Exhaust Statutory Remedies Under SARFAESI Act Before Filing Writ Petition: Allahabad HC

The Allahabad High Court reaffirmed that litigants must exhaust the statutory remedies available under debt recovery laws before invoking the High Court's jurisdiction under Article 226 of the Constitution of India. The Court emphasized that specialized tribunals are better equipped to adjudicate factual disputes concerning loan settlements and the release of documents

A division bench comprising Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary heard a petition seeking directions for the return of original title deeds and the issuance of a 'No Dues Certificate' after a purported loan settlement. The Court declined to exercise its discretionary writ jurisdiction, pointing out the availability of an efficacious alternative remedy before the Debt Recovery Tribunal (DRT).

Factual Dispute Over Loan Settlement Precludes Writ Jurisdiction

The petitioners claimed that they had settled their dues for four loan accounts as per directions from the DRT and were entitled to the release of their original title deeds and compensation for delay as per RBI circulars. Conversely, Canara Bank contended that the settlement only applied to one account and that liabilities for other accounts persisted. The Court noted that these issues involved complex factual implications that could not be adjudicated in a writ petition.

The Court, in its reasoning, observed: "Apparently, these issues have factual implications and are to be decided before a proper forum and then only the title document has to be released, which, according to this Court, is an act of subsequent event after a Bank has issued a NOC or at least have filed some pleadings admitting the settlement... We are clear in our mind that this Court, while exercising its jurisdiction under Article 226 of the Constitution of India, does not wish to enter into any disputed questions of fact."

DRT Empowered to Pass Directions for Document Release

The bench highlighted that Section 19(25) of the Recovery of Debts and Bankruptcy Act, 1993 (applicable to SARFAESI Act, 2002 proceedings) provides residuary powers to the Tribunal to pass orders necessary to secure the ends of justice. It found no cogent reason for the petitioners to bypass the DRT, especially when an appeal regarding the settlement orders was already pending before the Debt Recovery Appellate Tribunal (DRAT).

Drawing on established precedents such as United Bank of India Vs. Satyawati Tondon and others ( "2010 (8) SCC 110": 2010 CaseBase(SC) 387), South Indian Bank Ltd. v. Naveen Mathew Philip, and Celir LLP v. Bafna Motors (Mumbai) (P) Ltd. ( "(2024) 2 SCC 1 : 2023 SCC OnLine SC 1209": 2023 CaseBase(SC) 630), the Court reiterated that High Courts must exercise self-imposed restraint in matters involving recovery of public dues and bank debts where a specialized code exists.

The Court has following directions:

"In view of above, the writ petition is dismissed with liberty granted to the petitioners to file an appropriate application(s) before the DRT. In case, if the petitioners file any such application(s), the Tribunal shall decide the same on its own merits, in accordance with law, uninfluenced by any of the observations made by this Court in the present writ petition."

Background:

The dispute arose after M/S R.S. Contractors And Engineers defaulted on financial facilities sanctioned by Canara Bank. The bank initiated recovery actions under the SARFAESI Act, 2002, including a sale notice for the mortgaged property and an order under Section 14 for physical possession. The petitioners challenged these actions before the DRT, Lucknow, which subsequently allowed them to deposit Rs. 70 Lacs for settlement while an auction was ongoing.

After depositing the amount, the petitioners sought the return of their title deeds, which the Bank refused, claiming the settlement was incomplete. The High Court ultimately dismissed the writ petition, directing the parties to seek redressal before the specialized tribunal already seized of the matter.

Case Details:
Case No.: WRIT - C No. - 6374 of 2024
Case Title: M/S R.S. Contractors And Engineers Thru. Its Partner Sri Sumit Kumar And 2 Others Versus Debts Recovery Tribunal Lko. And 2 Others
Appearances:
For the Petitioner(s): Apoorv Dev, Ashutosh Chaubey, Prashant Kumar Singh, Advocates
For the Respondent(s): Praveen Dwivedi, Alok Saxena, Advocates

Source: 2026 CaseBase(ALL) 215