A) ABSTRACT / HEADNOTE

This case examines the jurisdiction of High Courts under Article 226 of the Indian Constitution in the presence of alternative remedies, particularly concerning recovery dues under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The Supreme Court reiterates the principle of self-restraint for courts in cases involving recovery of taxes and public dues. The case also clarifies when High Courts may intervene, notwithstanding statutory remedies, especially addressing fraud, collusion, or violations of natural justice. The judgment quashed the High Court’s order to entertain a writ petition by the borrower and emphasized adherence to alternative statutory mechanisms. It awarded costs against the borrower for misusing judicial resources.

Keywords:

1. Alternative remedy
2. SARFAESI Act
3. Self-imposed restraint
4. Auction sale
5. Judicial review

B) CASE DETAILS

i) Judgment Cause Title
PHR Invent Educational Society v. UCO Bank and Others

ii) Case Number
Civil Appeal No. 4845 of 2024

iii) Judgment Date
10 April 2024

iv) Court
Supreme Court of India

v) Quorum
Justice B.R. Gavai, Justice Rajesh Bindal, and Justice Sandeep Mehta

vi) Author
Justice B.R. Gavai

vii) Citation
[2024] 4 S.C.R. 541 : 2024 INSC 297

viii) Legal Provisions Involved

• Article 226, Constitution of India
• Section 17 & 18, SARFAESI Act, 2002

ix) Judgments Overruled by the Case
No explicit overruling, but prior High Court orders were quashed.

x) Case is Related to Law Subjects
Constitutional Law, Banking Law, Civil Procedure, Recovery of Debts

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The appeal arose from a High Court order entertaining a writ petition by the borrower despite an available statutory remedy under Section 18 of the SARFAESI Act. The borrower had defaulted on loan repayments, and the UCO Bank initiated recovery proceedings, auctioning mortgaged properties. The auction purchaser sought finality in the transaction, challenging the High Court’s intervention under Article 226.

The Supreme Court addressed critical questions about the jurisdictional limits of High Courts in such matters and emphasized the need for adherence to statutory grievance redressal mechanisms, including the Debts Recovery Tribunal (DRT) and appellate procedures.

D) FACTS OF THE CASE

1. Loan and Mortgage Defaults: The borrower obtained loans secured by mortgaged properties but failed to repay, prompting UCO Bank to initiate proceedings under the SARFAESI Act.
2. Auction Initiated: An auction sale notice was issued, and properties were auctioned. PHR Invent Educational Society was the highest bidder and deposited the bid amount.
3. Litigation Before DRT: The borrower filed a securitization application (S.A.) under Section 17 of the SARFAESI Act to challenge the sale but failed to comply with interim conditions imposed by the DRT.
4. Withdrawal and Restoration of S.A.: The borrower withdrew the S.A., citing out-of-court settlement, later contested by the bank. Attempts to restore the S.A. were dismissed by the DRT.
5. High Court Writ Petition: The borrower moved the High Court under Article 226, bypassing statutory appellate mechanisms, which led to the restoration of the S.A.
6. Supreme Court Appeal: The auction purchaser and the bank appealed against the High Court’s interference, citing settled principles of alternative remedies.

E) LEGAL ISSUES RAISED

1. Can High Courts entertain writ petitions under Article 226 in the presence of an alternative statutory remedy?
2. Were the principles of natural justice or judicial procedure violated to justify High Court intervention?
3. Is the auction sale process irreversible post-confirmation and registration of sale?

F) PETITIONER/APPELLANT’S ARGUMENTS

1. Alternative Remedy Rule: The petitioner emphasized the availability of statutory remedies under Sections 17 and 18 of the SARFAESI Act, urging dismissal of the writ petition.
2. Finality of Auction Sale: It was argued that the auction sale had attained finality upon issuance and registration of the sale certificate, making further interference unjust.
3. Borrower’s Conduct: The borrower’s failure to comply with interim orders and withdrawal of S.A. disentitled them to equitable relief.

G) RESPONDENT’S ARGUMENTS

1. Jurisdictional Grounds: The borrower argued that Article 226 jurisdiction could be invoked despite alternative remedies in exceptional cases, such as to prevent irreparable harm.
2. Denial of Remedy: It was contended that the borrower would be left remediless if the High Court did not entertain the writ petition.

H) JUDGMENT

a. Ratio Decidendi

1. High Courts should not entertain writ petitions under Article 226 when effective statutory remedies exist.
2. Exceptions exist only for cases of fraud, collusion, defiance of judicial procedure, or gross violations of natural justice.

b. Obiter Dicta

The Supreme Court highlighted the rampant misuse of writ jurisdiction in debt recovery matters, urging High Courts to exercise caution.

c. Guidelines

1. Exhaustion of alternative remedies must be adhered to strictly in recovery matters.
2. Auction sales achieve finality upon confirmation and registration unless exceptional circumstances like fraud exist.

I) CONCLUSION & COMMENTS

This case underscores the principle of self-restraint in judicial review, balancing equitable relief and statutory frameworks. The judgment reaffirms the sanctity of statutory remedies in financial recovery cases and highlights the finality of auction sales post-confirmation.

J) REFERENCES

a. Important Cases Referred

1. United Bank of India v. Satyawati Tondon [2010] 9 SCR 1
2. Celir LLP v. Bafna Motors [2023] 13 SCR 53
3. Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir [2022] 1 SCR 950
4. Valji Khimji v. Official Liquidator [2008] 12 SCR 1

b. Important Statutes Referred

1. Constitution of India, Article 226
2. SARFAESI Act, 2002, Sections 17 and 18