HC not to interfere when alternate remedy available
The Supreme Court (SC) , in PHR Invent Educational Society v UCO Bank & Others, deprecated the High Court’s interference in the auction sale proceedings completed by the Bank, on behalf of the borrower, despite having statutory remedy of appeal under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
HC set aside bank’s auction sale in a writ
In this case, the borrower filed a writ petition under Article 226 of the constitution Challenging the Debt Recovery Tribunal’s (DRT) order of auction sale by the Bank under the SARFAESI Act, before the High Court.
The High Court allowed the borrower’s application and set aside the auction sale order of the DRT.
HC can interfere only when there is fraud or collusion
The SC says that the High Court should exercise due care and caution while entertaining the petitions under Article 226 of the constitution even when there exists an alternative statutory remedy.
The High Court ought to have taken into consideration that the confirmed auction sale could have been interfered with only when there was a fraud or collusion.
The present case was not a case of fraud or collusion. The effect of the order of the High Court would be again reopening the issues which have achieved finality.
SC Guidelines on when HC can interfere
The SC has carved out some exceptions when a petition under Article 226 of the Constitution could be entertained despite the availability of an alternative remedy.
Some of those exceptions are as follows:
- where the statutory authority has not acted in accordance with the provisions of the enactment in question;
- it has acted in defiance of the fundamental principles of judicial procedure;
- it has resorted to invoke the provisions which are repealed; and
- when an order has been passed in total violation of the principles of natural justice.
Earlier SC judgement in this regard
The SC, in United Bank of India v. Satyawati Tondon and Others, observed that, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person.
SC says HC must not show over enthusiasm in SARFAESI matters
The SC laments that despite repeated pronouncements, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues.
SC wants the HCs to show caution in future
The SC wants the High Courts in future to exercise their discretion in such matters with greater caution, care and circumspection.
Additional reading
