Only a Person with Legal Interest—Borrower, Mortgagor, Guarantor, or Protected Tenant—Can Challenge SARFAESI Action Under Article 226

The High Court ruled that only a person with a legal interest—such as a borrower, mortgagor, guarantor, or protected tenant—can challenge SARFAESI proceedings under Article 226 of the Constitution.

The Delhi High Court Division Bench, comprising Justice Subramonium Prasad and Justice Harish Vaidyanathan, recently held, while adjudicating a writ petition, that a person who is neither a borrower, mortgagor, guarantor, nor a protected tenant under the SARFAESI Act lacks the legal standing to invoke writ jurisdiction under Article 226 of the Constitution to obstruct or challenge recovery proceedings initiated by a secured creditor.

The Delhi High Court, in a writ petition filed by the daughter-in-law of defaulting borrowers, adjudicated a long-standing residential dispute arising under the SARFAESI Act involving a high-value property situated in Nizamuddin West, Delhi. The Petitioner had been residing in the subject property for nearly 29 years with her two daughters and claimed that the property was her sole matrimonial residence. She contended that the Bank, in collusion with her in-laws, was attempting to dispossess her under the guise of loan recovery proceedings, despite already being in possession of a saleable portion of the property. She also alleged procedural lapses on the part of the Bank and suppression of facts before the Magistrate.

The Bank, however, argued that the Petitioner lacked legal standing under the SARFAESI Act since she was neither a borrower, mortgagor, tenant, nor title-holder of the property. It pointed out that several proceedings had been initiated by the Petitioner and her family members to stall recovery, including multiple SAs before the DRT, none of which yielded any relief. The Bank relied on an unchallenged Recovery Certificate issued in 2013, stating that dues had now escalated to over ₹27 crores.

The High Court examined the maintainability of the writ petition under Article 226 and the Petitioner’s legal status in the context of SARFAESI proceedings. It was observed that mere long-standing possession did not create enforceable rights under the statute, particularly when the Petitioner did not hold any ownership, tenancy, or security interest in the property. The Court held that her claim to the matrimonial home did not override the rights of the secured creditor under the special legislative framework of SARFAESI.

Citing the Supreme Court’s judgment in South Indian Bank Limited and Others v. Naveen Mathew Philip and Another Etc Etc, REEDLAW 2023 SC 04201, the Court emphasised the limited scope of writ jurisdiction in commercial matters governed by a statutory adjudicatory scheme. The Court found the Petitioner’s allegations of fraud, collusion, and suppression unsubstantiated and noted her pattern of using litigation to delay legitimate recovery. Concluding that no exceptional grounds existed to interfere with the well-reasoned orders of the DRT and DRAT, the High Court dismissed the writ petition and all pending applications.

Mr. Parveen Kumar Mehdiratta, Advocate, represented the Petitioner.

Mr. Hitesh Sachar, Ms. Anju Jain and Ms. Poonam Kumari, Advocates, appeared for the Respondents.

---

To access the full content related to this article, including the complete judgment text, detailed legal analysis, ratio decidendi, headnotes, cited case laws, and updates on relevant statutes and notifications, we invite you to subscribe to our premium service.

Click "Subscribe" to unlock these exclusive legal resources.

If you are already a subscriber, please explore these resources by clicking the following citation/link.

Read Judgment