Kerala High Court: Writ Jurisdiction No Substitute for DRT in SARFAESI Cases

KOCHI, KERALA – In a significant reaffirmation of judicial restraint in commercial matters, a Division Bench of the Kerala High Court has ruled that writ petitions under Article 226 of the Constitution cannot be entertained to challenge proceedings under the SARFAESI Act when an effective statutory remedy is available before the Debts Recovery Tribunal (DRT).

The judgment, delivered by a bench comprising Justice Anil K. Narendran and Justice Muralee Krishna S., set aside a Single Judge's decision that had granted installment relief and ordered the return of a mortgaged property to a defaulting borrower. The ruling in Kerala Bank and Anr v Jishith Kumar (WA 2036/ 2025) underscores the primacy of the specialised mechanism established by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

This decision serves as a crucial reminder to litigants and legal practitioners about the circumscribed scope of the High Court's extraordinary jurisdiction in matters governed by specific statutory regimes.

Background of the Dispute

The case originated from a business loan of Rs. 16 lakh availed by the respondent-borrower in 2019 from the appellant, Kerala Bank. Following a default in repayment, the bank initiated recovery proceedings under the SARFAESI Act. These proceedings culminated in the bank taking possession of the mortgaged property on March 17, 2025.

Subsequently, the borrower filed a writ petition before the Kerala High Court, not to challenge the legality of the proceedings, but to seek relief in the form of an installment plan and the restoration of the property's possession. A Single Judge of the High Court granted conditional relief, directing the bank to return possession upon the borrower's payment of Rs. 4,00,000 and to accept the remaining outstanding amount in twelve equated monthly installments.

Aggrieved by this order, which effectively interfered with the statutory recovery process, Kerala Bank, represented by Advocate P.C. Sasidharan, filed a writ appeal before the Division Bench. The core legal question was whether the High Court ought to have exercised its writ jurisdiction when the borrower had failed to exhaust the statutory remedy available under Section 17 of the SARFAESI Act.

The Division Bench's Analysis and Ruling

The Division Bench meticulously examined the established legal principles governing judicial review in SARFAESI matters, drawing heavily on landmark Supreme Court precedents. The Court reiterated that the SARFAESI Act is a comprehensive code designed for the expeditious recovery of non-performing assets by banks and financial institutions. A key component of this framework is the remedy provided to aggrieved persons under Section 17, which allows them to approach the DRT to challenge the measures taken by the secured creditor.

The bench observed that the legislative intent behind the Act was to create a specialised forum (the DRT) to adjudicate such disputes, thereby preventing the regular court system from being inundated with debt recovery litigation. Invoking Article 226 to bypass this statutory mechanism would frustrate the very purpose of the Act.

Quoting the bench's observation from the judgment:

“If the respondent-petitioner and his mother, who are the borrowers, are aggrieved by the proceedings initiated by the appellants under the provisions of the SARFAESI Act, which had resulted in the Bank repossessing the secured asset on 17.03.2025, they should have invoke the statutory remedy provided under Section 17 of the SARFAESI Act by approaching the Debts Recovery Tribunal, instead of invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India.”

Reliance on Supreme Court Jurisprudence

The High Court's decision was firmly anchored in a consistent line of Supreme Court judgments that have repeatedly cautioned High Courts against interfering in SARFAESI proceedings. The bench cited several key cases:

• United Bank of India v. Satyawati Tondon [(2010) 8 SCC 110]: This seminal judgment established that High Courts should not entertain petitions under Article 226 challenging SARFAESI actions if an effective alternative remedy is available, particularly when the dispute involves purely monetary claims.
• Phoenix ARC Pvt. Ltd. v. Vishwa Bharati Vidya Mandir [(2022) 5 SCC 345]: The Supreme Court here deprecated the practice of High Courts showing undue indulgence and granting interim orders staying SARFAESI actions, emphasising that such interference undermines the Act's objective.
• South Indian Bank Ltd. v. Naveen Mathew Philip [(2023) 17 SCC 311]: In this recent pronouncement, the Apex Court reinforced that High Court intervention should be reserved for extraordinary circumstances, such as cases involving patent procedural illegalities, lack of jurisdiction, or violations of natural justice.

The Division Bench concluded that the present case did not fall into any of the exceptional categories carved out by the Supreme Court. The borrower's grievance was a standard challenge to a recovery action, which is precisely what the DRT is empowered to adjudicate under Section 17.

Furthermore, the bench noted a critical factual error in the Single Judge's order. Since the bank had already taken lawful possession of the secured asset before the writ petition was filed, the direction to restore possession was legally untenable. The proper course for the borrower was to file an application before the DRT, which has the specific power to restore possession if it finds the creditor's actions were not in accordance with the law.

Implications for Banking Law Practice

This judgment has significant practical implications for legal professionals handling banking and finance litigation:

• Primacy of the DRT: It solidifies the DRT's position as the primary forum for all disputes arising from SARFAESI actions. Practitioners should advise clients that a direct approach to the High Court is likely to be dismissed for failure to exhaust alternative remedies.
• Limited Scope for Writs: The threshold for invoking Article 226 in these matters remains exceptionally high. A petition must clearly demonstrate a fundamental flaw in the proceedings, such as a fraudulent action by the bank, a complete lack of jurisdiction, or a blatant disregard for the principles of natural justice. A mere plea for leniency or an installment facility will not suffice.
• Strategic Litigation: Borrowers' counsel must focus on building a robust case for the DRT under Section 17, which provides a wide ambit to challenge the creditor's measures on both procedural and substantive grounds. For lenders, this judgment reinforces their right to proceed under the Act without undue interference, provided they adhere strictly to the prescribed procedures.

Ultimately, the Kerala High Court's decision aligns with the national trend of judicial policy aimed at strengthening the debt recovery framework and ensuring that specialised tribunals function effectively as intended by the legislature. By setting aside the Single Judge's order, the Division Bench allowed the appeal and declared the original writ petition as not maintainable, while clarifying that the borrower is still at liberty to pursue the statutory remedy available before the DRT.

In Other News: Judicial Transfers Announced

In separate developments concerning the judiciary, the Central Government has notified transfers affecting the Kerala, Delhi, and Madras High Courts, exercising its powers under Article 222 of the Constitution.

• Justice C.S. Sudha has been transferred from the Kerala High Court to the Delhi High Court. Justice Sudha began her judicial career in 1995 and was appointed as a Permanent Judge of the Kerala High Court on September 2, 2023.

• Justice J. Nisha Banu , previously a judge of the Madras High Court since October 5, 2016, has been transferred to the Kerala High Court.

These transfers are part of the routine administrative process managed by the Supreme Court Collegium and the Central Government to ensure the effective functioning of High Courts across the country.