In a recent judgment, the Jaipur bench of the Rajasthan High Court reaffirmed the principle that courts should refrain from intervening in proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act when statutory remedies are available. Justice Avneesh Jhingan emphasized the necessity of adhering to the "self-imposed restriction of non-interference in writ petitions where statutory remedies were available," particularly in cases governed by the SARFAESI Act.
Case Background
The petitioner, having purchased a property from his brother, became embroiled in legal proceedings after the original owner defaulted on a loan secured against the property. The loan, initially taken over by ICICI Home Finance, fell into arrears, leading the financial institution to initiate recovery actions under the SARFAESI Act. Consequently, the property was classified as a Non-Performing Asset (NPA), and physical possession was assumed by the lender.
Petitioner's Legal Actions
In response to the possession takeover, the petitioner filed a securitization application with the Debt Recovery Tribunal (DRT), seeking a stay on the proceedings. Upon rejection of the stay application, the petitioner escalated the matter to the High Court, contending that, as a bona fide purchaser and not the original borrower, he was ineligible to appeal under the SARFAESI Act. Additionally, he argued that appealing the DRT's decision necessitated a pre-deposit of 50% of the outstanding amount, posing a significant financial burden.
Arguments Against the Petitioner
Opposing the petition, it was highlighted that the petitioner and the original borrower were siblings, suggesting that the property's transfer aimed to defraud financial institutions post the loan's NPA classification. Furthermore, it was noted that the petitioner had already engaged the statutory remedy by filing a securitization appeal under the SARFAESI Act, which remained pending.
Court's Analysis and Decision
The High Court dismissed the petitioner's claim of being a bona fide purchaser exempt from filing an appeal. The court clarified that Section 18 of the SARFAESI Act is broadly framed, granting the right to appeal to "any person aggrieved" by a DRT order. Citing the Supreme Court's ruling in Union of India v. Satyawati Tondon and Ors. (2010), the court underscored that the term "any person" in Section 17 of the SARFAESI Act encompasses not only borrowers but also any individual affected by actions under Sections 13(4) or 14 of the Act.
The court further noted that the petitioner had already pursued the statutory remedy by filing an appeal with the DRT, which was still under consideration. Emphasizing the principle of non-interference when alternative remedies are available, the court declined to exercise its writ jurisdiction in this matter.
Implications of the Judgment
This judgment reinforces the judiciary's stance on limiting interference in SARFAESI proceedings when statutory remedies exist. It underscores the importance of exhausting available legal avenues before seeking judicial intervention, thereby upholding the SARFAESI Act's framework designed to facilitate efficient recovery of defaulted loans by financial institutions.
The decision also clarifies that individuals other than the original borrowers, including subsequent purchasers of secured properties, fall within the ambit of "any person aggrieved" under Sections 17 and 18 of the SARFAESI Act. This interpretation ensures that all parties affected by recovery actions have access to statutory remedies, promoting a fair and comprehensive adjudication process.
Conclusion
The Rajasthan High Court's ruling serves as a significant precedent, affirming that courts should exercise restraint and avoid intervening in SARFAESI proceedings when alternative statutory remedies are available. This approach not only respects the legislative intent behind the SARFAESI Act but also encourages aggrieved parties to utilize the designated legal mechanisms for redressal, thereby ensuring an orderly and efficient resolution of disputes arising from loan defaults and recovery actions.
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