Supreme Court Upholds Statutory Remedies Over Writ Petitions in SARFAESI Act Case: PHR Invent Educational Society vs. UCO Bank and Others

Read Full Judgment: PHR Invent Educational Society vs. UCO Bank and Others

The judgment concerns an appeal challenging a High Court order that set aside a Debt Recovery Tribunal (DRT) decision and restored a securitization application (S.A.) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The case involves PHR Invent Educational Society as the appellant and UCO Bank and others as respondents.

Here’s a summary of the key points:

1. Background: The borrower defaulted on a loan from UCO Bank, leading to the initiation of proceedings under the SARFAESI Act. The bank issued an auction sale notice for the mortgaged properties. The appellant emerged as the highest bidder at the auction, deposited a portion of the bid amount, and eventually paid the full amount after the borrower failed to comply with the DRT’s directives.
2. Legal Proceedings: The borrower filed a securitization application before the DRT, seeking to set aside the auction sale. However, the application was dismissed as withdrawn after the borrower claimed to have settled the matter out of court. Subsequently, the bank confirmed the sale in favor of the appellant.
3. High Court Intervention: The borrower filed a writ petition before the High Court challenging the DRT’s decision. The High Court set aside the DRT order and directed it to proceed with the securitization application.
4. Appeal to Supreme Court: The appellant, the auction purchaser, appealed to the Supreme Court, arguing that the High Court erred in entertaining the writ petition when the borrower had an alternative remedy under the SARFAESI Act.
5. Supreme Court Decision: The Supreme Court agreed with the appellant, emphasizing that the High Court should ordinarily not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available. The Court noted that the borrower’s conduct, failure to comply with DRT directives, and subsequent attempt to revive the application after the sale was confirmed, were relevant factors.
6. Conclusion: The Supreme Court ruled in favor of the appellant, concluding that the High Court erred in entertaining and allowing the petition under Article 226 of the Constitution. The Court emphasized the importance of adhering to statutory remedies and discouraged the practice of bypassing them in favor of writ petitions.

Disclaimer: The case is presented solely for educational purposes. It does not constitute legal advice or imply any legal conclusion. Readers should consult qualified legal professionals for specific legal advice or guidance related to any legal matters.