Back
IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
Rakesh Kumar, D. Ramesh, JJ.
Sri Rama Enterprises and Ors. – Appellants
Versus
State Bank of India and Ors. – Respondents
WP No. 7295 of 2018
Decided On : 12-05-2020
SARFAESI ACT - SECTION 13(2), 13(4), 13(8) - WRIT PETITION - MAINTAINABILITY - STATUTORY REMEDY - AUCTION SALE - NOTICE - REDEMPTION - OTS PROPOSAL - REJECTION - JUDICIAL REVIEW - SCOPE - INTERFERENCE BY HIGH COURT - CIRCUMSPECTION - PUBLIC MONEY - FIDUCIARY CAPACITY - TIMELY REPAYMENT - LIQUIDITY - FRIVOLOUS LITIGATION. 1. A writ petition challenging the auction sale of secured assets under the SARFAESI Act is not maintainable if the petitioners have a statutory remedy under Section 17 of the Act. 2. The High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person, especially in matters involving recovery of public dues, taxes, cess, fees, and dues of banks and other financial institutions. 3. In matters involving challenge to the action taken for recovery of public dues, etc., 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. 4. The High Courts must exercise their discretion in such matters with greater caution, care, and circumspection, especially when the law stands well settled. 5. Grant of ex parte interim orders in financial matters can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. 6. Loans by financial institutions are granted from public money generated at the taxpayer's expense and 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. 7. 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.
Fact of the Case:
The petitioners, whose loan accounts were declared NPAs in 2009 and were issued demand notices under the SARFAESI Act in the same year, challenged the auction sale of their secured assets in a writ petition. They claimed that they were ready for settlement of the accounts, but the respondent-bank proceeded with the auction proceedings. They also argued that they were never given notice of the auction sale and that their OTS proposal was never rejected.
Finding of the Court:
The Court held that the writ petition was not maintainable since the petitioners had a statutory remedy under Section 17 of the SARFAESI Act. It also held that the petitioners had not exhausted the remedies available to them under the Act before filing the writ petition. The Court further held that the High Court should not have entertained the writ petition since the law was well settled and the petitioners had an alternative remedy.
Issues: 1. Whether the writ petition was maintainable in light of the statutory remedy available to the petitioners under Section 17 of the SARFAESI Act? 2. Whether the petitioners had exhausted all available remedies before filing the writ petition? 3. Whether the High Court should have entertained the writ petition given the settled law and the availability of an alternative remedy?
Ratio Decidendi: 1. The Court relied on the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person, especially in matters involving recovery of public dues, taxes, cess, fees, and dues of banks and other financial institutions. 2. The Court also relied on the principle that in matters involving challenge to the action taken for recovery of public dues, etc., 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. 3. The Court further held that the High Courts must exercise their discretion in such matters with greater caution, care, and circumspection, especially when the law stands well settled.
Final Decision: The Court dismissed the writ petition, holding that it was not maintainable and that the petitioners had not exhausted all available remedies before filing the petition.
JUDGMENT :
Rakesh Kumar, J.
1. The petitioners herein, whose loan accounts were declared as Non-Performing Assets (NPAs) long back in the year 2009 and thereafter under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the SARFAESI Act') demand notices were issued in the year 2009 itself, have succeeded in keeping the litigation alive till date, despite the fact that twice earlier they approached this Court invoking the writ jurisdiction and, on both occasions, they did not get favourable orders. This is the third attempt.
2. Petitioner No. 1 had obtained loan of Rs. 4,00,000/- vide Loan Account No. 30011043530, on 30.7.2005, from the respondent-bank and created mortgage by way of depositing title deeds and also personal guarantee of 2nd petitioner. Similarly, 2nd petitioner had obtained loan of Rs. 4,00,000/- vide Loan Account No. 30011041033, on 25.7.2005, and created mortgage by depositing title deeds and also secured personal guarantee of 1st petitioner. Since both the loan accounts remained irregular, in the year 2009, both accounts were declared NPAs, and demand notices were issued to both the petitioners. Despite issuance of notices, the said accounts were not settled and as such under Section 13(4) of the SARFAESI Act, possession notices were issued on 11.8.2009 and thereafter sale notice too was issued. Petitioners thereafter filed SA No. 25 of 2011 before the Debts Recovery Tribunal (for short, 'the DRT'), Visakhapatnam, challenging the sale notice, which was dismissed by the DRT, Visakhapatnam, on 11.12.2012. The order of the DRT, Visakhapatnam, was challenged by the petitioners vide SA No. 74 of 2013 before the Debts Recovery Appellate Tribunal (for short, 'the DRAT'), Kolkata, which also stood dismissed on 5.12.2017. Since respondent-bank had already issued 2nd sale notice, dated 7.1.2013, because of the fact that earlier sale was not materialized pursuant to the sale notice, dated 22.1.2011, before final order was passed by the DRAT, Kolkata, the petitioners had preferred a writ petition vide WP No. 1520 of 2016, wherein a prayer was made for expeditious disposal of SA No. 74 of 2013. As stated in the writ petition, the said writ petition was disposed of directing the petitioners to move DRAT. After dismissal of SA No. 74 of 2013, the petitioners again filed a writ petition vide WP No. 42025 of 2017, which stood dismissed on 12.12.2017, leaving it open to the petitioners to pursue remedies available to them in law, if any, in accordance with due procedure. Despite dismissal of the writ petition, the petitioners again filed the present writ petition with the following prayer:
(i) the notification "sale by means of sealed tender-cum-open auction" dated 7.1.2013 on 8.1.2013 in Deccan Chronicle English Daily;
(ii) conformation of the sale dated 8.2.2013 and the sale certificate dated 12.2.2013 issued in favour of the respondent No. 4;
(iii) proceedings dated 4.10.2012 issued by the respondent No. 3 as illegal, violative of Articles 14, 19(1)(g) and 300-A of the Constitution of India and the provisions of the SARFAESI Act, 2002 and the Rules framed thereunder;
(iv) declaring that the petitioners are entitled for the benefits of OTS-2012 scheme and
(v) pass such other orders as this Hon'ble Court may deem fit in the circumstances of the case."
3. In the writ petition, besides arraying the bank and its officials as respondents, the petitioners also impleaded the auction purchaser as 4th respondent. By order dated 6.3.2018, while the writ petition was taken up for admission before notice, learned Standing Counsel for the respondent-bank took notices on respondent Nos. 1 to 3, whereas personal notice by registered post upon respondent No. 4 was directed and thereafter on 1.5
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
