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Issues: (i) whether a guarantor or mortgagor falls within the expression "borrower" and can be proceeded against under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (ii) whether the petitioners could invoke Articles 226 and 227 of the Constitution of India to challenge measures under Section 13(4) despite the statutory appeal under Section 17 of the Act.
Issue (i): whether a guarantor or mortgagor falls within the expression "borrower" and can be proceeded against under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
Analysis: The statutory definition of "borrower" was read broadly to include a person who has given guarantee or created mortgage or pledge as security for financial assistance. The scheme and object of the Act were treated as directed toward speedy recovery of secured debts and reduction of non-performing assets. Section 13(1), Section 13(2), Section 13(4) and Section 13(11) were taken together to show legislative intent that enforcement may be taken against guarantors and mortgagors as well, and that the secured creditor may proceed against pledged or secured assets without first exhausting action against the original borrower.
Conclusion: The guarantor or mortgagor is covered by the Act and can be proceeded against under Section 13; the objection to maintainability on that ground fails.
Issue (ii): whether the petitioners could invoke Articles 226 and 227 of the Constitution of India to challenge measures under Section 13(4) despite the statutory appeal under Section 17 of the Act.
Analysis: Section 17 provides an effective and exhaustive remedy to any person aggrieved by measures taken under Section 13(4), and the Debts Recovery Tribunal is empowered to examine compliance with the Act and the Rules and to restore possession if the measures are illegal. The Court applied the settled principle that writ jurisdiction is ordinarily not exercised when an efficacious alternative statutory remedy exists. Alleged non-compliance with Rule 8 of the Security Interest (Enforcement) Rules, 2002 and disputes about whether additional financial assistance of Rs. 10 crore formed part of restructuring were treated as matters that could be examined in statutory proceedings and not in writ jurisdiction.
Conclusion: The petitions were not entertainable in writ jurisdiction, and the petitioners were relegated to the remedy under Section 17.
Final Conclusion: The challenge to the SARFAESI measures failed on merits and on the ground of alternative statutory remedy, leaving the petitioners to pursue relief before the Debts Recovery Tribunal.
Ratio Decidendi: A guarantor or mortgagor is included within the statutory concept of borrower for enforcement under Section 13 of the SARFAESI Act, and a writ petition will ordinarily not be entertained against measures under Section 13(4) when an efficacious appeal under Section 17 is available.
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