M/S SOUTH INDIAN BANK LTD. & ORS. versus NAVEEN MATHEW PHILIP & ANR. ETC. ETC.

[2023] 4 S.C.R.

AM/S SOUTH INDIAN BANK LTD. & ORS.

NAVEEN MATHEW PHILIP & ANR. ETC. ETC.

(Civil Appeal Nos. 2861-62 of 2023)

BAPRIL 17, 2023

[SANJIV KHANNA AND M. M. SUNDRESH, JJ.]

Securitization and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002:

CWrit Jurisdiction of High Court under – Matter pertaining todefault in payment of outstanding dues by the borrowers – Issuanceof notices u/s. 13(4) – Writ petitions by the borrowers challengingthe notices before the High Court – Debt Recovery tribunal was notfunctional at the time when said writ petitions were filed– However,became so from the month of March 2022 – Meanwhile, in an SLP,Dorder passed by this Court to transfer the pending matters to theconcerned tribunals when they start functioning with their respectivePresiding Officers duly in-charge – Notwithstanding the said order,the High Court took upon itself to decide the said petitions andallowed the borrower to make deferred payment in 12 months –EAppeal before this Court – Appellant’s case that the relief grantedby the High Court may not be disturbed while pressing for reiterationof law which might guide the High Court in not entertaining suchwrit petitions in the future – Held: In view of the fair stand of theappellant, the relief granted by the High Court not to be disturbed– Powers conferred under Article 226 are rather wide but areFrequired to be exercised only in extraordinary circumstances – Inmatters where the legislature has provided for specific mechanismfor appropriate redressal, constitutional remedy not to be resortedto – Constitution of India – Art. 226.

SARFAESI Act – Purpose and Object – Discussed.GWrit:

Writ of certiorari – Issuance of, when – Held: Is to be issuedover decision when the Court finds that the process does notconform to the law or statute – Writ is not to be issued to remedy allHviolations – Writ court cannot substitute itself with the decision-

making authority while finding fault with the process – When atribunal is constituted,it is expected to determine issues of fact andlaw, including statutory violation – Constitution of India – Art.226.

Writ of mandamus – Issuance of – Writ petition before theHigh Court in commercial matters against the private individualseeking issuance of mandamus – Held: Writ of Mandamus is aprerogative writ – In the absence of any legal right, the Court cannotexercise the said power – More circumspection is required in afinancial transaction, particularly when one of the parties wouldnot come within the purview of Art. 12.

Judicial deprecation: Interference of the High Courts inmatters pertaining to the SARFAESI Act – Held: Said practice isdeprecated – Request to the High Courts not to entertain such cases– When statute prescribes particular mode, an attempt tocircumvent shall not be encouraged by writ court – litigantcannot avoid the non-compliance of approaching the tribunal whichrequires the prescription of fees and use the constitutional remedyas an alternative – Constitution of India – Article 226.

Judicial notice: Commercial matters, where an effective andefficacious alternative forum has been constituted through statute– Interference by certain High Court invoking Art. 226 in suchmatters leading to regular supply of cases before this Court –Judicial notice taken by this Court.

Hari Vishnu Kamath v. Syed Ahmad Ishaque (1955) 1SCR 1104; Mardia Chemicals Ltd. v. Union of India,(2004) 4 SCC 311 : [2004] 3 SCR 982– relied on.

Radha Krishan Industries v. State of H.P. (2021) 6 SCC771; Phoenix Arc Private Limited vs. Vishwa BharatiVidya Mandir & Ors. (2022) 5 SCC 345; Federal BankLtd. vs. Sagar Thomas & Ors. (2003) 10 SCC 733 :[2003] 4 Suppl. SCR 121; State Bank of India vs.Arvindra Electronics (P) Ltd. 2022 SCC Online SC1522; United Bank of India vs. Satywati Tondon &Others (2010) 8 SCC 110 : [2010] 9 SCR 1; AuthorizedOfficer, State Bank of Travancore & Another vs.

AMathew K.C. (2018) 3 SCC 85 : [2018] 1 SCR 233;Varimadugu OBI Reddy vs. B. Sreenivasulu & Others(2023) 2 SCC 168 – referred to.

DCIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2861-2862 of 2023.

From the Judgment and Order dated 19.10.2022 of the High Courtof Kerala at Ernakulam in WA Nos. 1492 and 1497 of 2022.

K. V. Vishwanathan, Sr. Adv., A. Karthik, Arsh Khan, Ms. SmrithiESuresh, Ms. Sreepriya K, Advs. for the Appellants.

Shyam Divan, Sr. Adv., Nishe Rajen Shonker, Mrs. Anu K Joy,Abraham C. Mathew, Alim Anvar, Advs. for the Respondents.

The Judgment of the Court was delivered by

FM. M. SUNDRESH, J.

1. Leave granted.

2. Seeking enforcement of unilateral offer concerning privatefinancial transactions, while questioning the steps taken to recover thedues on the failure to comply with the one-time settlements, extraordinaryGjurisdiction of the High Court was sought to be invoked. Acceding to therequest made by duly interfering with the action taken by the Appellants,orders were passed, in exercise of the powers conferred under Article226 of the Constitution of India by the High Court of Kerala, which areimpugned in the present appeals.H

3. Heard Mr. K.V. Vishwanathan, learned Senior Counsel for theAppellants and Mr. Shyam Divan, learned Senior Counsel for theRespondents.

