1. The challenge in this intra-court appeal is to an order dated 14.12.2022 passed by the learned Single Judge in WP No.8576/2021, whereby the learned Single Judge has allowed the writ petition filed by the respondent herein by stating in paragraph No.16 as under:

“16. For the aforesaid reasons, I pass the following:

ORDER

(i) Writ Petition is allowed and the communication dated 23-03-2021 of the respondent/Bank stands quashed.

(ii) The proceedings initiated by the respondent/Bank under the SARFAESI Act dated 29-04-2021 by seeking to conduct e-auction, though the date of e-auction is over, stands quashed.

(iii) Mandamus issues to the Bank to take OTS offer as accepted by the Bank, to its logical end.

Consequently, I.A.1/2022 stands disposed.”

2. The writ petition was filed by the respondent herein challenging the action of the appellant-Bank notifying conduct of e-auction on 29.04.2021, further communication dated 23.03.2021, whereby the appellant-Bank herein withdraws One Time Settlement (‘OTS’ for short) that was offered. The respondent had also sought for a direction for issuance of writ in the nature of mandamus to accept OTS.

3. The facts to be noted are, the respondent is a private limited company registered under the provisions of the Companies Act, 1956. The respondent had approached the appellant-Bank for availing credit facility. The total loan that was availed by the respondent was Rs.18,00,00,000/- (Rupees Eighteen Crores only). The installments towards loan not having been made at regular intervals as was necessary, the account of the respondent became a non-performing asset (NPA). It is noted that, the Bank after issuance of notice to the respondent indicating the huge default in payment of installments, initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short). Notice under Section 13(4) of the SARFAESI Act was issued on 22.03.2019 seeking a symbolic possession of the properties of the respondent mortgaged with the Bank.

4. It was then that the respondent and the appellant pursuant to talks, entered into an understanding whereby OTS was offered by the respondent, which was accepted by the appellant-Bank. The first offer of OTS was accepted by the Bank on 28.08.2019 indicating certain amount in the communication. This was replied to by the respondent accepting the terms and conditions mentioned in the letter dated 28.08.2019 which directed the payment of certain amount.

5. In terms of the OTS, an amount of Rs.18,00,00,000/- (Rupees Eighteen Crores only) was required to be paid by the respondent. There was a delay in executing the same. It was the case of the respondent before the learned Single Judge that with the onset of COVID-19 pandemic, the Bank itself extended OTS to the respondent and directed the respondent to pay the entire amount on or before 28.02.2021. The respondent was also permitted by the Bank to sell the property that was mortgaged with the Bank, as the respondent had a potential buyer of the said property. The property was sold by the respondent and Rs.18,90,00,000/- (Rs.18.90 Crores) was deposited with the Bank towards the account. The outstanding amount as claimed by the appellant was in total Rs.19,22,00,000/- (Rs.19.22 Crores). It was the case of the respondent that, on 28.02.2021 itself it has deposited Rs.18,90,00,000/- (Rs.18.90 Crores). The Bank vide its communication dated 23.03.2021 on the ground that the respondent had not paid the entire amount in full, withdrew the OTS and cancelled the offer extended. The follow-up action was that, a paper publication was made by the Bank indicating e-auction on 29.04.2021. It was at that juncture the respondent had approached the learned Single Judge.

6. The case of the respondent before the learned Single Judge was primarily that, it had paid an amount more than what was required to be paid. After offering OTS, the Bank went on increasing the amount in the garb of interest. On every doctrine of fairness, proportionality and legitimate expectation, the action of the appellant- Bank is contrary to law and equity.

7. On the other hand, the case of the appellant- Bank before the learned Single Judge was, though the respondent had deposited Rs.18,90,00,000/- (Rs.18.90 Crores) towards OTS, it was not in full and final as interest was yet to be paid. Therefore, exercising the right under the conditions stipulated in OTS offer, the Bank had withdrawn it. It was the case of the appellant- Bank that, no fault can be found with the action of the Bank for sale being the secured creditor. It was also contended that, the Court cannot extend the time stipulated in the OTS.

