2015 (12) TMI 573 - HC - Companies Law

Writ Petition Against Private Bank Dismissed; Sale Agreement Valid

Mukesh Kumar and others Versus The Debts Recovery Tribunal, Hyderabad and others

Mukesh Kumar and others Versus The Debts Recovery Tribunal, Hyderabad and others - TMI Issues Involved:1. Maintainability of the writ petition against a private bank under Article 226 of the Constitution of India.2. Validity of the sale agreement under Section 13(13) of the SARFAESI Act.3. Requirement to exhaust alternative remedy of appeal under Section 18 of the SARFAESI Act before invoking writ jurisdiction.Issue-Wise Detailed Analysis:1. Maintainability of the Writ Petition:The Division Bench held that the 2nd respondent (a private bank) was not an instrumentality of the State under Article 12 of the Constitution of India and thus, a writ petition was not maintainable against it. The Bench referred to the judgment in *Federal Bank Limited v. Sagar Thomas*, which established that private banks do not perform public functions merely by providing banking services. The petitioners argued that the bank was required to discharge statutory duties under the SARFAESI Act and that a writ petition is maintainable for statutory violations. However, the court maintained that the writ petition was not maintainable against the private bank as it was not performing a public function. The review petition was partially allowed on this point, recognizing that statutory obligations imposed on private banks can be questioned under Article 226.2. Validity of the Sale Agreement:The Division Bench initially held that the sale agreement in favor of the petitioners was invalid under Section 13(13) of the SARFAESI Act, which prohibits the creation of any interest in the secured asset without the consent of the secured creditor. The petitioners contended that a previous Division Bench had already ruled that such an agreement was not void under Section 13(13). The court acknowledged that the previous judgment was binding and that the Division Bench in W.P. No.35413 of 2013 erred in re-examining the validity of the sale agreement. Thus, the order on this point was reviewed and set aside.3. Exhaustion of Alternative Remedy:The Division Bench held that the petitioners should have exhausted the alternative remedy of appeal under Section 18 of the SARFAESI Act before invoking the writ jurisdiction of the High Court. The court cited several Supreme Court judgments emphasizing that the existence of an alternative remedy is a bar to the exercise of writ jurisdiction, especially in matters involving recovery of dues by banks. The petitioners argued that the alternative remedy was neither effective nor efficacious due to the pre-deposit condition. However, the court upheld the requirement of exhausting the statutory remedy, stating that the pre-deposit condition does not render the remedy ineffective. The review petition was dismissed on this point.Conclusion:The review petition was partially allowed. Points 1 and 2 were reviewed, and the conclusions recorded thereunder were set aside. However, the order on Point 3, requiring the petitioners to exhaust the alternative remedy of appeal, was upheld, and the review petition was dismissed to that extent.