Division Bench Emphasizes Mandatory Pre-Deposit for Appeals and Limits on Writ Jurisdiction
In a significant judgment, the Kerala High Court's Division Bench, comprising Justices Anil K. Narendran and Muralee Krishna S., has set aside a prior ruling by a Single Judge concerning the maintainability of a writ petition under Article 226 of the Constitution of India related to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The case involved the Kerala Gramin Bank and M/s. Prajith Builders & Developers Private Limited, wherein the bank had initiated recovery proceedings under the SARFAESI Act due to a loan default.
The controversy centered on the requirement for a pre-deposit when filing an appeal with the Debt Recovery Appellate Tribunal (DRAT) under Section 18 of the SARFAESI Act. The Division Bench clarified that the DRAT cannot entertain an appeal unless the appellant deposits at least 25% of the debt as pre-deposit, a statutory requirement that cannot be waived entirely.
The earlier decision by the Single Judge had allowed the respondents to treat a deposit made with the bank as fulfilling this pre-deposit requirement, a stance the Division Bench found legally unsupported. The court emphasized that such deposits must be made with the DRAT, and any deviation from this statutory provision was deemed improper.
Furthermore, the Division Bench reiterated that writ petitions under Article 226 should not circumvent statutory appeal processes, except under exceptional circumstances, such as a violation of fundamental principles of judicial procedure or natural justice. The court found that the conditions for such exceptions were not met in this case.
The judgment underscores the court's stance on upholding statutory remedies and ensuring adherence to procedural requirements, reinforcing the principle that alternative statutory remedies must be exhausted before seeking judicial intervention under Article 226.
Bottom Line:
SARFAESI Act - Writ jurisdiction under Article 226 of the Constitution of India is not maintainable when an efficacious statutory remedy is available under Section 18 of the SARFAESI Act, unless exceptional circumstances such as violation of fundamental principles of judicial procedure or principles of natural justice are demonstrated.
Statutory provision(s): Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 18, Constitution of India, 1950, Article 226
