Supreme Court overturns UCO Bank’s verdict in favor of PHR Invent Educational Society in landmark sanative Petition ruling.
CASE TITLE – PHR INVENT EDUCATIONAL SOCIETY VS. UCO BANK AND OTHERS
CASE NUMBER – SLP(C) – 8867 of 2022
Dated on – 10th April,2024
QUORUM – JUSTICE B.R. Gavai.
FACTS OF THE CASE:
In the case of PHR INVENT EDUCATIONAL SOCIETY Vs. UCO BANK & OTHERS, the UCO Bank initiated the process of retrieving a loan from a borrower. The process of recovering the loan from the borrower was initiated under the SARFAESI ACT (Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act) for auctioning the property of the borrower. The PHR Invent Educational Society took an active participation in the auction and emerged as the highest bidder in the auction. The auction sale notice was challenged by the borrower through an application of securitization before the Debt Recovery Tribunal. The borrower challenged the same under the Section 17 of the SARFAESI Act. Even though the said application was pending before the DRT, the auction did not cease rather the PHR Invent Educational Society deposited a part of the bid amount.
CONTENTIONS OF THE APPELLANT:
1. The appellant, through their counsel, in the said case contended that it was a lawful auction conducted by the SARFAESI and that they legally the highest bidder in the auction.
2. The appellant, through their counsel, in the said case contended that the writ petition of the borrower should not have been entertained by the High Court when an alternative remedy i.e., the Securitization Application was available.
CONTENTIONS OF THE RESPONDENT:
1. The Respondent, through their counsel, in the said case contended that the borrower has challenged the legality of the auction process itself through the Application of Securitization.
2. The Respondent, through their counsel, in the said case contended that they have followed the due procedure as prescribed under the SARFAESI Act for recovery.
LEGAL PROVISIONS:
1. Section 17 of the Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) prescribing the Securitization Applications before the Debt Recovery Tribunal (DRT).
2. Article 226 of the Constitution of India dealing with Writ Petitions under the power of Judicial Review.
ISSUES:
1. Whether the Sale through Auction conducted under the SARFAESI Act was valid or invalid?
2. Whether the entertainment of the Writ Petition filed before the High Court was justified when an alternative remedy existed?
COURT’S ANALYSIS AND JUDGMENT:
The Supreme Court in the given case scrupulously analysed that the alternative remedies (if available) must be first exhausted before filing a Writ Petition in the High Court. However, the court justified the decision the High Court assuming that the borrower might not have had a fair chance of trial before the Debt Recovery Tribunal (DRT). The court directed the Debt Recovery Tribunal (DRT) to proceed with the Securitization Application, taking into account the arguments of both the parties.
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Judgement Reviewed by – Sruti Sikha Maharana