SARFAESI Act | Writ Jurisdiction Limited to Exceptional Circumstances : Kerala High Court

The Kerala High Court has reiterated the limited scope of Article 226 jurisdiction in matters arising under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). In a recent judgment, the Court dismissed a writ appeal challenging an assignment agreement, holding that aggrieved parties must exhaust remedies before the Debts Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act, except in exceptional circumstances such as statutory non-compliance or violation of natural justice.

Background & Facts

The Dispute

The appellant, a borrower who availed a cash credit facility from Federal Bank Ltd., challenged an assignment agreement (Ext.P6) dated 26.03.2013, under which the bank transferred its rights over the appellant’s secured assets to J.M. Financial Asset Reconstruction Company (P) Ltd. The appellant contended that the assignment was executed without notice, violating Section 13(8) of the SARFAESI Act and Rule 8(6) of the Security Interest (Enforcement) Rules, 2002. He further alleged non-compliance with Section 13(3A) of the SARFAESI Act, lack of CERSAI registration, and undervaluation of properties sold for ₹1.48 crore against a 2011 valuation of ₹3.39 crore.

Procedural History

The case progressed through multiple forums:

• 2010: Bank issued notices under Section 13(2) and Section 13(4) of the SARFAESI Act.
• 2012: Bank filed Crl.M.P.No.4689 of 2012 under Section 14 of the SARFAESI Act for possession; appellant filed W.P.(C) No.29235 of 2022 seeking status quo.
• 2013: Assignment agreement (Ext.P6) executed between the bank and the asset reconstruction company.
• 2025: Appellant filed W.P.(C) No.46146 of 2025 under Article 226 to quash Ext.P6, and O.P.(DRT) No.362 of 2025 before the DRT.
• 19.12.2025: Single Judge disposed of the writ petition, directing the DRT to decide M.A. Nos. 33 and 34 of 2016 (applications for condonation of delay and setting aside ex parte orders) within one month.

Relief Sought

The appellant sought:

• Quashing of Ext.P6 assignment agreement to the extent it pertained to his six properties.
• Declaration that the sale was void due to non-compliance with statutory provisions, including Section 13(8) of the SARFAESI Act and Rule 8(6) of the Security Interest (Enforcement) Rules.
• Direction to the Reserve Bank of India (RBI) to regulate the transaction.

The Legal Issue

The central question was whether the High Court could entertain a writ petition under Article 226 of the Constitution challenging proceedings under the SARFAESI Act, where the aggrieved party had an alternative remedy under Section 17 of the Act before the Debts Recovery Tribunal.

Arguments Presented

For the Appellant

The appellant contended that:

• The assignment agreement (Ext.P6) was executed in violation of Section 13(8) of the SARFAESI Act, which mandates notice to the borrower before transferring secured assets.
• The bank failed to comply with Rule 8(6) of the Security Interest (Enforcement) Rules, which requires a 30-day notice before sale.
• The properties were undervalued, causing financial prejudice.
• The transaction lacked CERSAI registration, rendering it illegal under Section 26 of the SARFAESI Act.
• The RBI, as the regulatory authority, failed to oversee the bank’s compliance with statutory provisions.

For the Respondents

The bank argued that:

• The writ petition was not maintainable as the appellant had an efficacious remedy under Section 17 of the SARFAESI Act before the DRT.
• The Single Judge’s judgment did not address the merits of the case due to a procedural error in considering a connected DRT matter.
• Ext.P6 was an assignment agreement, not a sale deed, and thus not subject to the same procedural requirements as a sale.

The Court's Analysis

The Division Bench examined the scope of Article 226 jurisdiction in matters arising under the SARFAESI Act, relying on settled precedents:

1. Exceptional Circumstances Requirement: The Court cited Authorized Officer, State Bank of Travancore v. Mathew K.C. (2018 (1) KHC 786), where the Supreme Court held that High Courts should entertain writ petitions under Article 226 only in four exceptional circumstances:

   • Statutory authority acting contrary to the provisions of the enactment.
   • Defiance of fundamental principles of judicial procedure.
   • Invocation of repealed provisions.
   • Orders passed in violation of principles of natural justice.

   "The High Court under Article 226 of the Constitution of India can entertain a writ petition only under exceptional circumstances and that it is a self-imposed restraint by the High Court."

2. Alternative Remedy: The Court relied on South Indian Bank Ltd. v. Naveen Mathew Philip (2023 (4) KLT 29), where the Supreme Court emphasized that High Courts should not entertain writ petitions when an effective alternative remedy is available, particularly in matters involving recovery of public dues. The SARFAESI Act provides a comprehensive mechanism under Section 17 for aggrieved parties to challenge actions of secured creditors before the DRT.

   "The High Court must insist that before availing remedy under Art.226 of the Constitution, a person must exhaust the remedies available under the relevant statute."

3. No Exceptional Circumstances: The Court held that the appellant’s contentions - such as lack of notice, undervaluation, and non-compliance with CERSAI registration - did not fall within the exceptional circumstances warranting interference under Article 226. The appellant’s remedy lay before the DRT under Section 17 of the SARFAESI Act.

4. Procedural Error: The Court noted that the Single Judge had erroneously considered the facts of a connected DRT matter (O.P.(DRT) No.362 of 2025) while disposing of the writ petition. However, it declined to remand the matter for reconsideration, as the appellant’s remedy lay before the DRT in any event.

5. Nature of Ext.P6: The Court clarified that Ext.P6 was an assignment agreement, not a sale deed, and thus the appellant’s challenge to its validity was misplaced.

The Verdict

The writ appeal was dismissed. The Court held that the appellant’s remedy lay before the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, and no exceptional circumstances existed to justify interference under Article 226 of the Constitution. The appellant was left free to approach the DRT for appropriate relief, subject to the law of limitation.

What This Means For Similar Cases

Writ Jurisdiction Is Not a Substitute for Statutory Remedies

The judgment reinforces that Article 226 jurisdiction cannot be invoked as a matter of routine in SARFAESI Act matters. Practitioners must:

• Exhaust remedies under Section 17 of the SARFAESI Act before approaching the High Court.
• Frame arguments around the four exceptional circumstances identified in Mathew K.C. to justify writ jurisdiction.
• Avoid filing writ petitions merely to bypass the DRT’s jurisdiction, as such petitions are likely to be dismissed.

Debts Recovery Tribunal Is the Primary Forum for SARFAESI Disputes

• Aggrieved parties must file applications under Section 17 of the SARFAESI Act before the DRT to challenge actions of secured creditors.
• The DRT has the authority to adjudicate on issues such as:
  • Compliance with statutory provisions (Section 13(8), Rule 8(6), etc.).
  • Valuation of secured assets.
  • Validity of assignment agreements or sale deeds.
• High Courts will not entertain writ petitions unless the DRT’s remedy is exhausted or exceptional circumstances exist.

Compliance with Statutory Provisions Is Non-Negotiable

• Secured creditors must strictly adhere to the procedural requirements under the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002, including:
  • Issuance of notices under Section 13(2) and Section 13(4).
  • Compliance with Section 13(3A) for providing account details to borrowers.
  • Registration of transactions with CERSAI under Section 26 of the SARFAESI Act.
• Non-compliance may render actions of secured creditors vulnerable to challenge before the DRT, but not necessarily before the High Court under Article 226.