SARFAESI Act Section 13 | High Court Must Decline Writ Jurisdiction When DRT Remedy Available : Andhra Pradesh HC

The Andhra Pradesh High Court recently dismissed a writ petition filed under Article 226 of the Constitution, reaffirming the principle that High Courts should not entertain petitions challenging actions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) when an effective alternative remedy, such as approaching the Debts Recovery Tribunal (DRT), is available. The judgment underscores the self-imposed restraint exercised by High Courts in matters involving recovery of public dues, aligning with the Supreme Court’s observations in PHR Invent Educational Society v. UCO Bank and United Bank of India v. Satyawati Tondon.

Background & Facts

The Dispute

The petitioner, M/s. Bheem Eco Build Tech, represented by its proprietor Smt. Polla Naga Sudha Rani, is the absolute owner of land measuring 8,905.60 sq. yards in Survey Nos. 514 and 515, Turlapadu Village, Chandarlapadu Mandal, NTR District, Andhra Pradesh. The petitioner availed three loans from Canara Bank (4th respondent) under the MSME Loan scheme:

1. Rs. 1.25 crores (Loan Account No. 3973201000070, dated 25.03.2017)
2. Rs. 20 lakhs (Loan Account No. 3973746000002)
3. Rs. 20 lakhs (Loan Account No. 3973755000244) Additionally, a Canara Vehicle Loan of Rs. 6.65 lakhs (Account No. 3973603000033) was availed.

Key Facts

• The petitioner’s loan accounts became irregular on 11.08.2022 and were subsequently declared Non-Performing Assets (NPA).
• The bank issued a Demand Notice on 15.09.2023, followed by a Possession Notice on 11.01.2024 and a Sale Notice on 28.03.2024.
• The bank fixed the reserve price of the immovable property at Rs. 66,59,044, despite the petitioner’s claim that the market value exceeded Rs. 5 crores.
• The petitioner paid over Rs. 2 crores toward the loans, leaving an outstanding amount of Rs. 66,59,044 as of 29.04.2024.
• The petitioner submitted representations on 22.01.2024 and 23.04.2024, requesting regularisation of the account and highlighting the discrepancy in the property’s valuation.
• The 5th respondent, Sri Vattikunta Sambasiva Rao, an ex-employee of the bank, was declared the successful bidder in the e-auction conducted on 27.05.2024. The petitioner alleged that the bank’s circulars prohibit ex-employees from participating in auctions.
• The bank issued a letter on 29.01.2025, proposing to sell or shift the non-hypothecated machinery lying in the premises, without considering the petitioner’s representation dated 07.02.2025.

Procedural History

• 11.01.2024: Bank issued Possession Notice under the SARFAESI Act.
• 28.03.2024: Bank issued Sale Notice, fixing the reserve price at Rs. 66,59,044.
• 27.05.2024: Bank issued Sale Certificate to the 5th respondent, adjusting Rs. 35 lakhs toward the petitioner’s loan accounts.
• 27.05.2024: Petitioner submitted a declaration on non-judicial stamp paper, stating she had no claim over the movable property sold to the 5th respondent for Rs. 5 lakhs.
• 01.09.2024: The 5th respondent informed the bank that the agreement for movable property was cancelled and requested removal of the machinery.
• 29.01.2025: Bank issued a letter to the petitioner, advising removal of un-hypothecated machinery or risk its sale/shifting.
• 28.05.2024: Bank credited a surplus amount of Rs. 42,47,000 to the petitioner’s account, of which Rs. 32,40,000 was debited on 01.06.2024 and transferred to the account of the petitioner’s husband.
• Earlier Litigation:
  • W.P. No. 18523 of 2024: Filed by the petitioner, disposed of with the observation that the petitioner had an alternative remedy before the DRT.
  • W.P. No. 14184 of 2024: Filed by the 5th respondent, with the petitioner seeking impleadment.
• Present Writ Petition (W.P. No. 3973 of 2025): Filed on 22.07.2025, challenging the bank’s action of selling/shifting non-hypothecated machinery without considering the petitioner’s representation.

Relief Sought

The petitioner sought:

1. A Writ of Mandamus declaring the bank’s letter dated 29.01.2025 as illegal, arbitrary, and unconstitutional.
2. A direction to the bank not to sell or shift the non-hypothecated machinery.
3. Relief on grounds of violation of the SARFAESI Act and Rules.

The Legal Issue

The central question before the Court was whether the High Court could exercise its extraordinary jurisdiction under Article 226 of the Constitution to entertain a writ petition challenging actions under the SARFAESI Act, when the petitioner had an effective alternative remedy available before the Debts Recovery Tribunal (DRT).

Arguments Presented

For the Petitioner

1. The bank’s action of issuing the letter dated 29.01.2025 to sell/shift non-hypothecated machinery was illegal and arbitrary, as it failed to consider the petitioner’s representation dated 07.02.2025.
2. The reserve price fixed by the bank (Rs. 66,59,044) was grossly undervalued, as the market value of the property exceeded Rs. 5 crores.
3. The 5th respondent, an ex-employee of the bank, was debarred from participating in the auction under the bank’s circulars, rendering the sale void.
4. The petitioner had paid over Rs. 2 crores toward the loans, and the bank’s actions were unjust and disproportionate.

