SARFAESI disputes must be adjudicated by the DRT where statutory proceedings are pending.

The petitioners, proprietors and guarantors of M/s. Aditya Rice Mill and M/s. Aditya Agro, had availed financial assistance from the State Bank of India in 2015, including a cash-credit facility of ₹40 lakhs and a term loan of ₹28 lakhs; petitioner No. 3 had stood as guarantor.

The petitioners’ rice stock was allegedly damaged after heavy rainfall in April 2016, following which the Chhattisgarh State Co-operative Marketing Federation stopped issuing delivery orders and requested encashment of bank guarantees.

The Bank issued demand notices dated 1 November 2017 and 18 December 2017 under Section 13(2) of the SARFAESI Act. The petitioners submitted objections under Section 13(3A), but the Bank thereafter issued a possession notice dated 17 February 2018 under Section 13(4).

The petitioners challenged the measures before the Debts Recovery Tribunal, Jabalpur, where their securitisation application remained pending. The Bank had also filed O.A. No. 1058/2018 before the DRT, to which the petitioners had filed their reply.

During the pendency of those proceedings, the Bank issued fresh notices dated 5 March 2026 under Section 13(2), stating that the earlier proceedings had been withdrawn and seeking to recommence recovery proceedings.

The petitioners sought quashing of the fresh notices and all consequential proceedings, contending that repeated proceedings arising from the same transaction were impermissible.

The Court applied Sections 13(2), 13(3A), 13(4), and 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Section 13(3A) provides the borrower an opportunity to make a representation or raise objections against a demand notice, while the statutory remedy before the DRT under Section 17 is available against measures taken under Section 13(4).

Relying on Devi Ispat Limited v. State Bank of India, decided on 16 April 2014, the Court held that a borrower should ordinarily pursue the statutory mechanism under the SARFAESI Act instead of bypassing it through a writ petition.

Relying further on ICICI Bank Ltd. v. Umakanta Mohapatra, decided on 5 October 2018, the Court reiterated that writ petitions arising under the SARFAESI Act are generally not maintainable when an efficacious statutory remedy before the DRT exists, absent exceptional circumstances.

The Court found that the petitioners’ challenge arose directly from SARFAESI proceedings and that their securitisation application, as well as the Bank’s O.A. No. 1058/2018, were already pending before the DRT, Jabalpur.

In view of the statutory scheme and the Supreme Court’s rule against bypassing the DRT remedy, the High Court declined to adjudicate the legality of the fresh notices in writ jurisdiction.

The Court considered that the DRT was the competent forum to examine both the parties’ substantive claims and the petitioners’ allegation that the Bank had repeatedly initiated proceedings despite the pending litigation.

The petitioners were therefore permitted to raise that specific grievance before the DRT.

The parties were relegated to the jurisdiction of the DRT, Jabalpur, and were granted liberty to pursue the proceedings already pending there.

The DRT was directed to consider and decide the parties’ claims in accordance with law, and the petitioners were permitted to raise the objection regarding repeated issuance of SARFAESI notices.

Any interim order granted by the High Court was directed to remain operative for 10 days from the date of receipt of a copy of the order.