Title: Thara Philip v. Federal Bank Ltd. & Anr.
Decided on: 12th October, 2023
WP(C) NO. 30346 OF 2023
CORAM: Hon’ble Justice K. Babu
Introduction
Last week, the Kerala High Court dismissed a challenge to recovery actions brought under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) regarding a few land parcels that the petitioner claimed were agricultural lands and were therefore protected under Section 31 (i) of the law.
Facts of the Case
M/S Thara Coffee Pvt. Ltd., a partnership company, had used the respondent-Bank’s credit facility with the petitioner serving as guarantee. As a result, several properties were mortgaged in order to use the lending facility. However, the loan fell into default, and the bank started recovery actions under the SARFAESI Act. In order to take actual physical ownership of the properties, the bank secured symbolic custody of them and then petitioned the Chief Judicial Magistra tical Court in Kalpetta. An advocate commissioner was chosen by the court, and he or she published a notice ordering the properties taken into custody.
The bank sold the mortgaged assets, which have been contested in this plea, despite the borrowers contesting the proceedings before the Debts Recovery Tribunal (DRT), Ernakulam.
Courts analysis and decision
The writ petition is not maintainable is the bank’s principal objection. The alternative remedy rule serves as the foundation for this challenge.
The Court read the SARFAESI Act’s scheme and noted that it was designed to help banks and financial institutions realise long-term assets, manage liquidity issues, asset liability issues, and mismatches, improve recovery by using the authority to seize securities and sell them, and decrease non-performing assets (NPAs) by implementing measures for recovery and reconstruction. The main enforcing provision for this is Section 13.
The Court described the Act as a “self-contained code” and stated that it offers an efficient remedy for an aggrieved party to contest the procedures in Section 17 before the DRT (“Application against measures to recover secured debts”). The Court consequently believed that the merits of the writ petition needed to be evaluated in the context of the effective remedy offered by the Act.
The Court also upheld the challenge to the maintainability of the argument that the respondent-Bank is not an institution or company performing a statutory or public duty and therefore is not subject to writ jurisdiction under Article 226 of the Constitution because it is a private company carrying on banking business as a scheduled bank.
Reiterating the principle of South Indian Bank Ltd. v. Naveen Mathew Philip (2023 SCC OnLine SC 435) = [2023 (4) KLT 29 (SC), the Court held that where there are disputed questions of facts, the High Court may decide to decline jurisdiction in a writ petition unless the Court is of the view that the nature of the controversy requires the exercise of its jurisdiction. In the present case, the writ petition has not been filed to enforce a fundamental right protected by Part III of the Constitution
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Written by- Aashi Narayan