4. Two loans were obtained by the Respondents, being housing/ KCC overdraft loan and business loan. The accounts of theRespondents were declared as non-performing assets (“NPA”) on27.05.2021. Notices under Section 13(2) of the Securitization andReconstruction of Financial Assets and Enforcement of Security InterestAct, 2002 (hereinafter referred to as “SARFAESI Act”) were issued on07.08.2021 and 12.08.2021, respectively, which were duly replied to bythe Respondents on 28.10.2021, seeking twelve months’ time to repaythe loan.

5. Strangely enough, within 3 days of the reply dated 28.10.2021,prior to the expiry of the statutory period prescribed, challenge waslaid to the demand notice issued under Section 13(2) of the SARFAESIAct, by filing Writ Petition No. 23940 of 2021. Entertaining the said lis,a direction was issued to the Appellants to consider the proposal placed.In due compliance of the aforesaid order, the Respondents were allowedto remit the dues accrued in five installments instead of twelve. Theextended benefit conferred was not utilized by the Respondents, andtherefore, reminder was also sent. Receiving no response, two noticesunder Section 13(4) of the SARFAESI Act, were issued on 02.12.2021and 20.12.2021.

6. Impugning the aforesaid notices, two writ petitions were filedby the Respondents, being Writ Petition No. 30238 of 2021 and 30450 of2021 questioning the action taken, through writ of certiorari whilepraying for positive direction to accept the unilateral offers made. It isto be noted that the Debt Recovery Tribunal, though was not functionalat the time of filing the aforesaid Writ Petitions, became so from themonth of March, 2022.

7. Taking note of the then prevailing situation resulting in the postof Presiding Officer lying vacant for proper adjudication in variousTribunals, an order was passed by this Court in Special Leave PetitionNo. 10911 dated 16.12.2021,

“Learned Senior Counsel appearing for the petitioner hasbrought to our notice the difficulty being faced by parties onaccount of non-appointment of members in DRTs and DRATs.

AHe requested that the matters before DRT and DRAT can bedirected to be considered by other Tribunals like CentralAdministrative Tribunal, Armed Forces Tribunal and IndustrialTribunal within the State.

With view to resolve the problem being faced by the parties,Bfor the time being and purely as stop-gap arrangement, werequest the concerned High Court(s) to entertain the matters fallingwithin the jurisdiction of DRTs and DRATs under Article 226 ofthe Constitution of India, till further orders.

We make it clear that once the Tribunal(s) is/are constituted,Cthe matters can be relegated to the Tribunals by the High Court(s).

List the matter on 21-1-2022.”

8. As could be seen, the order is self-explanatory, making it clearthat it is only an interim arrangement, and therefore, the pending mattersought to be transferred to the concerned Tribunals when they startDfunctioning with their respective Presiding Officers duly in-charge. Theaforesaid matter was disposed of by the order dated 12.09.2022,

“1. Counsel appearing on behalf of the petitioner states that sincethe post in the Debt Recovery Tribunal has been filled up, thecause does not survive.E2. The Special Leave Petition is accordingly disposed of withoutthis Court expressing any opinion on the question of law raised.

3. Pending applications, if any, stands disposed of.”

9. Notwithstanding the orders passed above by this Court, theFHigh Court took upon itself to decide the issues raised, on merit, byallowing the Respondents to make deferred payment in 20 installments,a relief which was more than the one prayed for. The installments weremodified by the learned Division Bench in Writ Appeal No. 1492 of 2022and 1497 of 2022, to 12 months as originally prayed for by the RespondentsGwhile declining to interfere with the decision of the learned Single Judgeon merit. Impugning the aforesaid orders, the lender bank has filed thepresent appeals.

10. The learned Senior Counsel appearing for the Appellants fairlysubmitted that the relief granted by the High Court may not be disturbedwhile pressing for the reiteration of law which might guide the HighH

Court in not entertaining such writ petitions in the future. It is furthersubmitted that the High Court has exercised writ jurisdiction under Article226 of the Constitution of India, even after the Debt Recovery Tribunalbecame functional, in about 185 cases pertaining to the Appellants alone.After the filing of the Special Leave Petitions, 35 Writ Petitions havebeen filed. Resultantly, the Appellants are not in position to proceedfurther to recover the amounts due from the defaulting borrowers/guarantors, defeating the object of the SARFAESI Act itself.

11. Learned Senior Counsel brought to the notice of this Courtthat writ petition involving private individuals over financial transactionis not maintainable. Despite the position being settled, the interferenceby various High Courts continues. The very objective of the Act 54 of2002 is being frustrated by such interference. The alternative remedybeing effective and efficacious, the extraordinary jurisdiction of the HighCourt under Article 226 of the Constitution of India, either be writ ofcertiorari or mandamus, ought not to have been invoked. One has tosee the impact on the Appellants of the repeated interference by theHigh Court. The learned Senior Counsel took us through the followingdecisions:

•Phoenix Arc Private Limited vs.Vishwa Bharati VidyaMandir & Ors., (2022) 5 SCC 345.

