The Kerala High Court on 31 August held that a Recovery Officer cannot attach a statutory pre-deposit made by a borrower under the second proviso to Section 18 of the Securitisation and Reconstruction of Financial Assets Enforcement of Security Interest Act, 2002 (SARFAESI Act), by invoking Section 28(4) of the Recovery of Debts and Bankruptcy Act, 1993.

A Division Bench of Chief Justices Soumen Sen and Syam Kumar V.M. set aside the Recovery Officer's order attaching E.T. Firoz's Rs. 3,95,50,000 statutory pre-deposit lying with the Debts Recovery Tribunal (DRT), Chennai, which he had made to pursue his appeal under the SARFAESI Act. The Bench held:

“…in our view, Section 28(4) of the Act of 1993 is in the nature of a garnishee proceeding and does not contemplate a situation where a statutory pre-deposit which has been made under the second proviso to Section 18 of the Securitisation and Reconstruction of Financial Assets And Enforcement of Security Interest Act, 2002 could be attached invoking the said provision,”

Firoz had earlier approached the High Court seeking protection against the attachment or appropriation of the pre-deposit lying with the DRT, Chennai. He withdrew that petition before the Recovery Officer passed the impugned attachment order. He subsequently challenged the attachment before the High Court.

Canara Bank and Punjab National Bank, the secured creditors, opposed the challenge. They argued that the Recovery Officer's order was appealable under Section 30 of the 1993 Act and that Firoz ought to have invoked the High Court's jurisdiction under Article 227 of the Constitution. They also relied on the Supreme Court's decision in Radhey Shyam v. Chhabi Nath in opposing the exercise of Article 226 jurisdiction.

The Bench agreed that a statutory remedy under Section 30 was available and that a challenge to the Recovery Officer's order would ordinarily have to be brought under Article 227. However, relying on the Supreme Court's decision in Ajit Singh v. State of Rajasthan, it held that the availability of an Article 227 remedy did not, by itself, prevent the High Court from exercising its discretion under Article 226.

It observed that directing Firoz to file a fresh Article 227 petition at that stage would “compound the problem”. It also found it necessary to intervene under Article 226 to “lay down the law to be followed by the Tribunal in similar situations”. It held:

“For the larger interest of justice, we decide the appeal, instead of once again directing the appellant to file an application under Article 227 of the Constitution of India challenging the said order of the Recovery Officer,”

On merits, the Court held that Section 28(4) of the 1993 Act, which enables the Recovery Officer to attach certain debts and other amounts payable to the person against whom recovery is sought, operates “in the nature of a garnishee proceeding”. It therefore does not permit attachment of a statutory pre-deposit made under the second proviso to Section 18 of the SARFAESI Act.

The secured creditors' counsel also conceded during the hearing that the mode of attachment contemplated under Section 28(4) was different from the course of action actually adopted by the Recovery Officer. The Bench consequently held that the Recovery Officer's exercise of power under Section 28(4) was “palpably erroneous and contrary to law”.

Accordingly, the High Court allowed the appeal and set aside the attachment order.

For Appellant: Advocate Praveen N

For Respondents: Advocate C Ajith Kumar

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Case Title :  E.T Firoz v. The Recovery Officer and OrsCase Number :  WA No. 1618 of 2026CITATION :  2026 LLBiz HC(KER) 175
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