Article 226 petition should not be entertained when alternative statutory remedies exist, SC

Article 226 petition should not be entertained when alternative statutory remedies exist, SC

Murali Krishnan

The Supreme Court today reiterated that the jurisdiction under Article 226 of the Constitution has to be exercised by High Courts judiciously, and that a writ petition under Article 226 ought not be entertained if alternate statutory remedies are available, except in cases falling within the well-defined exceptions.

The judgment was delivered by a Bench of Justices Rohinton Fali Nariman and Navin Sinha in an appeal filed by State Bank of Travancore against an interim order of the Kerala High Court.

The High Court, in an Article 226 petition filed by respondent Mathew KC, had stayed proceedings under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act), 2002, leading to an appeal against the same in the Supreme Court.

Senior Advocate Harin P Raval appeared for the appellant bank, while advocate Roy Abraham appeared for the respondent.

The facts surrounding the litigation are as follows.

A loan account of the Respondent was declared a Non-Performing Asset (NPA) on December 28, 2014. The outstanding dues of the Respondent on the date of the institution of the writ petition was Rs. 41,82,560. Despite repeated notices, the Respondent failed to pay the dues. Statutory notice under Section 13(2) of the SARFAESI Act was issued to the Respondent on January 21, 2015.

The objections under Section 13(3A) were considered, and rejection was communicated by the appellant on March 31, 2015. Possession notice was then issued under Section 13(4) of the Act read with Rule 8 of The Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as ‘the Rules’) on April 21, 2015.

Meanwhile, the respondent filed the writ petition in the Kerala High Court and obtained stay of proceedings on April 24, 2015. This order by a single judge was confirmed by a Division Bench in appeal, which led to the appeal in Supreme Court.

The Supreme Court in its judgment noted that it was, in exercise of its jurisdiction under Article 136 of the Constitution, loath to interfere with an interim order passed in a pending proceeding before the High Court. However, it did so in special circumstances, to prevent manifest injustice or abuse of the process of the court.

It then proceeded to set out the legal position with respect to Article 226.

“The discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well-defined exceptions as observed in Commissioner of Income Tax and Others vs. Chhabil Dass Agarwal, 2014 (1) SCC 603.”

Referring to the case at hand, the Court observed that the pleadings in the writ petition were very bald and contained no statement that the grievances fell within any of the well-defined exceptions.

“The allegation for violation of principles of natural justice is rhetorical, without any details and the prejudice caused thereby. It harps only on a desire for regularisation of the loan account, even while the Respondent acknowledges its own inability to service the loan account for reasons attributable to it alone. The writ petition was filed in undue haste in March 2015 immediately after disposal of objections under Section 13(3A).”

The Court went on to note that the legislative scheme, in order to expedite the recovery proceedings, does not envisage grievance redressal procedure at this stage [that is at the stage of Section 13(3A)], by virtue of the explanation added to Section 17 of the Act, by Amendment Act 30 of 2004.

However, once Section 13(4) notice along with possession notice under Rule 8 was issued on April 21, 2015, statutory remedy under Section 17 of the SARFAESI Act was now available to the respondent if aggrieved.

The Court noted that these developments were not brought on record or placed before the Court when the impugned interim order came to be passed. It, therefore, questioned the bonafides of the writ petition, stating,

“The writ petition was clearly not instituted bonafide, but patently to stall further action for recovery. There is no pleading why the remedy available under Section 17 of the Act before the Debt Recovery Tribunal was not efficacious and the compelling reasons for by-passing the same. Unfortunately, the High Court also did not dwell upon the same or record any special reasons for grant of interim relief by direction to deposit.”

It, therefore, set aside the interim order passed by the High Court, while also holding that the questions of law and fact remain open for consideration in any application by the aggrieved party before the statutory forum under the SARFAESI Act.

Read the judgment below.

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