DRT Orders Under SARFAESI: Writ Jurisdiction Barred When Statutory Appeal Exists
The decision in Haridasu Srinivasa Rao Vs Debts Recovery Tribunal by the Andhra Pradesh High Court reiterates a settled but critical principle: when a special statute like the SARFAESI Act provides a specific appellate mechanism, assessees cannot ordinarily bypass that route and directly invoke writ jurisdiction under Article 226 of the Constitution.
This judgment focuses on the maintainability of a writ petition filed against an order of the Debts Recovery Tribunal (DRT), Visakhapatnam, and clarifies the scope of remedy under Section 17(1) and Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Background of the Dispute
Challenge before the DRT
The assessee had availed credit facilities from a financial institution, and upon default, the creditor invoked provisions of the SARFAESI Act to recover the outstanding loan. This included:
- Initiation of recovery measures under the SARFAESI Act; and
- Approaching the jurisdictional Magistrate for assistance in taking possession of the secured asset.
Pursuant to the application made under the SARFAESI framework, the Magistrate passed an order appointing an Advocate Commissioner to:
- Take physical possession of the secured asset; and
- Facilitate enforcement of the security interest in favour of the financial institution.
Aggrieved by these enforcement steps, the assessee filed an application before the Debts Recovery Tribunal, Visakhapatnam, registered as S.A.No.228 of 2023, invoking Section 17(1) of the SARFAESI Act.
The application before the DRT specifically assailed:
- The recovery measures taken by the respondent financial institution under the SARFAESI Act; and
- The order of the learned Magistrate appointing an Advocate Commissioner to take physical possession of the secured asset.
The DRT, after considering the contentions, dismissed the assessee’s application.
Direct Writ Petition Before the High Court
Relief Sought in the Writ Petition
Instead of availing the statutory appellate remedy, the assessee approached the Andhra Pradesh High Court under Article 226 of the Constitution by filing a writ petition. The primary objective of the writ petition was:
- To set aside the order passed by the Debts Recovery Tribunal in S.A.No.228 of 2023; and
- To indirectly challenge the SARFAESI measures and the order of the Magistrate regarding possession of the secured asset.
Learned counsel for the writ petitioner was heard by the High Court, and the challenge was confined to the legality of the DRT order, which had upheld the action of the financial institution and the Magistrate.
Statutory Framework Under the SARFAESI Act
Remedy Under Section 17(1)
Section 17(1) of the SARFAESI Act provides that any person, including the borrower, aggrieved by any of the measures referred to in Section 13(4) taken by the secured creditor, may approach the Debts Recovery Tribunal. The DRT is therefore the first forum of challenge against actions such as:
- Taking possession of the secured asset;
- Taking over management; or
- Other enforcement steps under
Section 13(4).
In this case, the assessee had already exercised this remedy by filing S.A.No.228 of 2023, which ended in dismissal.