Writ Petition or Statutory Remedy: The Alternative Remedy Rule in Recovery Matters

Parties to a recovery dispute sometimes go to the High Court under Article 226 of the Constitution, when they believe an action taken by a bank, a tribunal or an authority is unlawful. The High Courts have wide powers, but they apply a settled rule of restraint: where an effective statutory remedy exists, the court ordinarily sends the petitioner to it. A creditor facing a petition, or a borrower or creditor considering one, should understand where the line is. This note explains it. It is general information, not advice on a particular case.

The rule

The High Courts' writ jurisdiction is discretionary. The alternative remedy rule is one of self-restraint, not a bar. In Whirlpool Corporation v. Registrar of Trade Marks (1998), the Supreme Court identified the circumstances in which a writ petition may be entertained despite an alternative remedy: where the petition seeks the enforcement of a fundamental right, where there has been a violation of the principles of natural justice, where the order or proceedings are wholly without jurisdiction, or where the vires of an Act is challenged. These are exceptions and a petitioner must bring itself within one.

SARFAESI and Debts Recovery Tribunals

The Securitisation Act provides a complete remedy. A borrower aggrieved by a measure taken under Section 13(4) may file an application before the Debts Recovery Tribunal under Section 17, within forty-five days, and may appeal to the Debts Recovery Appellate Tribunal under Section 18. In United Bank of India v. Satyawati Tondon (2010), the Supreme Court held that the High Court should not entertain a petition against the action of a bank under the Act when an efficacious remedy under Section 17 exists. The Court has repeated this in later decisions, and has criticised interim orders in such petitions that have the effect of stalling recovery.

The tribunal's remedy is also conditional. An appeal to the Appellate Tribunal requires a deposit of fifty per cent of the amount of debt due from the borrower as claimed by the secured creditor or as determined by the tribunal, whichever is less, and the Appellate Tribunal may reduce it to not less than twenty-five per cent for reasons recorded. A borrower may not avoid this requirement by going to the High Court.

When a writ may be entertained

• Where the action is wholly without jurisdiction, for example, a bank has proceeded against property that is not a secured asset, or the account was never classified as non-performing in accordance with the guidelines.
• Where a mandatory step has been skipped in a way that goes to the root of the action and no tribunal would remedy it in time.
• Where the petitioner challenges the constitutional validity of a provision.
• Where the respondent is a State authority acting arbitrarily in a way that affects fundamental rights.

Money claims against the State and its bodies

A writ is not ordinarily the remedy for a contractual money claim. The High Courts have said that where a dispute turns on facts that are contested and require evidence, the petitioner should go to a civil court. A writ may be issued where the sum is admitted and the refusal to pay is arbitrary, though the court may be slow to order payment without a decree.

Practical points

1. A creditor served with a writ petition should plead the alternative remedy as a preliminary objection and identify the specific provision.
2. A borrower should file within the statutory period under Section 17, even if a writ is also contemplated, since time under that Section is short.
3. A petitioner who must go to the High Court should state why the case falls within an exception, and should not rely on the general breadth of Article 226.
4. Both sides should expect that interim orders in writ proceedings will be conditioned on a deposit.

The question of forum is often argued before the merits. A creditor that knows the statutory route, and the exceptions to it, is better placed in both directions.