Case Note & Summary
The petitioner, Trishul Developers, a partnership firm, had availed a loan from L & T Housing Finance Limited (respondent No.1). Upon default, the respondent initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The petitioner filed a securitisation application under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal (DRT), Bengaluru, which was dismissed. Aggrieved, the petitioner filed an appeal under Section 18 of the SARFAESI Act before the Debt Recovery Appellate Tribunal (DRAT), Chennai. The DRAT dismissed the appeal as not maintainable, holding that the petitioner had an alternative remedy of filing a civil suit. The petitioner then approached the High Court under Article 227 of the Constitution of India. The High Court considered the issue of maintainability of the appeal under Section 18 of the SARFAESI Act. The Court noted that the SARFAESI Act provides a complete mechanism for challenging measures taken by secured creditors, and the remedy of appeal under Section 18 is a statutory right that cannot be ousted by the availability of a civil suit. The Court held that the DRAT erred in dismissing the appeal on the ground of alternative remedy. The High Court set aside the impugned order of the DRAT and remanded the matter back to the DRAT for consideration on merits. The writ petition was allowed.
Headnote
A) SARFAESI Act - Appeal - Maintainability - Section 18 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The issue was whether an appeal under Section 18 lies against an order passed by the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act. The High Court held that the DRAT erred in dismissing the appeal as not maintainable on the ground of alternative remedy of civil suit, as the SARFAESI Act provides a complete mechanism for challenging measures taken by secured creditors, and the remedy of appeal under Section 18 is a statutory right that cannot be ousted by the availability of a civil suit. (Paras 1-10) B) Constitution of India - Writ Jurisdiction - Article 227 - The High Court examined whether the impugned order of the DRAT was liable to be set aside under Article 227. The Court held that the DRAT's order was patently erroneous and suffered from an error of law, warranting interference under Article 227 to prevent a miscarriage of justice. (Paras 11-15)
Issue of Consideration
Whether the Debt Recovery Appellate Tribunal (DRAT) was justified in dismissing the appeal as not maintainable on the ground that the petitioner had an alternative remedy of filing a civil suit?
Final Decision
The High Court allowed the writ petition, set aside the impugned order of the DRAT dated 16.04.2019, and remanded the matter back to the DRAT for consideration on merits. The DRAT was directed to dispose of the appeal in accordance with law, without being influenced by the observations made in the impugned order.
Law Points
- Maintainability of appeal under Section 18 of SARFAESI Act
- 2002
- Availability of alternative remedy
- Scope of Article 227 of Constitution of India
