Writ petitions challenging SARFAESI actions are maintainable only when alternative remedies are exhausted, emphasizing the importance of valid security interests.

JUDGMENT

Muralee Krishna S., J.

The petitioners in W.P.(C)No.42944 of 2025 have filed this writ appeal under Section 5 (i) of the Kerala High Court Act, 1958 , challenging the judgment dated 17.11.2025, passed by the learned Single Judge in that writ petition.

2. The appellants filed W.P.(C)No.42944 of 2025, invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India, seeking the following reliefs;

“i) Issue a writ of certiorari calling for the records leading to Exhibit P6 Order of the Hon’ble CJM Court, Kottayam passed without verifying whether a valid security interest has been created over the properties scheduled therein;

ii) Issue a writ of certiorari calling for the records leading Exhibit P3 demand notice and all consequential actions resulting therefrom are bad for contravention of the mandate of Section 26D of the SARFAESI Act and quash the same;

iii) Issue a writ declaring that recovery measures adopted under SARFAESI Act cannot be proceeded with when the secured creditor has failed to create a valid security interest in terms of Section 20 of the Act;

iv) Issue a writ declaring further that the classification of the loan account of the petitioners as NPA by resorting to circuitous methods is bad in law;

v) Issue a writ declaring that the action taken to take possession of the property given as security towards KCC loan is a device resorted to defeat the MSME benefits granted vide Exhibit P11 Judgment is nothing but a fraud on power;

vi) Issue a writ declaring that the declaration of the KCC loan as NPA and all recovery measures pursuant thereto being consequent to the declaration of the other loans of the borrower cannot be proceeded with in the light of Ext-P11 judgment”

3. From the pleadings in the writ petition, it could be gathered that Appellants 1 and 2 availed a KCC overdraft facility from the respondent bank (‘the bank’ for short). Appellants 3 and 4 stood as guarantors to the said loan transaction. The property having an extent of 24.19 ares in Re.Sy. No.24/5-2 and 24/6 at Ettumanoor village, belonging to appellants 1 and 3, were offered as security for the loan. Apart from that, the 1^st appellant individually availed an additional overdraft facility from the bank in his capacity as the Managing Partner of M/s. PDMC Industries, and as the Proprietor of M/s. PDMC CO Rubber.

3.1. According to the appellants, both PDMC Industries and PDMC CO Rubber were registered as MSME and Udyam entities, making them eligible for the 'Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises' (Framework for MSMEs) as per notifications issued by the Ministry dated 29.05.2015 and the RBI dated 21.07.2016. However, this framework was not extended to them before their accounts were classified as Non-Performing Assets (‘NPA’ for short). Following the classification of PDMC Industries and PDMC CO Rubber's accounts as NPA, the bank recalled the KCC overdraft facility availed by appellants 1 and 2. Specifically, the 1^st appellant’s KCC loan account was classified as NPA on 06.04.2023, leading to the filing of Ext.P4 objection dated 12.09.2023, to which the bank replied via Ext.P5 reply dated 29.09.2023. Subsequently, the 1^st appellant challenged the bank's action against the KCC overdraft facility by filing W.P.(C) No.32498 of 2023, which was disposed of by a common judgment that relegated the appellants to approach the Tribunal.

3.2. Following the disposal of W.P.(C) No. 32498 of 2023, the appellants filed R.P. No. 536 of 2024 against the common judgment, which was subsequently disposed of with a clarificati