Court Not To Interfere In SARFAESI Matter Unless Bank Actions Patent Illegality And/Or Mala Fide: Allahabad High Court

While dealing with challenge to recovery proceedings initiated by bank, the Allahabad High Court has held that the Court must not interfere in matters pertaining to Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 unless the actions by the bank are patently illegal and/or mala fide.

Relying on the judgment of the Apex Court in United Bank Of India vs Satyawati Tondon & Ors, the bench of Justice Shekhar B. Saraf and Justice Dr. Yogendra Kumar Srivastava held

“This Court is required not to interfere in matters with regard to the SARFAESI Act unless this Court finds patent illegality and/or mala fide actions being taken by the bank authorities.”

Petitioner approached the High Court seeking quashing of the proceedings initiated by the respondent bank under Section 13(4) of the SARFAESI Act. Section 13(4) of the SARFAESI Act empowers the secured creditor, like bank, to initiate proceedings of recovery against the borrower in case of default in discharge of liabilities within 60 days from the date of notice under Section 13(2).

Counsel for petitioner argued that the objection/ representation made by the petitioner under Section 13(3A) of the SARFAESI Act was not decided by the bank before proceeding under Section 13(4).

Based on the documents filed with the writ petition, the Court noted that though order on objection had been passed and sent through post to the petitioners, the delivery attempt on petitioner 2 & 3 had been unsuccessful and the service report showed door of their residence was shut. It noted that petitioner no.1 may not have been served proper notice.

Further, the Court observed that the notices under Section 13(4) were received by the petitioners and they had approached the Debts Recovery Tribunal against the notices. During the pendency of their securitisation application before the DRT, petitioners approached the High Court.

The Court observed that at the time of filing of the writ petition, the petitioners did not disclose that they had already approached the DRT. They only disclosed that fact by way of a supplementary affidavit filed later, noted the Court.

“In our view, the factum of passing of the order under Section 13(3A) of the SARFAESI Act and the attempt to carry out service of the same on the petitioners coupled with the fact that the Section 13(4) notice was received by the petitioners leads us to the conclusion that the petitioners have missed the bus. Having now challenged the Section 13(4) notice before the Debts Recovery Tribunal, the petitioners cannot be allowed to sail on two boats at the same time by raising the earlier proceedings under Section 13(3A) of the SARFAESI Act before this Court. It is also to be noted that the petitioners have also taken the ground with regard to Section 13(3A) in the S.A. application before the Debts Recovery Tribunal,” held the Court.

In United Bank Of India vs Satyawati Tondon & Ors, the Apex Court had held that while the High Court has discretion under Article 226 of the Constitution of India to deal with entertain writ petitions and grant interim reliefs despite existence of alternate remedy, the Court must not do so and relegate parties to effective alternate remedy for which detailed mechanism has been provided in law.

Ruling out mala fide intentions on part of the bank and noting that sale had already taken place, the Court refused to interfere in proceedings under Section 13(4) of the SARFAESI Act. Accordingly, the writ petition was dismissed.

Case Title: M/S K.C. International Situate And 2 Others vs. Indian Bank Kanpur Main Branch 2025 LiveLaw (AB) 147 [WRIT - C No. - 263 of 2025]

Case Citation: 2025 LiveLaw (AB) 147

Counsel for petitioner: Prerna Surolia

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