Court’s Decision
The Karnataka High Court, presided over by Justice E.S. Indiresh, dismissed a writ petition filed under Article 226 of the Constitution challenging a sale certificate issued under the SARFAESI Act. The Court noted that the petitioner had filed a memo seeking permission to withdraw the petition with liberty to approach the Debt Recovery Tribunal (DRT).
Allowing the request, the Court recorded the memo and dismissed the writ petition as withdrawn, reserving the petitioner’s right to pursue appropriate remedies before the DRT. The Court observed that when an effective statutory remedy exists, interference under Article 226 is not warranted, especially in matters arising from bank recovery proceedings under the SARFAESI Act, 2002.
Facts
The petitioner had availed a loan from Punjab National Bank (PNB), secured by a mortgage of immovable property. Due to default in repayment, the bank initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
Subsequently, the bank conducted an auction sale of the secured asset, which was purchased by a third party. The Authorized Officer of the bank issued a sale certificate dated 2 August 2019 in favour of the auction purchaser, thereby transferring ownership of the property.
Aggrieved, the petitioner approached the High Court seeking to quash the sale certificate and all further proceedings arising therefrom. The petitioner also sought directions to the bank to allow him to repay the bid amount with interest at 6% per annum, and to return the original title deeds deposited with the bank at the time of availing the loan.
During the pendency of the petition, the petitioner’s counsel submitted a memo seeking to withdraw the writ petition and sought liberty to approach the Debt Recovery Tribunal (DRT), which is the competent forum to adjudicate such grievances under the SARFAESI Act.
Issues
- Whether the petitioner’s challenge to the sale certificate under Article 226 of the Constitution was maintainable.
- Whether the petitioner should be relegated to the statutory remedy available under the SARFAESI Act before the Debt Recovery Tribunal (DRT).
Petitioner’s Arguments
The petitioner contended that the bank’s auction proceedings and issuance of the sale certificate were irregular and unjust. He claimed that the bank did not properly comply with statutory requirements under the SARFAESI Act, and that he should have been allowed to repay the loan and redeem his mortgaged property before the sale was finalized.
He further sought to set aside the sale certificate dated 02.08.2019, arguing that the bank had prematurely transferred the property without due notice or opportunity. The petitioner also sought a direction permitting him to repay the amount deposited by the auction purchaser, along with interest at 6%, in exchange for restoration of ownership and retrieval of the title deeds.
However, acknowledging the existence of an alternative remedy, the petitioner filed a memo seeking permission to withdraw the writ petition with liberty to approach the DRT to ventilate his grievance through appropriate statutory mechanisms.
Respondent’s Arguments
The bank, through its authorized officer, maintained that the auction sale and issuance of the sale certificate were conducted strictly in accordance with the SARFAESI Act and Rules of 2002. It submitted that the petitioner had defaulted in repayment and was duly notified of the bank’s actions at every stage.
The respondent contended that the writ petition was not maintainable, as the Debt Recovery Tribunal (DRT) has exclusive jurisdiction to entertain disputes arising from actions taken by banks under the SARFAESI framework. Therefore, the petitioner should exhaust the statutory remedies available under Section 17 of the Act, instead of invoking constitutional jurisdiction.
Analysis of the Law
The High Court reaffirmed the principle of alternative remedy, which bars the exercise of writ jurisdiction when an effective statutory forum exists. The SARFAESI Act provides borrowers and aggrieved parties with a detailed mechanism to challenge actions of banks, including the issuance of possession notices, auctions, and sale certificates.
Under Section 17 of the SARFAESI Act, any person aggrieved by measures taken by a secured creditor may approach the Debt Recovery Tribunal (DRT) for redressal. The DRT has the power to examine the legality of the creditor’s actions, grant stays, and even set aside sale certificates if found irregular.
Accordingly, the High Court recognized that judicial intervention under Article 226 should be limited in cases where the statute provides a specialized remedy, especially in financial and recovery matters.
