REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 1281 OF 2018

(Arising out of SLP (C) No.24610 of 2015)

AUTHORIZED OFFICER, STATE BANK OF

TRAVANCORE AND ANOTHER ..........Appellant(s)

VERSUS

MATHEW K.C. ......Respondent(s)

JUDGMENT

NAVIN SINHA, J.

Leave granted.

2.The present appeal assails an interim order dated

24.04.2015 passed in a writ petition under Article 226 of the

Constitution, staying further proceedings at the stage of

Section 13(4) of the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act,

2002 (hereinafter referred as the ‘SARFAESI Act’), on deposit of

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Rs.3,50,000/-within two weeks. An appeal against the same

has also been dismissed by the Division Bench observing that

counter affidavit having been filed, it would be open for the

Appellant Bank to seek clarification/modification/variation of

the interim order.

3.Shri H.P. Raval, learned Senior Counsel appearing for the

Appellants, submits that the loan account of the Respondent

was declared a Non-Performing Asset (NPA) on 28.12.2014.

The outstanding dues of the Respondent on the date of the

institution of the writ petition was Rs.41,82,560/-. Despite

repeated notices, the Respondent failed and neglected to pay

the dues. Statutory notice under Section 13(2) of the

SARFAESI Act was issued to the Respondent on 21.01.2015.

The objections under Section 13(3A) were considered, and

rejection was communicated by the Appellant on 31.3.2015.

Possession notice was then issued under Section 13(4) of the

Act read with Rule 8 of The Security Interest (Enforcement)

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Rules, 2002 (hereinafter referred to as ‘the Rules’) on

21.04.2015.

4. The SARFAESI Act is a complete code by itself, providing

for expeditious recovery of dues arising out of loans granted by

financial institutions, the remedy of appeal by the aggrieved

under Section 17 before the Debt Recovery Tribunal, followed

by a right to appeal before the Appellate Tribunal under

Section 18. The High Court ought not to have entertained the

writ petition in view of the adequate alternate statutory

remedies available to the Respondent. The interim order was

passed on the very first date, without an opportunity to the

Appellant to file a reply. Reliance was placed on United Bank

of India vs. Satyawati Tandon and others , 2010 (8) SCC

110, and General Manager, Sri Siddeshwara Cooperative

Bank Limited and another vs. Ikbal and others , 2013 (10)

SCC 83. The writ petition ought to have been dismissed at the

threshold on the ground of maintainability. The Division

Bench erred in declining to interfere with the same.

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5.Shri Roy Abraham, learned Counsel for the Respondent,

submitted that it was desirous to repay the loan, and merely

sought regularisation of the loan account. The inability to

service the loan was genuine, occasioned due to market

fluctuations causing huge loss in business, beyond the control

of the Respondent. The failure of the Bank to consider the

request for regularisation of the loan account, the absence of a

right to appeal under Section 17 against the order passed

under Section 13(3A), the Respondent was left with no option

but to prefer the writ application as the Respondent genuinely

desired to discharge the loans. The collateral security offered

included agricultural lands also, which had to be excluded

under Section 31 of the SARFAESI Act. There had been

violation of the principles of natural justice. A large number of

similar writ applications are pending before the High Court

preferred by the concerned borrowers, but the Bank has

singled out the present Respondent alone for a challenge.

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6.We have considered the submissions on behalf of the

parties. Normally this Court in exercise of jurisdiction under

Article 136 of the Constitution is loathe to interfere with an

interim order passed in a pending proceeding before the High

Court, except in special circumstances, to prevent manifest

injustice or abuse of the process of the court. In the present

case, the facts are not in dispute. The discretionary

jurisdiction under Article 226 is not absolute but has to be

exercised judiciously in the given facts of a case and in

accordance with law. The normal rule is that a writ petition

under Article 226 of the Constitution ought not to be

entertained if alternate statutory remedies are available,

except in cases falling within the well defined exceptions as

observed in Commissioner of Income Tax and Others vs.

