G. Sekar Vs Union of India (Madras High Court)
The Madras High Court dismissed a writ petition challenging SARFAESI proceedings and the auction sale of the petitioner’s residential property conducted on 10.09.2024. The petitioner alleged that the NBFC lacked jurisdiction because the outstanding loan was below the Rs.20 lakh threshold under Ministry of Finance Notification S.O. 856(E) dated 24.02.2020, as modified on 12.02.2021. He also alleged non-service of the Demand Notice under Section 13(2), Possession Notice under Section 13(4), and Sale Notice.
The Court held that the second respondent, a private financial institution, was not an instrumentality of the State under Article 12 and was enforcing contractual security rights rather than performing a public function. Relying on S.Shobha v. Muthoot Finance Ltd, the Court held that writ jurisdiction under Article 226 was not maintainable absent a public law element.
The Court further held that the SARFAESI Act is a complete code, with Section 17 providing a remedy before the Debts Recovery Tribunal (DRT) against measures under Section 13(4). The petitioner’s challenges, including the Rs.20 lakh threshold, valuation issues and alleged non-service of notices, could be raised before the DRT.
Although an earlier DRT proceeding had been dismissed on 30.08.2024, the subsequent auction sale created a fresh cause of action. The writ petition was therefore dismissed for availability of an alternative remedy. The petitioner was granted 30 days to approach the DRT, with liberty to raise all grounds. If approached within that period, the DRT was directed to exclude the period spent bona fide pursuing the writ petition while considering delay condonation.
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