8. Suffice to state, the learned Single Judge has referred to the communications exchanged between the parties, and in paragraph No.15, the learned Single Judge has held as under:

“15. The petitioner becomes entitled to the prayer that is sought in the peculiar facts of this case, as the Bank has been absolutely unfair to the petitioner. Whether a defaulter should be shown any indulgence would have been the question if the petitioner had not complied with OTS or not fulfilled any condition of OTS. According to the petitioner, he has paid the entire amount that was indicated in the OTS by selling his property that he had mortgaged with the Bank with the permission of the Bank. Therefore, the Bank having accepted the offer of the petitioner at every step, could not have wriggled out by cancelling OTS at the climax and further could not have retained the entire amount of Rs.19 crores and again sought to e-auction the other properties of the petitioner for realizing the alleged interest, which according to the petitioner nothing remains to be paid, but according to the Bank certain amounts are due. It would have been open for the Bank to have had a dialogue with the petitioner in the peculiar facts rather than putting other properties of the petitioner to sale after having received Rs.19.52 crores towards the amount offered in OTS.”

Submissions:

9. The submission of the learned counsel for the appellant-Bank is that, the learned Single Judge has clearly erred and has also failed to appreciate that the respondent having failed to adhere to the OTS terms and conditions, the OTS was rightly withdrawn. According to him, the OTS was sanctioned vide letter dated 28.08.2019, which was a period before the onset of COVID-19 and the last date for deposit of the payment was 27.02.2020, which was also a period before the onset of COVID-19. In any case, the extension was granted by the Bank vide letter dated 11.12.2020 which is in the following manner:

“1. Extension of time permitted for payment of OTS amount from 22.02.2020 i.e., expiry date of OTS to 31.12.2020 i.e., date of last installment of OTS amount (313 days) in making payment of the entire OTS amount of Rs 1800.00, Lakh [Rs 500.00 Lacs kept in prospective buyer's current account will be adjusted immediately on conveying this sanction]

2. The OTS shall carry the delayed period interest and expenses of Rs 214.92 Lakh [Rupees Two Crore Fourteen Lacs and Ninety Two Thousand Only] calculated at MCLR + 1.50 (MCLR 8.20% as on 01.04.2020) i.e., 9.70% compounded monthly for the differential period.

3. Rs 1500.00 Lacs plus delayed period of interest as stated above shall be paid on or before 31.12.2020 and the secured properties shall be released after receipt of entire amount.”

He submitted, by a further letter dated 28.01.2021, the appellant-Bank accepted the request of the respondent and granted extension of time upto 28.02.2021 to pay the amount as was directed in terms of OTS dated 28.08.2019. The OTS period was subject to payment of differential interest for the extended period in OTS amount. It was stated that, Rs.15,90,00,000/- (Rs.15.90 Crores) has been received by the appellant and therefore, releasing of remaining securities would be only upon receipt of the balance amount i.e., interest amounting to Rs.1,31,60,000/-. It is an admitted position that, the sum of Rs.1,31,60,000/- has not been deposited by the respondent within the extended period. It was in this background that the OTS was withdrawn vide letter dated 12.03.2021. In fact, he also stated, the respondent had only challenged the subsequent letter dated 23.03.2021 which referred to the earlier letter dated 12.03.2021. The learned Single Judge has proceeded on the erroneous premise that the Bank withdrew the OTS vide letter dated 23.03.2021 to arrive at a finding that no reasons were given as to why OTS was withdrawn. According to him, the learned Single Judge had also proceeded on erroneous basis that the respondent had deposited Rs.18,90,00,000/- (Rs.18.90 Crores) by 28.02.2021 and there has been no default in OTS. On perusal of OTS extension letter dated 28.01.2021, it is noted that a sum of Rs.1,31,60,000/- was required to be paid by 28.02.2021, which was admittedly not paid. During the course of submissions, he has also stated that till 28.02.2021, an amount of Rs.18,90,00,000/- (Rs.18.90 Crores) was paid by the respondent. After the deadline, an amount of Rs.10,11,429/- was made. Thereafter, with effect from 19.03.2021 till 11.05.2021, an amount of Rs.87,05,429/- was made. So cumulatively, the amount deposited by the respondent was only Rs.19,77,05,429/-. According to him, the same is not in compliance with the terms of extension granted to the respondent till 28.02.2021. In other words, it is his submission that, admittedly, further amount of Rs.87,05,429/- was deposited by the respondent after 12.03.2021 would clearly demonstrate the complete amount was not paid on or before 28.02.2021. He also states, the learned Single Judge clearly holds that, the respondent has substantially made payment which surely does not include the complete payment as is required to be made.

