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M/S. South Indian Bank Ltd. & Ors. vs Naveen Mathew Philip & Anr. (Civil Appeal Nos. 2861-2862 of 2023)

Civil Appeal · 2023 INSC 379Decided 17 Apr 2023
Civil Appeal Nos. 2861-2862 of 2023
Sanjiv Khanna · M.M. Sundresh · Sanjiv Khanna in place of the Chief Justice

Background

The borrowers had taken a housing/business loan from South Indian Bank, and their accounts were declared non-performing assets; instead of exhausting the statutory remedies under the SARFAESI Act (which has its own tribunal, the DRT), they went straight to the Kerala High Court seeking a writ to stop recovery action and to compel the bank to accept their unilateral repayment proposal. Although the DRT became functional partway through, the High Court still went on to decide the matter on merits and granted relief more generous than what the borrowers had even asked for (extending repayment installments). The bank appealed, arguing this bypassed the specialised statutory recovery mechanism and that the High Court had entertained roughly 185 such writ petitions against it alone.

Decision Breakdown

The Supreme Court did not disturb the specific relief already granted to these borrowers (since the bank's counsel fairly conceded that point), but used the appeal to restate the settled law on when High Courts should exercise writ jurisdiction under Article 226 despite an available alternate statutory remedy. It reaffirmed that ordinarily a writ petition should not be entertained where an efficacious alternate remedy (like the DRT under the SARFAESI Act) exists, with only narrow exceptions (violation of a fundamental right, breach of natural justice, orders wholly without jurisdiction, or a challenge to a law's validity) and that disputes between a private bank and a private borrower over commercial loan recovery ordinarily do not attract writ jurisdiction at all. The Court expressed serious concern that High Courts, including Kerala's, continue entertaining such writ petitions en masse, undermining the specialised recovery scheme the legislature created, and directed the order be circulated to the Kerala and Punjab & Haryana High Courts for guidance.

Lesson Learnt

Borrowers facing bank recovery action under the SARFAESI Act should ordinarily pursue the statutory remedy before the Debt Recovery Tribunal rather than filing a writ petition in the High Court. Courts will generally decline (or, per this ruling, should decline) to bypass that specialised mechanism except in narrow, well-defined circumstances.

Official source (sci.gov.in)View Judgment (PDF)

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