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Judgment
This Writ Petition is filed seeking the following relief:-
―..to issue a writ order or direction more particularly one in the nature of WRIT OF MANDAMUS declaring the action of respondents, particularly 3rd respondent in invoking Chapter III of SARFAESI Act 2016 as illegal, void and against the act and rules and violative of Articles 14 and 21 and 300A of the Constitution of India and consequently set aside the same ...‖
The case of the writ petitioner, in brief, is that –
[i] The petitioner has availed a mortgage loan from the 3rd respondent-Bank for a sum of Rs.8,00,000/- on 06.10.2012, and the same was secured by way of mortgaging the residential property of the petitioner located at Door No.32-10-10C, Gummadivari Street, Mohalrajpuram, Vijayawada. On 11.04.2023 the mortgaged asset was registered with the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI), as mandated under the SARFAESI Act.
[ii] Section 26D of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) mandates the same, which reads as follows:
―26D. Right of enforcement of securities.—
Notwithstanding anything contained in any other law for the time being in force, from the date of commencement of the provisions of this Chapter, no secured creditor shall be entitled to exercise the rights of enforcement of securities under Chapter III unless the security interest created in its favour by the borrower has been registered with the Central Registry.‖
[iii] Without registering the subject property within 30 days from the date of registration of mortgage, the creditor is statutorily barred from invoking the proceedings in terms Sections 13(2), 13(4) of SARFAESI Act. The outstanding amount of Rs.14,62,966.59/- as claimed by the 3rd respondent under the demand notices reflects an unfair and arbitrary calculation of interest, therefore, illegal. There is violation of Rule 5 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Central Registry) Rules, 2011 and Section 26D of SARFAESI Act. The petitioner has no alternative remedy except the writ petition. Hence, filed the present Writ Petition.
Counter is filed on behalf of the 3rd respondent-Bank, contending that –
[i] The petitioner has availed Mortgage Loan of ₹8,00,000/- on repayable in 120 equated monthly instalments at Rs.6,667/-p.m. each and the 3rd respondent has duly registered the security interest with the CERSAI, in terms of Section 26D of the SARFAESI Act on 11.04.2023 and the particulars of the mortgage are uploaded in the CERSAI portal. The allegations contra are false. The CERSAI registration is a procedural requirement the delay does not invalidate the security interest or extinguish the Bank’s statutory right under the SARFAESI Act.
[ii] Rule 5, which earlier prescribed a 30-days time limit for registration, was omitted by the Security Interest (Central Registry) Amendment Rules, 2020 vide Notification No.G.S.R.45(E) dated 20.01.2020, there is no prescribed period of limitation for filing particulars of security interest with the Central Registry, (CERSAI).
[iii] The 3rd respondent has invoked the provisions of SARFAESI Act and followed the legal procedure laid for Co-operative bank by initiating arbitration proceedings to recover the loans from 2023 onwards in line with the decision of the Hon'ble Supreme Court in Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Ltd.,1, commenced initiating recovery measures under the SARFAESI Act in all eligible accounts. Accordingly the Central Registry (CERSAI) entry was made at the same time as with the commencement of SARFAESI Act proceedings in 2023.
[iv] The registration with CERSAI portal is procedural requirement and delay will not invalidate the security interest. The writ petitioner utterly failed to repay the loan amount and subsequently loan became Non-Performing Asset (NPA). Hence, the petitioner was served with demand notice dated 01.06.2024 under Section 13(2) of SARFAESI Act, 2022. After the lapse of stipulated time the 3rd respondent Bank has issued 13(4) possession Notice under SARFAESI Act, and the procedure envisaged as per the Act is followed at each and every stage, following the RBI guidelines.
[v] The petitioner has legal obligation to co-operate with the legal proceedings and he has efficacious remedy under Section 17 of the SARFAESI Act, by way of appeal before the Debts Recovery Tribunal (DRT). The present writ petition is not maintainable in view of the law laid down by the Supreme Court in United Bank of India v. Satyawati Tondon and Authorised Officer, State Bank of Travancore and Mathew K.C., the petitioner is bypassing the effective alternative remedies provided under SARFAESI Act, thereby attempting to invoke extraordinary jurisdiction of this Court, which is absolutely abuse of process of law. Therefore, the petition is devoid of merits and liable to be dismissed.
[vi] Further, the 3rd respondent has enclosed Notification No.G.S.R.45(E) dated 20.01.2020 and produced the particulars relating to entry in Central Registry (CERSAI), indicating the registration date as 11.04.2023.
Reply affidavit is also filed on behalf of the writ petitioner stating that the belated registration will go to the root of jurisdiction of the Bank, to invoke the SARFAESI Act proceedings. Belated registration is a gross violation of rules and registration in CERSAI portal is not merely procedural requirement.
Heard learned counsel appearing on both sides. Learned counsel for the respective parties reiterated their respective contentions.
Perused the petition as well as counter and other material placed by both sides.
Thoughtful consideration is given to the arguments advanced by both sides.
Analysis:
The following points are clear:-
The writ petitioner has availed loan.
The loan was declared as NPA.