Chhabil Dass Agarwal, 2014 (1) SCC 603, as follows:

“15. Thus, while it can be said that this Court

has recognised some exceptions to the rule of

alternative remedy i.e. where the statutory

authority has not acted in accordance with the

provisions of the enactment in question, or in

defiance of the fundamental principles of

judicial procedure, or has resorted to invoke

the provisions which are repealed, or when an

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order has been passed in total violation of the

principles of natural justice, the proposition

laid down in Thansingh Nathmal case,

Titaghur Paper Mills case and other similar

judgments that the High Court will not

entertain a petition under Article 226 of the

Constitution if an effective alternative remedy

is available to the aggrieved person or the

statute under which the action complained of

has been taken itself contains a mechanism for

redressal of grievance still holds the field.

Therefore, when a statutory forum is created

by law for redressal of grievances, a writ

petition should not be entertained ignoring the

statutory dispensation.”

7.The pleadings in the writ petition are very bald and

contain no statement that the grievances fell within any of the

well defined exceptions. The allegation for violation of

principles of natural justice is rhetorical, without any details

and the prejudice caused thereby. It harps only on a desire

for regularisation of the loan account, even while the

Respondent acknowledges its own inability to service the loan

account for reasons attributable to it alone. The writ petition

was filed in undue haste in March 2015 immediately after

disposal of objections under Section 13(3A). The legislative

scheme, in order to expedite the recovery proceedings, does

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not envisage grievance redressal procedure at this stage, by

virtue of the explanation added to Section 17 of the Act, by

Amendment Act 30 of 2004, as follows :-

“Explanation.—For the removal of doubts, it

is hereby declared that the communication of

the reasons to the borrower by the secured

creditor for not having accepted his

representation or objection or the likely action

of the secured creditor at the stage of

communication of reasons to the borrower

shall not entitle the person (including the

borrower) to make an application to the Debts

Recovery Tribunal under this sub-section.”

8. The Section 13(4) notice along with possession notice

under Rule 8 was issued on 21.04.2015. The remedy under

Section 17 of the SARFAESI Act was now available to the

Respondent if aggrieved. These developments were not

brought on record or placed before the Court when the

impugned interim order came to be passed on 24.04.2015.

The writ petition was clearly not instituted bonafide, but

patently to stall further action for recovery. There is no

pleading why the remedy available under Section 17 of the Act

before the Debt Recovery Tribunal was not efficacious and the

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compelling reasons for by-passing the same. Unfortunately,

the High Court also did not dwell upon the same or record any

special reasons for grant of interim relief by direction to

deposit.

9.The statement of objects and reasons of the SARFAESI

Act states that the banking and financial sector in the country

was felt not to have a level playing field in comparison to other

participants in the financial markets in the world. The

financial institutions in India did not have the power to take

possession of securities and sell them. The existing legal

framework relating to commercial transactions had not kept

pace with changing commercial practices and financial sector

reforms resulting in tardy recovery of defaulting loans and

mounting non-performing assets of banks and financial

institutions. The Narasimhan Committee I and II as also the

Andhyarujina Committee constituted by the Central

Government Act had suggested enactment of new legislation

for securitisation and empowering banks and financial

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institutions to take possession of securities and sell them

without court intervention which would enable them to realise

long term assets, manage problems of liquidity, asset liability

mismatches and improve recovery. The proceedings under the

Recovery of Debts due to Banks and Financial Institutions Act,

1993, (hereinafter referred to as ‘the DRT Act’) with passage of

time, had become synonymous with those before regular

courts affecting expeditious adjudication. All these aspects

have not been kept in mind and considered before passing the

impugned order.

10.Even prior to the SARFAESI Act, considering the

alternate remedy available under the DRT Act it was held in

Punjab National Bank vs. O.C. Krishnan and others ,

(2001) 6 SCC 569, that :-

“6. The Act has been enacted with a view to

provide a special procedure for recovery of

debts due to the banks and the financial

institutions. There is a hierarchy of appeal

provided in the Act, namely, filing of an appeal

under Section 20 and this fast-track procedure

cannot be allowed to be derailed either by

taking recourse to proceedings under Articles

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226 and 227 of the Constitution or by filing a

civil suit, which is expressly barred. Even

though a provision under an Act cannot

expressly oust the jurisdiction of the court

under Articles 226 and 227 of the Constitution,

nevertheless, when there is an alternative

remedy available, judicial prudence demands

that the Court refrains from exercising its

jurisdiction under the said constitutional

provisions. This was a case where the High

Court should not have entertained the petition

under Article 227 of the Constitution and

should have directed the respondent to take

recourse to the appeal mechanism provided by

the Act.”

