Case Note & Summary
The petitioners, M/s. Otoklin Global Business (a partnership firm) and its partner Mr. Dhaval Dilip Jhaveri, filed a writ petition under Article 226 of the Constitution of India challenging the proceedings initiated by the respondent No.2, International Assets Reconstruction Company Private Limited (assignee of Bank of Baroda), under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The respondent had issued a notice under Section 13(2) of the SARFAESI Act to the petitioners and other guarantors for recovery of dues from the principal borrower, M/s. Otoklin Plants & Equipments Ltd. (in liquidation). The petitioners contended that the notice was invalid and that the respondent had taken actual possession of the secured asset without following the procedure under Section 14 of the SARFAESI Act. The court examined the maintainability of the writ petition in light of the alternative statutory remedy under Section 17 of the SARFAESI Act, which allows any person aggrieved by measures taken under Section 13(4) to file an application before the Debts Recovery Tribunal (DRT). The court held that the petitioners had an efficacious alternative remedy under Section 17 and that they had not availed of it. The court also noted that the notice under Section 13(2) was issued to the principal borrower and the guarantors, and the petitioners, being partners of the firm and guarantors, were liable. The court found no illegality in the notice and observed that the issue of possession could be raised before the DRT. Consequently, the court dismissed the writ petition, leaving it open to the petitioners to approach the DRT under Section 17 of the SARFAESI Act. The court also directed that if the petitioners approach the DRT within four weeks, the DRT shall consider the application on its own merits without being influenced by the dismissal of the writ petition.
Headnote
A) SARFAESI Act - Alternative Remedy - Maintainability of Writ Petition - Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The court held that when an efficacious alternative remedy under Section 17 of the SARFAESI Act is available, the High Court should not entertain a writ petition under Article 226 of the Constitution of India, especially when the petitioners have not availed of that remedy. The court dismissed the petition on the ground of alternative remedy, noting that the petitioners had not approached the DRT despite the availability of the remedy. (Paras 1-30) B) SARFAESI Act - Notice under Section 13(2) - Validity - Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The court observed that the notice under Section 13(2) was issued to the principal borrower and the guarantors, and the petitioners, being partners of the firm and guarantors, were liable. The court did not find any illegality in the notice. (Paras 1-30) C) SARFAESI Act - Possession - Symbolic vs. Actual Possession - Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The court noted that the respondent had taken symbolic possession of the secured asset, and the petitioners' contention that actual possession was taken without following procedure was not substantiated. The court held that the issue of possession can be raised before the DRT under Section 17. (Paras 1-30)
Issue of Consideration
Whether the writ petition under Article 226 of the Constitution of India is maintainable against the SARFAESI proceedings when an alternative statutory remedy under Section 17 of the SARFAESI Act is available, and whether the petitioners have made out a case for interference.
Final Decision
The writ petition is dismissed. The petitioners are at liberty to approach the Debts Recovery Tribunal under Section 17 of the SARFAESI Act within four weeks from the date of the judgment. If such an application is filed, the DRT shall consider it on its own merits without being influenced by the dismissal of this writ petition.
Law Points
- SARFAESI Act
- Section 13(2) notice
- Section 17 DRT remedy
- alternative remedy
- writ jurisdiction
- partnership firm
- guarantor
- secured asset
- symbolic possession
- actual possession
