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Supreme Court expresses disapproval on high Court interfering into debt recovery process

In STATE BANK OF TRAVANCORE vs MATHEW K.C., the Supreme Court has been critical of the an interim passed in a writ petition under Article 226 of the Constitution, staying further proceedings at the stage of Section 13(4) of the  SARFAESI Act and the appeal against the same dismissed by the Division Bench observing that counter affidavit having been filed, it would be open for the Appellant Bank to seek clarification/modification/variation of the interim order.

The story behind this is all too familiar. The Respondent borrowed money and when he was unable to repay, the lending bank took recourse to SARFAESI to take possession of the secured asset when the Respondent decided to approach the High Court.

While rejecting the orders of the High Court and the Divisional Bench, the Supreme Court held :-

1) The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well defined exceptions as observed in Commissioner of Income Tax and Others vs. Chhabil Dass Agarwal, 2014

2) The pleadings in the writ petition are very bald and contain no statement that the grievances fell within any of the well defined exceptions. The allegation for violation of principles of natural justice is rhetorical, without any details and the prejudice caused thereby. It harps only on a desire for regularisation of the loan account, even while the Respondent acknowledges its own inability to service the loan account for reasons attributable to it alone.

3) There is no pleading why the remedy available under Section 17 of the Act before the Debt Recovery Tribunal was not efficacious and the compelling reasons for by-passing the same. Unfortunately, the High Court also did not dwell upon the same or record any special reasons for grant of interim relief by direction to deposit. 

4) The proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, (hereinafter referred to as ‘the DRT Act’) with passage of time, had become synonymous with those before regular courts affecting expeditious adjudication. All these aspects have not been kept in mind and considered before passing the impugned order.

5) Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same.




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