| CITATION | 2024 INSC 297 |
| DATE OF JUDGEMENT | 10 APRIL 2024 |
| COURT | SUPREME COURT OF INDIA |
| APPELLANT | PHR Invent Educational Society |
| RESPONDENT | UCO Bank AND OTHER |
| BENCH | JUSTICE RAJESH BINDAL JUSTICE B.R. GAVAI |
INTRODUCTION
The case of Phr Invent Educational Society vs UCO Bank revolves around a challenge to the order passed by the Division Bench of the High Court for the State of Telangana at Hyderabad in a writ petition. The High Court had set aside the order of the Debts Recovery Tribunal-II (DRT) at Hyderabad, which had earlier dismissed an application filed by the borrower for restoration of a securitization application filed under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The central issue in this case pertains to the maintainability of the writ petition before the High Court when an efficacious alternative statutory remedy was available to the borrower under the SARFAESI Act.
FACTS OF THE CASE
1. The borrower, Dr. M.V. Ramana Rao, had availed a loan from UCO Bank and had mortgaged four properties as collateral security. Upon the borrower’s default in repayment, UCO Bank initiated proceedings under the SARFAESI Act and issued an Auction Sale Notice on September 2, 2017, for auctioning the mortgaged properties.
3. Aggrieved by the Auction Sale Notice, the borrower filed a securitization application (S.A. No. 1476 of 2017) before the DRT under Section 17 of the SARFAESI Act.
4. On December 14, 2017, the auction was conducted, and PHR Invent Educational Society emerged as the highest bidder, depositing the required amounts. The appellant deposited 25% of the bid amount i.e. Rs. 1,38,05,550/- including the Earnest Money Deposit of the said amount. The fact remains that the Borrower did not deposit the amount. 3.5 On the same day i.e., 14th December 2017, DRT passed an interim order in S.A. No. 1476 of 2017, thereby refusing to interfere with the sale of the scheduled properties which was to be conducted on that very day.
5. The Borrower had also filed an interlocutory application being I.A. No. 3446 of 2017, thereby praying for stay of further proceedings qua the auction of the scheduled properties.
6 DRT directed the Respondent-Bank not to confirm the sale of the scheduled properties subject to the Borrower depositing 30% of the outstanding dues as claimed. The Borrower failed to make the aforesaid deposits, the interim stay would stand vacated and the Respondent-Bank would be at liberty to confirm the sale in favor of the highest bidder.
7. The appellant deposited Rs.4,29,16,650/- towards the payment of the balance auction price on 28th December 2017.
5. The borrower proposed a One Time Settlement (OTS) proposal, which was rejected by UCO Bank.
6. Subsequently, UCO Bank confirmed the sale in favor of PHR Invent Educational Society, and a Sale Certificate was issued on November 2, 2020, with possession delivered to the auction purchaser.
7. In the meantime, the Borrower preferred M.A. No. 97 of 2020 in S.A. No. 1476 of 2017 before DRT, praying for the restoration. However, on 2nd February 2021, DRT passed an order thereby dismissing the said M.A. filed by the Borrower.
8. Aggrieved by the DRT’s order, the borrower filed a writ petition before the High Court, which allowed the writ petition, set aside the DRT’s order, and directed it to proceed with S.A. No. 1476 of 2017.
10. In mean time Invent Educational Society, the auction purchaser, filed the present appeal challenging the High Court’s order.
ISSUES RAISED
1. Whether the High Court erred in entertaining the writ petition filed by the borrower when an efficacious alternative statutory remedy was available under the SARFAESI Act?
2. Whether the High Court failed to consider the conduct of the borrower and the subsequent developments, including the confirmation of sale and registration of the Sale Certificate?
3. Whether the High Court erred in interfering with the confirmed auction sale in the absence of any allegation of fraud or collusion.?
CONTENTIONS OF THE APPELLANT
1. The High Court grossly erred in entertaining the writ petition when an effective alternative statutory remedy was available to the borrower under the SARFAESI Act.
