Summary
The Court dismissed borrowers’ writ petitions against a private asset reconstruction company’s proposed enforcement action and vacated years-long status quo orders. Recovery of contractual loans by the ARC was not a public function attracting writ jurisdiction. Even assuming the challenged communication was a measure under Section 13(4) of the SARFAESI Act, the effective statutory remedy under Section 17 should have been pursued. Mechanical interim protection on deposits of Rs3 crore against asserted dues of about Rs117 crore seriously prejudiced the secured creditor and amounted to abuse of process.
Issues
- Whether writ petitions against a private ARC’s proposed secured-debt recovery action should be entertained despite the statutory remedy.
- Whether continued interim protection justified Supreme Court intervention while the writ petitions remained pending.
Provisions considered
- Articles 226 and 136, Constitution of IndiaThe private ARC’s contractual recovery activity was not a public function; abuse of process and serious prejudice justified intervention against interim orders. (¶¶ 7.3-7.6, 10-13.2)
- Sections 13(4) and 17, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Even assuming the communication was an enforcement measure, the effective remedy before the Debts Recovery Tribunal displaced recourse to writ proceedings on these facts. (¶¶ 9-10, 13.2)
Held
- The private ARC was enforcing a commercial debt as secured creditor, not discharging a public function normally expected of State authorities. Its proposed action under the SARFAESI Act did not render it amenable to the writ relief sought. (¶ 12)
- Even on the borrowers’ characterization of the communication as action under Section 13(4), the statutory remedy under Section 17 was efficacious. The High Court should not have entertained these petitions. The alternative-remedy rule remains one of judicial restraint with recognized exceptions; no exception justified these proceedings. (¶¶ 7.3-7.6, 9-10, 13.1-13.2)
- The High Court mechanically granted and repeatedly extended status quo protection while an application to vacate it remained undecided. Deposits totalling Rs3 crore against asserted dues of approximately Rs117 crore did not justify preventing enforcement for years. These circumstances constituted abuse of process and warranted intervention despite the ordinarily restrained approach to interim orders. (¶¶ 10, 13-13.2)
- The decision relied upon by the borrowers concerning secured-creditor duties did not decide writ maintainability because that objection had not been pressed there. It therefore did not support entertaining the present petitions. (¶ 11)
Result
Appeals allowed; writ petitions dismissed and interim status quo orders vacated; Rs1 lakh costs in both cases payable directly to the appellants within four weeks.