2017 (10) TMI 756 - HC - Indian Laws

High Court dismisses petition challenging possession notice under SARFAESI Act, emphasizes alternative remedy

The High Court dismissed the petition challenging a possession notice under Section 13(4) of the SARFAESI Act, 2002, emphasizing the availability of an ... Possession notice issued u/s 13(4) of SARFAESI Act - Held that:- The SARFAESI Act, 2002 is a strict act which requires strict compliance of the provisions provided therein and any deviation in compliance of the provisions renders the action of the secured creditor bad and unsustainable. The Debt Recovery Tribunal is fully empowered to go into the record of the secured creditor regarding the compliance of the provisions of the Act and Rule and the borrower gets an opportunity to see the record of the proceedings initiated and conducted by the bank against him in recovery of debt from him before the Debts Recovery Tribunal. In the writ petitions filed under Article 226 of the constitution before the High Court, the borrower never gets the opportunity to rebut the action taken by the secured creditor against him and by accepting the liability alleged by the secured creditor, he gets estopped from raising any objection against the action of the secured creditor, in future, since he admits the liability and thereby ratifies all the actions done by the secured creditor against the borrower. Therefore, the remedy under Section 17 of the SARFAESI Act, 2002 before the Debts Recovery Tribunal is a broad remedy available to the borrower/guarantor vis-a-vis the jurisdiction of the High Court under Articles 226 and 227 of the Constitution and he has further opportunity to file further appeal under Section 18 of the Debt Recovery Appellate Tribunal against the order of Debts Recovery Tribunal in case he fails to get any relief under Section 17 of the SARFAESI Act, 2002 from the Debts Recovery Tribunal. The remedy of appeal under Section 18 of the SARFAESI Act, 2002 also eludes a borrower who approaches the High Court under Article 226/227 of the Constitution of India directly against the proceedings under SARFAESI Act, 2002 where the scope of inquiry regarding the action of the secured creditor is very limited. The remedy under Article 226/227 of the Constitution is still available to the borrower after exhaustion of remedies under the SARFAESI Act, 2002. Therefore, in view of the legal position stated above this writ petition is being dismissed on the ground of alternative remedy available to the petitioner under Section 17 of the SARFAESI Act, 2002. Issues Involved:1. Validity of possession notice under Section 13(4) of the SARFAESI Act, 2002.2. Availability of alternative remedy under Section 17(1) of the SARFAESI Act, 2002.3. Jurisdiction of the High Court under Article 226 of the Constitution of India.4. Compliance with the provisions of the SARFAESI Act, 2002 and Security Interest (Enforcement) Rules, 2002.Issue-wise Detailed Analysis:1. Validity of Possession Notice under Section 13(4) of the SARFAESI Act, 2002:The petitioner challenged the possession notice dated 26.9.2017 issued by the bank under Section 13(4) of the SARFAESI Act, 2002. The petitioner argued that her account became irregular due to demonetization and the implementation of GST, which caused business losses. The bank issued a notice under Section 13(2) on 05.07.2017 demanding payment of outstanding dues. The court observed that the account was classified as a Non-Performing Asset (NPA) due to the petitioner's failure to maintain financial discipline. The bank followed the procedure laid down in the SARFAESI Act, 2002 for recovery.2. Availability of Alternative Remedy under Section 17(1) of the SARFAESI Act, 2002:The respondent argued that the petitioner has an efficacious and alternative remedy under Section 17(1) of the SARFAESI Act, 2002, which allows the borrower to challenge the action of the secured creditor before the Debts Recovery Tribunal (DRT). The court cited the Supreme Court judgments in United Bank of India Vs. Satyawati Tandon and Mardia Chemical Ltd. Vs. Union of India, which established that the appropriate remedy for challenging actions under Section 13(4) lies before the DRT. The court emphasized that the petitioner should have pursued this statutory remedy instead of directly approaching the High Court.3. Jurisdiction of the High Court under Article 226 of the Constitution of India:The court reiterated that while Article 226 confers wide powers on the High Courts to issue writs, this power is discretionary and should not be exercised if an adequate alternative remedy is available. The court referred to various Supreme Court judgments, including K.S. Rashid & Sons Vs. Income Tax Investigation Commission and Union of India Vs. T.R. Varma, which held that the High Court should refrain from exercising jurisdiction when an alternative remedy exists. The court noted that the petitioner bypassed the statutory mechanism and directly approached the High Court, which is not permissible.4. Compliance with the Provisions of the SARFAESI Act, 2002 and Security Interest (Enforcement) Rules, 2002:The court examined the provisions of the SARFAESI Act, 2002 and the Security Interest (Enforcement) Rules, 2002, highlighting the detailed procedures for taking possession and selling secured assets. The court noted that the SARFAESI Act imposes strict compliance requirements on the secured creditor. The DRT is empowered to scrutinize the secured creditor's compliance with these provisions. The court emphasized that the borrower has the opportunity to challenge the secured creditor's actions before the DRT, which provides a comprehensive remedy.Conclusion:The court concluded that the writ petition cannot be entertained due to the availability of an alternative remedy under Section 17 of the SARFAESI Act, 2002. The court dismissed the petition, emphasizing that invoking the High Court's jurisdiction without exhausting statutory remedies is not permissible. The court highlighted that the statutory mechanism under the SARFAESI Act provides a broad and adequate remedy for borrowers to challenge the actions of secured creditors. There shall be no order as to costs.