Writ petition not maintainable against proceedings by banks: SC

What is the news?

The Supreme Court has observed that a writ petition by borrowers challenging proceedings under SARFAESI Act initiated by Bank/Asset Reconstruction Companies is not maintainable.

What was the case about?

A writ petition was filed in the Karnataka High Court by borrowers challenging proceedings under SARFAESI Act initiated by Asset Reconstruction Company (ARC).

Admitting the petition, the High Court granted an interim stay on proceedings.Challenging this, the ARC filed an appeal before the Supreme Court.

What did the Supreme Court say?

The Supreme Court dismissed the interim stay provided by the High Court.

The court said that if proceedings are initiated under the SARFAESI Act and if the borrower is aggrieved by any of the actions of the bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie or is maintainable or entertainable.

This is because the activity of the bank/ARC (of lending the money to the borrowers) cannot be said to be performing a public function which is normally expected to be performed by the State authorities.

Source: This post is based on the article “Writ petition not maintainable against proceedings by banks: SC” published in Business Standard on 13th January 2022.