The Supreme Court dealt with the legality of a High Court's interference in an auction sale under the SARFAESI Act, despite the availability of an alternative statutory remedy. The borrower, after defaulting on loan repayment, sought to reverse the auction sale of his properties, even after the highest bidder, PHR Invent Educational Society, paid the full auction amount and obtained a sale certificate. The Supreme Court quashed the High Court's decision to restore the securitization application and reinforced the principle that writ petitions should not be entertained when statutory remedies exist under the SARFAESI Act.

1. Parties Involved:

• Appellant: PHR Invent Educational Society (Auction Purchaser)
• Respondent No. 1: UCO Bank
• Respondent No. 2: Authorized Officer of UCO Bank
• Respondent No. 3: Dr. M.V. Ramana Rao (Borrower)

2. Case Background:

• The borrower mortgaged four properties in Vijayawada to secure a loan from UCO Bank.
• After defaulting on the loan, UCO Bank initiated proceedings under the SARFAESI Act and issued an auction notice.
• On December 14, 2017, PHR Invent Educational Society won the auction for ₹5,72,22,200 and paid 25% of the bid amount upfront.

3. Tribunal and High Court Proceedings:

• The borrower filed an application before the Debt Recovery Tribunal (DRT), but failed to comply with orders to deposit the required sum, leading to the confirmation of the auction in favor of PHR Invent Educational Society.
• The borrower’s subsequent one-time settlement (OTS) proposal was rejected by the bank, and his securitization application was withdrawn after the matter was allegedly settled out of court.
• The borrower later sought restoration of the securitization application, which the DRT dismissed. The High Court set aside the DRT’s order, directing it to reconsider the application.

4. Supreme Court Ruling:

• The Supreme Court found that the High Court erred in entertaining the writ petition when an effective alternative remedy under the SARFAESI Act was available.
• The Court emphasized that the auction sale had reached finality, and the borrower’s conduct did not merit equitable relief.

Acts and Sections Discussed:

• Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)
  • Section 17: Application to the DRT by aggrieved parties against measures taken by secured creditors.
  • Section 18: Appellate remedy against orders passed by the DRT.
• Constitution of India
  • Article 226: Jurisdiction of the High Court to issue writs.

Ratio Decidendi:

The Supreme Court held that the High Court should not have entertained the writ petition as the SARFAESI Act provides a comprehensive remedy through statutory mechanisms. The rule of exhaustion of remedies is crucial, particularly in financial matters, and the borrower’s failure to comply with prior tribunal orders and delayed petitions did not justify the High Court's intervention.

Subject:

Writ Jurisdiction and Auction Sales under the SARFAESI Act

SARFAESI Act, Writ Jurisdiction, Auction Sale, Debt Recovery, Alternative Remedy, Judicial Restraint.