SARFAESI Writ Maintainable

Whenever, the secured creditor proceeds under SARFAESI Act, the borrower has the right to challenge the action of the secured creditor/financial institution before the Debt Recovery Tribunal (DRT) under section 17 of the SARFAESI Act, 2002. The act itself is a complete act which provides the complete procedure and after the amendment in the same, the rights of the tenant are also protected under the same. If the order of DRT is to be challenged, the borrower/guarantor/third party may approach the Debt Recovery Appellate Tribunal under section 18 of the act with a precondition provided under the act i.e. 50 % of the amount demanded in the demand notice issued under section 13(2) of the act.

However, the High Court also has the superintendence power over the DRT thus, the High Court can also entertain the writ petition, which is often refused to be entertained due to the remedy available under the SARFAESI Act. In this Article we will discuss few judgments where the writ challenging the SARFAESI Proceedings held to be maintainable.  SARFAESI Writ Maintainable

SARFAESI Writ Maintainable

That the Hon’ble Punjab & Haryana High Court in the case titled as “M/s A-One Mega Mart P. Limited and Ors Vs HDFC Bank and Anr 2012(57) RCR (Civil) 235 held in para no. 26 as follows:

 “26. Another factor which cannot be ignored is that under Section 17 of the SARFAESI Act, an appeal lies to the Debt Recovery Tribunal against the action of the Bank and against any order passed thereunder, an appeal is maintainable under Section 18 of the said Act to Debt Recovery Appellate Tribunal (DRAT). An order passed by DRAT is amenable to writ jurisdiction of the High Court. Section 34 of SARFAESI Act also has significance in deciding the issue relating to writ jurisdiction of this Court. This facet lends different dimension to the controversy raised herein. Section 34 bars the jurisdiction of civil courts in matters relating to actions where provisions of SARFAESI Act have been invoked. Constitution guarantees equality and strikes against any arbitrary action of an authority. It cannot be said that wherever any authority acts in a discriminatory or unreasonable manner, the aggrieved party would be without any remedy either by way of civil suit or by invoking writ jurisdiction of the High Court. In such circumstances, it cannot be held that an action by the Scheduled Bank to which the provisions of SARFAESI Act are applicable and have been invoked by it, it shall be immune from the extraordinary writ jurisdiction of this Court”

Also Check: Section 7-Insolvency and bankruptcy code 2016

The similar view was taken by Hon’ble High Court of Punjab & Haryana in M/s Malhan Industries Pvt. Ltd. And another Vs Punjab National Bank and Others 2015(67) RCR (Civil) 782 and held in para no. 10 as follows

“It is true that after failure of the second OTS entire amount payable under the orders dated August 08, 2008 of the DRT became payable and against the action of the Bank an appeal lies to the DRT under Section 17 of the SARFAESI Act, and against any order passed by DRT, an appeal is maintainable under Section 18 of the said Act to Debt Recovery Appellate Tribunal (DRAT). An order passed by DRAT is amenable to writ jurisdiction of the High Court. Section 34 bars jurisdiction of the civil court in matters relating to actions where provisions of SARFAESI Act have been invoked. Be that as it may, Constitution of India guarantees equality and strikes against any arbitrary action of an authority. It cannot be said that wherever any authority acts in a discriminatory or unreasonable manner, the aggrieved party would be without any remedy either by way of civil suit or by invoking writ jurisdiction of the High Court. In such circumstances, it cannot be held action by a Scheduled Bank enjoys immunity from the extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India only because provisions of SARFAESI Act are applicable and have been invoked by it.”

Also Check: Overview of Section 138 Of Negotiable Instruments Act, along with Judgments

The Hon’ble Supreme Court of India in case titled as “Maharastra Chess Association vs Union of India & Ors 2019(3) Law Herald (SC) 1996” held in para no. 13 as follows:

 “13 While the powers the High Court may exercise under its writ jurisdiction are not subject to strict legal principles, two clear principles emerge with respect to when a High Court’s writ jurisdiction may be engaged. First, the decision of the High Court to entertain or not entertain a particular action under its writ jurisdiction is fundamentally discretionary. Secondly, limitations placed on the court’s decision to exercise or refuse to exercise its writ jurisdiction are self- imposed. It is a well settled principle that the writ jurisdiction of a High Court cannot be completely excluded by statute. If a High Court is tasked with being the final recourse to upholding the rule of law within its territorial jurisdiction, it must necessarily have the power to examine any case before it and make a determination of whether or not its writ jurisdiction is engaged. Judicial review under Article 226 is an intrinsic feature of the basic structure of the Constitution.

[Minerva Mills v Union of India (1980) 3 SCC 625; L Chandra Kumar v Union of India (1997) 3 SCC 261]

Further  the Hon’ble Telangana and Andhra Pradesh High Court in case titled as “Ms. Venshiv Pharma Chem (P) Ltd. And another Vs State Bank of India 2018(3) ALT 168 held that

“It must be remembered that refusal by High Courts to entertain writ petitions due to availability of alternative remedies is a self-imposed restraint and discretion in this regard has to be exercised judiciously on a case to case basis depending upon the individual facts obtaining therein. It is ultimately for the High Court to decide as to whether the individual case before it required adherence to the self-imposed restraint from entertaining it or warrants deviation therefrom.”

Also Check: Debt has to be acknowledged within 3 years i.e. limitation period to recover debt

Conclusion: Thus, it is a self imposed restraint to not to entertain the writ petition challenging action of Secured Creditor under the SARFAESI Act, 2002.

Author is the practicing Advocate in Punjab & Haryana High Court at Chandigarh