Case Note & Summary
The case involves a writ appeal filed by Union Bank of India (appellants) against an order dated 02.05.2023 passed by a learned Single Judge of the Karnataka High Court in W.P.No.8646/2017. The respondents (petitioners in the writ petition) had challenged an endorsement dated 02.07.2016 issued by the Corporation Bank (now merged with Union Bank of India) declining to accept their one-time settlement proposal. The learned Single Judge had quashed the endorsement and directed the bank to consider the petitioners' representation. The bank appealed under Section 4 of the Karnataka High Court Act. The Division Bench examined the facts: the respondents had availed credit facilities from the bank, defaulted, and the bank classified their account as non-performing asset. The bank issued notice under Section 13(2) of the SARFAESI Act, 2002, and took possession of the secured assets under Section 13(4). The respondents submitted a one-time settlement proposal, which the bank rejected via the impugned endorsement. The legal issues were whether the endorsement was a 'decision' under Section 17(1) of the SARFAESI Act and whether the writ petition was maintainable. The bank argued that the endorsement was not a measure under Section 13(4) and that the respondents had an alternative remedy before the Debts Recovery Tribunal under Section 17(1). The respondents contended that the endorsement was arbitrary and violative of Article 14. The court analyzed Section 17(1) and held that only actions under Section 13(4) can be challenged before the DRT, and the endorsement declining a one-time settlement is not such an action. The court also noted that the writ petition was not maintainable due to the availability of an alternative remedy. The Division Bench allowed the appeal, set aside the Single Judge's order, and dismissed the writ petition, leaving the respondents to avail remedies under the SARFAESI Act.
Headnote
A) Banking Law - SARFAESI Act - Section 17(1) - Jurisdiction of DRT - Endorsement declining one-time settlement is not a 'decision' under Section 17(1) of SARFAESI Act, 2002 - The bank's communication rejecting the one-time settlement proposal does not constitute a measure taken under Section 13(4) of the Act, and therefore, the remedy under Section 17(1) is not available. The writ petition challenging such endorsement was not maintainable as the petitioners had an alternative remedy before the DRT under Section 17(1) if any action under Section 13(4) was taken. (Paras 10-15) B) Constitutional Law - Article 226 - Maintainability of Writ Petition - Alternative Remedy - The High Court should not entertain a writ petition when an efficacious alternative remedy is available under the SARFAESI Act, 2002, unless exceptional circumstances exist. The learned Single Judge erred in entertaining the writ petition and quashing the endorsement. (Paras 16-20)
Issue of Consideration
Whether the endorsement dated 02.07.2016 issued by the bank declining to accept the one-time settlement proposal is a 'decision' under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and whether the writ petition was maintainable.
Final Decision
The appeal is allowed. The order dated 02.05.2023 passed by the learned Single Judge in W.P.No.8646/2017 is set aside. Consequently, the writ petition is dismissed. The respondents are at liberty to avail such remedies as available under the SARFAESI Act, 2002.
Law Points
- Jurisdiction of Debts Recovery Tribunal under Section 17(1) of SARFAESI Act
- 2002
- Maintainability of writ petition against bank's endorsement declining one-time settlement
- Scope of judicial review under Article 226 of Constitution of India