E•Federal Bank Ltd. vs. Sagar Thomas & Ors., (2003) 10SCC 733.

•State Bank of India vs. Arvindra Electronics (P) Ltd., 2022SCC Online SC 1522.

•United Bank of India vs. Satywati Tondon & Others, (2010)F8 SCC 110

•Authorized Officer, State Bank of Travancore & Anothervs. Mathew K.C., (2018) 3 SCC 85

•Varimadugu OBI Reddy vs. B. Sreenivasulu & Others,(2023) 2 SCC 168.

12. The learned Senior Counsel appearing for the Respondentssubmitted that at the time of filing the Writ Petitions, the Tribunal wasnot functioning. The power available under Article 226 of the Constitutionof India cannot be taken away, notwithstanding the existence of the

ATribunal. While appreciating the stand taken by the Appellants, it issubmitted that when extreme steps are taken, litigant may not haveany other option except to approach the writ court.

13. In view of the fair stand taken by the learned Senior Counselappearing for the Appellants, we do not wish to interfere with theBimpugned orders passed. We may, however, reiterate the settled positionof law on the interference of the High Court invoking Article 226 of theConstitution of India in commercial matters, where an effective andefficacious alternative forum has been constituted through statute. Weare also constrained to take judicial notice of the fact that certain HighCourts continue to interfere in such matters, leading to regular supplyCof cases before this Court. One such High Court is that of Punjab &Haryana.

14. writ of certiorari is to be issued over decision when theCourt finds that the process does not conform to the law or statute. Inother words, courts are not expected to substitute themselves with theDdecision-making authority while finding fault with the process along withthe reasons assigned. Such writ is not expected to be issued to remedyall violations. When Tribunal is constituted, it is expected to go into theissues of fact and law, including statutory violation. question as towhether such violation would be over mandatory prescription asEagainst discretionary one is primarily within the domain of the Tribunal.So also, the issue governing waiver, acquiescence, and estoppel. Wewish to place reliance on the decision of this Court in Hari VishnuKamath v. Syed Ahmad Ishaque, (1955) 1 SCR 1104,

“Then the question is whether there are proper grounds forFthe issue of certiorari in the present case. There was considerableargument before us as to the character and scope of the writ ofcertiorari and the conditions under which it could be issued. Thequestion has been considered by this Court in Parry & Co. v.Commercial Employees’ Association, Madras [(1952) SCR519], Veerappa Pillai v. Raman and Raman Ltd. & OthersG[(1952) SCR 583], Ibrahim Aboobaker v. Custodian General[(1952) SCR 696] and quite recently in T.C. Basappa v. T.Nagappa [(1955) SCR 250]. On these authorities, the followingpropositions may be taken as established: (1) Certiorari will beissued for correcting errors of jurisdiction, as when an inferiorHCourt or Tribunal acts without jurisdiction or in excess of it, orfails to exercise it. (2) Certiorari will also be issued when theCourt or Tribunal acts illegally in the exercise of its undoubtedjurisdiction, as when it decides without giving an opportunity tothe parties to be heard, or violates the principles of natural justice.(3) The Court issuing writ of certiorari acts in exercise of asupervisory and not appellate jurisdiction. One consequence ofthis is that the Court will not review findings of fact reached bythe inferior Court or Tribunal, even if they be erroneous. This ison the principle that Court which has jurisdiction over subject-matter has jurisdiction to decide wrong as well as right, and whenthe Legislature does not choose to confer right of appeal againstthat decision, it would be defeating its purpose and policy, if asuperior Court were to re-hear the case on the evidence, andsubstitute its own findings in certiorari. These propositions arewell-settled and are not in dispute.

(4) The further question on which there has been some controversyis whether writ can be issued, when the decision of the inferiorCourt or Tribunal is erroneous in law. This question came up forconsideration in Rex v. Northumberland Compensation AppealTribunal; Ex parte Shaw [(1951) 1 K.B. 711], and it was heldthat when Tribunal made “speaking order” and the reasonsgiven in that order in support of the decision were bad in law,certiorari could be granted. It was pointed out by Lord Goddard,C.J. that that had always been understood to be the true scope ofthe power. Walsall Overseers v. London and North Western Ry.Co. [(1879) 4 A.C. 30] and Rex v. Nat Bell Liquors Ld. [(1922)2 A.C. 28] were quoted in support of this view. In WalsallOverseers v. London and North Western Ry. Co. [(1879) 4 A.C.30] Lord Cairns, L.C. observed as follows:

“If there was upon the face of the order of the court ofquarter sessions anything which showed that order waserroneous, the Court of Queen’s Bench might be asked to havethe order brought into it, and to look at the order, and view itupon the face of it, and if the court found error upon the faceof it, to put an end to its existence by quashing it.”

In Rex v. Nat Bell Liquors Ld. [(1922) 2 A.C. 128] LordSumner said:

ABC

“That supervision goes to two points; one is the area of theinferior jurisdiction and the qualifications and conditions of itsexercise; the other is the observance of the law in the courseof its exercise.”

