Case Note & Summary
The petitioners, M/s. National Laminate Corporation (a partnership firm) and its partner Mr. Jayantilal L. Nisar, filed a writ petition under Article 226 of the Constitution of India before the Bombay High Court challenging an order dated 18 June 2015 passed under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The order was passed by the Chief Metropolitan Magistrate, Esplanade, Mumbai, directing the police to provide assistance to the respondent bank (Cosmos Cooperative Bank Limited) to take possession of the secured asset. The petitioners contended that the order was passed without notice to them and that they had not been given an opportunity of being heard. They argued that the bank had already sold the property to a third party (Respondent No. 2, Subhnen Ply Private Limited) and that the possession had been handed over, rendering the Section 14 order infructuous. The respondents, including the bank and the auction purchaser, opposed the petition, submitting that the petitioners had an alternative remedy under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal (DRT) and that the writ petition was not maintainable. They also argued that the petitioners had no locus standi as the property had already been sold and possession transferred. The Court, after hearing the parties, held that the writ petition was not maintainable due to the availability of an efficacious alternative remedy under Section 17 of the SARFAESI Act. The Court further held that once the secured asset is sold and possession is handed over to the auction purchaser, the borrower or its partner loses locus standi to challenge the Section 14 order. The Court dismissed the petition, leaving the petitioners to seek their remedy before the DRT if so advised. The Court also noted that the petitioners had not demonstrated any exceptional circumstances warranting interference under Article 226.
Headnote
A) Constitutional Law - Writ Jurisdiction - Maintainability - Alternative Remedy - Section 14, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - The petitioners challenged an order under Section 14 of the SARFAESI Act seeking police aid for possession. The Court held that the writ petition was not maintainable as the petitioners had an efficacious alternative remedy under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal (DRT). The Court further held that once the secured asset is sold and possession is handed over to the auction purchaser, the borrower or its partner loses locus standi to challenge the Section 14 order. (Paras 2-10) B) Banking and Finance - Securitisation - Locus Standi - Sale of Secured Asset - Section 14, SARFAESI Act - The Court held that after the sale of the secured asset to a third party and delivery of possession, the borrower or its partner has no right to challenge the Section 14 order. The remedy, if any, lies before the DRT under Section 17 of the SARFAESI Act. The writ petition was dismissed as the petitioners failed to show any exceptional circumstances warranting interference under Article 226. (Paras 11-15)
Issue of Consideration
Whether a writ petition under Article 226 of the Constitution of India is maintainable to challenge an order under Section 14 of the SARFAESI Act when the secured asset has already been sold to a third party and possession handed over, and whether the petitioners have locus standi to maintain the petition.
Final Decision
The Bombay High Court dismissed the writ petition, holding that the petitioners had an efficacious alternative remedy under Section 17 of the SARFAESI Act and that they had no locus standi to challenge the Section 14 order after the sale and transfer of possession of the secured asset. The Court left it open to the petitioners to seek their remedy before the Debt Recovery Tribunal if so advised.
Law Points
- Locus standi
- Section 14 SARFAESI Act
- Section 17 SARFAESI Act
- Alternative remedy
- Writ jurisdiction under Article 226
- Sale of secured asset extinguishes borrower's right
