The Bombay High Court has entertained a writ petition under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act) in a case involving fraudulent transfer of a mortgaged property by an ex-husband to his wife during divorce proceedings. The Court restrained the bank from dealing with the property, recognizing the wife's right to shelter as a victim of fraud, while directing further proceedings to determine possession status.
Background & Facts
The Dispute
The petitioner, Bharati Vidyanand Mulik, approached the Bombay High Court challenging the actions of Saraswat Co-operative Bank Ltd. (Respondent No. 1) under the SARFAESI Act. The dispute arose from a fraudulent transaction involving a flat purchased by the petitioner's ex-husband (Respondent No. 2) using a loan from the bank, which was subsequently mortgaged to the bank without the petitioner's knowledge.
Key Facts
24.03.2022: Divorce decree by mutual consent granted by the Competent Court at Thane, wherein the petitioner was to receive a flat as part of the settlement.
10.03.2022: Respondent No. 2 executed a registered gift deed transferring the flat to the petitioner in compliance with the divorce decree.
Post-divorce: The petitioner discovered that the flat had been mortgaged to Respondent No. 1 Bank as security for a loan taken by Respondent No. 2.
17.06.2026: Respondent No. 1 Bank pasted a notice on the flat, intending to take physical possession on 09.07.2026 under the SARFAESI Act.
09.07.2026: The bank took physical possession of the flat.
Procedural History
08.04.2026: The Bombay High Court issued an interim order in Writ Petition No. 14110 of 2025, entertaining the petition despite the availability of statutory remedies under the SARFAESI Act, citing peculiar circumstances of fraud.
Notice issued to Respondent No. 1 Bank, returnable on 09.06.2026.
Petitioner directed to serve Respondent Nos. 2 and 3 by private service.
Respondents to file reply affidavits within four weeks; rejoinder within two weeks thereafter.
Liberty granted to the petitioner to seek interim relief if possession was threatened.
09.07.2026: The bank took physical possession of the flat.
10.07.2026: The petition was listed urgently, and the Court:
Took the bank's affidavit in reply on record.
Directed the petitioner to file a rejoinder affidavit within two weeks.
Restrained the bank from further dealing with the flat until 28.07.2026, the next date of listing.
The Parties' Positions
Petitioner's Contentions
The petitioner was unaware of the mortgage on the flat at the time of the gift deed execution.
Respondent No. 2 defrauded both the petitioner and the bank by suppressing the mortgage details during the divorce proceedings.
The flat is the petitioner's only shelter, and she is entitled to protection under the law.
Respondent Bank's Contentions
The petitioner was not in actual physical possession of the flat, as the consent terms recorded the presence of a licensee.
Notice of possession was pasted on 17.06.2026, yet the petitioner failed to seek interim relief from the Court.
The bank acted within its rights under the SARFAESI Act to recover the secured asset.
Relief Sought
The petitioner seeks:
A declaration that the bank's actions under the SARFAESI Act are illegal and void.
Restoration of possession of the flat to the petitioner.
A restraint on the bank from dealing with the flat until the final disposal of the petition.
The Legal Issue
The central question before the Court was whether a writ petition under Article 226 of the Constitution of India could be entertained against actions taken under the SARFAESI Act, where the petitioner alleged fraud and suppression of material facts by her ex-husband, leading to the mortgaging of her sole shelter without her knowledge.
Arguments Presented
For the Petitioner
The petitioner relied on the peculiar circumstances of the case, emphasizing that she was a victim of fraud perpetrated by Respondent No. 2.
It was argued that the bank's actions under the SARFAESI Act would render the petitioner shelterless, violating her right to life under Article 21 of the Constitution.
The petitioner contended that the bank failed to conduct due diligence before accepting the flat as security, as the gift deed was executed in compliance with a court-ordered divorce decree.
For the Respondent Bank
The bank contended that the petitioner was not in physical possession of the flat, as evidenced by the consent terms in the divorce decree.
It was submitted that the petitioner failed to approach the Debt Recovery Tribunal (DRT) under the SARFAESI Act, which is the appropriate forum for such disputes.
The bank asserted that it acted in accordance with the SARFAESI Act and that the petitioner's delay in seeking relief undermined her claim.
The Court's Analysis
The Court recognized the extraordinary circumstances of the case, where the petitioner was not only defrauded by her ex-husband but also faced the loss of her sole shelter due to the bank's actions. The Court observed:
"The documents on record show that in the backdrop of a matrimonial dispute between the Petitioner and Respondent No. 2, a divorce decree by mutual consent was obtained from the Competent Court at Thane on 24/03/2022. As per the clauses of the consent terms, on the basis of which the divorce decree by mutual consent was granted, a flat was given to the Petitioner and Respondent No. 2 was required to execute a gift deed in that context. Accordingly, the Respondent No. 2 executed a registered gift deed dated 10/03/2022, thereby transferring the rights in the said flat in favor of the Petitioner in terms of the consent divorce decree."
The Court further noted:
"The Respondent No. 1 Bank, as a secured creditor, proceeded under the provisions of the SARFAESI Act in respect of the said flat (secured asset) and upon becoming aware of the said situation, the Petitioner is constrained to approach this Court. In this backdrop, we find that Respondent No. 2 has not only defaulted in respect of the loan taken from the Respondent No. 1 Bank, but he appears to have defrauded the Petitioner and also, prima facie, committed a fraud upon Competent Court at Thane."
The Court entertained the writ petition despite the availability of statutory remedies under the SARFAESI Act, citing the peculiar circumstances of fraud and the petitioner's vulnerability. The Court restrained the bank from dealing with the flat until the next date of listing, pending further consideration of the rejoinder affidavit.
The Verdict
The Bombay High Court, in its order dated 10.07.2026, restrained Saraswat Co-operative Bank Ltd. from further dealing with the subject flat until 28.07.2026, the next date of listing. The Court directed the petitioner to file a rejoinder affidavit within two weeks, while permitting her to file an affidavit of service within the same period. The bank was allowed to retain its affidavit in reply on record, and the matter was adjourned for further consideration.
What This Means For Similar Cases
Fraud and Suppression Vitiate Statutory Remedies
Courts may entertain writ petitions under Article 226 despite the availability of statutory remedies like the DRT under the SARFAESI Act, where fraud or suppression of material facts is alleged.
Practitioners should emphasize the peculiar circumstances of the case, such as fraudulent transfers or misrepresentation, to bypass the exhaustion of statutory remedies.
Right to Shelter as a Fundamental Consideration
The Court recognized the petitioner's right to shelter as a fundamental aspect of Article 21 of the Constitution, which may override procedural technicalities under the SARFAESI Act.
In cases involving vulnerable parties (e.g., divorcees, senior citizens), courts may intervene to prevent homelessness, even if the party is not in physical possession at the time of the bank's action.
Due Diligence by Secured Creditors
Banks and financial institutions must conduct thorough due diligence before accepting properties as security, especially where court orders or legal settlements are involved.
Failure to verify the legitimacy of property transfers may expose banks to legal challenges, even under stringent laws like the SARFAESI Act.
