The Karnataka High Court dismissed a writ petition challenging a SARFAESI action, emphasizing that when Section 17 offers an effective remedy, courts must refrain from exercising Article 226 jurisdiction.
Background & Facts
The Dispute
The respondents, M/s SLN Hollow Blocks and Earth Movers and its proprietor Mr Rajanna R, obtained an overdraft cash credit (OCC) loan of Rs 20,00,000 and an overdraft (OD) loan of Rs 55,00,000 from Canara Bank. The loans were secured by a Memorandum of Deposit of Title Deeds dated 16.03.2018 over 2 acres 8½ guntas of land in Survey No. 99/1, Kannur Village, Bidarahalli Hobli, Bengaluru East Taluk.
Key Facts
- 30.05.2019: Bank classified the loan account as a Non-Performing Asset (NPA).
- 29.07.2019: Notice under Section 13(2) SARFAESI demanding Rs 76,62,623 within 60 days.
- 23.01.2020: Notice under Section 13(4) SARFAESI; bank took symbolic possession of the property.
- 18.02.2020: Bank filed Crl. Misc. No. 115/2020 before the Chief Judicial Magistrate seeking possession under Section 14 SARFAESI.
- 13.03.2020: Judicial Magistrate ordered appointment of an Advocate Commissioner to take possession.
- 02.08.2021: Respondents submitted an OTS offer letter proposing settlement of Rs 58,00,000, paying Rs 20,000 on the spot.
- 25.02.2022: Respondents paid an additional Rs 5,00,000 towards the OTS.
- 29.11.2022: Single Judge of the High Court issued an interim order restraining the bank from proceeding.
- 18.07.2023: Bank’s statement of objections quantified total liability at Rs 1,01,00,000.
- Date unspecified (post-July 2023): Single Judge directed respondents to deposit Rs 40,00,000 in two instalments; failure to meet the schedule would vacate the interim order.
- 01.04.2024: Single Judge held a one-day delay vacated the interim order but extended protection as respondents had deposited Rs 54,44,900.
- 13.03.2020: Original order of the Judicial Magistrate under Section 14 SARFAESI, which was the subject of the writ petition.
- 11.08.2025: Order of the Single Judge that the appellant seeks to set aside.
Procedural History
- 13.03.2020: Crl. Misc. No. 115/2020 filed before the Chief Judicial Magistrate, Bengaluru Rural District, seeking possession under Section 14 SARFAESI.
- Date unspecified: Respondents filed Writ Petition No. 23835/2022 (GM-RES) challenging the Magistrate’s order.
- 29.11.2022: Interim order restraining the bank issued by the Single Judge.
- 18.07.2023: Bank filed statement of objections.
- Date unspecified: Single Judge directed payment of Rs 40,00,000 and warned of vacating the interim order.
- 01.04.2024: Single Judge vacated the interim order on technical grounds but extended protection.
- 11.08.2025: Single Judge’s order (the impugned order) was passed.
- 28.07.2026: Canara Bank filed Writ Appeal No. 1948 of 2025 under Section 4 of the Karnataka High Court Act, seeking to set aside the order dated 11.08.2025.
Relief Sought
Canara Bank (appellant) prayed that the High Court set aside the order dated 11.08.2025 and dismiss the writ petition, thereby restoring its right to enforce possession under the SARFAESI Act.
The Legal Issue
The central question was whether the High Court could entertain a writ petition under Article 226 of the Constitution challenging an order passed under Section 14 of the SARFAESI Act when an effective alternative remedy under Section 17 of the same Act was available to the aggrieved parties.
Arguments Presented
For the Appellant
The bank contended that:
- Section 17 SARFAESI provides a specific and speedy remedial mechanism, making the writ petition premature.
- No valid One-Time Settlement (OTS) existed because the handwritten “Accepted for OTS” notation was a mistake and the officer who signed it lacked authority.
- The Single Judge’s order went beyond the relief sought, effectively imposing a contract and deciding factual disputes beyond its jurisdiction.
For the Respondent
The respondents argued that:
- An OTS had been accepted, as evidenced by the handwritten notation and their partial payments.
- The interim order restraining the bank was necessary to protect their interests while the OTS dispute was being resolved.
- The bank’s failure to communicate a payment schedule rendered the OTS terms ambiguous, justifying the court’s intervention.
The Court's Analysis
The Court began by examining Section 34 of the SARFAESI Act, which bars civil courts from entertaining suits or proceedings that fall within the jurisdiction of the Debt Recovery Tribunal (DRT) or the Appellate Tribunal. Section 35 reinforces the overriding effect of the SARFAESI Act over any inconsistent law. The Court noted that these provisions embody a clear legislative intent to keep matters of bank-borrower disputes within the specialised SARFAESI framework.
"The High Court must ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person."
The Court then relied on Supreme Court precedents, particularly United Bank of India v. Satyawati Tondon (2010) SCC 110, which warned against invoking Article 226 where Section 17 offers an alternate remedy. It also cited South Indian Bank Ltd. v. Naveen Mathew Philip (2023) SCC 311 and PHR Invent Educational Society v. UCO Bank (2024) SCC 579, which reiterated that the rule of exhaustion of alternative remedies is a matter of discretion but must be observed in commercial disputes involving banks.
The Court observed that the respondents had the statutory right to approach the DRT or the Appellate Tribunal under Section 17 for any grievance arising from a notice under Section 13(4) or an order under Section 14. No such application had been filed, yet the High Court proceeded to entertain the writ petition. The Court held that this contravened the principle of self-restraint articulated in the aforementioned Supreme Court decisions.
Regarding the alleged OTS, the Court found that the handwritten acceptance was not corroborated by any formal communication from the bank rejecting the offer. However, the Court emphasized that the existence of an OTS is a factual issue that should be decided by the appropriate SARFAESI forum, not by a writ court. By effectively imposing a contract and directing payment terms, the Single Judge had exceeded its jurisdiction.
Consequently, the Court concluded that the impugned order was unsustainable on two grounds: (1) it violated the statutory bar on civil-court intervention under Sections 34 and 35, and (2) it ventured into factual determination and contract enforcement beyond the scope of the writ petition.
The Verdict
The Karnataka High Court set aside the order dated 11.08.2025, dismissed the writ petition, and allowed the appeal. The bank’s right to enforce possession under the SARFAESI Act was restored. No monetary award or interest was granted. All pending interlocutory applications were disposed of.
What This Means For Similar Cases
Exhaustion of Statutory Remedy Is Mandatory
Practitioners must ensure that borrowers first approach the DRT or Appellate Tribunal under Section 17 SARFAESI before filing writ petitions under Article 226. Failure to do so will likely result in dismissal.
- File a Section 17 application promptly after a SARFAESI notice.
- Cite the bar under Section 34 and Section 35 in any writ petition to pre-empt dismissal.
High Courts Must Respect the SARFAESI Framework
The judgment reinforces that High Courts cannot substitute the specialised SARFAESI adjudicatory mechanism with their own procedural orders.
- Avoid directing payment schedules or interest rates in writ proceedings.
- Reserve factual disputes about OTS acceptance for the DRT/Appellate Tribunal.
Limited Exceptions Remain
Only where the statutory authority acts contrary to its own provisions, violates natural justice, or where the law is repealed may a writ court intervene.
- Scrutinise the statutory process for procedural lapses before invoking Article 226.
- Document any breach of natural justice to fit within the narrow exception.