The decision in Rex v. Northumberland CompensationAppeal Tribunal; Ex parte Shaw [(1951) 1 K.B. 711] was takenin appeal, and was affirmed by the Court of Appeal in Rex v.Northumberland Compensation Appeal Tribunal; Ex parteShaw [(1952) 1 K.B. 338]. In laying down that an error of lawwas ground for granting certiorari, the learned Judgesemphasised that it must be apparent on the face of the record.Denning, L.J. who stated the power in broad and general termsobserved:

“It will have been seen that throughout all the cases thereis one governing rule: certiorari is only available to quash adecision for error of law if the error appears on the face ofthe record.”

The position was thus summed up by Morris, L.J.

“It is plain that certiorari will not issue as the cloak of anappeal in disguise. It does not lie in order to bring an order ordecision for rehearing of the issue raised in the proceedings. Itexists to correct error of law where revealed on the face ofan order or decision, or irregularity, or absence of, or excessof, jurisdiction where shown”.

In Veerappa Pillai v. Raman & Raman Ltd. [(1952) SCR 583],it was observed by this Court that under article 226 the writ shouldbe issued “in grave cases where the subordinate tribunals or bodiesor officers act wholly without jurisdiction, or in excess of it, or inviolation of the principles of natural justice, or refuse to exercise ajurisdiction vested in them, or there is an error apparent on theface of the record”. In T.C. Basappa v. T. Nagappa [(1955)SCR 250] the law was thus stated:

“An error in the decision or determination itself may alsobe amenable to writ of ‘certiorari’ but it must be manifesterror apparent on the face of the proceedings, e.g., when itis based on clear ignorance or disregard of the provisions of

law. In other words, it is patent error which can be correctedby ‘certiorari’ but not mere wrong decision.”

15. The object and reasons behind the Act 54 of 2002 are veryclear as observed by this Court in Mardia Chemicals Ltd. v. Union ofIndia, (2004) 4 SCC 311. While it facilitates faster and smoothermode of recovery sans any interference from the Court, it does providea fair mechanism in the form of the Tribunal being manned by legallytrained mind. The Tribunal is clothed with wide range of powers to setaside an illegal order, and thereafter, grant consequential reliefs, includingre-possession and payment of compensation and costs. Section 17(1) ofthe SARFAESI Act gives an expansive meaning to the expression “anyperson”, who could approach the Tribunal.

16. Approaching the High Court for the consideration of an offerby the borrower is also frowned upon by this Court. writ of mandamusis prerogative writ. In the absence of any legal right, the Court cannotexercise the said power. More circumspection is required in financialtransaction, particularly when one of the parties would not come withinthe purview of Article 12 of the Constitution of India. When statuteprescribes particular mode, an attempt to circumvent shall not beencouraged by writ court. litigant cannot avoid the non-complianceof approaching the Tribunal which requires the prescription of fees anduse the constitutional remedy as an alternative. We wish to quote withprofit recent decision of this Court in Radha Krishan Industries v.State of H.P., (2021) 6 SCC 771,

“25. In this background, it becomes necessary for this Court, todwell on the “rule of alternate remedy” and its judicial exposition.In Whirlpool Corpn. v. Registrar of Trade Marks (1998) 8 SCC1, two-Judge Bench of this Court after reviewing the case lawon this point, noted: (SCC pp. 9-10, paras 14-15)

“14. The power to issue prerogative writs under Article 226of the Constitution is plenary in nature and is not limited by anyother provision of the Constitution. This power can be exercisedby the High Court not only for issuing writs in the nature ofhabeas corpus, mandamus, prohibition, quo warranto andcertiorari for the enforcement of any of the Fundamental Rightscontained in Part III of the Constitution but also for “any otherpurpose”.

15. Under Article 226 of the Constitution, the High Court, havingregard to the facts of the case, has discretion to entertain ornot to entertain writ petition. But the High Court has imposedupon itself certain restrictions one of which is that if an effectiveand efficacious remedy is available, the High Court would notnormally exercise its jurisdiction. But the alternative remedyhas been consistently held by this Court not to operate asa bar in at least three contingencies, namely, where thewrit petition has been filed for the enforcement of any ofthe Fundamental Rights or where there has been violationof the principle of natural justice or where the order orproceedings are wholly without jurisdiction or the vires ofan Act is challenged. There is plethora of case-law on thispoint but to cut down this circle of forensic whirlpool, we wouldrely on some old decisions of the evolutionary era of theconstitutional law as they still hold the field”.