10. He also stated, the learned Single Judge has failed to appreciate the contention of the appellant that the learned Single Judge while exercising jurisdiction under Article 226 of the Constitution of India, could not have issued a mandamus directing the Bank to offer OTS or extend OTS.

11. That apart, it was his submission that the directions given by the learned Single Judge are at variance with the settled position of law of the Supreme Court in the case of Bijnor Urban Cooperative Bank Ltd., Bijnor and Ors. -Vs.- Meenal Agarwal and Ors. [2021 SCC OnLine SC 1255], wherein it was categorically held that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution directing a financial institution/Bank to positively grant the benefit of OTS to a borrower. He has also relied upon the judgment of the Supreme Court in the case of State Bank of India -Vs.- Arvindra Electronics Pvt. Ltd. [2022 SCC OnLine SC 1522], wherein according to him, the Supreme Court held that no writ of mandamus can be issued by the High Court to extend the time to make the balance payment under the OTS scheme. That apart, it is his submission that, given the aforesaid position, even the directions of the learned Single Judge quashing the auction sale notice issued under the SARFAESI Act in spite of there being an alternate and efficacious remedy available under Section 17 of the SARFAESI Act, is clearly untenable. He has also relied upon the following judgments in support of his contention that the conclusion drawn by the learned Single Judge allowing the writ petition filed by the respondent is contrary to the law and as such, the same is liable to be set aside:

"a. Judgments of the Supreme Court in the cases of:

i) Union of India -Vs.- ABN Amro Bank [(2013) 16 SCC 490];

ii) South Indian Bank -Vs.- Naveen Mathew Philip -[2023 SCC OnLine SC 435];

iii) S.P.Chengalvaraya Naidu (dead) by LRs - Vs.- Jagannath (dead) by LRs [(1994) 1 SCC 1];

b. Judgment of this Court in the case of Nitesh Residency Hotels Pvt. Ltd. -Vs.- Union of India [WP No.2004/2022, decided on 08.08.2022]."

12. On the other hand, Sri. Ashok Haranahalli, learned Senior Counsel for the respondent would justify the impugned order of the learned Single Judge. According to him, the subject matter of the challenge was primarily relatable to a loan which was taken by the respondent for certain business purposes and was during the onset of COVID-19 when the situation was not at all conducive from the business perspective. According to him, no doubt the OTS was accepted by the appellant- Bank vide letter dated 28.08.2019 on certain terms and conditions, the respondent had in deference to the directions of the Bank, till 19.01.2021, deposited an amount of Rs.18,90,00,000/- (Rs.18.90 Crores). It was on 28.01.2021 that second extension was granted to the respondent for the deposit of Rs.1,31,60,000/- on or before 28.02.2021. The respondent had deposited a substantial amount, unfortunately the appellant did not give the break-up of the amount as sought to be claimed from the respondent. In fact even thereafter, the respondent had deposited an amount of Rs.87,05,429/- till 11.05.2021. Despite the attempt of the respondent to deposit the amount, in between on 12.03.2021, the appellant-Bank had issued a communication withdrawing the OTS. The said communication was never received by the respondent herein. It was only vide letter dated 23.03.2021, the respondent came to know that the Bank has withdrawn the OTS vide letter dated 12.03.2021 and SARFAESI action would be continued for recovery of residual liabilities. He submits, even thereafter, till 11.05.2021, an amount of Rs.87,05,429/- was deposited by the respondent with the appellant-Bank. It was only when the respondent decided to initiate action under the SARFAESI Act, did the respondent approached the Court. He states, it is not a case that no amount was paid by the respondent to the appellant-Bank. He heavily relies upon the conclusion drawn by the learned Single Judge that substantial deposits have been accepted by the appellant. In any case it is his submission that, the appellant-Bank could not be unfair, arbitrary and overlooking the fact that the respondent had to sell its factory and even the house of the respondent on the brink of being sold for which a sale notice was issued. According to him, it was in the fitness of the things more particularly, the facts which arise for consideration that the learned Single Judge had observed that the Bank does not behove its status of being a State under Article 12 of the Constitution. In support of his submissions, he has relied upon the following judgments:

