Case Note & Summary
The appeal arose from a writ petition filed by respondent-borrowers challenging an order dated 13.03.2020 passed by the Chief Judicial Magistrate under Section 14 of the SARFAESI Act, 2002, allowing the appellant Bank to take possession of the secured asset. The borrowers had defaulted on loan repayments, leading to classification of their account as a Non-Performing Asset and initiation of SARFAESI proceedings. During pendency of the writ petition, the borrowers claimed that the Bank had accepted a One-Time Settlement offer of Rs. 58 lakh, evidenced by an endorsement on the offer letter. The Bank denied any valid OTS, contending that the branch official lacked authority. The Single Judge, by order dated 11.08.2025, directed the borrowers to pay the OTS amount with interest at 12% per annum from 01.01.2022 within three months and restrained the Bank from proceeding further. The Bank appealed, raising three principal contentions: (i) the writ petition was not maintainable in view of the alternate remedy under Section 17 of the SARFAESI Act; (ii) the court could not modify the terms of the alleged OTS and compel the Bank to accept delayed payments; and (iii) the order was beyond the relief prayed in the writ petition. The Division Bench found merit in all three contentions. Relying on the bar under Sections 34 and 35 of the SARFAESI Act and the Supreme Court's decision in United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110, the Court held that the writ petition ought not to have been entertained when an efficacious alternate remedy was available before the Debts Recovery Tribunal. It further held that even assuming a binding OTS, the court could not rewrite its terms to impose revised payment schedules and interest on the Bank. Finally, it found that the Single Judge had exceeded the scope of the writ petition by directing closure of the loan account on modified terms. The appeal was allowed, the impugned order was set aside, and the writ petition was dismissed, permitting the Bank to proceed under the SARFAESI Act.
Headnote
A) Banking Law - Alternate Remedy under SARFAESI Act - Maintainability of Writ Petition - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 17, 34, 35 - The respondent-borrowers filed a writ petition challenging a Magistrate's order under Section 14 for taking possession of secured assets. The High Court held that the writ petition was not maintainable in view of the efficacious alternate remedy available under Section 17 before the Debts Recovery Tribunal. The legislative intent under Sections 34 and 35 bars civil court jurisdiction and mandates that such matters be decided by the Tribunal. The Single Judge erred in entertaining the petition on the ground of subsequent developments during proceedings. Held, the writ petition ought to have been dismissed. (Paras 16-19) B) Banking Law - One-Time Settlement - Modification of Settlement Terms by Court - The borrowers alleged that the Bank had accepted an OTS offer, but the Bank disputed any valid OTS. The Single Judge, assuming the OTS was binding, directed the borrowers to pay the OTS amount with 12% interest within three months, modifying the original terms. The Division Bench held that even if an OTS existed, the court could not alter its terms and compel the Bank to accept delayed payments with interest. Held, the court cannot rewrite the contract or settlement between the parties. (Paras 13-15) C) Constitutional Law - Writ Jurisdiction - Relief Beyond Prayer in Writ Petition - The writ petition was limited to challenging the order under Section 14 of the SARFAESI Act. The Single Judge, however, directed closure of the loan account on modified OTS terms, which was beyond the relief sought. Held, a writ court cannot grant relief that has not been prayed for, and the order was thus unsustainable. (Paras 14-15)
Issue of Consideration
Whether the writ petition challenging an order under Section 14 of the SARFAESI Act was maintainable in view of the alternate remedy under Section 17; whether the Single Judge could modify the terms of an alleged OTS and direct the Bank to accept delayed payments with interest; whether the impugned order was beyond the relief sought in the writ petition
Final Decision
The appeal was allowed. The order of the Single Judge dated 11.08.2025 in W.P. No.23835/2022 was set aside, and the writ petition was dismissed. The Bank was permitted to proceed with SARFAESI measures as per law.
Law Points
- SARFAESI Act
- 2002
- Sections 34 and 35 bar civil court jurisdiction
- alternate remedy under Section 17 precludes writ jurisdiction
- court cannot modify terms of one-time settlement
- relief beyond pleadings impermissible
