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Phoenix ARC Private Limited Vs. Vishwa Bharati Vidya Mandir and Ors. - (Supreme Court) (12 Jan 2022)

If borrower is aggrieved by any of the actions of the private bank, borrower has to avail the remedy under the SARFAESI Act and no writ petition is maintainable

MANU/SC/0036/2022

Banking

The original Respondent - the Assets Reconstructing Company (ARC) has preferred the present appeals against the impugned order passed by the High Court by which the High Court has entertained the aforesaid writ petitions under Article 226 of the Constitution of India against the Appellant, an Assets Reconstructing Company and has passed an interim order directing for maintaining status quo with regard to SARFAESI action (possession of the secured assets).

It is the case on behalf of the Appellant that, the writ petitions against the communication dated 13th August, 2015 proposing to take further action under Section 13(4) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act) and that too against a private Assets Reconstructing Company (ARC) shall not be maintainable. It is also the case on behalf of the Appellant that assuming that the communication dated 13th August, 2015 can be said to be a notice under Section 13(4) of the SARFAESI Act, in view of the alternative statutory remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions.

It is required to be considered whether, in the facts and circumstances of the case, the High Court is justified in entertaining the writ petitions against the communication dated 13th August, 2015 and to pass the ex-parte ad interim order virtually stalling/restricting the proceedings under the SARFAESI Act by the creditor.

A writ petition against the private financial institution-ARC-Appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable.

Filing of the writ petitions by the borrowers before the High Court Under Article 226 of the Constitution of India is an abuse of process of the Court. The writ petitions have been filed against the proposed action to be taken under Section 13(4). Even assuming that the communication dated 13.08.2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs. 1 crore only (in all Rs. 3 crores) is absolutely unjustifiable.

The stay granted by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. Appeals allowed.

Tags : WRIT PETITION   MAINTAINABILITY   ALTERNATE REMEDY  

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