Limited SARFAESI Auction Deferment To Preserve Subject Matter Within Supervisory Jurisdiction: Kerala High Court

The Kerala High Court on Monday upheld a Single Judge's two-week deferment of a SARFAESI auction, holding that the limited relief granted to preserve the subject matter did not exceed supervisory jurisdiction under Article 227 of the Constitution.

A division bench of Justice Anil K Narendran and Justice Muralee Krishna S dismissed a writ appeal filed by Union Bank of India, observing that the single judge had not entered into the merits of the dispute.

S.S. Glass World had approached the Single Bench seeking a direction to the Debts Recovery Tribunal to dispose of its stay application in a securitisation application and to defer the auction of its movable assets scheduled pursuant to a sale notice.

According to Glass World, it had been a tenant in the secured asset since 2000. After the bank took physical possession of the property under the SARFAESI Act, stock worth Rs 3.46 crores belonging to Glass World was allegedly lying on the premises.

It contended that despite the borrower stating in earlier proceedings that the goods belonged to the tenant, the bank initiated measures to auction the movable assets, valued at Rs 3.46 crores, for Rs 8.24 lakhs.

Since the tribunal had posted the matter on the date of the auction, Glass World moved the High Court, contending that the sale would render the securitisation application infructuous. The single judge deferred the auction for two weeks and directed the tribunal to consider and pass orders on the stay application after hearing both sides.

Aggrieved, the bank approached the division bench. The bank contended that the issue of whether Glass World was a tenant had already been adjudicated earlier by the tribunal, which had found that it was not a tenant. It further argued that since the matter was already pending before the tribunal, the Single Bench should not have interfered in the auction process.

The bench observed that Glass World had sought interference of the High Court only to the limited extent of directing the tribunal to dispose of the stay application pursuant to the sale notice. Noting that the single judge had not entered into the matter on the merits of the dispute, the bench observed:

“the learned Single Judge made indulgence to a limited extent of deferring the said sale for a period of two weeks, so as to preserve the subject matter for a brief period in order to enable the Tribunal to consider and pass orders in Ext.P6 stay application filed in the Securitisation Application by the 1st respondent, on merits”

Rejecting the bank's contention that even the limited deferment would influence the tribunal, the bench held that the Single Judge had made no observations on the merits that could persuade the tribunal to stay further recovery proceedings.

Relying on apex court precedents, the bench further held that the limited two-week deferment granted by the Single Judge to preserve the subject matter did not exceed the jurisdiction under Article 227 of the Constitution. The writ appeal was accordingly dismissed

For Appellants: Advocates ASP Kurup, Sadchith P Kurup, Siva Suresh, Athira Vijayan, B Sreedevi, Vyshnav S Nair and Akshara Ravi

For Respondents: Advocate John Prakash