High Court of KeralaSingle Judge2024-01-03Dismissed

C. M. John v Pegasus Assets Reconstruction (P) Ltd and IndusInd Bank Limited

Case / Petition Number:WP(C) No.31175 of 2022

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: N. Nagareesh
Judgment Date: 2024-01-03
Court Decision / Holding: The writ petition is not maintainable and is dismissed. The court relies on the well-settled statutory regime under SARFAESI and the availability of an efficacious remedy under the Act, citing decisions from the Supreme Court and this Court to hold that none of the grounds raised justify interference with SARFAESI proceedings.
Final Disposition: Dismissed

Parties to the Case

Appellants / Petitioners

C. M. John

Respondents

Pegasus Assets Reconstruction (P) Ltd.
IndusInd Bank Limited

Legal Representation & Advocates

Counsels for Petitioners

• Adv T. Rajasekharan Nair

Counsels for Respondents

• Anzil Salim
• Lal K. Joseph

Case Synopsis & Summary

The petition challenges SARFAESI proceedings initiated by Pegasus Assets Reconstruction (ARC) and IndusInd Bank in relation to a housing loan of ₹1.05 crore sanctioned in December 2018, secured by a 3.80-acre equitable mortgage in Chalakudy. After substantial repayments, defaults led to a demand notice for ₹1.1498 crore (Ext. P1) and an order under Section 14 of SARFAESI, obtained through the CJM Thrissur (Ext. P2). An Advocate Commissioner’s notice followed, and the court had previously directed that a suitable settlement proposal could be considered (Ext. P4). The petitioner submitted Ext. P5, but Ext. P6 records the first respondent’s rejection as non-viable. The petitioner contends illegality on the ground that the loan account was renewed and transferred to ARC on the renewal date, and argues for regularization of the loan and EMI payments in full within a prescribed period. The respondents counter that an equitable mortgage existed, EMIs defaulted, the loan was declared NPA, and the account was transferred to ARC; the petitioner even offered to surrender on failure to deposit the full amount. The court repeatedly cites Supreme Court and High Court authorities holding that writ petitions under Article 226 are not maintainable against SARFAESI actions and should be pursued under the SARFAESI mechanism. The petition is dismissed with reliance on these authorities and the finding that no grounds exist to interfere with SARFAESI proceedings.

Provisions of Law Cited

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)Section 13 SARFAESI ActSection 14 SARFAESI ActArticle 226 of the Constitution of India

Legal Doctrines & Maxims

Abuse of process of the Court
Efficient/efficacious alternate remedy
No writ would lie against SARFAESI proceedings

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner contends illegality in initiating SARFAESI proceedings, arguing that the loan account was renewed and transferred to the Asset Reconstruction Company on the renewal date. He seeks regularisation of the loan and permission to pay the outstanding amount via EMI within a period fixed by the respondents, noting that Exts. P1 and P2 notices and Ext. P6 letter are arbitrary. He asserts that the loan was not a chronic default and that a suitable settlement was proposed (Ext. P5 under Ext. P4 directions). He urges that the option of six months’ time to clear dues could enable sale of another property to settle the account, but acknowledges the liability is substantial (over ₹1.8 crores as of 19.10.2022). The petitioner relies on Supreme Court precedents that writ petitions under Article 226 are not maintainable against SARFAESI actions and that remedy lies within the SARFAESI framework.

Contentions of Respondents

The respondents contend that the petitioner executed an equitable mortgage for 3.80 acres; the loan account was in default since 2018, declared NPA, and subsequently assigned to ARC. They maintain there is no illegality in transferring the loan and initiating SARFAESI proceedings. They emphasize the loan’s default, the demand notices, and the offer to surrender if the full amount cannot be deposited, arguing that Ext. P6 reflects the bank’s view that the settlement proposal was not viable. They assert that the statutory remedies under SARFAESI are efficacious and that the Court should refrain from entertaining a writ petition challenging SARFAESI actions, following established authority including Phoenix ARC Pvt. Ltd. and Satyawati Tondon. The respondents thus seek dismissal of the petition as not maintainable and without merit.”},

Cited Precedents (7)