"a. Judgments of this Court in:

i. Economic Transport Organisation Ltd. - Vs.- State Bank of India and Ors. [WP No.13226/2021, decided on 28.09.2021];

ii. State Bank of India -Vs.- Economic Transport Organisation Ltd. And Ors. [WA No.1196/2021, decided on 14.09.2023];

b. Judgment of Madhya Pradesh High Court in the case of Shri Mohanlal Patidar -Vs.- Bank of Maharashtra and Anr. [WP No.22127/2021, decided on 21.02.2022];

c. Order of the Supreme Court in the case of Bank of Maharashtra and Anr. -Vs.- Mohanlal Patidar [Petition(s) for Special Leave to Appeal (C) No(s).8088- 8089/2022, decided on 13.05.2022];

d. Judgment of Punjab and Haryana High Court in the case of Hardyal Singh Cheema -Vs.- State Bank of India and Ors. [MANU/PH/2539/2022]."

Analysis:

13. Having heard the learned counsel for the parties, the issue which falls for consideration is in a very narrow compass i.e., whether the learned Single Judge was right in:

"(i) allowing the writ petition filed by the respondent and setting aside the withdrawal of the OTS dated 23.03.2021

(ii) quashing the proceedings initiated by the appellant under the SARFAESI Act

(iii) issuing mandamus to the appellant-Bank to take OTS offer as accepted by the Bank, to its logical end"

14. Suffice to state, we are not in agreement with the conclusion drawn by the learned Single Judge. It is a fact that in terms of the OTS, the respondent was to pay an amount of Rs.13,00,00,000/- (Rupees Thirteen Crores) with interest i.e., simple interest at the rate of 10.15% on reducing balance till the payment of entire OTS amount on or before 27.02.2020. Concedingly, the said amount was not paid by the respondent. What was paid was only an amount of Rs.3,00,00,000/- (Rupees Three Crores) in the year 2019. The same resulted in the extension of OTS vide letter dated 11.12.2020 till 31.12.2020 for making payment of entire OTS amount of Rs.18,00,00,000/- (Rupees Eighteen Crores). The said OTS was required to carry delayed period interest and expenses of Rs.2,14,92,000/- compounding to Rs.15,00,00,000/- + delayed period of interest was required to be paid on or before 31.12.2020. Concedingly, Rs.15,50,00,000/- + Rs.40,00,000/- was deposited with the Bank through the sale of properties mortgaged with the appellant-Bank. It was on 28.01.2021 that a further extension was given to the respondent to deposit the complete amount by 28.02.2021. The clause (4) thereof clearly stipulates, in the event of non-compliance, OTS sanction stands automatically withdrawn and Bank reserves the right to proceed as it deems fit including proceeding legally for recovery of the entire dues. Before the said date, the total amount of OTS paid was Rs.18,90,00,000/- (Rs.18.90 Crores). It means that the complete amount was not paid till 28.02.2021; it also means that a further amount was due and payable to the Bank, which in fact the respondent had paid to the tune of Rs.87,05,429/- (as on 11.05.2021), still further amount was due and payable by the respondent to the appellant-Bank. As the amount due was not paid by 28.02.2021, the OTS was withdrawn on 12.03.2021. It is not understood as to how after the withdrawal of the OTS, payment was made, on which much reliance has been placed by Sri. Haranahalli. He has also raised an issue of non-receipt of letter dated 12.03.2021. In any case, in a subsequent communication dated 23.03.2021, the withdrawal of the OTS has been referred to, which communication has been received by the respondent. In that sense, no prejudice is caused for non-receipt of letter dated 12.03.2021. Further, the communication dated 23.03.2021 has been challenged in the writ petition. So it follows, still a substantial amount was due and payable by the respondent to the appellant-Bank, even after the payment of Rs.87,05,429/- that has been made by the respondent after 12.03.2021/23.03.2021, which is much less than what is required to be paid. The learned counsel for the appellant is justified in contending that the learned Single Judge could not have, only on a finding that a substantial amount has been paid, allowed the writ petition in the manner he has done in terms of the directions in paragraph No.16 of the impugned order. Unless complete payment is made, the NOC could not have been given for the loan in question. Surely if the terms of the OTS have not been followed, the Bank is within its right to withdraw the same and then proceed in accordance with law, including under the SARFAESI Act. The law is well settled in terms of the judgment of the Supreme Court in the case of Bijnor Urban Cooperative Bank Ltd. (supra), wherein in paragraphs No.12 to 15, the Supreme Court has held as under:

