LI Network
Published on: February 17, 2024 at 10:30 IST
The Allahabad High Court recently emphasized the necessity for collaborative efforts among all stakeholders, including the judiciary, to ensure the security and effectiveness of the banking system.
A bench comprising Justices Siddhartha Varma and Shekhar B Saraf acknowledged the challenges faced by financial institutions in dealing with Non-Performing Assets (NPA) and stressed the importance of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.
The Court emphasized the need to curb unnecessary litigation aimed at prolonging the resolution of NPAs and highlighted the proactive role of the SARFAESI Act in safeguarding the financial well-being of institutions.
“It is incumbent upon all stakeholders, including borrowers and the judiciary, to ensure that frivolous petitions do not impede the seamless progress of recovery proceedings initiated pursuant to the SARFAESI Act,” remarked the Court.
The case before the Court involved a petition filed by a company challenging the decision of an additional district magistrate to suspend SARFAESI Act proceedings related to a property due to an injunction order from a civil court.
The Court rejected the argument that an injunction order obtained by a tenant should be a reason to suspend SARFAESI Act proceedings, especially in cases without a registered lease deed.
The Court clarified that an unregistered lease, barred by the Registration Act, cannot be considered, and tenants seeking possession of secured assets must present a registered instrument in their favor.
The judgment highlighted that the Debts Recovery Tribunal also lacks the authority to restore possession of secured assets to tenants.
Additionally, the Court emphasized that no civil court can entertain suits against measures taken under the SARFAESI Act, asserting the magistrate’s failure to exercise jurisdiction in the present case.
As a result, the Court quashed the order of April 18, 2023, that suspended SARFAESI Act proceedings.