High Court should not entertain a writ petition under Article 226 of the Constitution of India. Additionally, suppression of material facts by the petitioner disentitles them to any equitable relief.
Judgment Excerpts
The petitioner is a Director and Shareholder of respondent No. 5 / N. Kumar Housing and Infrastructures/ mortgager.
Respondent Nos.1 and 2 had extended term loan facility to Respondent No. 4 /principal borrower for the advancement of business of contractor (Development and Construction of Club House cum Resort Project).
A request of principal borrower was considered by the respondent Nos. 1 and 2 and accordingly term loan of Rs. 62 crores was granted on 8.3.2011.
As the principal borrower defaulted in repayment of loan due, same resulted into classification of credit facility as non performing asset on 31.3.2017.
Consequently recourse to Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, “SARFAESI Act”) was taken by res. no. 1 and 2, since notice was not complied. Further measures under Section 13(4) of the SARFAESI Act were taken recourse to.
Respondent Nos. 1 and 2 filed Original Application before the Debts Recovery Tribunal, Nagpur for recovery of dues principal borrower and guarantors.
Procedural History
The bank granted loan on 8.3.2011. Loan became NPA on 31.3.2017. Bank issued notice under Section 13(2) and took possession under Section 13(4) of SARFAESI Act. Bank filed OA before DRT, Nagpur. Petitioner filed writ petition in 2023 challenging auction sale. High Court dismissed petition on 17.10.2025.
Acts & Sections
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: 13(2), 13(4), 17
- Constitution of India: 226
