The Bombay High Court has issued a critical directive reinforcing procedural fairness in enforcement proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. By halting physical possession of mortgaged property pending appellate review, the Court has reaffirmed that the right to effective remedy cannot be rendered illusory by procedural haste.
Background & Facts
The Dispute
The petitioners, proprietors of M/s. Swami Pharma & Surgical, faced enforcement action by Kotak Mahindra Bank Ltd. under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 after defaulting on a secured loan. The bank initiated proceedings to take physical possession of the mortgaged property and scheduled a court commissioner’s visit for 22 January 2026.
Procedural History
- The petitioners filed a Securitisation Appeal (S.A. No. 9/2026) before the Debt Recovery Tribunal (DRT), Nagpur, challenging the bank’s action.
- On 20 January 2026, they filed two interim applications: I.A. No. 105/2026 and I.A. No. 106/2026, seeking stay of possession and restraint on third-party rights.
- As of 22 January 2026, the DRT had not decided these applications despite their urgency.
- The bank proceeded with notice for physical possession on the same day, creating an imminent risk of irreparable harm.
Relief Sought
The petitioners sought: (i) immediate stay of possession; (ii) restraint on sale or creation of third-party interests; (iii) abeyance of any adverse DRT order for six weeks to enable appeal to the Debt Recovery Appellate Tribunal (DRAT); and (iv) direction to the DRT to decide pending applications within four weeks.
The Legal Issue
The central question was whether the right to effective appellate remedy under the Securitisation Act can be defeated by the bank’s unilateral enforcement of possession before the DRT disposes of the pending appeal and while the DRAT is functionally inaccessible due to jurisdictional constraints.
Arguments Presented
For the Petitioner
Learned counsel argued that the petitioners’ right to appeal under Section 20 of the Securitisation Act would be rendered meaningless if possession were taken before the DRT ruled on the appeal. They emphasized that the DRAT in Mumbai was not functional, and the only available forum - DRAT Chennai - required travel time that would render any appeal futile if possession occurred on 22 January 2026. Reliance was placed on M/s. S. S. Enterprises v. Union of India to argue that procedural fairness demands a reasonable opportunity to approach higher forums.
For the Respondent
The bank contended that it had lawfully initiated enforcement under the Act and that interim relief was not warranted as the DRT was merely delayed, not unwilling. It argued that possession was a statutory right and that the petitioners’ delay in approaching the Court undermined their claim of urgency.
The Court's Analysis
The Court examined the interplay between statutory enforcement powers and the constitutional guarantee of access to justice under Article 21. It noted that while the Securitisation Act empowers secured creditors to take possession, such power is not absolute and must yield to the principle of proportionality when appellate remedies are genuinely obstructed.
"The right to appeal is not a mere formality but a substantive right, and its effective exercise cannot be made impossible by the very act of enforcement which the appeal seeks to challenge."
The Court rejected the bank’s argument that delay in DRT adjudication was a mere administrative lapse. It held that when the appellate forum is geographically inaccessible and the enforcement action is imminent, the balance of convenience tilts decisively in favor of the debtor. The Court further observed that the DRT’s failure to decide pending applications within a reasonable time created a vacuum that the High Court was duty-bound to fill.
The Court also rejected the petitioners’ request for a six-week abeyance, reducing it to four weeks as a reasonable window to file and secure interim relief at DRAT, considering the statutory timelines under the Act.
The Verdict
The petitioners succeeded. The Court held that possession cannot be taken while a statutory appeal is pending and the appellate forum is inaccessible. It directed the bank to refrain from taking possession until 26 February 2026, mandated the DRT to decide pending applications within four weeks, and ordered that any adverse order be kept in abeyance for four weeks thereafter to enable appeal to DRAT.
What This Means For Similar Cases
Possession Cannot Precede Appellate Access
- Practitioners must immediately seek stay of possession when DRAT jurisdiction is geographically impractical or the appellate forum is non-functional.
- Banks cannot rely on administrative delays in DRTs to justify coercive action against borrowers with pending appeals.
Four-Week Abeyance Is Now the Standard
- In cases where DRAT is not locally accessible, courts will likely impose a four-week abeyance period after an adverse DRT order to allow filing at the nearest functional DRAT.
- This creates a predictable window for filing appeals without risking asset loss.
DRT Timelines Are Enforceable
- Courts will now actively monitor DRT timelines for interim applications under the Securitisation Act.
- Petitioners may file contempt proceedings if DRTs fail to decide applications within four weeks as directed.
Procedural Fairness Overrides Statutory Power
- The judgment establishes that statutory enforcement rights under the Securitisation Act are subject to the doctrine of proportionality.
- Any enforcement action that renders appellate remedies illusory will be stayed, regardless of the creditor’s prima facie right.
