Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2023 Supreme(Online)(SC) 5518

M.M. SUNDRESH, J
M/S. SOUTH INDIAN BANK LTD. – Appellant
Versus
NAVEEN MATHEW PHILIP & ANR. – Respondent
CIVIL APPEAL NOS. OF 2023 | SLP (Civil) Nos. 22021-22022 of 2022

Advocates:
For the Appellants/Petitioners: K.V. Vishwanathan
For the Respondents: Shyam Divan

The High Court should refrain from exercising jurisdiction under Article 226 when effective alternative remedies are available in matters concerning financial transactions under the SARFAESI Act.

Headnote:(A) Article 226 of the Constitution of India - Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - High Court's jurisdiction and its use in commercial matters questioned; loans declared as non-performing assets - Notices issued under SARFAESI Act and subsequent challenges by borrowers highlighted; writ petitions filed despite availability of statutory remedies - The interference by High Courts in matters related to the SARFAESI Act is deprecated, particularly when effective alternatives exist. (Paras 3, 9, 10, 18)

(B) Jurisdiction of High Courts under Article 226 - The rule of exhaustion of alternative remedies is established; courts should refrain from interfering in financial matters where statutory bodies exist to resolve disputes. The principle is applicable to private financial transactions. (Paras 10, 15, 18, 21)

(C) Certiorari powers of the High Court - Clarifications on when writs can be issued and the factors considered, including errors of law and jurisdictional issues. The High Court must refrain from reviewing factual findings of subordinate bodies unless clear errors exist. (Paras 11-12, 27)

Facts of the case:
The Appellants provided loans to the Respondents, who defaulted. Notices were issued under the SARFAESI Act, leading to the Respondents filing multiple writ petitions against recovery actions despite alternate remedies being available.

Findings of Court:
The High Court's intervention was unnecessary and detrimental to the lender's rights. General guidance on future cases involving High Court jurisdiction in financial matters was reiterated.

Issues: The misconduct in invoking writ jurisdiction in view of statutory mechanisms and the appropriateness of deferred repayments in commercial loans were central questions.

Ratio Decidendi: The rulings affirm that the availability of an alternative legal remedy should dissuade the High Court from exercising its jurisdiction. The power under Article 226 should be exercised only in exceptional circumstances.

Result: Appeals allowed.

Table of Content
1. enforcement of unilateral financial offers. (Para 2 , 4 , 5 , 6)
2. need for restraint by high courts in financial matters. (Para 9 , 13)
3. high court's jurisdiction should not interfere with statutory procedures. (Para 10 , 11 , 12)
4. conditions governing article 226 powers and alternative remedies. (Para 15 , 16 , 18)
5. appeals dismissed with guidance for future conduct. (Para 19)

JUDGEMENT

M.M. SUNDRESH, J. 1. Leave granted.

2. Seeking enforcement of a unilateral offer concerning private financial transactions, while questioning the steps taken to recover the dues on the failure to comply with the one-time settlements, extraordinary jurisdiction of the High Court was sought to be invoked. Acceding to the request made by duly interfering with the action taken by the Appellants, orders were passed, in exercise of the powers conferred under Article 226 of the Constitution of India by the High Court of Kerala, which are impugned in the present appeals.

3. Heard Mr. K.V. Vishwanathan, learned Senior Counsel for the Appellants and Mr. Shyam Divan, learned Senior Counsel for the Respondents. Digitally signed by BABITA PANDEY Date: 2023.04.18 17:54:26 IST Reason:

Signature Not Verified

4. Two loans were obtained by the Respondents, being a housing / KCC overdraft loan and a business loan. The accounts of the Respondents were declared as non- performing assets (“NPA”) on 27.05.2021. Notices under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”) were issued on 07.08.2021 and 12.08.2021, respectively, which were duly replied to by the Respondents on 28.10.2021, seeking twelve months’ time to repay the loan.

5. Strangely enough, within 3 days of the reply dated 28.10.2021, prior to the expiry of the statutory period prescribed, a challenge was laid to the demand notice issued under Section 13(2) of the SARFAESI Act, by filing Writ Petition No.

23940 of 2021. Entertaining the said lis, a direction was issued to the Appellants to consider the proposal placed. In due compliance of the aforesaid order, the Respondents were allowed to remit the dues accrued in five installments instead of twelve. The extended benefit conferred was not utilized by the Respondents, and therefore, a reminder was also sent. Receiving no response, two notices under Section 13(4) of the SARFAESI Act, were issued on 02.12.2021 and 20.12.2021.

6. Impugning the aforesaid notices, two writ petitions were filed by the Respondents, being Writ Petition No. 30238 of 2021 and 30450 of 2021 questioning the action taken, through a writ of certiorari while praying for a positive direction to accept the unilateral offers made. It is to be noted that the Debt Recovery Tribunal, though was not functional at the time of filing the aforesaid Writ Petitions, became so from the month of March, 2022.

7. Taking note of the then prevailing situation resulting in the post of Presiding Officer lying vacant for proper adjudication in various Tribunals, an order was passed by this Court in Special Leave Petition No. 10911 dated 16.12.2021,

“Learned Senior Counsel appearing for the petitioner has brought to our notice the

difficulty being faced by parties on account of non-appointment of members in DRTs and

DRATs.

He requested that the matters before DRT and DRAT can be directed to be

considered by other Tribunals like Central Administrative Tribunal, Armed Forces

Tribunal and Industrial Tribunal within the State.

With a view to resolve the problem being faced by the parties, for the time being and

purely as a stop-gap arrangement, we request the concerned High Court(s) to entertain the

matters falling within the jurisdiction of DRTs and DRATs under Article 226 of the

Constitution of India, till further orders.

We make it clear that once the Tribunal(s) is/are constituted, the matters can be

relegated to the Tribunals by the High Court(s).

List the matter on 21-1-2022.”

“

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2023 Supreme(Online)(SC) 5518

M.M. SUNDRESH, JM/S. SOUTH INDIAN BANK LTD. – AppellantVersusNAVEEN MATHEW PHILIP & ANR. – RespondentCIVIL APPEAL NOS. OF 2023 | SLP (Civil) Nos. 22021-22022 of 2022

The High Court should refrain from exercising jurisdiction under Article 226 when effective alternative remedies are available in matters concerning financial transactions under the SARFAESI Act.

M.M. SUNDRESH, J
M/S. SOUTH INDIAN BANK LTD. – Appellant
Versus
NAVEEN MATHEW PHILIP & ANR. – Respondent
CIVIL APPEAL NOS. OF 2023 | SLP (Civil) Nos. 22021-22022 of 2022