(emphasis supplied)

26. Following the dictum of this Court in Whirlpool Corpn. v.Registrar of Trade Marks [(1998) 8 SCC 1], in HarbanslalSahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107], this Courtnoted that: (Harbanslal Sahniacase, SCC p. 110, para 7)

“7. So far as the view taken by the High Court that the remedyby way of recourse to arbitration clause was available to theappellants and therefore the writ petition filed by the appellantswas liable to be dismissed is concerned, suffice it to observethat the rule of exclusion of writ jurisdiction by availability ofan alternative remedy is rule of discretion and not one ofcompulsion. In an appropriate case, in spite of availabilityof the alternative remedy, the High Court may still exerciseits writ jurisdiction in at least three contingencies: (i) wherethe writ petition seeks enforcement of any of thefundamental rights; (ii) where there is failure of principlesof natural justice; or (iii) where the orders or proceedingsare wholly without jurisdiction or the vires of an Act ischallenged. (See Whirlpool Corpn.v. Registrar of TradeMarks[(1998) 8 SCC 1].) The present case attracts applicabilityof the first two contingencies. Moreover, as noted, theappellants’ dealership, which is their bread and butter, came to

be terminated for an irrelevant and non-existent cause. In suchcircumstances, we feel that the appellants should have beenallowed relief by the High Court itself instead of driving themto the need of initiating arbitration proceedings.”

(emphasis supplied)

27. The principles of law which emerge are that:

27.1. The power under Article 226 of the Constitution to issuewrits can be exercised not only for the enforcement of fundamentalrights, but for any other purpose as well.

27.2. The High Court has the discretion not to entertain writpetition. One of the restrictions placed on the power of the HighCourt is where an effective alternate remedy is available to theaggrieved person.

27.3. Exceptions to the rule of alternate remedy arise where:(a) the writ petition has been filed for the enforcement of afundamental right protected by Part III of the Constitution; (b)there has been violation of the principles of natural justice; (c)the order or proceedings are wholly without jurisdiction; or (d)the vires of legislation is challenged.

27.4. An alternate remedy by itself does not divest the HighCourt of its powers under Article 226 of the Constitution in anappropriate case though ordinarily, writ petition should not beentertained when an efficacious alternate remedy is provided bylaw.

27.5. When right is created by statute, which itselfprescribes the remedy or procedure for enforcing the right orliability, resort must be had to that particular statutory remedybefore invoking the discretionary remedy under Article 226 of theConstitution. This rule of exhaustion of statutory remedies is arule of policy, convenience and discretion.

27.6. In cases where there are disputed questions of fact, theHigh Court may decide to decline jurisdiction in writ petition.However, if the High Court is objectively of the view that thenature of the controversy requires the exercise of its writjurisdiction, such view would not readily be interfered with.”

30SUPREME COURT REPORTS

A17. We shall reiterate the position of law regarding the interferenceof the High Courts in matters pertaining to the SARFAESI Act by quotinga few of the earlier decisions of this Court wherein the said practice hasbeen deprecated while requesting the High Courts not to entertain suchcases.

B•Federal Bank Ltd. v. Sagar Thomas, (2003) 10 SCC733,

“18. From the decisions referred to above, the positionthat emerges is that writ petition under Article 226 of theConstitution of India may be maintainable against (i) theState (Government); (ii) an authority; (iii) statutory body;(iv) an instrumentality or agency of the State; (v) companywhich is financed and owned by the State; (vi) privatebody run substantially on State funding; (vii) private bodydischarging public duty or positive obligation of public nature;and (viii) person or body under liability to discharge anyfunction under any statute, to compel it to perform such astatutory function.

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26.A company registered under the Companies Act forthe purposes of carrying on any trade or business is privateenterprise to earn livelihood and to make profits out of suchactivities. Banking is also kind of profession and acommercial activity, the primary motive behind it can wellbe said to earn returns and profits. Since time immemorial,such activities have been carried on by individuals generally.It is private affair of the company though the case ofnationalized banks stands on different footing. There maywell be companies, in which majority of the share capitalmay be contributed out of the State funds and in that viewof the matter there may be more participation or dominantparticipation of the State in managing the affairs of thecompany. But in the present case we are concerned with abanking company which has its own resources to raise itsfunds without any contribution or shareholding by the State.It has its own Board of Directors elected by its shareholders.It works like any other private company in the bankingbusiness having no monopoly status at all. Any company

carrying on banking business with capital of five lakhswill become scheduled bank. All the same, banking activityas whole carried on by various banks undoubtedly has animpact and effect on the economy of the country in general.Money of the shareholders and the depositors is with suchcompanies, carrying on banking activity. The banks financethe borrowers on any given rate of interest at particulartime. They advance loans as against securities. Therefore,it is obviously necessary to have regulatory check over suchactivities in the interest of the company itself, theshareholders, the depositors as well as to maintain the properfinancial equilibrium of the national economy. The bankingcompanies have not been set up for the purposes of buildingthe economy of the State; on the other hand such privatecompanies have been voluntarily established for their ownpurposes and interest but their activities are kept undercheck so that their activities may not go wayward and harmthe economy in general. private banking company withall freedom that it has, has to act in manner that it maynot be in conflict with or against the fiscal policies of theState and for such purposes, guidelines are provided byReserve Bank so that proper fiscal discipline, to conductits affairs in carrying on its business, is maintained. So as toensure adherence to such fiscal discipline, if need be, attimes even the management of the company can be takenover. Nonetheless, as observed earlier, these are allregulatory measures to keep check and provide guidelinesand not participatory dominance or control over the affairsof the company. For other companies in general carryingon other business activities, maybe manufacturing, otherindustries or any business, such checks are provided underthe provisions of the Companies Act, as indicated earlier.There also, the main consideration is that the company itselfmay not sink because of its own mismanagement or theinterest of the shareholders or people generally may not bejeopardized for that reason. Besides taking care of suchinterest as indicated above, there is no other interest of theState, to control the affairs and management of the privatecompanies. Care is taken in regard to the industries covered

ABC

DEF

under the Industries (Development and Regulation) Act,1951 that their production, which is important for theeconomy, may not go down, yet the business activity iscarried on by such companies or corporations which onlyremains private activity of the entrepreneurs/companies.