“12. Even otherwise, as observed hereinabove, no borrower can, as a matter of right, pray for grant of benefit of one-time settlement scheme. In a given case, it may happen that a person would borrow a huge amount, for example, Rs 100 crores. After availing the loan, he may deliberately not pay any amount towards instalments, though able to make the payment. He would wait for the OTS scheme and then pray for grant of benefit under the OTS scheme under which, always a lesser amount than the amount due and payable under the loan account will have to be paid. This, despite there being all possibility for recovery of the entire loan amount which can be realised by selling the mortgaged/secured properties. If it is held that the borrower can still, as a matter of right, pray for benefit under the OTS scheme, in that case, it would be giving a premium to a dishonest borrower, who, despite the fact that he is able to make the payment and the fact that the bank is able to recover the entire loan amount even by selling the mortgaged/secured properties, either from the borrower and/or guarantor. This is because under the OTS scheme a debtor has to pay a lesser amount than the actual amount due and payable under the loan account. Such cannot be the intention of the bank while offering OTS scheme and that cannot be the purpose of the scheme which may encourage such a dishonesty.

13. If a prayer is entertained on the part of the defaulting unit/person to compel or direct the financial corporation/bank to enter into a one-time settlement on the terms proposed by it/him, then every defaulting unit/person which/who is capable of paying its/his dues as per the terms of the agreement entered into by it/him would like to get one-time settlement in its/his favour. Who would not like to get his liability reduced and pay lesser amount than the amount he/she is liable to pay under the loan account In the present case, it is noted that the original writ petitioner and her husband are making the payments regularly in two other loan accounts and those accounts are regularised. Meaning thereby, they have the capacity to make the payment even with respect to the present loan account and despite the said fact, not a single amount/instalment has been paid in the present loan account for which original petitioner is praying for the benefit under the OTS Scheme.

14. The sum and substance of the aforesaid discussion would be that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial institution/bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS scheme and the guidelines issued from time-to- time. If the bank/financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS scheme. Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove.

15. In view of the aforesaid discussion and for the reasons stated above, we are of the firm opinion that the High Court, in the present case, has materially erred and has exceeded in its jurisdiction in issuing a writ of mandamus in exercise of its powers under Article 226 of the Constitution of India by directing the appellant Bank to positively consider/grant the benefit of OTS to the original writ petitioner. The impugned judgment and order [Meenal Agarwal v. State of U.P., 2021 SCC OnLine All 989] passed by the High Court is hence unsustainable and deserves to be quashed and set aside and is accordingly quashed and set aside.”

(Emphasis supplied)

15. In the case of Arvindra Electronics Pvt. Ltd. (supra), the Supreme Court has, in paragraphs No.22 and 23, held as under:

“22. Even otherwise as rightly submitted on behalf of the Bank directing the Bank to reschedule the payment under OTS would tantamount to modification of the contract which can be done by mutual consent under Section 62 of the Contract Act. By the impugned judgment and order rescheduling the payment under the OTS Scheme and granting extension of time would tantamount to rewriting the contract which is not permissible while exercising the powers under Article 226 of the Constitution of India.

