Summary
Borrowers whose accounts were classified as non-performing challenged SARFAESI notices in writ petitions and obtained directions from the Kerala High Court permitting repayment in instalments, at a time when the Debts Recovery Tribunal was initially non-functional but had become functional before the petitions were decided. The bank did not press for reversal but sought a reiteration of the law. The Supreme Court declined to disturb the orders but reiterated that Article 226 should not be invoked in lender-borrower matters where the statute provides an effective alternative forum, that mandamus cannot compel a private bank to accept a unilateral settlement offer, that certiorari is supervisory and no substitute for the Tribunal, and that the stop-gap direction allowing High Courts to hear such matters during Tribunal vacancies required relegation once Tribunals became functional.
Issues
- Whether the High Court should entertain writ petitions under Article 226 against measures taken by a private bank under the SARFAESI Act, and direct acceptance of a borrower's one-time settlement offer, when the statutory remedy before the Debts Recovery Tribunal is available.
- What is the effect of the Supreme Court's interim direction permitting High Courts to entertain matters falling within the jurisdiction of Debts Recovery Tribunals during vacancies, once the Tribunals became functional.
Provisions considered
- Article 226, Constitution of IndiaThe power is wide but is exercised only in extraordinary circumstances where a statute provides an adjudicatory scheme, more so in commercial matters between lender and borrower; the exceptions to the alternative remedy rule set out in Whirlpool and Radha Krishan Industries were reiterated. (¶¶ 13, 14, 16, 18)
- Sections 13(2), 13(4) and 17(1), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002The Act provides a fast and fair recovery mechanism with a Tribunal empowered to set aside illegal action and grant consequential relief, and 'any person' under Section 17(1) is given an expansive meaning; borrowers must avail that remedy rather than the writ jurisdiction. (¶¶ 4, 5, 15, 17)
- Article 12, Constitution of IndiaA private bank is not 'State'; greater circumspection is required in issuing mandamus in a financial transaction where one party is outside Article 12, following Federal Bank v. Sagar Thomas and Phoenix ARC. (¶¶ 16, 17)
Held
- The Supreme Court's order of 16 December 2021 requesting High Courts to entertain matters within the jurisdiction of Debts Recovery Tribunals was only an interim stop-gap arrangement during vacancies; once the Tribunals became functional, pending matters ought to have been relegated to them, and the High Court erred in deciding the petitions on merits thereafter. (¶¶ 7, 8, 9)
- Certiorari issues to correct errors of jurisdiction or law apparent on the face of the record in a supervisory, not appellate, capacity; where a Tribunal is constituted it is for the Tribunal to decide questions of fact and law, including whether a statutory prescription is mandatory and issues of waiver, acquiescence and estoppel. (¶ 14)
- A writ of mandamus is a prerogative writ unavailable absent a legal right; a borrower cannot compel a lender, particularly a private bank outside Article 12, to consider or accept a unilateral settlement offer, nor use the constitutional remedy to circumvent the statutory mode of approaching the Tribunal with its prescribed fees. (¶ 16)
- Reiterating Satyawati Tondon, Mathew K.C., Phoenix ARC and Varimadugu Obi Reddy, writ petitions against SARFAESI measures where an effective statutory remedy exists are not to be entertained, interim orders in financial matters have deleterious effects on recovery of public money, and High Courts, some of which continue to interfere, must exercise their discretion with caution; the Registry was directed to send the order to the Kerala and Punjab and Haryana High Courts. (¶¶ 13, 17, 18, 19)
Result
Appeals disposed of without interfering with the High Court's orders permitting repayment in twelve instalments, in view of the bank's fair stand, but reiterating the law that High Courts should not exercise jurisdiction under Article 226 in such lender-borrower matters where the SARFAESI Act provides an effective alternative remedy; copy of the order to be sent to the High Courts of Kerala and Punjab and Haryana; no costs.