The court may facilitate a settlement in SARFAESI proceedings by directing a partial deposit to test the borrower's bona fides, granting a conditional stay of sale, while preserving the bank's statutory rights if the conditions are not met.

THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 31.07.2026, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

JUDGMENT

Dated this the 31 st day of July 2026

SOUMEN SEN, C.J.

Heard Mr. John Numpeli (Junior), the learned counsel for the petitioner, Ms. Meenakshy S., representing Mr. Millu Dandapany, the learned counsel for respondent No.1 and Mr. Sajeev Kumar K. Gopal, the learned counsel for respondent Nos. 2 and 3.

2. The petitioner has challenged the jurisdiction of the Bank to recover the outstanding amount by initiating proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, "the SARFAESI Act"). The petitioner alleged that no security interest was created in respect of the property in question and therefore, the steps taken by the Bank under the SARFAESI Act are void, illegal and without jurisdiction. It appears that the proceedings under Section 14 of the SARFAESI Act were initiated after following the procedure under Section 13 of the Act for taking possession of the property, and the said order was unsuccessfully challenged before the DRT. The order of the DRT refusing to interfere with the possession of the property taken in exercise of the powers under Section 14 has not been challenged so far. Admittedly, the notice under Section 13(2) of the SARFAESI Act was issued on 8th April 2019. The learned counsel for the Bank submitted that, as on date, a sum of ₹ approximately 75 lakhs is due and payable on account of the overdraft facility availed of by the petitioner.

3. The learned counsel for the petitioner submitted that the petitioner had already approached the Bank for a settlement. In order to test the bona fides of the petitioner, we direct the petitioner to deposit a sum of ₹ 10 lakhs on or before 7th August 2026 and to submit, along with such deposit, a proposal for liquidating the remaining dues in instalments. In the event the said amount is deposited in terms of this order, along with a proposal for repayment of the loan amount, the Bank shall consider the said proposal favourably. The amount so deposited shall first be adjusted towards the principal outstanding. The Bank may also consider waiving the penal interest if the petitioner deposits the aforesaid amount, submits a proposal for repayment of the remaining outstanding amount, and furnishes an undertaking to pay the balance amount in instalments. However, the Bank shall be entitled to statutory interest on the principal amount that became due and payable from the date on which the account became irregular and was declared a Non-Performing Asset (NPA).

4. It is needless to mention that, in the event the aforesaid amount is not paid, the proceedings pending before the Authorised Officer shall revive, and the Bank shall be at liberty to proceed with the exercise of its statutory rights in accordance with law. The Authorised Officer is restrained from proceeding with the sale of the property in question for a period of 10 days from date. In the event the said amount is deposited within the stipulated period, the Bank shall recall the said notice, and a lenient view may be taken until a final decision is taken by the Bank with regard to the proposal to be submitted by the borrower/petitioner for repayment of the loan amount.

The writ appeal is accordingly disposed of.