In a rare exercise of equitable jurisdiction, the Madhya Pradesh High Court has intervened to prevent the forcible dispossession of residential property by a bank while the debtor’s statutory remedy under the SARFAESI Act remains suspended due to the non-functioning of the Debt Recovery Tribunal. The order provides a structured, time-bound repayment plan as a condition for preserving the borrowers’ right to reside in their home, balancing creditor rights with constitutional protections against homelessness.
Background & Facts
The Dispute
The petitioners, Seema Gupta and others, are borrowers who defaulted on multiple loans extended by Union Bank of India. The bank classified their accounts as Non-Performing Assets (NPAs) and initiated proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). On 23.01.2025, the bank issued a notice under Section 13(2) of the Act, followed by an order dated 20.06.2025 under Section 13(4) authorizing possession of the mortgaged residential flat. A further order dated 07.01.2026 reiterated the bank’s intent to take physical possession. The petitioners, who have no alternative accommodation, filed this writ petition under Article 226 of the Constitution seeking quashing of these orders and protection from eviction.
Key Facts
- The petitioners’ total outstanding liability across multiple accounts exceeds Rs.19,00,000
- The residential flat in question is their only dwelling
- The petitioners have filed an application under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal (DRT), Jabalpur, seeking stay on possession
- The DRT at Jabalpur has been non-functional since at least 2024 due to the absence of a Presiding Officer
- The petitioners have expressed willingness to repay a portion of the dues to demonstrate bonafides
- The bank has not accepted any settlement proposal to date
Procedural History
- 23.01.2025: Notice under Section 13(2) of SARFAESI Act issued by Union Bank of India
- 20.06.2025: Possession order issued under Section 13(4) of SARFAESI Act
- Before 07.01.2026: Application under Section 17 of SARFAESI Act filed before DRT, Jabalpur
- 07.01.2026: Order passed by Respondent No.2 confirming NPA classification and intent to enforce security
- 15.04.2026: Writ Petition No. 15086 of 2026 filed before High Court of Madhya Pradesh, Jabalpur
- 05.05.2026: Final hearing conducted; petition disposed of by interim order
Relief Sought
The petitioners sought:
- Quashing of the NPA classification notice dated 23.01.2025
- Quashing of the possession order dated 20.06.2025
- Quashing of the order dated 07.01.2026
- Stay on dispossession of the residential flat
- Direction to the bank to consider a one-time settlement
The Legal Issue
The central question was whether, in the absence of a functional DRT to adjudicate a Section 17 application, a court under Article 226 may grant interim protection from repossession to a mortgagor who is willing to make structured repayments and has no alternative residence.
Arguments Presented
For the Petitioner
Learned counsel for the petitioners argued that the bank’s attempt to evict the petitioners from their only residential property while the DRT remains non-functional violates the principle of natural justice and the right to shelter under Article 21 of the Constitution. They emphasized that the petitioners are not intransigent defaulters but are ready to pay a substantial portion of the dues in installments. The non-functioning of the DRT, they submitted, is not the fault of the borrowers and cannot be used to deprive them of their home without due process.
For the Respondent
Counsel for Union Bank of India acknowledged the outstanding liability but maintained that the bank was bound by its internal guidelines and regulatory obligations to enforce security upon default. The bank contended that the petitioners had not made any prior attempts at settlement and that the SARFAESI Act empowers banks to take possession without judicial intervention. However, the bank did not oppose the court’s intervention if a structured repayment plan was proposed.
The Court's Analysis
The Court recognized that while the SARFAESI Act grants banks broad powers to enforce security interests, such powers are not absolute and must be exercised in a manner consistent with constitutional rights. The Court noted that the petitioners’ residential property is their sole dwelling and that their application under Section 17 of the Act, which provides a statutory remedy to challenge the bank’s actions, remains pending due to circumstances beyond their control.
"The right to shelter is an essential component of the right to life under Article 21. Denial of access to one’s only residence, while a statutory remedy lies dormant due to administrative failure, cannot be countenanced."
The Court held that the bank’s enforcement action, at this stage, would be disproportionate and unjust. It emphasized that the petitioners’ willingness to pay a significant portion of the dues - Rs.6,00,000 in staged installments - demonstrates bonafide intent and should be treated as a mitigating factor. The Court further observed that the bank’s regulatory obligations do not override the constitutional imperative to prevent homelessness.
The Court also noted that the DRT’s non-functionality is a systemic failure and cannot be used to circumvent the borrower’s statutory rights. It therefore fashioned an interim remedy that preserves the status quo while ensuring the bank’s secured interest is progressively protected.
The Verdict
The writ petition was disposed of with the following directions:
- The petitioners shall pay Rs.1,00,000 within fifteen days from 05.05.2026
- Another Rs.2,00,000 shall be paid within the next fifteen days
- A further Rs.3,00,000 shall be paid within two months from 05.05.2026
- If the above payments are made, the bank shall not dispossess the petitioners from their residential flat
- The bank shall consider any one-time settlement proposal submitted by the petitioners sympathetically
- Within one month of the DRT becoming functional, the petitioners shall file or revive their Section 17 application
- The petitioners shall communicate this order to the Registrar, DRT, Jabalpur, within seven working days
- Breach of any condition shall entitle the bank to proceed under law
What This Means For Similar Cases
Interim Relief Is Available When DRT Is Non-Functional
- Practitioners may now invoke Article 226 to seek stay on repossession where DRT is non-functional and borrowers are willing to pay structured installments
- Courts may treat the inability to access DRT as a ground for equitable intervention, even if the SARFAESI Act does not explicitly provide for it
- The burden shifts to the bank to show why a borrower’s bonafide repayment offer should be rejected
Residential Property Warrants Greater Protection
- Courts are increasingly recognizing the constitutional dimension of residential possession in SARFAESI enforcement
- Banks must now consider alternatives to eviction for primary residences, especially where no other accommodation exists
- Settlement offers, even partial, should be evaluated with leniency under the principle of proportionality
Procedural Compliance Must Accommodate Systemic Failure
- Administrative delays in DRT appointments cannot be weaponized against borrowers
- Courts may impose time-bound repayment schedules as a substitute for immediate possession
- Borrowers must act promptly to comply with court-ordered timelines to preserve their rights
