Point of Law: SARFAESI Act was enacted to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith. Liquidation of secured interest through a more expeditious procedure is what has been envisaged under the SARFAESI Act and the two Acts are cumulative remedies to the secured creditors.

ORDER :

1. The instant writ petition has been filed seeking for following reliefs :-

“A. Issue a writ of certiorari quashing and setting aside the notice dated 22.08.2022 issued by respondent no.3 whereby the commencement of arbitration was notified by the arbitrator and consequential arbitration proceedings arising there from.

B. Grant the cost of the petition to the petitioner.

C. Grant any other relief as deemed fit and proper in the facts and circumstances of the case.”

2. The impugned order Annexure P-1 under challenge is a notice issued by the respondent no.3 the sole arbitrator appointed to arbitrate upon the dispute between the petitioner and respondent no.1 & 2.

3. Facts relevant for adjudication of the present dispute is that the petitioner had obtained certain loan for commercial transactions from the respondent no.1 & 2. The respondent no.1 & 2 in turn sanctioning to the petitioner the loan of Rs. 1,82,93,945(One crore, Eighty two lakhs, ninety three thousand, nine forty five Rupees) vide loan Account No.LNRAIHL-12180043625.

4. In pursuance to the sanctioning of loan, the petitioner entered into a law agreement with respondent No.1 & 2 and created a mortgage in respect of the properties measuring 4000 Sq.Feet at Khatiyan No.431 Plot No. H-29 situated at Bharat Gruh Nirman Samiti Maryadit, Rajiv Nagar, Kali Mata Ward No.30, PC. NO.109, RIC-Raipur, Chhattisgarh.

5. As a result of default on the part of the petitioner, in re-payment of loan, respondent no.1 & 2 initiated proceedings under Sarfaesi Act against the petitioner. It is also contended that respondent no.1 & 2 initiated proceedings under Payment and Settlement Systems Act, 2007. Lastly respondent no.1 & 2 resorted to invoke the arbitration clause and have appointed respondent no.3 as a sole arbitrator to resolve the dispute between the parties.

6. Mr. Ankit Pandey appearing for respondent no.1 & 2 raised a question of maintainability of the writ petition. The contention of the learned counsel for the respondents was that firstly respondent no.1 & 2 being a private financial institution the same would not fall within the ambit of State under Article 12 of the Constitution of India. Secondly, it was contended that the appointment of respondent no.3 as an arbitrator invoking the provision of arbitration Act also is not one which could be questioned by way of a writ petition under Article 226 as there is no legal bar for the two proceedings i.e. the proceedings under Arbitration Act and one under the Sarfaesi Act from being proceeded simultaneously.

7. Learned counsel for the petitioner on the other hand in support of his contention relied upon the decision of the Supreme Court in the case of Phoenix Arc Private Limited Vs. Vishwa Bharati Vidya Mandir & Others, (2022) 5 SCC 345 and also the decision in the case of Vidya Droliya & Others Vs. Durga Trading Corporation, (2021) 2 SCC 1 in support of this contention and also the judgment rendered in the case of Bhaven Construction, through Authorized Signatory Premjibhai K. Shah Vs. Executive Engineer, Sardar Sarovar Narmada Nigam Limited and Another, (2022) 1 SCC 75.

8. As regards the first contention of the learned counsel for the respondent that Writ would not be maintainable against private financial institution, it would be relevant at this juncture to take note of the judgment relied upon by the petitioner themselves i.e. in the case of Phoenix Arc Private Limited(Supra) wherein in paragraph 18, 20 & 21 it has been held as under :-

18. Even otherwise, it is required to be noted that a writ petition against the private financial institution – ARC – appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions whi