27. Such private companies would normally not beamenable to the writ jurisdiction under Article 226 of theConstitution. But in certain circumstances writ may issueto such private bodies or persons as there may be statuteswhich need to be complied with by all concerned includingthe private companies. For example, there are certainlegislations like the Industrial Disputes Act, the MinimumWages Act, the Factories Act or for maintaining properenvironment, say the Air (Prevention and Control ofPollution) Act, 1981 or the Water (Prevention and Controlof Pollution) Act, 1974 etc. or statutes of the like naturewhich fasten certain duties and responsibilities statutorily

upon such private bodies which they are bound to complywith. If they violate such statutory provision writ wouldcertainly be issued for compliance with those provisions.For instance, if private employer dispenses with the serviceof its employee in violation of the provisions contained underthe Industrial Disputes Act, in innumerable cases the HighCourt interfered and has issued the writ to the private bodiesand the companies in that regard. But the difficulty in issuinga writ may arise where there may not be any non-compliance with or violation of any statutory provision bythe private body. In that event writ may not be issued atall. Other remedies, as may be available, may have to beresorted to.”•United Bank of India v. Satyawati Tondon, (2010) 8SCC 110,

“42.There is another reason why the impugned ordershould be set aside. If Respondent 1 had any tangiblegrievance against the notice issued under Section 13(4) oraction taken under Section 14, then she could have availedremedy by filing an application under Section 17(1). Theexpression “any person” used in Section 17(1) is of wide

import. It takes within its fold, not only the borrower butalso the guarantor or any other person who may be affectedby the action taken under Section 13(4) or Section 14. Both,the Tribunal and the Appellate Tribunal are empowered topass interim orders under Sections 17 and 18 and arerequired to decide the matters within fixed time schedule.It is thus evident that the remedies available to an aggrievedperson under the SARFAESI Act are both expeditious andeffective.

43. Unfortunately, the High Court overlooked the settledlaw that the High Court will ordinarily not entertain petitionunder Article 226 of the Constitution if an effective remedyis available to the aggrieved person and that this rule applieswith greater rigour in matters involving recovery of taxes,cess, fees, other types of public money and the dues ofbanks and other financial institutions. In our view, whiledealing with the petitions involving challenge to the actiontaken for recovery of the public dues, etc. the High Courtmust keep in mind that the legislations enacted byParliament and State Legislatures for recovery of such duesare code unto themselves inasmuch as they not onlycontain comprehensive procedure for recovery of the duesbut also envisage constitution of quasi-judicial bodies forredressal of the grievance of any aggrieved person.Therefore, in all such cases, the High Court must insist thatbefore availing remedy under Article 226 of the Constitution,a person must exhaust the remedies available under therelevant statute.

44. While expressing the aforesaid view, we areconscious that the powers conferred upon the High Courtunder Article 226 of the Constitution to issue to any personor authority, including in appropriate cases, any Government,directions, orders or writs including the five prerogative writsfor the enforcement of any of the rights conferred by PartIII or for any other purpose are very wide and there is noexpress limitation on exercise of that power but, at the sametime, we cannot be oblivious of the rules of self-imposedrestraint evolved by this Court, which every High Court is

bound to keep in view while exercising power under Article226 of the Constitution.

45. It is true that the rule of exhaustion of alternativeremedy is rule of discretion and not one of compulsion,but it is difficult to fathom any reason why the High Courtshould entertain petition filed under Article 226 of theConstitution and pass interim order ignoring the fact thatthe petitioner can avail effective alternative remedy by filingapplication, appeal, revision, etc. and the particular legislationcontains detailed mechanism for redressal of his grievance.

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55. It is matter of serious concern that despite repeatedpronouncement of this Court, the High Courts continue toignore the availability of statutory remedies under the DRTAct and the SARFAESI Act and exercise jurisdiction underArticle 226 for passing orders which have serious adverseimpact on the right of banks and other financial institutionsto recover their dues. We hope and trust that in future theHigh Courts will exercise their discretion in such matterswith greater caution, care and circumspection.”