2. The High Court overlooked the settled legal position that it should not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available, particularly in matters involving recovery of dues of banks and financial institutions.
3. The conduct of the borrower disentitled him to an equitable relief, as the writ petition was filed after the entire payment was made by the appellant-auction purchaser and a Sale Certificate was issued in its favor.
CONTENTIONS OF THE RESPONDENT
1. The non-exercise of jurisdiction under Article 226/227 of the Constitution on the ground of availability of an alternative remedy is a rule of self-restraint, and in deserving cases, the High Court is not precluded from entertaining a petition under Article 226 to do justice to the parties.
2. The borrower had invoked his remedy by filing a securitization application under Section 17 of the SARFAESI Act, which was pending for three years before the DRT, and the dismissal of the miscellaneous application by the DRT did not appear to be justified.
JUDGMENT
The Supreme Court allowed the appeal and quashed the impugned order of the High Court, dismissing the writ petition filed by the borrower with costs of Rs. 1,00,000/- imposed upon the borrower. The court made the following observation.
The High Court grossly erred in entertaining and allowing the petition under Article 226 of the Constitution when an efficacious alternative statutory remedy was available to the borrower under the SARFAESI Act. The same failed to consider the conduct of the borrower and the subsequent developments, including the confirmation of sale and registration of the Sale Certificate, which had reached an irreversible stage. The confirmed auction sale could have been interfered with only in cases of fraud or collusion, which were not present in the instant case. The right of redemption stood extinguished upon the execution of the registered Sale Deed. The exceptions carved out by the Supreme Court for entertaining a petition under Article 226 despite the availability of an alternative remedy were not applicable in the present case. The High Court erred in not adhering to the settled legal position that it should not entertain a petition under Article 226 when an effective alternative statutory remedy is available, particularly in matters involving recovery of dues of banks and financial institutions.
ANALYSIS
The Supreme Court’s judgment in the present case reiterates the well-established legal principle that the High Courts should exercise restraint in entertaining petitions under Article 226 of the Constitution when an efficacious alternative statutory remedy is available to the aggrieved party. This principle assumes greater significance in matters involving the recovery of dues by banks and financial institutions, where specific statutory mechanisms are in place for redressal of grievances.
The Court has emphasized that the High Courts should be cautious in exercising their discretion under Article 226, as the remedies provided under statutes like the SARFAESI Act are comprehensive and envisage the constitution of quasi-judicial bodies for resolving disputes. The Court has consistently discouraged the practice of entertaining writ petitions in such matters, as it undermines the statutory remedies and adversely impacts the rights of banks and financial institutions to recover their dues. The Court reiterated that a confirmed auction sale can be interfered with only in exceptional cases of fraud or collusion, which were not present in the instant matter.
The judgment serves as a reminder to the High Courts to exercise caution and circumspection when dealing with matters involving the recovery of dues by banks and financial institutions The Court, ensuring adherence to the statutory remedies provided under the relevant Legislature
CONCLUSION
The Supreme Court’s decision in Phr Invent Educational Society vs UCO Bank reinforces the principle of judicial restraint in entertaining petitions under Article 226 of the Constitution when efficacious alternative statutory remedies are available. The Court has upheld the sanctity of statutory mechanisms established for the resolution of disputes, particularly in matters involving the recovery of dues by banks and financial institutions. By quashing the High Court’s order and dismissing the writ petition, the Supreme Court has emphasized the importance of adhering to established legal principles and the court has reiterated that the High Courts should exercise their discretion in such matters with greater caution.
REFERENCES
1.SCC ONLINE
2. Phr Invent Educational Society vs Uco Bank on 10 April, 2024 (indiankanoon.org)
3. PHR INVENT EDUCATIONAL SOCIETY v. UCO BANK | Supreme Court Of India | Judgment | Law | CaseMine
This case commentary is written by Shivam Kumar Sahu, as an intern in Legal Vidhya.
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