In a recent judgment, the Allahabad High Court emphasized that judicial intervention in matters governed by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, should be limited to instances where banks have acted either unlawfully or with mala fide intent.
The division bench, comprising Justice Shekhar B. Saraf and Justice Dr. Yogendra Kumar Srivastava, cited the Supreme Court’s ruling in United Bank of India vs. Satyawati Tondon & Others to support its stance. The bench noted, “Interference by this Court in SARFAESI-related issues is not warranted unless a clear case of illegality or bad faith is established on the part of the bank authorities.”
This section empowers financial institutions to recover dues by enforcing security interests if a borrower fails to repay within 60 days after receiving a demand notice under Section 13(2).
The petitioner argued that the bank did not respond to their objection filed under Section 13(3A) before initiating recovery action under Section 13(4). However, upon reviewing the documents submitted, the court found that the bank had issued an order addressing the objection and attempted to serve it via post. Though delivery to two of the petitioners was unsuccessful due to the premises being locked, the court acknowledged that proper service to one petitioner may not have occurred. Despite this, the petitioners had received the Section 13(4) notice and had subsequently challenged it before the Debts Recovery Tribunal (DRT).
The High Court pointed out that the petitioners initially failed to inform the court that they had already approached the DRT. This fact only came to light through a supplementary affidavit filed later. The court observed that since the petitioners had already sought remedy before the DRT, pursuing the same grievance through a writ petition constituted a case of attempting to “sail in two boats.”
“The existence of an order under Section 13(3A), the efforts made to deliver it, and the petitioners’ acknowledgment of the Section 13(4) notice suggest that they had the opportunity to raise their concerns before the appropriate forum. Having done so, they cannot now bypass that process by invoking the writ jurisdiction of this Court,” the bench observed.
The court further highlighted that the petitioners had already raised the same objections regarding Section 13(3A) in their application before the DRT, rendering their writ plea redundant.
Reaffirming the precedent set by the Supreme Court in Satyawati Tondon, the High Court stressed that although the Constitution allows for writ petitions even where alternate remedies exist, such discretion should be exercised sparingly when an effective statutory mechanism is available.
With no evidence of mala fide conduct by the bank and considering that the asset sale had already occurred, the court found no reason to intervene. Consequently, the writ petition was dismissed.