Writ jurisdiction and surplus sale proceeds under the Securitisation Act: unrelated lien cannot defeat statutory refund duty.

A writ petition under Article 226 remained maintainable against a bank's action under the Securitisation Act where the challenge alleged exercise of power beyond the statute; the availability of alternate remedies did not bar review in such a case. The bank, acting as a State instrumentality, was amenable to writ jurisdiction. On the merits, the secured creditor was required under Section 13(7) to apply sale proceeds only to statutory costs and secured dues from the same enforcement transaction and then remit the residue to the entitled person. An unrelated loan transaction could not support a separate lien to withhold the surplus, and the retention justified interest on the withheld amount.

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Issues: (i) Whether a writ petition under Article 226 was maintainable against the bank's action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 despite the availability of alternate remedies; (ii) whether the bank could retain the surplus realised from sale of the secured property by invoking a right of lien arising from a separate loan transaction, and whether interest was payable on the withheld amount.

Issue (i): Whether a writ petition under Article 226 was maintainable against the bank's action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 despite the availability of alternate remedies.

Analysis: The statutory remedy under the Securitisation Act does not oust writ jurisdiction in all cases. Where the action complained of discloses an inherent lack of power or jurisdiction, or where the exercise of power is beyond the scope of the statute, the High Court can intervene under Article 226. The bank, being an instrumentality of the State, was amenable to writ jurisdiction. Since the controversy turned on whether the bank had any authority under the Securitisation Act to retain the surplus amount, the petition was maintainable.

Conclusion: The writ petition was maintainable.

Issue (ii): Whether the bank could retain the surplus realised from sale of the secured property by invoking a right of lien arising from a separate loan transaction, and whether interest was payable on the withheld amount.

Analysis: Section 13(7) of the Securitisation Act requires the secured creditor to hold the sale proceeds in trust, first to meet costs, charges and secured dues, and thereafter to pay the residue to the person entitled thereto. That obligation is confined to the very transaction and security interest enforced under the Act. A separate and distinct loan transaction cannot be imported to defeat the statutory duty to return the residue. The bank's asserted lien arose from an unrelated transaction and could not override the statutory scheme. The Act's overriding effect under Section 35 prevails where there is inconsistency, while Section 37 only preserves other laws to the extent they are not inconsistent with the Act. As the bank had no authority to retain the surplus, the withholding was wrongful and compensatory interest was justified.

Conclusion: The bank could not retain the surplus on the basis of a separate lien claim, and the petitioner was entitled to refund of the surplus with interest at 8% per annum.

Final Conclusion: The petitions were allowed to the extent of directing repayment of the surplus sale proceeds with interest, while leaving the parties' rights in the pending DRT proceedings unaffected.

Ratio Decidendi: A secured creditor enforcing its security interest under the Securitisation Act must treat the sale proceeds as a statutory trust fund and can apply only the statutory and transaction-linked entitlements before remitting the residue to the person entitled thereto; an unrelated contractual lien cannot be used to withhold the surplus.

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