Article 226 | Rule Of Alternative Remedy Is A Rule Of Discretion, Not Rule Of Jurisdiction: Kerala High Court

The Kerala High Court has held that merely because it may not exercise its discretion under Article 226 of the Constitution in view of availability of alternative remedy, is not a ground to hold that it has no jurisdiction.

A Division Bench of Justice Suresh Kumar and Justice C.S. Sudha said that the case appears to be a classic example of the 'fence eating the crop'.

"The rule of alternative remedy is a rule of discretion and not a rule of jurisdiction. Merely because the Court may not exercise its discretion, is not a ground to hold that it has no jurisdiction. There may be cases where the High Court would be justified in exercising its writ jurisdiction because of some glaring illegality committed. One must also remember that the alternative remedy must be efficacious. Therefore, it will be for the High Court to decide in the peculiar facts and circumstances of each case whether it should exercise its extraordinary writ jurisdiction or not. There cannot be a blanket ban on the exercise of such jurisdiction because that would effectively mean that the writ court is denuded of its jurisdiction to entertain such writ petitions which is not the law laid down in L. Chandra Kumar v. Union of India, AIR 1997 SC 1125."

The appeals were against three judgments passed by a SIngle Judge. The Chengalam Service Co-perative Bank is the appellant and Jose Antony, his daughters, his wife and his loyal close aides are the respondents respectively. 

The respondents had availed loans from the Bank by offering their property as security. Due to the onset of the pandemic, it is alleged that they could not make prompt repayments but the outstanding amount is not substantial. Meanwhile, they received a notice from the Bank that their property would be proceeded against for realization of the defaulted amounts.

According to the respondents, they did not receive any notice from the Bank calling upon them to make any payments. Upon enquiry, they came to know that the bank had initiated arbitration proceedings for realization of the amounts due from them, resulting in ex-parte awards. They alleged that they never received any notice of the arbitration proceedings either. 

Therefore, they filed a petition before a Single Judge. It was also submitted that they had filed applications before the tribunal for setting aside the exparte awards. 

However, the Bank submitted that Jose Antony was the President of the Bank for 15 consecutive years until he was disqualified from contesting the election. While being the President, several loans were allegedly availed by him in the name of different persons to circumvent the by-law of the Bank that a member cannot take a loan of more than ₹ 25 lakhs by pledging a property. 

Since after availing the loans, no amount whatsoever had been repaid, arbitration proceedings were initiated. Although notice was served on the respondents, they did not enter appearance or contest the proceedings resulting in exparte awards being passed against them. The appellant bank argued that the default was wilful non-repayment of the loan. Further, it was submitted that they had not filed any application for setting aside the exparte awards passed against them.

It was submitted that the Bank was now running at a loss and was finding it difficult to refund the deposits of its customers due to paucity of funds. It can only refund the deposits to its customers if the property given as security is sold and the money realized. Even if the property pledged by the petitioners is sold, the amounts due cannot be fully realised.

However, the Single Judge allowed the writ petitions. Aggrieved, the Bank came up with appeal.

In the appeal, it was alleged that the petitions were filed raising false and untenable contentions and that they are nothing but an abuse of the process of the court and an attempt to protract the recovery proceedings initiated against the respondents and the property given as security. The extraordinary discretionary jurisdiction under Article 226 ought not to have been exercised in favour of the petitioners, it was argued.

Senior Advocate Grashious Kuriakose appeared for the bank/ appellant and Advocate I. Dinesh Menon represented the respondents.  

The Court observed that the case appears to be a classic example of the 'fence eating the crop'.

It was noted that High Courts under Art.226 of the Constitution of India, exercises equity jurisdiction, which is essentially discretionary. Writ of Mandamus is one of the prerogative writs issued by the superior Courts, which is in the shape of a command to the State, its instrumentality or its functionaries to compel them to perform their constitutional/statutory/public duty.

However, the exercise of the jurisdiction is discretionary; it is not exercised merely because it is lawful to do so.

It is a settled position that the High Court do not ordinarily entertain a writ petition under Art.226 of the Constitution of India if an effective alternative remedy is available to the aggrieved person or if the statute itself provides for a mechanism for redressal of the grievance. It is also well settled that alternative remedy does not act as an absolute bar for entertaining a writ petition where the vires of any statutory provision is under challenge or the order impugned is completely without jurisdiction or has been passed in clear violation of the principles of natural justice 

With respect to efficacious alternate remedy, the well-recognised exceptions are violation of the principles of natural justice; a proceeding taken under a provision of law which is ultra vires and when the proceeding itself is an abuse of the process of law.

The question was if this case falls under any of these exceptions.

Rule 67(7)(b) of the Kerala Co-operative Societies Rules, 1969 empowers the arbitrator to decide a dispute ex-parte. Though there is no specific provision in the Act or the Rules empowering the arbitrator to set aside an exparte award, it is well settled in the light of the dictums  that the Arbitrator has the necessary power to set aside exparte awards also, in case sufficient reasons are shown.

Although the respondents alleged that they had not received any notice in the arbitration proceedings however, the documents proved otherwise. Even assuming that they had not received any summons before the awards were passed, they ought to have filed applications for setting aside the same before the appropriate forum.

On the date of filing the petitions, there appears to have been no applications pending before the authority concerned seeking setting aside of the exparte awards. So the respondents sought the indulgence of the court over non-existent applications, which is nothing but a gross misuse or abuse of the process of the court.

Moreover, although they alleged that they defaulted payment due to the pandemic, the awards were issued in 2019, which is before the onset of the Covid pandemic suggesting that the loans were availed much before that. 

Therefore, it was held that the writ petitions seem to have been filed with only totally false and untrue statements and half-truths. 

"Normally, discretionary orders are not interfered with unless the impugned orders are without jurisdiction, contrary to law, or are perverse, and they also cause serious prejudice to the parties in such a manner that it might be difficult to restore the status quo ante or grant adequate compensation."

However, it was observed that the idea was to provide an internal remedy in such cases without compelling the parties to go all the way to the Supreme Court under Art.136 of the Constitution of India or increase the burden of that court unnecessarily.

That being the position, it was held that this is not a fit case to invoke the discretionary extra ordinary jurisdiction of this court under Article 226 of the Constitution. In the result, the writ appeals were allowed and the impugned judgments were set aside.

Case Title: Chengalam Service Co-operative Bank Ltd. v. Rajkumar & Ors. 

Citation: 2022 LiveLaw (Ker) 197

Click Here To Read/Download The Order