The Court clarifies conditions under which writ petitions may challenge SARFAESI Act proceedings, emphasizing alternative remedies.
In a significant ruling, the Kerala High Court has delineated the boundaries of its writ jurisdiction concerning challenges under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The judgment, delivered by a Division Bench comprising Chief Justice Soumen Sen and Justice Syam Kumar V.M., highlights the discretionary nature of entertaining writ petitions when an efficacious alternative remedy is available.
The case originated from a writ petition filed by M/s. Grids Engineers and Contractors challenging the proceedings initiated by Union Bank of India under Section 14 of the SARFAESI Act. The petitioners contended that the Bank's notice was issued without jurisdiction. During the proceedings, it emerged that the parties had reached a settlement, and the loan account had been closed, rendering the dispute largely academic.
The Court emphasized that while the rule of exhausting alternative remedies is discretionary, exceptions exist that allow writ petitions to be entertained. These include instances of jurisdictional errors, fraud, mala fide actions, or violations of natural justice principles. The judgment reiterated the Supreme Court's stance that High Courts should ordinarily refrain from entertaining writ petitions when statutory remedies are available, particularly in matters involving financial recoveries under the SARFAESI Act.
The decision also addressed the procedural aspect of intra-court appeals under Section 5 of the Kerala High Court Act, 1958. It clarified that appeals against interlocutory orders affecting substantial rights are maintainable, urging adherence to judicial discipline and precedent.
Ultimately, the Court dismissed the writ appeal filed by the Bank, noting that the settlement had resolved the underlying financial dispute. The ruling underscores the judiciary's cautious approach in interfering with statutory processes and highlights the importance of following established legal remedies.
Bottom Line:
SARFAESI Act, 2002 - High Court's jurisdiction under Article 226 - Writ petition challenging proceedings under SARFAESI Act is generally not maintainable if there exists an efficacious alternative remedy under the Act - Rule of exhaustion of alternative remedy is discretionary and not mandatory - However, exceptions exist for entertaining writ petitions, such as lack of jurisdiction, fraud, mala fide action, or violation of natural justice in the proceedings.
Statutory provision(s): SARFAESI Act, 2002, Sections 13(4), 14, 17, Kerala High Court Act, 1958 Section 5, Article 226 of the Constitution of India.
