Supreme Court recently held that high courts should exercise caution in entertaining petitions under Article 226 of the Constitution when alternative statutory remedies are available, especially in financial matters.
The three-judge bench of the Supreme Court comprising Justice B.R. Gavai, Justice Rajesh Bindal and Justice Sandeep Mehta was hearing an appeal and observed that high courts should exercise caution in entertaining petitions under Article 226 of the Constitution when alternative statutory remedies are available, especially in cases involving recovery of dues by financial institutions. The bench further noted, that once an auction sale is confirmed, it should not be reopened unless exceptional circumstances like fraud are demonstrated, as confirmed sales achieve finality.
The Supreme Court granted leave to appeal against the order dated February 4, 2022, issued by the Division Bench of the High Court for the State of Telangana at Hyderabad in Writ Petition No. 5275 of 2021. The Writ Petition was filed by Dr. M.V. Ramana Rao, the borrower, challenging the dismissal of his Miscellaneous Application (M.A.) No. 97 of 2020 by the Debts Recovery Tribunal-II at Hyderabad (DRT). The DRT had dismissed the M.A. for the restoration of Securitization Application (S.A.) No. 1476 of 2017, which had been withdrawn earlier. The High Court, in its impugned order, set aside the DRT's decision and directed it to proceed with S.A. No. 1476 of 2017.
The case stemmed from a loan availed by Dr Rao from UCO Bank, secured by mortgaged properties. Defaulting on repayment, the bank initiated proceedings under the SARFAESI Act, leading to an auction notice for the mortgaged properties. Despite legal proceedings, the auction took place, with the appellant emerging as the highest bidder. The Respondent-Bank confirmed the sale in favour of the appellant-auction purchaser on 2nd November 2020.
Thereafter, on 4th November 2020, the Borrower filed a miscellaneous application being M.A. No. 97 of 2010 for restoration of the said S.A. No. 1476 of 2017 on the ground that the said S.A. No. 1476 of 2017 had been withdrawn because the Chief Manager and AGM of the Respondent-Bank had orally told the Borrower that unless the S.A. No. 1476 of 2017 was withdrawn, they could not process the OTS proposal.
It is further relevant to note that on 11th November 2020, the Sale Certificate was registered. Vide order dated 2nd February 2021, DRT dismissed the said M.A. No. 97 of 2010. Thereafter, the writ petition being No. 5275 of 2021 came to be filed by the Borrower on 25th February 2021 before the High Court. Vide the impugned order, the High Court set aside the order passed by DRT and directed it to proceed with S.A. No. 1476 of 2017.
The appellant, dissatisfied with the High Court's decision, appealed to the Supreme Court. The Court heard arguments from all parties, emphasizing the principle that the High Court should typically refrain from entertaining petitions under Article 226 of the Constitution when alternative statutory remedies are available.
The Apex Court also noted that the confirmed auction sale, barring exceptional circumstances like fraud, should not be reopened. It found fault with the High Court's decision, as it did not consider the irreversible nature of the confirmed sale.
Ultimately, the Supreme Court allowed the appeal, quashing the High Court's order and dismissing Dr Rao's writ petition with imposed costs. The Court emphasized the importance of High Courts exercising discretion cautiously, particularly when dealing with matters involving the recovery of dues by financial institutions.
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