Alternate remedy under SARFAESI limits writs; assignment of secured debts and securities was upheld as valid.

An efficacious statutory remedy under the SARFAESI Act before the Debts Recovery Tribunal ordinarily bars writ intervention under Article 226, and no exceptional circumstances were shown to bypass that forum; the petitioners were therefore relegated to the remedy under Section 17(1). The transfer of secured debts and underlying securities between financial entities, and then to the secured creditor enforcing SARFAESI measures, was treated as legally valid because the statutory definitions of financial asset, security interest and secured creditor permit such assignment, the Banking Regulation Act, 1949 did not prohibit it, and the RBI material supported the transaction. The challenge to the SARFAESI measures failed.

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Issues: (i) Whether the writ petitions were maintainable in view of the statutory remedy under the SARFAESI Act; (ii) Whether the transfer of the secured debts and underlying securities from one financial entity to another, and thereafter to the secured creditor invoking action under the SARFAESI Act, was legally valid under the SARFAESI Act, the Banking Regulation Act, 1949 and the RBI guidelines.

Issue (i): Whether the writ petitions were maintainable in view of the statutory remedy under the SARFAESI Act.

Analysis: The statutory scheme provided an efficacious remedy before the Debts Recovery Tribunal against measures taken under Section 13(4) of the SARFAESI Act. The rule of alternate remedy was applied with particular caution in matters involving recovery of bank dues, and the exceptions to that rule were not made out. The challenge did not disclose such exceptional circumstances as would justify bypassing the statutory forum under Article 226 of the Constitution of India.

Conclusion: The writ jurisdiction was not to be exercised and the petitioners were relegated to the remedy under Section 17(1) of the SARFAESI Act.

Issue (ii): Whether the transfer of the secured debts and underlying securities from one financial entity to another, and thereafter to the secured creditor invoking action under the SARFAESI Act, was legally valid under the SARFAESI Act, the Banking Regulation Act, 1949 and the RBI guidelines.

Analysis: The scheme of the SARFAESI Act treats a securitisation or reconstruction company, and in the relevant context a bank or financial institution, as capable of acquiring financial assets and stepping into the position of lender and secured creditor. The definitions of financial asset, security interest and secured creditor, read with the enforcement provisions, did not prohibit the inter se assignment of debts and securities. The alleged transfer was also not shown to be barred by the Banking Regulation Act, 1949, nor was there any legal basis to treat the transaction as prohibited trading or as a void arrangement under the Indian Contract Act, 1872. The RBI sanction and the material on record supported the validity of the transfers.

Conclusion: The transfers were held to be legally valid and the challenge to their legality failed.

Final Conclusion: The challenge to the SARFAESI measures was rejected on merits, and the petitioners were left to pursue any permissible statutory remedy before the appropriate forum.

Ratio Decidendi: Where an efficacious statutory remedy is available under the SARFAESI Act, writ jurisdiction will ordinarily not be exercised absent exceptional circumstances, and inter se assignment of financial assets is permissible when supported by the statutory definitions and enforcement scheme governing secured creditors.

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