The Bombay High Court has clarified that judicial authorities cannot rely on oral directions to restrain secured creditors from taking possession under the SARFAESI Act. In a significant intervention, the Court stayed a Debts Recovery Tribunal order directing restoration of possession, emphasizing the necessity of written interim orders to ensure procedural fairness and legal certainty.
Background & Facts
The Dispute
The Bank of Maharashtra, as a secured creditor, initiated recovery proceedings against contesting respondents (borrowers and guarantors) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The bank took physical possession of the secured asset on or about 09.02.2026, following issuance of notice under Section 13(2) and subsequent notice under Section 13(4) of the Act. The borrowers filed an application before the Debts Recovery Tribunal-III, Mumbai (DRT) seeking restoration of possession, alleging that the bank had acted in violation of an oral direction issued by the DRT.
Key Facts
- The secured asset was a commercial property located in Mumbai, mortgaged to the Bank of Maharashtra under a loan agreement dated 15.07.2018
- The loan account was declared a Non-Performing Asset (NPA) on 31.12.2024
- Demand notice under Section 13(2) was issued on 10.01.2025
- Reply to the demand notice was received on 28.02.2025, which was rejected by the bank on 10.03.2025
- Notice under Section 13(4) was issued on 18.03.2025, specifying 60 days for repayment
- The bank took physical possession of the asset on 09.02.2026
- On 09.02.2026, the borrowers filed Interlocutory Application No. 430 of 2026 before the DRT seeking restraint on possession
- The DRT heard the application on 09.02.2026 and adjourned the matter to 12.02.2026, recording only that detailed written arguments were filed
- No written interim or ad-interim order was passed restraining possession on 09.02.2026
- On 02.03.2026, the DRT passed an order directing the bank to restore possession, relying on alleged oral directions given on 09.02.2026
Procedural History
- 10.01.2025: Section 13(2) notice issued by the Bank of Maharashtra
- 18.03.2025: Section 13(4) notice issued
- 09.02.2026: Bank took physical possession of secured asset
- 09.02.2026: Borrowers filed I.A. No. 430 of 2026 before DRT
- 09.02.2026: DRT adjourned hearing to 12.02.2026; no written order issued
- 12.02.2026: DRT hearing adjourned without any interim order
- 02.03.2026: DRT passed order directing restoration of possession
- 03.03.2026: Bank filed Miscellaneous Appeal No. 381 of 2026 before DRAT
- 16.03.2026: DRAT heard the appeal but adjourned to 16.06.2026; no written order uploaded
- 18.03.2026: Writ Petition No. 3609 of 2026 filed before Bombay High Court
The Parties' Positions
Petitioner (Bank of Maharashtra): Argued that no written interim order existed on 09.02.2026 restraining possession; the DRT’s reliance on oral directions was legally invalid and contrary to principles of natural justice. The bank acted in compliance with SARFAESI Act and was entitled to enforce its security interest.
Respondents (Borrowers and Guarantors): Contended that the DRT had orally directed the bank to "hold its hands" on 09.02.2026, and the bank’s subsequent possession was in violation of that direction. They relied on the DRT’s order dated 02.03.2026 as binding.
Relief Sought
The petitioner sought quashing of the DRT’s order dated 02.03.2026, stay of its operation, and direction to the DRAT to decide the appeal expeditiously. The bank also sought protection from enforcement of the restoration order pending appeal.
The Legal Issue
Can a Debts Recovery Tribunal rely on unrecorded oral directions to restrain a secured creditor from taking possession under the SARFAESI Act, and does such an oral direction constitute a valid interim order under Section 17 of the Act?
Arguments Presented
For the Petitioner
The bank argued that under the SARFAESI Act, a secured creditor may take possession without court intervention unless restrained by a written interim order. The absence of any written order on 09.02.2026 meant no legal bar existed. The bank cited M/s. Lakshmi Shankar Mills (P) Ltd. v. Indian Bank to establish that oral directions lack legal enforceability. It emphasized that judicial bodies must record orders in writing to ensure transparency and accountability.
For the Respondent
The borrowers contended that the DRT’s oral direction on 09.02.2026, even if unrecorded, was binding on the bank. They argued that the bank’s conduct in proceeding with possession despite the oral direction amounted to contempt of court and undermined the authority of the DRT. They relied on the DRT’s subsequent order dated 02.03.2026 as confirmation of the earlier direction.
The Court's Analysis
The Court examined the procedural irregularities in the DRT’s handling of the application. It noted that the order dated 09.02.2026 merely recorded adjournment and filing of written arguments, with no mention of any restraint on possession. The Court held that judicial and quasi-judicial authorities cannot operate on the basis of unrecorded oral directions, as this violates the principles of natural justice and the requirement of reasoned, written orders under Article 14 of the Constitution.
"Nothing prevented the DRT from passing a short ad-interim order dated 09.02.2026... That's all that the order dated 09.02.2026 records. There is no direction or ad-interim order restraining the petitioner-bank from taking physical possession of the secured asset."
The Court further observed that the DRAT’s failure to upload its order dated 16.03.2026 compounded the procedural uncertainty, leaving the bank without any formal protection despite having filed an appeal. The Court decried the practice of issuing oral directions as incompatible with the statutory framework of the SARFAESI Act, which mandates written orders for any interim relief.
The Court emphasized that while the DRAT remains the appropriate forum to adjudicate the merits of the bank’s appeal, the absence of a written interim order from the DRT rendered the restoration order unsustainable on its face. The Court declined to rule on the merits of the appeal but intervened to prevent irreparable harm to the bank’s statutory rights pending adjudication.
The Verdict
The writ petition was disposed of with the following directions: (1) The DRAT shall decide the pending Miscellaneous Appeal No. 381 of 2026 within four weeks from 18.03.2026; (2) The order dated 02.03.2026 of the DRT directing restoration of possession is stayed until the DRAT disposes of the appeal; (3) The stay operates to protect the bank’s possession of the secured asset during the pendency of the appeal; (4) The DRAT shall decide the appeal without being influenced by the observations made in this order.
What This Means For Similar Cases
Written Orders Are Mandatory for Interim Relief
- Practitioners must insist on written interim orders from DRTs before any possession or restoration order is enforced
- Oral directions, even if allegedly given in court, cannot be invoked to restrain a secured creditor under SARFAESI Act
- Any application for stay must be accompanied by a formal, signed, and uploaded order
Procedural Compliance Overrides Alleged Conduct
- A secured creditor acting in the absence of a written restraint cannot be held liable for breach of direction
- The burden shifts to the borrower to produce a written order to justify restraint
- Failure to record orders by DRTs may lead to judicial intervention under Article 226
DRAT’s Duty to Ensure Transparency
- DRATs must ensure all orders are uploaded promptly to the e-filing portal
- Delayed or non-existent orders create legal uncertainty and justify writ jurisdiction
- Courts may intervene to enforce procedural compliance even if the appeal is pending
