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PHR Invent Educational Society vs. UCO Bank and Others

Not available · 2024 INSC 297Decided 10 Apr 2024
Not available
Justice B.R. Gavai · Justice Rajesh Bindal · Justice Sandeep Mehta

Background

A borrower had mortgaged four properties to UCO Bank as collateral for a loan and later defaulted. The bank initiated SARFAESI Act proceedings and issued an auction sale notice for the mortgaged properties. The borrower challenged this before the Debts Recovery Tribunal (DRT) by filing a securitization application, which was later dismissed as withdrawn, and a subsequent application to restore that case was also dismissed by the DRT. Instead of pursuing the statutory appeal route available under the SARFAESI Act, the borrower filed a writ petition directly before the Telangana High Court under Article 226 of the Constitution, and the High Court set aside the DRT's order and directed the DRT to proceed with the case, prompting the appellant (a third party/auction purchaser, PHR Invent Educational Society) to appeal to the Supreme Court.

Decision Breakdown

The Supreme Court reiterated the well-settled principle that a High Court should not entertain a writ petition under Article 226 when an effective, statutory alternative remedy is available, such as the appellate mechanism under the DRT Act and SARFAESI Act, except in narrow, specific exceptions (such as a complete lack of jurisdiction, action taken under a repealed provision, or a total violation of natural justice), none of which applied here. The Court held that the High Court had erred in bypassing this rule and entertaining the writ petition, and reminded High Courts, quoting its own earlier precedent, that repeatedly ignoring the availability of statutory remedies under banking recovery laws causes serious adverse impact on the ability of banks and financial institutions to recover dues. The appeal was allowed, the High Court's order was quashed, and the borrower's writ petition was dismissed with costs of Rs. 1,00,000 imposed on the borrower.

Lesson Learnt

When a special law like the SARFAESI Act provides its own appellate remedy for disputes, courts should insist that litigants use that specific remedy rather than bypass it through a writ petition: except in the limited, well-defined situations where the ordinary remedy is truly inadequate.

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

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