Kerala HC Sets Aside DRT Order Rejecting Joint Plea By Tenants | Holds Section 17 SARFAESI Act Allows Consolidated Application Despite Separate Lease Deeds
Safiya Malik
The High Court of Kerala Single Bench of Justice Mohammed Nias C.P. allowed a petition challenging the refusal of the Registrar, Debts Recovery Tribunal-I, Ernakulam, to register a securitisation application filed jointly by multiple tenants under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Court set aside the impugned order and directed the Tribunal Registrar to number the application. The Tribunal was further directed to consider the petitioners’ application on merits. The interim relief granted earlier by the Court was directed to continue for six weeks to enable the petitioners to pursue appropriate relief before the Tribunal.
The petitioners, four individuals who were tenants of a secured asset, filed a consolidated application before the Debts Recovery Tribunal-I, Ernakulam, under Section 17 of the SARFAESI Act. Their application challenged the enforcement measures initiated by the secured creditor, M/s. Pegasus Assets Reconstruction Co. Pvt. Ltd., including a dispossession notice dated 05.06.2024 issued by an Advocate Commissioner.
The secured asset in question was under common occupation by the petitioners, who operated separate commercial establishments but faced a unified dispossession action. The tenants jointly filed a securitisation application before the Tribunal seeking protection of their possessory rights. The petitioners also filed supporting documents, including the notice of dispossession, orders from the Chief Judicial Magistrate’s Court, and relevant interim orders from the High Court.
The Tribunal Registry declined to register the joint application, citing procedural grounds. Specifically, the Registrar held that each tenant was required to file a separate application and refused to number the consolidated filing. The order rejecting the application was issued on 17.08.2024 and was challenged before the High Court under Article 227 of the Constitution of India.
The petitioners contended that the action taken by the Registrar was contrary to the provisions of the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002. They asserted that the statutory framework did not prohibit a joint application by multiple aggrieved tenants and that the impugned order frustrated the intent of the legislation by placing undue procedural barriers.
The first respondent, M/s. Pegasus Assets Reconstruction Co. Pvt. Ltd., was represented by its Senior Manager and Authorised Officer. The second respondent was the Registrar, Debts Recovery Tribunal-I, Ernakulam.
The petitioners relied on Exhibit P1, the dispossession notice dated 05.06.2024; Exhibit P6, the securitisation application filed before the Tribunal on 26.06.2024; and Exhibit P8, the order of the Registrar refusing registration. The High Court had also granted interim relief by way of an interim order dated 19.06.2024, continued by order dated 28.06.2024.
In addition to the procedural materials, the petitioners placed reliance on legal principles established in precedent, particularly the judgment of the Supreme Court in Mardia Chemicals Ltd. v. Union of India, which had clarified the scope and nature of proceedings under Section 17 of the SARFAESI Act.
The High Court proceeded to examine the statutory provisions, rules, and precedents applicable to the matter, with specific reference to the rights of tenants, the permissibility of consolidated applications, and the legislative intent behind the procedural rules of the Tribunal.
The Court held that the dismissal of a consolidated application filed by multiple tenants, concerning the same cause of action and challenging the enforcement measures of the secured creditor under Section 17 of the SARFAESI Act, solely on the ground that each tenant must file a separate application, was legally unsustainable for multiple reasons.
It recorded that Section 17(1) clearly provides that “any person (including borrower)” aggrieved by measures under Section 13(4) may apply to the Debts Recovery Tribunal, and the term “any person” is broad and inclusive, covering not only borrowers but also third parties such as tenants whose possessory or leasehold rights are affected by the secured creditor’s actions.
The Court further noted that neither the Act nor the Rules impose any express prohibition on multiple aggrieved persons filing a single, consolidated application.
The absence of such a bar indicates that the legislature did not intend to prohibit joint applications.
It stated that the DRT, as a specialised forum, is expected to show flexibility in procedural matters to ensure that legitimate grievances are adjudicated on their merits.
It also observed that when several tenants challenge the same action by a secured creditor, such as taking possession or auctioning the property, their grievances arise from a common cause of action, even if their lease agreements differ.
Therefore, the requirement for separate filings constitutes an unduly rigid interpretation that lacks support in either the Act or the Rules.
The Court referred to the Supreme Court’s judgment in Mardia Chemicals Ltd. v. Union of India [(2004) 4 SCC 311], which emphasised that tribunals must avoid hyper-technical objections that obstruct substantive justice. It noted that proceedings under Section 17 are not appellate in nature, but are rather at the stage of initial proceedings akin to filing a suit in a civil court.
The Court concluded that rejecting a consolidated application contradicts the legislative intent behind SARFAESI, which aims at the swift resolution of disputes.
Mandating each tenant to file a separate application would result in repetitive pleadings, potentially conflicting interim orders, and delays that undermine the objective of summary adjudication under Section 17.
It held that procedural rules should be construed in a manner that facilitates dispute resolution and ensures timely and diligent legal redress.
The Court recorded that procedural law should not be a tyrant but a servant, not an obstruction but an aid to justice.
The Court set aside Ext. P8, the order of the Registrar of the Debts Recovery Tribunal-I, Ernakulam, dated 17.08.2024, which had refused to register the consolidated application filed by the petitioners.
The Court directed the Registrar of the Debts Recovery Tribunal to number the application filed by the petitioners and proceed accordingly.
The Court further directed that the Debts Recovery Tribunal shall consider the case of the petitioners on merits and pass appropriate orders in accordance with law.
The Court ordered that the interim relief passed by the High Court would continue for a further period of six weeks to enable the petitioners to seek appropriate relief from the Tribunal concerned.
The original petition was allowed in the above terms.
Advocates Representing the Parties
For the Petitioners: Sri. O.D. Sivadas, Advocate
For the Respondents: Sri. Renjith R., Advocate
Case Title: Moideen Koya & Others v. M/s. Pegasus Assets Reconstruction Co. Pvt. Ltd. & Another
Neutral Citation: 2025:KER:39233
Case Number: OP (DRT) No. 287 of 2024
Bench: Justice Mohammed Nias C.P.
[Read/Download order]
