Supreme Court Criticises High Courts For Staying SARFAESI Proceedings In Writ Petitions

The Supreme Court recently criticised the Karnataka High Court for restraining LIC Housing Finance Ltd. (secured creditor) from proceeding under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), without recording any reasons, despite repeated warnings from the apex court against such interference.A bench of Justice Dipankar Datta and Justice Augustine George Masih reiterated that High Courts must exercise writ jurisdiction cautiously in matters involving secured creditors under the SARFAESI Act, considering the object and purpose of the statute. The Court observed that some High Courts still grant interim relief without just and sufficient reasons, and that such interference causes “great disservice to institutional credibility.”“Despite this Court in a series of judgments [United Bank of India Vs. Satyawati Tondon & Ors. being one of them] having cautioned the high courts to exercise writ jurisdiction judiciously while entertaining challenges to actions taken by secured creditors under Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to enforce their security interest in view of the scheme, purpose and object of the enactment, some of the high courts look the other way and grant interim relief on the mere asking. We still come across cases where, without just and sufficient reason being recorded, proceedings taken by secured creditors have ben interdicted by the high courts, with or without imposition of conditions, amounting to great disservice to institutional credibility”, the Court observed.The Court was hearing a special leave petition filed by LIC Housing Finance Ltd against interim orders passed by the High Court in favour of Nagson and Company, a borrower who had defaulted on payments.On 29 September 2021The High Court in a writ petition by the borrower passed an interim order restraining LIC Housing Finance from proceeding under Section 13 of the SARFAESI Act, on the condition that Nagson and Company deposit Rs. 5 crore - Rs.2.5 crore within two weeks and the remaining amount within the next two weeks. This direction was issued even though LIC Housing Finance had issued two demand notices dated 5 August 2021, claiming amounts of Rs.41 crore and Rs.31 crore from the borrower. No reasons were recorded by the High Court while granting the interim relief.Later, on 23 September 2022, the High Court continued the interim relief after taking note of the fact that the borrower had belatedly complied with the payment condition and had offered a plausible explanation for the delay. LIC Housing Finance filed the present SLP against these interim orders.The Supreme Court noted that despite more than thirty months having passed since the writ petition was filed, it had not yet been heard finally. The Court expressed concern that Nagson and Company continued to enjoy the benefit of unreasoned interim orders.“We are taken aback having been informed of the pendency of the writ petition, together with the subsisting unreasoned interim orders, for so long,” the bench remarked.While refraining from expressing any opinion on the merits of the pending writ petition, the Supreme Court requested the High Court to give precedence to the matter and decide it, subject to its convenience, by the end of September 2025. It directed that the roster bench take up the matter and decide it in accordance with law, uninfluenced by any of the observations made in its own order.The Supreme Court also issued notice returnable on 10 October 2025 on the application for condonation of delay as well as the special leave petition filed by LIC Housing Finance against the HC orders.Case no. – Special Leave Petition (Civil) Diary No. 7979/2025Case Title – LIC Housing Finance Ltd v. Nagson and Company & Ors.Citation : 2025 LiveLaw (SC) 722Click Here To Read/Download OrderRelated - Supreme Court Deprecates High Courts Entertaining Writ Petitions In SARFAESI Matters; Frowns Upon Borrowers Approaching HCs To Consider Offers To Banks

Supreme Court Criticises High Courts For Staying SARFAESI Proceedings In Writ Petitions

Amisha Shrivastava

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Amisha Shrivastava

Supreme Court Criticises High Courts For Staying SARFAESI Proceedings In Writ Petitions

Amisha Shrivastava

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Amisha Shrivastava

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