23. It is required to be noted that under the OTS Scheme which was originally sanctioned in the year 2017 the borrower was required to pay Rs 10,53,75,069.74 against the outstanding of Rs 13,99,89,273.99. Therefore, under the original sanctioned OTS Scheme the borrower was getting the substantial relief of approximately Rs 3 crores. The Bank agreed and accepted the OTS offer on the terms and conditions mentioned in the letter dated 21-11-2017. In the sanctioned letter dated 21-11-2017 it was specifically mentioned in Clause

(iv) that the entire payment under the OTS Scheme was to be made by 21-5-2018, otherwise OTS would be rendered infructuous. Therefore, the borrowers were bound to make the payment as per the sanctioned OTS Scheme. Therefore, the High Court ought not to have granted further extension dehors the sanctioned OTS Scheme while exercising the powers under Article 226 of the Constitution of India.”

(Emphasis supplied)

16. We also agree with the submission made by the learned counsel for the appellant that challenge to the sale notice can only before the DRT when the proceedings have been initiated under the SARFAESI Act, as such, petition before the learned Single Judge was not at all maintainable. In this regard, we may refer to the judgment in the case of Naveen Mathew Philip (supra), wherein in paragraphs No.17 and 18, the Supreme Court has held as under:

“17. We shall reiterate the position of law regarding the interference of the High Courts in matters pertaining to the SARFAESI Act by quoting a few of the earlier decisions of this Court wherein the said practice has been deprecated while requesting the High Courts not to entertain such cases.

• Federal Bank Ltd. v. Sagar Thomas, (2003) 10 SCC 733,

“18. From the decisions referred to above, the position that emerges is that a writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State (Government); (ii) an authority; (iii) a statutory body; (iv) an instrumentality or agency of the State; (v.) a company which is financed and owned by the State; (vi) a private body run substantially on State funding; (vii) a private body discharging public duty or positive obligation of public nature; and

(viii) a person or a body under liability to discharge any function under any statute, to compel it to perform such a statutory function.

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26. A company registered under the Companies Act for the purposes of carrying on any trade or business is a private enterprise to earn livelihood and to make profits out of such activities. Banking is also a kind of profession and a commercial activity, the primary motive behind it can well be said to earn returns and profits. Since time immemorial, such activities have been carried on by individuals generally. It is a private affair of the company though the case of nationalized banks stands on a different footing. There may well be companies, in which majority of the share capital may be contributed out of the State funds and in that view of the matter there may be more participation or dominant participation of the State in managing the affairs of the company. But in the present case we are concerned with a banking company which has its own resources to raise its funds without any contribution or shareholding by the State. It has its own Board of Directors elected by its shareholders. It works like any other private company in the banking business having no monopoly status at all. Any company carrying on banking business with a capital of five lakhs will become a scheduled bank. All the same, banking activity as a whole carried on by various banks undoubtedly has an impact and effect on the economy of the country in general. Money of the shareholders and the depositors is with such companies, carrying on banking activity. The banks finance the borrowers on any given rate of interest at a particular time. They advance loans as against securities. Therefore, it is obviously necessary to have regulatory check over such activities in the interest of the company itself, the shareholders, the depositors as well as to maintain the proper financial equilibrium of the national economy. The banking companies have not been set up for the purposes of building the economy of the State; on the other hand such private companies have been voluntarily established for their own purposes and interest but their activities are kept under check so that their activities may not go wayward and harm the economy in general. A private banking company with all freedom that it has, has to act in a manner that it may not be in conflict with or against the fiscal policies of the State and for such purposes, guidelines are provided by Reserve Bank so that a proper fiscal discipline, to conduct its affairs in carrying on its business, is maintained. So as to ensure adherence to such fiscal discipline, if need be, at times even the management of the company can be taken over. Nonetheless, as observed earlier, these are all regulatory measures to keep a check and provide guidelines and not a participatory dominance or control over the affairs of the company. For other companies in general carrying on other business activities, maybe manufacturing, other industries or any business, such checks are provided under the provisions of the Companies Act, as indicated earlier.

There also, the main consideration is that the company itself may not sink because of its own mismanagement or the interest of the shareholders or people generally may not be jeopardized for that reason. Besides taking care of such interest as indicated above, there is no other interest of the State, to control the affairs and management of the private companies. Care is taken in regard to the industries covered under the Industries (Development and Regulation) Act, 1951 that their production, which is important for the economy, may not go down, yet the business activity is carried on by such companies or corporations which only remains a private activity of the entrepreneurs/companies.