State Bank of Travancore v. Mathew K.C., (2018) 3SCC 85,

“5. We have considered the submissions on behalf ofthe parties. Normally this Court in exercise of jurisdictionunder Article 136 of the Constitution is loath to interferewith an interim order passed in pending proceeding beforethe High Court, except in special circumstances, to preventmanifest injustice or abuse of the process of the court. Inthe present case, the facts are not in dispute. Thediscretionary jurisdiction under Article 226 is not absolutebut has to be exercised judiciously in the given facts of acase and in accordance with law. The normal rule is that awrit petition under Article 226 of the Constitution ought notto be entertained if alternate statutory remedies areavailable, except in cases falling within the well-definedexceptions as observed in CIT v. Chhabil Dass Agarwal[(2014) 1 SCC 603], as follows: (SCC p. 611, para 15)

“15. Thus, while it can be said that this Court hasrecognised some exceptions to the rule of alternativeremedy i.e. where the statutory authority has not actedin accordance with the provisions of the enactment inquestion, or in defiance of the fundamental principles ofjudicial procedure, or has resorted to invoke the provisionswhich are repealed, or when an order has been passedin total violation of the principles of natural justice, theproposition laid down in Thansingh Nathmal v. Supt.of Taxes [AIR 1964 SC 1419], Titaghur Paper MillsCo. Ltd. v. State of Orissa [(1983) 2 SCC 433: 1983SCC (Tax) 131] and other similar judgments that theHigh Court will not entertain petition under Article 226of the Constitution if an effective alternative remedy isavailable to the aggrieved person or the statute underwhich the action complained of has been taken itselfcontains mechanism for redressal of grievance stillholds the field. Therefore, when statutory forum iscreated by law for redressal of grievances, writ petitionshould not be entertained ignoring the statutorydispensation.”

8. The Statement of Objects and Reasons ofthe SARFAESI Act states that the banking and financialsector in the country was felt not to have level playingfield in comparison to other participants in the financialmarkets in the world. The financial institutions in India didnot have the power to take possession of securities and sellthem. The existing legal framework relating to commercialtransactions had not kept pace with changing commercialpractices and financial sector reforms resulting in tardyrecovery of defaulting loans and mounting non-performingassets of banks and financial institutions. NarasimhanCommittee I and II as also the Andhyarujina Committeeconstituted by the Central Government Act had suggestedenactment of new legislation for securitisation andempowering banks and financial institutions to takepossession of securities and sell them without court

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intervention which would enable them to realise long-termassets, manage problems of liquidity, asset liabilitymismatches and improve recovery. The proceedings underthe Recovery of Debts Due to Banks and FinancialInstitutions Act, 1993 (hereinafter referred to as “the DRTAct”) with passage of time, had become synonymous withthose before regular courts affecting expeditiousadjudication. All these aspects have not been kept in mindand considered before passing the impugned order.

9. Even prior to the SARFAESI Act, considering thealternate remedy available under the DRT Act it was heldin Punjab National Bank v. O.C. Krishnan [(2001) 6 SCC569] that: (SCC p. 570, para 6)

“6. The Act has been enacted with view to providea special procedure for recovery of debts due to thebanks and the financial institutions. There is hierarchyof appeal provided in the Act, namely, filing of an appealunder Section 20 and this fast-track procedure cannotbe allowed to be derailed either by taking recourse toproceedings under Articles 226 and 227 of theConstitution or by filing civil suit, which is expresslybarred. Even though provision under an Act cannotexpressly oust the jurisdiction of the court under Articles226 and 227 of the Constitution, nevertheless, when thereis an alternative remedy available, judicial prudencedemands that the Court refrains from exercising itsjurisdiction under the said constitutional provisions. Thiswas case where the High Court should not haveentertained the petition under Article 227 of theConstitution and should have directed the respondent totake recourse to the appeal mechanism provided by theAct.”

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15. It is the solemn duty of the court to apply the correctlaw without waiting for an objection to be raised by party,especially when the law stands well settled. Any departure,if permissible, has to be for reasons discussed, of the case

falling under defined exception, duly discussed afternoticing the relevant law. In financial matters grant of exparte interim orders can have deleterious effect and it isnot sufficient to say that the aggrieved has the remedy tomove for vacating the interim order. Loans by financialinstitutions are granted from public money generated at thetaxpayer’s expense. Such loan does not become the propertyof the person taking the loan, but retains its character ofpublic money given in fiduciary capacity as entrustmentby the public. Timely repayment also ensures liquidity tofacilitate loan to another in need, by circulation of the moneyand cannot be permitted to be blocked by frivolous litigationby those who can afford the luxury of the same. The cautionrequired, as expressed in United Bank of India v.Satyawati Tondon [(2010) 8 SCC 110: (2010) 3 SCC (Civ)260], has also not been kept in mind before passing theimpugned interim order: (SCC pp. 123-24, para 46)

“46. It must be remembered that stay of an actioninitiated by the State and/or its agencies/instrumentalitiesfor recovery of taxes, cess, fees, etc. seriously impedesexecution of projects of public importance and disablesthem from discharging their constitutional and legalobligations towards the citizens. In cases relating torecovery of the dues of banks, financial institutions andsecured creditors, stay granted by the High Court wouldhave serious adverse impact on the financial health ofsuch bodies/institutions, which (sic will) ultimately provedetrimental to the economy of the nation. Therefore,the High Court should be extremely careful andcircumspect in exercising its discretion to grant stay insuch matters. Of course, if the petitioner is able to showthat its case falls within any of the exceptions carvedout in Baburam Prakash Chandra Maheshwari v.Antarim Zila Parishad [AIR 1969 SC 556], WhirlpoolCorpn. v. Registrar of Trade Marks [(1998) 8 SCC1] and Harbanslal Sahnia v. Indian Oil Corpn.Ltd. [(2003) 2 SCC 107] and some other judgments, thenthe High Court may, after considering all the relevant

parameters and public interest, pass an appropriate interimorder.”

