The High Court should not entertain a petition under Article 226 of the Constitution particularly when an alternative statutory remedy is available : SC

Case title: PHR Invent Educational Society v. UCO Bank and Ors

Case no.: Civil Appeal No. ….. of 2024 (Arising out of SLP(C) No. 8867 of 2022)

Order on: 10^th April 2024

Quorum: Justice B.R. Gavai, Justice Rajesh Bindal and Justice Sandeep Mehta

FACTS OF THE CASE

The case revolves around a loan availed by the borrower (Dr. M.V. Ramana Rao) from UCO Bank, for which four properties were mortgaged as collateral security. Due to default in repayment, the bank initiated proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

The Bank issued an Auction Sale Notice for the scheduled properties. The borrower challenged this through a securitization application before the Debts Recovery Tribunal (DRT).

Meanwhile, the auction was conducted, and the appellant emerged as the highest bidder. Despite interim orders from the DRT, the borrower failed to comply with payment obligations. Eventually, the sale was confirmed in favor of the appellant.

CONTENTIONS OF THE APPELLANT

The appellant argued against the High Court entertaining the borrower’s writ petition, citing settled law on alternative remedies under the SARFAESI Act. They emphasized the borrower’s conduct, including non-compliance with payment obligations and the finality of the sale in favor of the appellant.

Shri Basant, learned Senior Counsel appearing for the appellant-auction purchaser relied on the judgments of this Court in the cases of,

United Bank of India v. Satyawati Tondon and Other:

The High Court overlooked the settled law that it will 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.

The Court further held that though the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, still it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution.

CONTENTIONS OF THE RESPONDENTS

UCO Bank and others argued for the dismissal of the borrower’s writ petition, emphasizing the availability of statutory remedies under the DRT Act and SARFAESI Act. They highlighted the borrower’s failure to comply with payment obligations and the finality of the confirmed sale.

ISSUE –

• Whether the High Court erred in entertaining the borrower’s writ petition despite the availability of alternative remedies under the SARFAESI Act.
• Whether the borrower’s conduct disentitles them to equitable relief.

COURT’S ANALYSIS AND JUDGEMENT

The court reiterated settled law that the High Court should not entertain petitions under Article 226 of the Constitution when effective alternative remedies are available. It emphasized the finality of the confirmed sale and the extinguishment of the borrower’s right of redemption. The court found no exceptional circumstances warranting the High Court’s interference. It held that the High Court erred in entertaining and allowing the borrower’s petition and dismissed the same.

The court, while recognizing the High Court’s wide powers under Article 226, stressed the importance of exhausting alternative remedies, especially in matters involving recovery of dues. The judgment upheld the finality of the confirmed sale and the borrower’s failure to avail statutory remedies, ultimately dismissing the borrower’s writ petition.

This case underscores the significance of adhering to statutory procedures and exhausting alternative remedies before seeking recourse through writ jurisdiction, particularly in matters concerning financial obligations and recovery actions.

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Judgement Reviewed by – Chiraag K A

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