Volume 2 Issue 7

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Aggrieved party's writ petition is not admissible against proceedings initiated by banks, ARCs under SARFAESI Act: Apex Court

Date of News: 

28-01-2022

Date of Publication: 

10-02-2022

Unique ID:

202281507

Name of the Author: 

Mansi Tekam

Field of Law: 

Banking and Consumer Law

Content of News:

A bench of Justices consisting of M R Shah and B V Nagarathna of the Supreme Court of India opined that a writ petition by the parties aggrieved against the proceedings started by banks or assets reconstruction company (ARC) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFAESI) 2002 is not maintainable before a court of law. The bench vacated the order of the Karnataka High Court, which instructed that the status quo regarding possession of mortgaged properties be maintained subject to the borrowers making a payment of Rs 1 crore to the ARC concerned. It stated that petitions before the High Court under Article 226 of the Constitution in the case was an "abuse of process" of the court. It delivered its verdict on the ARC's appeals contesting the high court's judgement, which had considered the petition and issued an interim order mandating the continuation of the proposed action under the Act. It emphasised that a writ petition under Article 226 against the proposed action/actions under Section 13(4) of the Act is not a viable remedy against ARC. It stated that the high court should have recognised that the secured creditor's rights to collect the due amount were significantly jeopardised by issuing such an interim order. It said that the secured creditor or its assignor has the right to reclaim the amount owed to it from borrowers.

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