•Phoenix ARC (P) Ltd. v. Vishwa Bharati VidyaMandir, (2022) 5 SCC 345,

“18. Even otherwise, it is required to be noted that awrit petition against the private financial institution — ARC— the appellant herein under Article 226 of the Constitutionof India against the proposed action/actions under Section13(4) of the SARFAESI Act can be said to be notmaintainable. In the present case, the ARC proposed totake action/actions under the SARFAESI Act to recoverthe borrowed amount as secured creditor. The ARC assuch cannot be said to be performing public functions whichare normally expected to be performed by the Stateauthorities. During the course of commercial transactionand under the contract, the bank/ARC lent the money tothe borrowers herein and therefore the said activity of thebank/ARC cannot be said to be as performing publicfunction which is normally expected to be performed bythe State authorities. If proceedings are initiated underthe SARFAESI Act and/or any proposed action is to betaken and the borrower is aggrieved by any of the actionsof the private bank/bank/ARC, borrower has to avail theremedy under the SARFAESI Act and no writ petitionwould lie and/or is maintainable and/or entertainable.Therefore, decisions of this Court in Praga ToolsCorpn. v. C.A. Imanual, [(1969) 1 SCC 585] and RameshAhluwalia v. State of Punjab, [(2012) 12 SCC 331: (2013)3 SCC (L&S) 45: 4 SCEC 715] relied upon by the learnedcounsel appearing on behalf of the borrowers are not ofany assistance to the borrowers.

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21. Applying the law laid down by this Court in StateBank of Travancore v. Mathew K.C., [(2018) 3 SCC 85:(2018) 2 SCC (Civ) 41] to the facts on hand, we are of theopinion that filing of the writ petitions by the borrowersbefore the High Court under Article 226 of the Constitution

of India is an abuse of process of the court. The writ petitionshave been filed against the proposed action to be takenunder Section 13(4). As observed hereinabove, evenassuming that the communication dated 13-8-2015 was anotice under Section 13(4), in that case also, in view of thestatutory, efficacious remedy available by way of appealunder Section 17 of the SARFAESI Act, the High Courtought not to have entertained the writ petitions. Even theimpugned orders passed by the High Court directing tomaintain the status quo with respect to the possession ofthe secured properties on payment of Rs 1 crore only (in allRs 3 crores) is absolutely unjustifiable. The dues are to theextent of approximately Rs 117 crores. The ad interim reliefhas been continued since 2015 and the secured creditor isdeprived of proceeding further with the action underthe SARFAESI Act. Filing of the writ petition by theborrowers before the High Court is nothing but an abuse ofprocess of court. It appears that the High Court has initiallygranted an ex parte ad interim order mechanically andwithout assigning any reasons. The High Court ought tohave appreciated that by passing such an interim order, therights of the secured creditor to recover the amount dueand payable have been seriously prejudiced. The securedcreditor and/or its assignor have right to recover the amountdue and payable to it from the borrowers. The stay grantedby the High Court would have serious adverse impact onthe financial health of the secured creditor/assignor.Therefore, the High Court should have been extremelycareful and circumspect in exercising its discretion whilegranting stay in such matters. In these circumstances, theproceedings before the High Court deserve to bedismissed.”

•Varimadugu Obi Reddy v. B. Sreenivasulu,(2023) 2 SCC 168,

“36. In the instant case, although the respondentborrowers initially approached the Debts Recovery Tribunalby filing an application under Section 17 ofthe SARFAESI Act, 2002, but the order of the Tribunal

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indeed was appealable under Section 18 of the Act subjectto the compliance of condition of pre-deposit and withoutexhausting the statutory remedy of appeal, the respondentborrowers approached the High Court by filing the writapplication under Article 226 of the Constitution. Wedeprecate such practice of entertaining the writ applicationby the High Court in exercise of jurisdiction under Article226 of the Constitution without exhausting the alternativestatutory remedy available under the law. This circuitousroute appears to have been adopted to avoid the conditionof pre-deposit contemplated under 2nd proviso to Section18 of the 2002 Act.”

18. While doing so, we are conscious of the fact that the powersconferred under Article 226 of the Constitution of India are rather widebut are required to be exercised only in extraordinary circumstances inmatters pertaining to proceedings and adjudicatory scheme qua statute,Dmore so in commercial matters involving lender and borrower, whenthe legislature has provided for specific mechanism for appropriateredressal.

19. Reiterating the concern expressed, the present appeals aredisposed of. The Registry is directed to mark copy of this order to theEHigh Court of Kerala and the High Court of Punjab & Haryana. Nocosts.

Nidhi Jain(Assisted by : Rakhi, LCRA)

Appeals disposed of.