Case Name	Citation	Treatment	Explanation
Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir	2022 (1) KLT Online 1124 (SC)	Positive	Cited to support that writ petitions challenging SARFAESI actions lie against the statutory remedy mechanism and that the writ petition is not maintainable.
United Bank of India v. Satyawati Tondon and others	(2010) 8 SCC 110	Positive	Cited to affirm that no writ petition should be entertained against SARFAESI proceedings and that the statutory remedy is efficacious.
Authorised Officer, State Bank of Travancore v. Mathew K.C.	2018 (1) KLT 784	Positive	Cited to reinforce the principle that writs are not maintainable against SARFAESI actions in light of statutory remedies.
Satyawati Tondon	(2010) 8 SCC 110	Positive	Cited as the governing rationale for dismissing writ petitions against SARFAESI actions.
Anilkumar v. State Bank of India	2020 (2) KLT 756	Positive	Cited to show the higher court’s stance on not entertaining articles 226 challenges against SARFAESI actions.
South Indian Bank Limited v. Naveen Mathew Philip	2023 (4) KLT 29	Positive	Cited to emphasize that Article 226 powers should be exercised only in extraordinary circumstances where statutory remedies are insufficient.
Jayakrishnan A. v. Union Bank of India	W.P.(C) No.30803/2023	Positive	Cited to confirm that writ petitions are not maintainable where an effective remedy under the SARFAESI Act exists.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MR.JUSTICE N.NAGARESH`** ``` WEDNESDAY, THE 3[RD] DAY OF JANUARY 2024 / 13TH POUSHA, 1945 ``` ## **`WP(C) NO. 31175 OF 2022`** ## **`PETITIONER:`** ``` C.M.JOHN, AGED 48 YEARS S/O.MATHEW, CHAMAVALAPPIL HOUSE, NEAR HOLY CONVENT, POTTA, THRISSUR – 680722 ``` ## **`BY ADV T.RAJASEKHARAN NAIR`** ## **`RESPONDENTS:`** - **`1 M/S.PEGASUS ASSETS RECONSTRUCTION (P) LTD., NO.31/970 B2, UZHIZELIL TOWERS, 1ST FLOOR, SUBHASH CHANDRA BASE ROAD,PONNURUNNI, VYITTLA P.O., KOCHI - 682019, REP. BY P.M.MOHAN.`** - **`2 INDUSIND BANK LIMITED, REGISTERED OFFICE, AT 2401, GEN.THIMMAYYA ROAD, PUNE - 411001, REPRESENTED BY ITS MANAGER.`** ``` BY ADVS. ANZIL SALIM LAL K.JOSEPH ``` ``` THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 03.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` WP(C) No.31175 of 2022 ``` ``` 2 ``` ## **JUDGMENT** Dated this the 3[rd ] day of January, 2024 The petitioner has approached this Court aggrieved by initiation of proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 2. The petitioner states that he along with his wife executed a loan agreement dated 27.12.2018 and availed a Housing Loan of ₹1,05,00,000/- from the 2nd respondentBank. The petitioner provided equitable mortgage of property having an extent of 3.80 Ares in Kuttichira Village of Chalakudy Taluk. 3. The petitioner states that the tenure of the loan was 15 years and had to be paid in 181 equated monthly instalments. The petitioner remitted substantial amount. But, when certain default occurred in repayment, the ``` WP(C) No.31175 of 2022 ``` ``` 3 ``` 2[nd] respondent resorted to SARFAESI proceedings and a Demand Notice was issued for payment of 1,14,98,000/-₹ along with further interest, as per Ext.P1. The 2[nd] respondentBank also moved the Chief Judicial Magistrate’s Court, Thrissur and obtained an order under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Advocate Commissioner has issued Ext.P2 Demand Notice. The petitioner states that he is not in a position to remit the amount demanded by the Bank in a lump. 4. The petitioner filed W.P.(C) No.25520 of 2019 and this Court as per Ext.P4 judgment directed that if a suitable proposal for settlement of loan account is submitted by the petitioner, the 2[nd] respondent-Bank will be free to consider the same. If a proposal is not made, the Bank will be at liberty to proceed against the petitioner. The petitioner submitted Ext.P5 proposal. However, the 1[st] respondent issued Ext.P6 stating that such proposal cannot be accepted as it is not ``` WP(C) No.31175 of 2022 ``` ``` 4 ``` viable. 