The Jammu & Kashmir and Ladakh High Court strongly criticised a defaulting borrower for repeatedly resorting to frivolous litigation aimed at delaying and obstructing enforcement measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Division Bench observed that it was highly disturbing that certain borrowers, instead of fulfilling contractual obligations, deliberately filed multiple proceedings in civil courts and before the High Court solely to stall enforcement actions taken by a secured creditor to recover outstanding dues. The Court noted that such misuse of judicial process undermines the purpose of the SARFAESI Act, which is designed to enable secured creditors to realise dues expeditiously when borrowers default on repayment obligations.
The case arose from two connected writ petitions. One petition was filed by a borrower challenging an e-auction sale notice and sale intimation issued by the bank after defaulting on loan repayment. The second petition was filed by successful bidders in the e-auction seeking a direction for the bank to hand over physical possession of the auctioned property. The High Court addressed the borrower’s petition first, since the relief claimed by the bidders depended on the outcome of the borrower’s challenge.
The Court noted that after the borrower failed to clear outstanding dues, the bank issued a statutory demand notice under Section 13(2) of the SARFAESI Act and initiated enforcement measures under Section 13(4). At an interim stage, the bank had approved a One Time Settlement with conditions requiring the borrower to pay the settled amount within three months. The borrower failed to comply, and the bank proceeded with recovery actions, including publication of the auction notice for the mortgaged property. The High Court held that once the borrower breached the settlement terms, he could not contend that the bank remained obliged to accept payments beyond the stipulated period.
A key point considered was whether the borrower’s right of redemption survived after the publication of the e-auction sale notice. The High Court held that under Section 13(8) of the SARFAESI Act, a borrower’s right to redeem the property by paying dues exists only up to the date of publication of the auction notice, and once such notice is issued, the secured creditor is not obliged to accept payment to stop the sale. Any subsequent deposit of amounts by the borrower after publication of the auction notice was therefore immaterial.
The High Court took serious exception to the borrower’s conduct in repeatedly filing petitions to obstruct the recovery process. It noted that the borrower had used litigation not as a legitimate judicial remedy but as a tactical tool to delay enforcement actions, filing one petition after another across different levels of the judicial hierarchy. The Court observed that such behaviour amounts to abuse of the judicial process and has been consistently condemned because it frustrates statutory mechanisms designed for timely recovery of dues by secured creditors.
The High Court dismissed the borrower’s writ petition as devoid of merit and confirmed that the borrower’s right of redemption ceased with the publication of the auction notice. It also disposed of the related petition by successful bidders by granting the bank liberty to complete the e-auction and proceed with the sale in accordance with the sale intimation. The judgment reaffirmed that enforcement measures under the SARFAESI Act cannot be obstructed by frivolous and repetitive litigation and stressed that borrowers must engage in judicial process responsibly rather than misuse it to stall lawful recovery actions.
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