11. In Satyawati Tandon (supra), the High Court had

restrained further proceedings under Section 13(4) of the Act.

Upon a detailed consideration of the statutory scheme under

the SARFAESI Act, the availability of remedy to the aggrieved

under Section 17 before the Tribunal and the appellate remedy

under Section 18 before the Appellate Tribunal, the object and

purpose of the legislation, it was observed that a writ petition

ought not to be entertained in view of the alternate statutory

remedy available holding :-

“43. Unfortunately, the High Court overlooked

the settled law that the High Court will

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ordinarily not entertain a petition under Article

226 of the Constitution if an effective remedy

is available to the aggrieved person and that

this rule applies with greater rigour in matters

involving recovery of taxes, cess, fees, other

types of public money and the dues of banks

and other financial institutions. In our view,

while dealing with the petitions involving

challenge to the action taken for recovery of

the public dues, etc. the High Court must keep

in mind that the legislations enacted by

Parliament and State Legislatures for recovery

of such dues are a code unto themselves

inasmuch as they not only contain

comprehensive procedure for recovery of the

dues but also envisage constitution of

quasi-judicial bodies for redressal of the

grievance of any aggrieved person. Therefore,

in all such cases, the High Court must insist

that before availing remedy under Article 226

of the Constitution, a person must exhaust the

remedies available under the relevant statute.

***

55. It is a matter of serious concern that

despite repeated pronouncement of this Court,

the High Courts continue to ignore the

availability of statutory remedies under the

DRT Act and the SARFAESI Act and exercise

jurisdiction under Article 226 for passing

orders which have serious adverse impact on

the right of banks and other financial

institutions to recover their dues. We hope and

trust that in future the High Courts will

exercise their discretion in such matters with

greater caution, care and circumspection.”

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12.In Union Bank of India and another vs. Panchanan

Subudhi, 2010 (15) SCC 552, further proceedings under

Section 13(4) were stayed in the writ jurisdiction subject to

deposit of Rs.10,00,000/- leading this Court to observe as

follows :

“7. In our view, the approach adopted by the

High Court was clearly erroneous. When the

respondent failed to abide by the terms of

one-time settlement, there was no justification

for the High Court to entertain the writ petition

and that too by ignoring the fact that a

statutory alternative remedy was available to

the respondent under Section 17 of the Act.”

13.The same view was reiterated in Kanaiyalal Lalchand

Sachdev and others vs. State of Maharashtra and others ,

2011 (2) SCC 782 observing:

“23. In our opinion, therefore, the High Court

rightly dismissed the petition on the ground

that an efficacious remedy was available to the

appellants under Section 17 of the Act. It is

well settled that ordinarily relief under Articles

226/227 of the Constitution of India is not

available if an efficacious alternative remedy is

available to any aggrieved person. (See

Sadhana Lodh v. National Insurance Co. Ltd.;

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Surya Dev Rai v. Ram Chander Rai and SBI v.

Allied Chemical Laboratories.)”

14.In Ikbal (supra), it was observed that the action of the

Bank under Section 13(4) of the ‘SARFAESI Act’ available to

challenge by the aggrieved under Section 17 was an efficacious

remedy and the institution directly under Article 226 was not

sustainable, relying upon Satyawati Tandon (Supra),

observing :

“27. No doubt an alternative remedy is not an

absolute bar to the exercise of extraordinary

jurisdiction under Article 226 but by now it is

well settled that where a statute provides

efficacious and adequate remedy, the High

Court will do well in not entertaining a petition

under Article 226. On misplaced

considerations, statutory procedures cannot be

allowed to be circumvented.

***

28…….In our view, there was no justification

whatsoever for the learned Single Judge to

allow the borrower to bypass the efficacious

remedy provided to him under Section 17 and

invoke the extraordinary jurisdiction in his

favour when he had disentitled himself for

such relief by his conduct. The Single Judge

was clearly in error in invoking his

extraordinary jurisdiction under Article 226 in

light of the peculiar facts indicated above. The

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Division Bench also erred in affirming the

erroneous order of the Single Judge.”