5. The petitioner states that Exts.P1 and P2 notices and Ext.P6 letter issued by the 1[st] respondent are highly arbitrary. The respondents ought to have realised the fact that the petitioner is not a chronic defaulter. In the circumstances, the petitioner seeks to direct the respondents to regularise the loan and allow the petitioner to pay the amount by the agreed EMI regularly in full satisfaction of the loan amount within a period prescribed by the respondents. 6. The 1[st] respondent-Asset Reconstruction Company entered appearance and resisted the writ petition. The 1[st] respondent filed a statement. On behalf of the 1[st] respondent, it is submitted that the petitioner created equitable mortgage of the property having an extent of 3.80 Ares. When the EMIs were defaulted, security proceedings were initiated against the petitioner. The prayer in the writ petition is to regularise the loan and allow the petitioner to pay the amount by the agreed EMI regularly. Due to the failure of the petitioner to ``` WP(C) No.31175 of 2022 ``` ``` 5 ``` comply with the agreed terms, the loan account has been declared as NPA and the debt has been made over to the 1[st] respondent-Asset Reconstruction Company. 7. The 1[st] respondent further submitted that on 28.09.2022, when the 1[st] respondent along with the Advocate Commissioner appointed by the Chief Judicial Magistrate’s Court, Thrissur, visited the secured asset for taking possession, the petitioner issued Ext.R1(d) letter submitting that he will surrender the secured asset to the 1[st] respondent within five days, if he cannot deposit the entire amount in five days. 8. Heard. 9. The counsel for the petitioner submitted that the proceedings of the respondents under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is illegal since the loan account was transferred to the Asset Reconstruction Company on the same day the loan was renewed. The Standing Counsel, on ``` WP(C) No.31175 of 2022 ``` ``` 6 ``` the other hand, would point out that the loan account was declared as NPA in the year 2018 and the loan account was transferred to the Asset Reconstruction Company on 14.03.2019. In the circumstances, I do not find any illegality in the action of the Bank transferring the loan account to the 1[st] respondent-Asset Reconstruction Company. 10. The counsel for the petitioner then contended that if the petitioner is granted six months' time to clear the entire outstanding dues, the petitioner may be able to find out a purchaser for sale of another property of the petitioner. The petitioner will be thus able to clear the entire dues in six months time. It is to be noted that the liability of the petitioner exceeds 1.8 Crores as on 19.10.2022. When huge amounts₹ are due to the Bank, the petitioner cannot be granted time for repayment liberally. 11. The Apex Court has held in the judgment in _**Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir** [2022 (1) KLT Online 1124 (SC)]_ that if the ``` WP(C) No.31175 of 2022 ``` ``` 7 ``` proceedings are initiated under the SARFAESI Act and any proposed action is to be taken and the borrower is aggrieved by any of the actions of the Private Bank, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and is maintainable or entertainable. Filing of writ petitions by the borrower before the High Court under Article 226 of the Constitution of India is an abuse of process of the Court. 12. The grievance of the petitioner is relating to the proceedings initiated by the respondents under Sections 13 and 14 of the Securitisation Act and the attempt of the respondents to take over and sell the secured asset provided by the petitioner. 