The 3rd respondent-Bank has initiated the proceedings for recovery of dues in terms of SARFAESI Act under Sections 13(2), 13(4).
The 3rd respondent-Bank has registered the mortgage with CERSAI belatedly.
It is not clear as to whether the requirement of registration with CERSAI is intended for the benefit of the writ petitioner, and it is also not clear as to what prejudice has been caused to the writ petitioner on account of the non-registration of the mortgage.
There is no convincing explanation as to the significance or effect of the amendment omitting the earlier requirement of registration within thirty (30) days.
In view of the omission of the provision prescribing registration within thirty (30) days, the contention regarding belated registration works in favour of the loanee, found not acceptable.
It is not explained as to why the petitioner cannot raise the same grounds before the competent DRT questioning the legal and factual objections.
Precedential guidance:-
[i] With regard to the scope of interference in the matters pertaining to the SARFAESI Act, the Hon’ble Apex Court in PHR Invent Educational Society v. UCO Bank2, while deciding an appeal challenging the orders passed by the Division Bench of the High Court of Telangana in a writ petition, exhaustively considered various several judgments from paragraph 22 onwards. In para 41 of the judgment of the Hon’ble Apex Court, observed as follows:-
“41.While dismissing the writ petition, we will have to remind the High Courts of the following words of this Court in Satyawati Tondon [United Bank of India v. Satyawati Tondon (2010) 8 SCC 110 : (2010) 3 SCC (Civ) 260 : 2010 INSC 428] since we have come across various matters wherein the High Courts have been entertaining petitions arising out of the DRT Act and the SARFAESI Act in spite of availability of an effective alternative remedy : (SCC p. 128, para 55)
―55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.‖
[ii] The observations of the Hon’ble Apex Court in Satyawati Tondon's3 case which are referred to in paragraph 22 of PHR Invent Educational Society v. UCO Bank’s case [cited 2 surpa], reads as follows:
―22. The law with regard to entertaining a petition under Article 226 of the Constitution in case of availability of alternative remedy is well settled. In Satyawati Tondon [United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110 : (2010) 3 SCC (Civ) 260 : 2010 INSC 428] , this Court observed thus : (SCC p. 123, paras 43-45)
―43. Unfortunately, the High Court [Satyawati Tondon v. State of U.P., 2009 SCC OnLine All 2608] overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
44.While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.
45.It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.”
[iii] In a case, M/s. South Indian Bank Ltd. And Ors. Versus Naveen Mathew Philip And Anr. etc. while considering the issue as to entertaining the Writ Petitions under the Constitution of India in the matters involving recovery of dues in terms of SARFAESI Act, particularly where an effective alternative remedy is available, the Hon’ble Apex Court held that, unless there are extra-ordinary circumstances exist, the High Courts cannot interfere in such matters. After referring to various judgments, deprecated the practice of approaching the High Courts, without exhausting of statutory remedy. In para 16 of the judgment, the scope of approaching the High Court and entertaining a Writ of Mandamus, the prerogative writ has been addressed by placing reliance of another judgment in Radha Krishan Industries v. State of H.P.5, certain principles are referred. Exceptions contemplated to interfere even when there is alternative remedy, are :
Writ Petition is filed for enforcement of fundamental right contemplated by part III of the Constitution of India.
Violation of principles of natural justice.
The order or proceedings wholly without jurisdiction.
The vires of legislation is challenged, and that
merely an alternative remedy by itself does not divert the High Courts of its power under article 226 of the Constitution of India in appropriate case, though ordinary Writ should not be entertained.
[iv] Further, in para 18 of the judgment in M/s. South Indian Bank Ltd. And Ors.’s case (cited 4 supra) the Hon’ble Apex court observed as follow:-
“18. ......, we are conscious of the fact that the powers conferred under Article 226 of the Constitution of India are rather wide but are required to be exercised only in extraordinary circumstances in matters pertaining to proceedings and adjudicatory scheme qua a statute, more so in commercial matters involving a lender and a borrower, when the legislature has provided for a specific mechanism for appropriate redressal.‖
Upon considering the factual scenario and the legal position referred supra vide the observations of the Hon’ble Apex Court in PHR Invent Educational Society, Satyawati Tondon, M/s. South Indian Bank Ltd. And Ors.’s, and Radha Krishan Industries cases (cited 2 to 5), having regard to the observations of the Division Bench of this Court in M/s.Bheem Eco Build Tech Vs. Union of India6 in W.P.No.3973 of 2025, this Court is of the considered view that the petitioner is not entitled to the relief of a writ of Mandamus as prayed for and the writ petition is liable to be dismissed, as extra-ordinary circumstances, which are contemplated in M/s. South Indian Bank Ltd. And Ors. (cited 4 supra) are not found.
Accordingly, the Writ Petition is dismissed. However, the petitioner is given liberty to approach the competent DRT within period of (4) weeks from the date of receipt of a copy of this order and raise all the defences and contentions available under law. Till then, the respondents shall maintain status quo with regard to alienation, registration, or creation of third-party interests in respect of the subject property for a period of four (04) weeks from today. No costs.
As a sequel, miscellaneous petitions pending, if any, shall stand closed.