Case Note & Summary
The petitioners, M/s. Citron Infraprojects Limited and its director, filed a writ petition before the Bombay High Court challenging an order of the Debts Recovery Tribunal-II, Mumbai (DRT) dated 29th April 2026, which rejected their interlocutory application (IA No. 981 of 2026) seeking a stay on the taking over of possession of a secured asset by respondent No.1, IFCI Limited, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act). The petitioners had defaulted on credit facilities, leading IFCI to issue a notice under Section 13(2) of the Securitisation Act on 30.09.2021. Upon failure to discharge the liability, IFCI took symbolic possession under Section 13(4) and obtained an order from the Magistrate under Section 14 for physical possession on 18.08.2025. The petitioners filed a Securitisation Application (No. 487 of 2025) before the DRT and sought interim stay, which was rejected. Instead of appealing to the Debts Recovery Appellate Tribunal (DRAT) under Section 18 of the Securitisation Act, the petitioners directly approached the High Court under Article 226, arguing that IFCI could not invoke the Securitisation Act due to Section 31(j) thereof, which exempts financial institutions under the State Financial Corporations Act, 1951. The Court examined the rival submissions and held that the writ petition was not maintainable because an efficacious alternative remedy of appeal before the DRAT was available and the petitioners had not shown any exceptional circumstances to bypass it. On the merits of the Section 31(j) argument, the Court noted that IFCI is not a financial institution under the State Financial Corporations Act, 1951, and therefore the exemption under Section 31(j) did not apply. Consequently, the Court dismissed the writ petition, upholding the DRT order and directing the petitioners to pursue the alternative remedy if so advised.
Headnote
A) Securitisation Act - Alternative Remedy - Maintainability of Writ Petition - Section 18, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The petitioners challenged an order of DRT rejecting their interlocutory application for stay of possession, directly before the High Court without filing an appeal under Section 18 of the Securitisation Act. The Court held that the availability of an efficacious alternative remedy of appeal before the DRAT is a bar to the maintainability of the writ petition, and no exceptional circumstances were made out to bypass the same. (Paras 1-6) B) Securitisation Act - Applicability of Section 31(j) - IFCI - Section 31(j), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The petitioners contended that respondent No.1 (IFCI) could not take recourse to the Securitisation Act because Section 31(j) exempts financial institutions under the State Financial Corporations Act, 1951. The Court rejected this contention, holding that IFCI is not a financial institution under the State Financial Corporations Act, 1951, and therefore Section 31(j) does not apply. (Paras 2-3) C) Securitisation Act - Possession - Stay of Possession - Section 13(2), 13(4), 14, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The respondent No.1 issued notice under Section 13(2) and took symbolic possession under Section 13(4) after default, and the Magistrate passed an order under Section 14 for physical possession. The DRT rejected the petitioners' application for stay of possession. The Court found no reason to interfere with the DRT order. (Paras 3-4)
Issue of Consideration
Whether the petitioners are entitled to maintain a writ petition directly before the High Court without exhausting the alternative remedy of appeal under Section 18 of the Securitisation Act, and whether Section 31(j) of the Securitisation Act bars the action of respondent No.1 (IFCI) under the Securitisation Act.
Final Decision
The High Court dismissed the writ petition, holding that the petitioners have an efficacious alternative remedy of appeal under Section 18 of the Securitisation Act and that no exceptional circumstances were shown to bypass it. The Court also rejected the contention regarding Section 31(j), noting that IFCI is not a financial institution under the State Financial Corporations Act, 1951. The petitioners were granted liberty to pursue the alternative remedy.
Law Points
- Section 31(j) of Securitisation Act does not apply to IFCI
- IFCI is not a financial institution under State Financial Corporations Act
- 1951
- alternative remedy of appeal under Section 18 of Securitisation Act is available and should be exhausted
- writ petition under Article 226 not maintainable when alternative remedy exists and no exceptional circumstances shown
