Court Grants Installment Facility to Liquidate Entire Outstanding Arrears Under SARFAESI Act Proceedings

The petitioner approached the High Court seeking relief against coercive recovery proceedings initiated by Federal Bank Ltd. under the SARFAESI Act, 2002

The bank had obtained an order from the Chief Judicial Magistrate Court, Kollam (MC No. 450/2026), and an Advocate Commissioner had issued a notice for possession dated 02.05.2026

The total outstanding liability as of 21.05.2026 was quantified at ₹53,47,313/-

The petitioner sought an opportunity to liquidate the debt in installments

1. Whether the court should exercise its discretionary jurisdiction under Article 226 to grant the petitioner an installment facility to clear the debt and stay coercive proceedings under the SARFAESI Act

The court exercised its equitable jurisdiction in matters relating to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)

While the Act provides a stringent mechanism for the enforcement of security interests, the court applied the principle of judicial discretion to allow a defaulting borrower to regularize or clear dues in installments when the secured creditor (the Bank) expresses no objection to such an arrangement, provided the repayment schedule is beneficial to the recovery process

The Court evaluated the petitioner's request for leniency against the Bank's stance. The Standing Counsel for the Bank submitted that there was no objection to permitting the petitioner to clear the entire outstanding amount via installments, noting that such a recovery would be beneficial to the institution

Based on this consensus and the specific facts and circumstances of the default, the Court reasoned that granting a structured repayment plan would balance the interests of both parties

The Court determined that a sum of ₹5,00,000/- should be paid as an upfront commitment, with the remainder spread over six months to ensure timely liquidation of the debt

The Court ordered: 1. A payment of ₹5,00,000/- on or before 10.06.2026; 2. The balance to be paid in 6 equal monthly installments starting July 2026, due by the 15th of every month; 3. Coercive steps are to be stayed provided the petitioner complies with these conditions; however, any default in a single installment allows the respondent to resume recovery proceedings as per law