Upholding Statutory Remedies: Supreme Court's Caution on Article 226 Petitions

The Supreme Court, in a recent verdict on April 10, emphasized the need for caution in High Court's exercise of jurisdiction under Article 226 of the Constitution, especially when alternative statutory remedies are available. The apex court deprecated a High Court's interference in auction sale proceedings conducted by a bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act"), despite the existence of a statutory remedy of appeal.

Background

In the case of PHR Invent Educational Society v. UCO Bank and Others, the borrower challenged the Debt Recovery Tribunal's order of auction sale under the SARFAESI Act by filing a writ petition under Article 226 before the High Court. Surprisingly, the High Court set aside the auction sale order, prompting the matter to be brought before the Supreme Court for adjudication.

Supreme Court's Observations

The Bench comprising Justices BR Gavai, Rajesh Bindal, and Sandeep Mehta clarified that Article 226 petitions should not be entertained by the High Court if an effective alternative remedy is available to the aggrieved party or if the statute itself provides a mechanism for redressal. Justice BR Gavai, in the judgment, emphasized that the High Court's interference in such matters should be limited to exceptional circumstances, such as instances of fraud or collusion.

Exceptions to Entertain Article 226 Petitions

The Supreme Court delineated specific exceptions when a petition under Article 226 could be entertained despite the availability of alternative remedies. These exceptions include situations where the statutory authority acts contrary to the enactment's provisions, violates fundamental principles of judicial procedure, invokes repealed provisions, or passes orders in total violation of natural justice principles.

Impact on Banks and Financial Institutions

The court expressed concern over High Courts' tendency to entertain petitions related to recovery actions under acts like the DRT Act and SARFAESI Act, disregarding the available statutory remedies. It cited the case of United Bank of India v. Satyawati Tondon, stressing that legislation for recovery of public dues constitutes a comprehensive procedure and establishes quasi-judicial bodies for grievance redressal. The court cautioned that such interference adversely affects banks and financial institutions' rights to recover dues.

Conclusion

In the PHR Invent Educational Society case, the Supreme Court allowed the appeal, setting aside the High Court's order. Additionally, a cost of Rs.1 Lakh was imposed on the borrower. This verdict underscores the importance of upholding statutory remedies and exercising judicial discretion with caution, ensuring a balanced approach between access to justice and maintaining the efficacy of statutory frameworks.

-Tarun Lal, Advocate

BLJ Legal

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www.bljlegal.in