15.A similar view was taken in Punjab National Bank and

another vs. Imperial Gift House and others, (2013) 14 SCC

622, observing:-

“3. Upon receipt of notice, the respondents filed

representation under Section 13(3-A) of the

Act, which was rejected. Thereafter, before any

further action could be taken under Section

13(4) of the Act by the Bank, the writ petition

was filed before the High Court.

4. In our view, the High Court was not justified

in entertaining the writ petition against the

notice issued under Section 13(2) of the Act

and quashing the proceedings initiated by the

Bank.”

16.It is the solemn duty of the Court to apply the correct law

without waiting for an objection to be raised by a party,

especially when the law stands well settled. Any departure, if

permissible, has to be for reasons discussed, of the case falling

under a defined exception, duly discussed after noticing the

relevant law. In financial matters grant of ex-parte interim

orders can have a deleterious effect and it is not sufficient to

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say that the aggrieved has the remedy to move for vacating the

interim order. Loans by financial institutions are granted from

public money generated at the tax payers expense. Such loan

does not become the property of the person taking the loan,

but retains its character of public money given in a fiduciary

capacity as entrustment by the public. Timely repayment also

ensures liquidity to facilitate loan to another in need, by

circulation of the money and cannot be permitted to be

blocked by frivolous litigation by those who can afford the

luxury of the same. The caution required, as expressed in

Satyawati Tandon (supra), has also not been kept in mind

before passing the impugned interim order:-

“46. It must be remembered that stay of an

action initiated by the State and/or its

agencies/instrumentalities for recovery of

taxes, cess, fees, etc. seriously impedes

execution of projects of public importance and

disables them from discharging their

constitutional and legal obligations towards the

citizens. In cases relating to recovery of the

dues of banks, financial institutions and

secured creditors, stay granted by the High

Court would have serious adverse impact on

the financial health of such

bodies/institutions, which (sic will) ultimately

prove detrimental to the economy of the nation.

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Therefore, the High Court should be extremely

careful and circumspect in exercising its

discretion to grant stay in such matters. Of

course, if the petitioner is able to show that its

case falls within any of the exceptions carved

out in Baburam Prakash Chandra Maheshwari

v. Antarim Zila Parishad, Whirlpool Corpn. v.

Registrar of Trade Marks and Harbanslal

Sahnia v. Indian Oil Corpn. Ltd. and some other

judgments, then the High Court may, after

considering all the relevant parameters and

public interest, pass an appropriate interim

order.”

17.The writ petition ought not to have been entertained and

the interim order granted for the mere asking without

assigning special reasons, and that too without even granting

opportunity to the Appellant to contest the maintainability of

the writ petition and failure to notice the subsequent

developments in the interregnum. The opinion of the Division

Bench that the counter affidavit having subsequently been

filed, stay/modification could be sought of the interim order

cannot be considered sufficient justification to have declined

interference.

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18.We cannot help but disapprove the approach of the High

Court for reasons already noticed in Dwarikesh Sugar

Industries Ltd. vs. Prem Heavy Engineering Works (P) Ltd.

and Another, 1997 (6) SCC 450, observing :-

“32. When a position, in law, is well settled as

a result of judicial pronouncement of this

Court, it would amount to judicial impropriety

to say the least, for the subordinate courts

including the High Courts to ignore the settled

decisions and then to pass a judicial order

which is clearly contrary to the settled legal

position. Such judicial adventurism cannot be

permitted and we strongly deprecate the

tendency of the subordinate courts in not

applying the settled principles and in passing

whimsical orders which necessarily has the

effect of granting wrongful and unwarranted

relief to one of the parties. It is time that this

tendency stops.”

19.The impugned orders are therefore contrary to the law

laid down by this Court under Article 141 of the Constitution

and unsustainable. They are therefore set aside and the

appeal is allowed.

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20.All questions of law and fact remain open for

consideration in any application by the aggrieved before the

statutory forum under the SARFAESI Act.

……………………………….J.

(Rohinton Fali Nariman)

…….………………………..J.

(Navin Sinha)

New Delhi,

January 30, 2018

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