Maintainability of writ and proof of settlement under a compromise scheme determine whether recovery proceedings can continue against secured property.

Writ jurisdiction was held maintainable despite an available appellate remedy, because alternate remedy is discretionary and does not bar challenge where proceedings are alleged to be without jurisdiction or contrary to legal rights; the territorial objection was also not accepted. On the merits, a compromise scheme sanctioned under the Companies Act binds creditors, but discharge of the secured debt and release of the mortgage depended on proof of actual payment. As reliable proof of settlement was lacking, and the documents did not show full satisfaction of the liability, the recovery proceedings were not treated as barred. The petition ultimately failed and the recovery action was allowed to stand.

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Issues: (i) Whether the writ petition was maintainable despite the availability of an appellate remedy before the Debt Recovery Appellate Tribunal and the objection as to territorial jurisdiction. (ii) Whether the compromise scheme sanctioned under the Companies Act had the effect of releasing the mortgage and extinguishing the secured debt so as to bar continuation of the recovery proceedings against the subject properties.

Issue (i): Whether the writ petition was maintainable despite the availability of an appellate remedy before the Debt Recovery Appellate Tribunal and the objection as to territorial jurisdiction.

Analysis: The rule of alternate remedy is one of discretion and not compulsion. It does not bar writ jurisdiction where the impugned proceedings are alleged to be wholly without jurisdiction or to infringe fundamental or legal rights. Since the challenge was directed against recovery proceedings said to operate upon immovable properties situated within the territorial limits of the Court, and the grievance was that those proceedings were contrary to earlier judicial orders, the objection based on alternate remedy and territorial jurisdiction was not accepted.

Conclusion: The writ petition was held to be maintainable.

Issue (ii): Whether the compromise scheme sanctioned under the Companies Act had the effect of releasing the mortgage and extinguishing the secured debt so as to bar continuation of the recovery proceedings against the subject properties.

Analysis: A scheme sanctioned under section 391(2) of the Companies Act, 1956 binds the creditors once approved by the requisite statutory majority. However, the factual question was whether the settlement amount had in fact been proved to have been paid to the concerned creditor. The Court found that mere assertion of tender of demand drafts, without dependable proof of delivery or credit, was insufficient. The recitals in the later conveyance documents also indicated that the outstanding liability had not been shown to have been fully settled. On that basis, the Court held that the recovery proceedings could not be treated as barred merely by the earlier compromise order.

Conclusion: The challenge to the continuation of the recovery proceedings failed.

Final Conclusion: The petition did not succeed, and the impugned recovery action was permitted to stand.

Ratio Decidendi: A sanctioned compromise scheme binds creditors, but the resulting discharge of secured debt and release of mortgage must be established by proof of actual compliance; absent reliable proof of payment, recovery proceedings are not barred merely because the scheme was approved.

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