The Rajasthan High Court has dismissed a writ petition challenging proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), reiterating the Supreme Court's caution against entertaining writ petitions in financial recovery matters where alternate statutory remedies exist. The Court emphasized that High Courts must exercise extreme circumspection in granting stays in such cases to avoid adverse impact on the financial health of secured creditors and the economy.
Background & Facts
The Dispute
The petitioners, including Ashwin Kumar Saini, Pawan Saini, Bhagwati Devi, Harsh Traders, and Shankarlal Saini, filed a writ petition in 2025 challenging proceedings initiated by Cholamandalam Investment and Finance Co. Ltd. under the SARFAESI Act. The petitioners sought to quash the proceedings, which involved enforcement of security interest against their properties.
Key Facts
- The petitioners are residents of Aburoad, Sirohi, Rajasthan.
- The respondents are Cholamandalam Investment and Finance Co. Ltd. and its Abu Road Branch Manager.
- The petitioners failed to provide instructions to their counsel during the hearing.
- The controversy involves the maintainability of writ petitions under Article 226 of the Constitution against SARFAESI proceedings.
Procedural History
- 2025: Writ petition filed before the Rajasthan High Court (SB Civil Writ Petition No. 10943/2025).
- 22.07.2026: Hearing before the High Court.
- The Court considered the settled position of law and the Supreme Court's judgments in United Bank of India v. Satyawati Tondon and Phoenix ARC Pvt. Ltd. v. Vishwa Bharati Vidya Mandir.
Relief Sought
The petitioners sought to quash the SARFAESI proceedings and restrain the respondents from taking any coercive action against them.
The Legal Issue
The central question was whether the High Court should entertain a writ petition under Article 226 of the Constitution challenging SARFAESI proceedings, given the existence of alternate statutory remedies under the SARFAESI Act.
Arguments Presented
For the Petitioner
The petitioners did not present any arguments or instructions, leaving the Court without any rebuttal to the respondents' position.
For the Respondent
The respondents relied on the Supreme Court's judgments in United Bank of India v. Satyawati Tondon and Phoenix ARC Pvt. Ltd. v. Vishwa Bharati Vidya Mandir to argue that writ petitions in financial recovery matters should not be entertained unless exceptional circumstances exist. They contended that the petitioners had alternate remedies under the SARFAESI Act and that entertaining the writ petition would frustrate the legislative intent behind the special legislation.
The Court's Analysis
The Court examined the Supreme Court's judgments in United Bank of India v. Satyawati Tondon and Phoenix ARC Pvt. Ltd. v. Vishwa Bharati Vidya Mandir, which held that High Courts must exercise extreme caution in granting stays in financial recovery matters under the SARFAESI Act. The Court noted that:
"It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation."
The Court also observed that:
"Filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the Court. The writ petitions have been filed against the proposed action to be taken under Section 13(4). Even assuming that the communication dated 13.08.2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions."
The Court held that the petitioners had alternate remedies under the SARFAESI Act and that entertaining the writ petition would frustrate the legislative intent behind the special legislation. It emphasized that High Courts must be extremely careful and circumspect in exercising their discretion under Article 226 in such matters.
The Verdict
The writ petition was dismissed. The Court granted liberty to the petitioners to avail the alternate and efficacious remedy before the appropriate forum within 30 days from the date of the order. The interim order, if any, in favor of the petitioners, was continued for the said period, and no coercive action was to be taken against the petitioners during this period.
What This Means For Similar Cases
Writ Petitions in Financial Recovery Matters Are Not Routine
- High Courts must exercise extreme caution in entertaining writ petitions under Article 226 challenging SARFAESI proceedings.
- The existence of alternate statutory remedies under the SARFAESI Act is a critical factor in determining the maintainability of such writ petitions.
Abuse of Process of Court
- Filing writ petitions to frustrate financial recovery actions is an abuse of the process of the Court.
- Courts must ensure that interim orders do not prejudice the rights of secured creditors to recover their dues.
Strict Adherence to Alternate Remedies
- The SARFAESI Act provides a statutory framework for recovery of debts, and parties must exhaust these remedies before approaching the High Court.
- Writ petitions should not be entertained unless exceptional circumstances exist, as outlined in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, Whirlpool Corpn. v. Registrar of Trade Marks, and Harbanslal Sahnia v. Indian Oil Corpn. Ltd.
