Sanchayita Lahkar

The High Court of Kerala, Division Bench of Justice Anil K. Narendran and Justice Muralee Krishna S dismissed a writ appeal filed by borrowers challenging recovery proceedings initiated by Hero Fincorp Ltd., a private Non-Banking Financial Company (NBFC), under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The Court observed that a litigant cannot use the constitutional remedy of writ petitions as an alternative to avoid approaching the Tribunal under the SARFAESI Act, which requires the payment of fees. It held that such matters must be pursued before the statutory forum and affirmed the financier’s right to proceed with recovery

The case arose from financial assistance extended by a private non-banking financial company to a borrower firm for a sum of ₹88,00,000, secured by mortgaging a property owned by one of the co-borrowers. Following defaults in repayment, the lender initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), issuing a notice under Section 13(2) and subsequently seeking possession of the secured asset through proceedings before the Chief Judicial Magistrate under Section 14. The secured asset was taken possession of by an Advocate Commissioner appointed by the Magistrate.

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The borrowers filed a writ petition before the High Court seeking a declaration that the possession notice and all related steps were illegal and praying for permission to clear the outstanding dues in instalments, along with a short moratorium period. The petitioners contended that the lender’s recovery steps were contrary to the SARFAESI Act as the outstanding amount was less than 20% of the total principal and interest, relying on clause (j) of Section 31. They further sought the Court’s intervention to restructure repayment terms.

The lender opposed the petition, arguing that the writ was not maintainable against a private non-banking financial company and that an alternative statutory remedy was available under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal. The petitioners had also failed to comply with the condition imposed in an interim order requiring part payment. The Single Judge dismissed the writ petition, holding that there was no justification for interference. The borrowers then filed an appeal before the Division Bench under Section 5(i) of the Kerala High Court Act, challenging the dismissal and reiterating their claim of illegality in the enforcement proceedings.

The Division Bench noted that the Single Judge had correctly applied the principles laid down by the Supreme Court in South Indian Bank Ltd. v. Naveen Mathew Philip [(2023) 17 SCC 311], which clarified the limited jurisdiction of High Courts under Article 226 in matters arising under the SARFAESI Act. The Court observed that "when this Court is approached with a prayer to permit the borrowers to clear the liability in instalments, the borrowers must prove bona fides." The Bench further stated that the non-compliance of the interim order indicated lack of bona fides, thereby disentitling the petitioners to relief.

Citing the Supreme Court’s observations in Naveen Mathew Philip, the Bench recorded that courts should not substitute themselves for the statutory tribunal when a specific remedy exists under the Act. It referred to multiple apex court judgements, including United Bank of India v. Satyawati Tondon and State Bank of Travancore v. Mathew K.C., reaffirming that the SARFAESI Act provides a self-contained mechanism for adjudication of disputes between lenders and borrowers.

The Bench further relied on Sobha S. v. Muthoot Finance Limited [2025 (2) KHC 229 : 2025 SCC OnLine SC 177], wherein the Supreme Court held that writ petitions are not maintainable against private non-banking financial companies unless they discharge public functions or statutory obligations. The Court recorded that "a private company carrying on banking business as a Scheduled bank cannot be termed as a company carrying on any public function or public duty." It concluded that Hero Fincorp Limited, being a private NBFC, does not qualify as a public authority or instrumentality of the State.

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The Court held that “the contention of the learned counsel for the appellants that the proceedings initiated by the 1st respondent under the provisions of the SARFAESI Act is not legally maintainable, since the overdue amount is less than 20% of the principal amount and interest thereon, is untenable and the same is hereby repelled.

” It further stated that “in view of the law laid down by the Apex Court in Shobha S. v. Muthoot Finance Limited, the appellants cannot invoke the writ jurisdiction of this Court under Article 226 of the Constitution of India challenging the proceedings initiated under the provisions of the SARFAESI Act. This writ appeal fails and the same is accordingly dismissed.

Advocates Representing the Parties:
For the Petitioners: Shri. E.N. Vishnu Namboodiri, Shri. P. Sankaran Nampoothiri, Shri. Narayanan P. Potty, and Shri. M.K. Saseendran (Melel)

Case Title: M/s. Thiruvonam Industries & Others v. Hero Fincorp Limited & Others
Neutral Citation: 2025: KER:53782
Case Number: W.A. No.1708 of 2025
Bench: Justice Anil K. Narendran and Justice Muralee Krishna S.