For the Respondents (Bank and Union of India)

1. The petitioner’s loan accounts were declared NPA on 11.08.2022, and the bank followed the due process under the SARFAESI Act, including issuing Demand Notice, Possession Notice, and Sale Notice.
2. The Sale Certificate was issued on 27.05.2024 to the 5th respondent, who paid the sale consideration, which was adjusted toward the petitioner’s loan dues.
3. The petitioner submitted a declaration on 27.05.2024, stating she had no claim over the movable property sold to the 5th respondent.
4. The petitioner failed to remove the un-hypothecated machinery despite the bank’s letter dated 29.01.2025, and the bank was entitled to sell/shift the machinery to recover its dues.
5. The petitioner availed the surplus amount of Rs. 42,47,000 credited by the bank, without objection, which established her acceptance of the sale.
6. The S.A. (Securitisation Application) referred to by the petitioner was un-numbered and un-admitted by the DRT, indicating non-exhaustion of alternative remedies.
7. The High Court should not entertain the writ petition as the petitioner had an alternative remedy under the SARFAESI Act.

The Court's Analysis

The Court conducted a detailed analysis of the factual and legal contentions, focusing on the availability of alternative remedies and the scope of High Court’s jurisdiction under Article 226 in matters involving the SARFAESI Act.

1. Alternative Remedy:

   • The Court noted that the petitioner had earlier filed W.P. No. 18523 of 2024, which was disposed of with the observation that the petitioner had an alternative remedy before the DRT.
   • The petitioner’s reference to an un-numbered S.A. before the DRT suggested awareness of the alternative remedy, yet no effective steps were taken to pursue it.
   • The Court relied on the Supreme Court’s judgment in PHR Invent Educational Society v. UCO Bank [(2024) 6 SCC 579], which reiterated the principle that High Courts should not entertain writ petitions under Article 226 when an effective alternative remedy is available under statutes like the SARFAESI Act and DRT Act.

2. Scope of Interference under Article 226:

   • The Court quoted paragraph 41 of PHR Invent Educational Society v. UCO Bank, which referred to the Supreme Court’s observations in United Bank of India v. Satyawati Tondon [(2010) 8 SCC 110]:

     “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.”

   • The Court further quoted paragraph 22 of PHR Invent Educational Society, which reproduced the Supreme Court’s observations in Satyawati Tondon:

     “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.’”

3. Application to the Present Case:

   • The Court held that the petitioner had failed to exhaust the alternative remedy available under the SARFAESI Act and DRT Act.
   • The bank’s actions, including the issuance of notices and sale of property, were in accordance with the statutory procedure.
   • The petitioner’s acceptance of the surplus amount and failure to pursue the remedy before the DRT weakened her case.
   • The Court concluded that no grounds existed to invoke the extraordinary jurisdiction of the High Court under Article 226.

The Verdict

The Writ Petition (W.P. No. 3973 of 2025) was dismissed. The Court held:

1. The petitioner failed to exhaust the alternative remedy available under the SARFAESI Act and DRT Act.
2. The bank’s actions were in compliance with statutory provisions, and the petitioner’s representation dated 07.02.2025 was duly considered.
3. No costs were awarded.
4. Miscellaneous petitions pending, if any, stood closed.

What This Means For Similar Cases

High Courts Must Exercise Restraint Under Article 226

• The judgment reiterates the principle that High Courts should not entertain writ petitions under Article 226 when an effective alternative remedy is available under statutes like the SARFAESI Act or DRT Act.
• Practitioners must exhaust remedies before quasi-judicial bodies like the DRT before approaching the High Court, unless exceptional circumstances (e.g., violation of natural justice or patent illegality) exist.

Alternative Remedy Is Not Merely Procedural

• The Court emphasized that the availability of an alternative remedy is not a mere technicality but a substantive bar to the High Court’s jurisdiction.
• Filing an un-numbered or un-admitted application before the DRT does not constitute exhaustion of remedy. Petitioners must actively pursue their claims before the appropriate forum.

Banks’ Actions Under SARFAESI Act Are Presumptively Valid

• The judgment reinforces the presumptive validity of banks’ actions under the SARFAESI Act, including issuance of notices, possession, and sale of secured assets.
• Undervaluation of property or procedural irregularities must be challenged before the DRT at the earliest opportunity, not through a writ petition as a first resort.

Petitioners’ Conduct Matters

• The Court took note of the petitioner’s conduct, including:
  • Acceptance of surplus amount credited by the bank.
  • Failure to remove un-hypothecated machinery despite the bank’s notice.
  • Submission of a declaration relinquishing claims over movable property.
• Such conduct weakens a petitioner’s case and may preclude relief under Article 226.

Key Takeaways for Practitioners

1. Always exhaust alternative remedies before filing a writ petition under Article 226 in matters involving SARFAESI Act or DRT Act.
2. Challenge bank actions (e.g., notices, possession, sale) before the DRT at the earliest stage, not after the fact.
3. Avoid conduct that may be construed as acceptance of the bank’s actions (e.g., accepting surplus amounts, submitting declarations).
4. Ensure applications before the DRT are properly numbered and admitted to demonstrate exhaustion of remedy.
5. Cite PHR Invent Educational Society v. UCO Bank and United Bank of India v. Satyawati Tondon to argue against entertaining writ petitions when alternative remedies exist.