High Court Cannot Circumvent Statutory SARFAESI Remedies

In a significant ruling clarifying the limits of judicial intervention in financial disputes, the High Court of Kerala has reiterated that borrowers cannot bypass statutory remedial mechanisms provided under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) by filing writ petitions under Article 226 of the Constitution.

The Division Bench, comprising Justice Anil K. Narendran and Justice Muralee Krishna S., set aside a Single Judge's order that had previously permitted a borrower to retain possession of a secured asset through a conditional installment plan.

The Backdrop: A Battle Over Debt Recovery

The dispute involved a business loan of ₹16,00,000 availed by the respondent, Jishith Kumar, from the Kerala State Co-operative Bank’s Kakkodi branch in 2019. Following defaults in repayment, the Bank initiated recovery proceedings under the SARFAESI Act, eventually taking physical possession of the mortgaged property—a 20.5-cent holding in Chelannur Village—on March 17, 2025.

Mr. Kumar had approached the High Court seeking a writ of mandamus to facilitate loan regularisation through installments and the immediate return of his property. While an initial interim arrangement was granted, the Bank challenged the final order, asserting that such judicial interference in ongoing SARFAESI proceedings was legally unsustainable.

Arguments from the Bench

The Bank’s counsel argued that the borrower had already been granted the benefit of a One Time Settlement (OTS) scheme following a prior court order, but failed to comply with the terms. They contended that once the Bank invokes its powers under the SARFAESI Act, the appropriate forum for any grievance is the Debts Recovery Tribunal (DRT) under Section 17 , not the constitutional writ jurisdiction of the High Court.

The respondent maintained that the court had the discretion to allow for repayment opportunities, especially when the conditions imposed were clear and stipulated that a single default would result in the loss of property.

Key Observations: The Legal Threshold

In its detailed analysis, the court emphasised the sanctity of the legislative framework designed for financial recovery. Referencing the Supreme Court judgment in South Indian Bank Ltd. v. Naveen Mathew Philip , the bench noted:

> "The object and reasons behind the SARFAESI Act are very clear... While it facilitates a faster and smoother mode of recovery sans any interference from the court, it does provide a fair mechanism in the form of the Tribunal being manned by a legally trained mind."

Further, the court warned against the trend of seeking relief in High Courts to avoid the rigors of statutory procedures:

> "When a statute prescribes a particular mode, an attempt to circumvent that mode shall not be encouraged by a writ court. A litigant cannot avoid the non-compliance of approaching the Tribunal, which requires the prescription of fees, and use the constitutional remedy as an alternative."

The Verdict and Its Impact

The High Court allowed the Bank's appeal, dismissing the original writ petition as not maintainable. The judgment underscores the judiciary’s stance that high-value commercial disputes between lenders and borrowers should remain within the adjudicatory scheme established by statute.

This ruling serves as a vital reminder to legal practitioners and litigants alike: the writ jurisdiction is not an omnibus remedy for financial distress. Borrowers aggrieved by recovery actions must adhere to the Section 17 appeal process, ensuring that the specialized Debts Recovery Tribunals—not the High Court—remain the primary arbiters of SARFAESI-related grievances.