27. Such private companies would normally not be amenable to the writ jurisdiction under Article 226 of the Constitution. But in certain circumstances a writ may issue to such private bodies or persons as there may be statutes which need to be complied with by all concerned including the private companies. For example, there are certain legislations like the Industrial Disputes Act, the Minimum Wages Act, the Factories Act or for maintaining proper environment, say the Air (Prevention and Control of Pollution) Act, 1981 or the Water (Prevention and Control of Pollution) Act, 1974 etc. or statutes of the like nature which fasten certain duties and responsibilities statutorily upon such private bodies which they are bound to comply with. If they violate such a statutory provision a writ would certainly be issued for compliance with those provisions. For instance, if a private employer dispenses with the service of its employee in violation of the provisions contained under the Industrial Disputes Act, in innumerable cases the High Court interfered and has issued the writ to the private bodies and the companies in that regard. But the difficulty in issuing a writ may arise where there may not be any non- compliance with or violation of any statutory provision by the private body. In that event a writ may not be issued at all. Other remedies, as may be available, may have to be resorted to.”

• United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110,

“42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression “any person” used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective.

43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.

45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.

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55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.”

• State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85,

“5. We have considered the submissions on behalf of the parties. Normally this Court in exercise of jurisdiction under Article 136 of the Constitution is loath to interfere with an interim order passed in a pending proceeding before the High Court, except in special circumstances, to prevent manifest injustice or abuse of the process of the court. In the present case, the facts are not in dispute. The discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well-defined exceptions as observed in CIT v. Chhabil Dass Agarwal [(2014) 1 SCC 603], as follows : (SCC p. 611, para 15)

“15. Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal v. Supt. of Taxes [AIR 1964 SC 1419], Titaghur Paper Mills Co. Ltd. v. State of Orissa [(1983) 2 SCC 433 : 1983 SCC

(Tax) 131] and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.”

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8. The Statement of Objects and Reasons of the SARFAESI Act states that the banking and financial sector in the country was felt not to have a level playing field in comparison to other participants in the financial markets in the world. The financial institutions in India did not have the power to take possession of securities and sell them. The existing legal framework relating to commercial transactions had not kept pace with changing commercial practices and financial sector reforms resulting in tardy recovery of defaulting loans and mounting non-performing assets of banks and financial institutions. Narasimhan Committee I and II as also the Andhyarujina Committee constituted by the Central Government Act had suggested enactment of new legislation for securitisation and empowering banks and financial institutions to take possession of securities and sell them without court intervention which would enable them to realise long-term assets, manage problems of liquidity, asset liability mismatches and improve recovery. The proceedings under the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as “the DRT Act”) with passage of time, had become synonymous with those before regular courts affecting expeditious adjudication. All these aspects have not been kept in mind and considered before passing the impugned order.

9. Even prior to the SARFAESI Act, considering the alternate remedy available under the DRT Act it was held in Punjab National Bank v. O.C. Krishnan [(2001) 6 SCC 569] that : (SCC p. 570, para 6)

“6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section

20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act.”

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15. It is the solemn duty of the court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the taxpayer's expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in United Bank of India v. Satyawati Tondon [(2010) 8 SCC 110 : (2010) 3 SCC (Civ) 260], has also not been kept in mind before passing the impugned interim order : (SCC pp. 123- 24, para 46)

“46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad [AIR 1969 SC 556], Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107] and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order.”

• Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir, (2022) 5 SCC 345,

“18. Even otherwise, it is required to be noted that a writ petition against the private financial institution - ARC - the appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable. Therefore, decisions of this Court in Praga Tools Corpn. v. C.A. Imanual, [(1969) 1 SCC 585] and Ramesh Ahluwalia v. State of Punjab, [(2012) 12 SCC 331 : (2013) 3 SCC (L&S) 45 : 4 SCEC 715] relied upon by the learned counsel appearing on behalf of the borrowers are not of any assistance to the borrowers.