The Court’s order also aligns with the principle of judicial economy, ensuring that disputes are adjudicated by the appropriate statutory body possessing subject-matter expertise.
Precedent Analysis
Although the judgment itself is brief, the reasoning aligns with several Supreme Court decisions governing the doctrine of alternate remedy and non-interference in SARFAESI proceedings:
- Union Bank of India v. Satyawati Tondon, (2010) 8 SCC 110 — The Supreme Court held that High Courts should refrain from entertaining writ petitions in SARFAESI matters when borrowers have statutory remedies before the DRT.
- Authorized Officer, State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85 — The Court reiterated that interference under Article 226 in recovery proceedings should be minimal and only in cases of clear jurisdictional errors.
- ICICI Bank Ltd. v. Umakanta Mohapatra, (2019) 13 SCC 497 — It was held that High Courts should dismiss writ petitions challenging SARFAESI measures when an efficacious alternative remedy is available.
In the instant case, the Karnataka High Court applied the same principle, acknowledging the DRT’s competence to adjudicate the dispute.
Court’s Reasoning
Justice E.S. Indiresh noted that the petitioner himself sought liberty to approach the DRT, recognizing that the remedy under Article 226 was not maintainable. The Court took the memo on record and observed that when an effective statutory forum is available, constitutional jurisdiction need not be exercised.
Since the petitioner’s grievance pertained to the sale of mortgaged property and issuance of the sale certificate, both matters fall squarely within the DRT’s jurisdiction under the SARFAESI Act. Accordingly, the Court allowed the petitioner to withdraw the writ petition, granting him liberty to seek relief before the DRT.
The brief order reflects judicial discipline in deferring to specialized forums created under economic legislation to handle such disputes.
Conclusion
The Karnataka High Court dismissed the writ petition as withdrawn, while granting the petitioner liberty to approach the Debt Recovery Tribunal (DRT) to challenge the sale certificate issued under the SARFAESI Act.
The Court reaffirmed that writ jurisdiction cannot be invoked to bypass statutory remedies, particularly when the SARFAESI Act provides a structured mechanism for redressal. This ensures that financial disputes are adjudicated efficiently by specialized bodies equipped to handle the nuances of debt recovery and asset enforcement.
Implications
This decision reinforces the judicial principle that High Courts should not entertain writ petitions in banking recovery disputes governed by the SARFAESI Act. Borrowers must first exhaust remedies before the Debt Recovery Tribunal (DRT) before approaching constitutional courts.
The ruling upholds the autonomy of specialized tribunals and prevents misuse of writ jurisdiction to stall or delay recovery proceedings. It further strengthens the legislative intent of expeditious and efficient debt enforcement.
For litigants, the order serves as a reminder that Article 226 cannot substitute statutory appeals and that the DRT remains the first recourse in disputes involving sale of secured assets.
Judgments Referred
- Union Bank of India v. Satyawati Tondon, (2010) 8 SCC 110 — High Courts must not interfere when alternative remedies exist under SARFAESI.
- Authorized Officer, State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85 — Borrowers must approach DRT; writ petitions in SARFAESI matters are non-maintainable.
- ICICI Bank Ltd. v. Umakanta Mohapatra, (2019) 13 SCC 497 — Writ petitions challenging recovery actions must be dismissed for want of jurisdiction.
FAQs
Q1. Can a borrower directly approach the High Court to challenge a sale certificate under the SARFAESI Act?
No. The High Court generally does not entertain such petitions since Section 17 of the SARFAESI Act provides an effective remedy before the Debt Recovery Tribunal (DRT).
Q2. What is the appropriate remedy if a borrower claims irregularity in a bank’s auction process?
The borrower should file an application under Section 17 of the SARFAESI Act before the DRT to challenge the sale proceedings or the issuance of the sale certificate.Q3. Why was the writ petition dismissed as withdrawn in this case?
Because the petitioner himself sought permission to withdraw the petition with liberty to approach the DRT, acknowledging that the High Court’s writ jurisdiction was not the proper forum.
