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Filing of petition by the borrowers before the HC under Art. 226 is an abuse of process of the Court

The Supreme Court bench comprising of Justices M.R. Shah and B. V. Nagarathna was hearing a case filed against the borrower by the Appellant - Asset Reconstruction Company (ARC). Feeling aggrieved and dissatisfied with the impugned order passed by the High Court of Karnataka by which the High Court had entertained the writ petitions under Article 226 of the Constitution of India against the appellant, an ARC and has passed an interim order directing for maintaining status quo with regard to SARFAESI action (possession of the secured assets), the original respondent – the Assets Reconstructing Company (ARC) has preferred the present appeals.

Applying the law laid down by the Supreme Court in the case of Mathew K.C., REED 2018 SC 01202 to the facts on hand, the Apex Court observed that "filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the Court."

"The writ petitions have been filed against the proposed action to be taken under Section 13(4). As observed hereinabove, even assuming that the communication dated 13.08.2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions", the Bench said.

"Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs.1 crore only (in all Rs.3 crores) is absolutely unjustifiable", the Apex Court noted.

The Bench further said, "The dues are to the extent of approximately Rs. 117 crores. The ad-interim relief has been continued since 2015 and the secured creditor is deprived of proceeding further with the action under the SARFAESI Act. Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of the Court."

The Bench observed that "It appears that the High Court has initially granted an ex-parte ad-interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that bypassing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced."

"The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court would have a serious adverse impact on the financial health of the secured creditor/assignor", the Bench further noted.

The Supreme Court bench cautioned, "the High Court should have been extremely careful and circumspect in exercising its discretion while granting a stay in such matters."

Apex Court in these circumstances dismissed the proceedings before the High Court and present appeals succeeded.

View Judgment

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