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21. Applying the law laid down by this Court in State Bank of Travancore v. Mathew K.C., [(2018) 3 SCC 85 : (2018) 2 SCC (Civ) 41] to the facts on hand, we are of the opinion that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the court. The writ petitions have been filed against the proposed action to be taken under Section 13(4). As observed hereinabove, even assuming that the communication dated 13-8-2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs. 1 crore only (in all Rs. 3 crores) is absolutely unjustifiable. The dues are to the extent of approximately Rs. 117 crores. The ad interim relief has been continued since 2015 and the secured creditor is deprived of proceedingfurther with the action under the SARFAESI Act. Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of court. It appears that the High Court has initially granted an ex parte ad interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced. The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed.”

• Varimadugu Obi Reddy v. B. Sreenivasulu, (2023) 2 SCC 168,

“36. In the instant case, although the respondent borrowers initially approached the Debts Recovery Tribunal by filing an application under Section 17 of the SARFAESI Act, 2002, but the order of the Tribunal indeed was appealable under Section 18 of the Act subject to the compliance of condition of pre-deposit and without exhausting the statutory remedy of appeal, the respondent borrowers approached the High Court by filing the writ application under Article 226 of the Constitution. We deprecate such practice of entertaining the writ application by the High Court in exercise of jurisdiction under Article 226 of the Constitution without exhausting the alternative statutory remedy available under the law. This circuitous route appears to have been adopted to avoid the condition of pre- deposit contemplated under 2nd proviso to Section 18 of the 2002 Act.”

18. While doing so, we are conscious of the fact that the powers conferred under Article 226 of the Constitution of India are rather wide but are required to be exercised only in extraordinary circumstances in matters pertaining to proceedings and adjudicatory scheme qua a statute, more so in commercial matters involving a lender and a borrower, when the legislature has provided for a specific mechanism for appropriate redressal.” ”

17. Similarly, the counsel is also justified in relying upon the judgment of this Court in the case of Nitesh Residency Hotels Pvt. Ltd. (supra), wherein this Court has, in paragraphs No.4(E)(ii), held as under:

“4. xx xx xx xx xx

E. AS TO EMERGENCY CREDIT LOAN GUARANTEE PREROGATIVE: SCHEME AND BANKER’S

(i) xx xx xx xx xx

(ii) The Apex Court in PRADEEP KUMAR vs. POST MASTER GENERAL [CIVIL APPEAL NOS.8775-8776 OF 2016 disposed off on 07.02.2022] after referring to the English Court's decision in TAI HING COTTON MILL LTD vs. LIU CHONG HING BANK [(1985) AII ER 947] at paragraph 34 observed as under:

"On the aspect of civil obligation of a customer in terms of banking contract and in tort law, this decision approves the following observations made by the Privy Council in Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd. and Others: "37. Then the Privy Council proceeded to consider the weightier submissions advanced by the bank (1) a wider duty on the part of the customer to act with diligence which must be implied into the contract and alternatively that such a duty arises in tort from the relationship between banker and customer. The Privy Council parted company with the observation by the Court of Appeal here and repelled the plea that it was necessary to imply into a contract between a banker and the customer a wider duty and that it was not a necessary incident of banker/customer relationship that the customer should owe his banker a wider duty of care. This duty is in the form of an undertaking by the customer to exercise reasonable care in executing his written orders so as not to mislead the bank or to facilitate forgery. The Privy Council accepted that an obligation should be read into the contract as the nature of this contract implicitly requires. In other words "the term sought to be implied must be one without which the whole transaction would become futile and inefficacious" ”

(Emphasis supplied)

18. Insofar as the judgments relied upon by Sri. Haranahalli are concerned, we have seen the judgments. Suffice to state, the said judgments were in the facts of the case and all the judgments which have been referred to by Sri. Haranahalli were prior to the judgments which have been referred to by the learned counsel for the appellant and hence, are clearly distinguishable to be held to be confined to the facts of those cases. In fact in the appeal against the judgment in the case of Shri Mohanlal Patidar (supra), the Supreme Court has left the question of law open.

19. In view of our discussion above, we are of the view that the learned Single Judge has clearly erred in allowing the writ petition in the manner he has done in paragraph No.16. Accordingly, we proceed to decide the appeal with the following directions:

i. Writ appeal is allowed;

ii. Impugned order dated 14.12.2022 passed by the learned Single Judge in WP No.8576/2021 is set aside.

No costs.

In view of the order in the appeal, pending application(s), if any, shall stand disposed of.