13. It is settled law that no writ would lie against the proceedings initiated by a financial institution under the provisions of the SARFAESI Act. In _**United Bank of India v. Satyawati Tondon and others** [(2010) 8 SCC 110]_ , the Hon’ble Apex Court declared that no writ petition shall be ``` WP(C) No.31175 of 2022 ``` ``` 8 ``` entertained against the proceedings initiated under the SARFAESI Act at the instance of a defaulter since the statute provides for an efficacious alternate remedy. 14. In the judgment in _**Authorised Officer, State Bank of Travancore v. Mathew K.C.** [2018 (1) KLT 784],_ the Hon’ble Apex Court reiterated that no writ petition would lie against the proceedings under the SARFAESI Act in view of the statutory remedy available under the said Act. 15. Following the judgment in _**Satyawati Tondon**_ (supra), a Division Bench of this Court in the judgment in _**Anilkumar v. State Bank of India** [2020 (2) KLT 756]_ declined to exercise jurisdiction under Article 226 of the Constitution of India against the proceedings initiated under the Securitisation Act. 16. In _**South Indian Bank Limited v. Naveen Mathew Philip** [2023 (4) KLT 29]_ , the Apex Court held that when the legislature has provided a specific mechanism for appropriate ``` WP(C) No.31175 of 2022 ``` ``` 9 ``` redressal, the powers conferred under Article 226 of the Constitution of India shall be exercised only in extraordinary circumstances. 17. In Jayakrishnan A. v. Union Bank of India and others (W.P.(C) No.30803/2023), this Court held that writ petition challenging any proceedings under the Securitisation Act is not maintainable since the aggrieved person has an effective and efficacious remedy before the Tribunal constituted under the Act which is competent to adjudicate the issues of fact and law, including statutory violations. In the light of the categorical pronouncements of law made by the Apex Court and by this Court, the above writ petition is not maintainable and it is dismissed. **Sd/-** **N.NAGARESH** **JUDGE** spk ``` WP(C) No.31175 of 2022 ``` ``` 10 ``` ## **`APPENDIX OF WP(C) 31175/2022`** ## **`PETITIONER EXHIBITS`** ``` EXHIBIT P1 ``` ``` A TRUE PHOTOCOPY OF THE DEMAND NOTICE ISSUED BY THE 1 ST RESPONDENT TO THE PETITIONER DATED 05.02.2019 ``` ``` EXHIBIT P2A TRUE PHOTOCOPY OF THE NOTICE DATED 18.9.2019 ISSUED BY THE ADVOCATE COMMISSION IN CRI.M.P. NO.3335/2019 ON THE FILE OF THE CJM, THRISSUR TO THE PETITIONER ``` ``` EXHIBIT P3A TRUE PHOTOCOPY OF THE NOTICE ISSUED BY THE ADVOCATE COMMISSIONER TO THE PETITIONER DATED 06.08.2022 ``` - **`EXHIBIT P4 A TRUE PHOTOCOPY OF THE JUDGMENT IN W.P.(C) 25520/2019 DATED 25.8.2022 PASSED BY THIS HONOURABLE COURT`** - **`EXHIBIT P5 A TRUE PHOTOCOPY OF THE PROPOSAL SUBMITTED BY THE PETITIONER BEFORE THE LST RESPONDENT`** - **`EXHIBIT P6 A TRUE PHOTOCOPY OF THE LETTER DATED 13.9.2022 ISSUED BY THE LST RESPONDENT`** ## **`RESPONDENT ANNEXURES`** - **`ANNEXURE R1(A) TRUE COPY OF THE ASSIGNMENT DEED DATED 14.03.2019`** - **`ANNEXURE R1(B) TRUE COPY OF THE ASSIGNMENT INTIMATION LETTER DATED 5.02.2019 SENT BY THE ASSIGNOR BANK TO THE RESPONDENTS`** - **`ANNEXURE R1(C) TRUE COPY OF THE ACCOUNT STATEMENT FOR THE PERIOD FROM 29/12/2018 TO 20/11/2019`** - **`ANNEXURE R1(D) TRUE COPY OF THE LETTER DATED 28/09/2022 ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT`** - **`EXHIBIT R1(E) TRUE COPY OF THE RBI CIRCULAR RBI/2022-23/128 DOR.SIG.FIN.REC.75/ 26.03.001/2022-23 DATED 11/10/2022 REVIEWING THE REGULATORY FRAMEWORK FOR`** ``` WP(C) No.31175 of 2022 ``` ``` 11 ``` ``` EXHIBIT R1(F) ``` ``` ASSET RECONSTRUCTION COMPANIES (ARCS). TRUE COPY OF THE JUDGMENT DATED 12/01/2022 OF THE HON'BLE SUPREME COURT OF INDIA IN PHOENIX ARC PVT. LTD. V. VISHWA BHARATI VIDYA MANDIR AND REPORTED AS 2022 (1) KLT ONLINE 1124 (SC) ```