Statutory pre-deposit under SARFAESI cannot be attached under Section 28(4) of the RDB Act, rules Kerala High Court

The appellant had made a statutory pre-deposit of ₹3,95,50,000 under the second proviso to Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, while pursuing an appeal before the DRT, Chennai.

The Recovery Officer subsequently passed an order under Section 28(4) of the Recovery of Debts and Bankruptcy Act, 1993, attaching the pre-deposit amount. The appellant challenged that order under Article 226 of the Constitution. The Banks contended that the order was appealable under Section 30 of the 1993 Act and that the proper constitutional remedy, if any, was under Article 227. The Court noted that an earlier writ petition, O.P.(DRT) No. 401 of 2024, had included an interim prayer against appropriation of the pre-deposit, but that petition was withdrawn before the impugned attachment order was passed.

Whether a writ petition under Article 226 challenging an order of the Recovery Officer under Section 28(4) of the Recovery of Debts and Bankruptcy Act, 1993 was maintainable, notwithstanding the alternative remedies under Section 30 of the Act and Article 227 of the Constitution.

Whether the Recovery Officer could invoke Section 28(4) of the 1993 Act to attach a statutory pre-deposit made under the second proviso to Section 18 of the SARFAESI Act, 2002.

Section 30 of the Recovery of Debts and Bankruptcy Act, 1993 provides an appellate remedy against an order of the Recovery Officer.

The Court relied on Radhey Shyam v. Chhabi Nath, (2015) 5 SCC 423, for the principle that judicial orders of tribunals should ordinarily be challenged through statutory appeal or revision, or under Article 227, rather than by a writ under Article 226. It also relied on Ajit Singh v. State of Rajasthan, 2026 SCC OnLine SC 1372, which held that orders of tribunals may be challenged under Article 227 where the High Court exercises supervisory jurisdiction, and that the existence of an Article 227 remedy does not by itself bar the exercise of Article 226 jurisdiction.

Section 28(4) of the 1993 Act was construed as providing a garnishee-type attachment mechanism; it does not authorise attachment of a statutory pre-deposit made under the second proviso to Section 18 of the SARFAESI Act.

The Court accepted that the challenge ought ordinarily to have been brought under Article 227, particularly since the Recovery Officer’s order was amenable to the statutory remedy under Section 30. However, it held that directing the appellant to institute fresh proceedings under Article 227 at that stage would be unfair and would unnecessarily prolong the matter, especially because the writ petition had already been entertained and the legal issue required determination.

On the substantive issue, the Court held that Section 28(4) operates as a garnishee provision and is intended to attach amounts or property held by a third party for the certificate-debtor. A statutory pre-deposit made for maintaining an appeal under Section 18 of the SARFAESI Act is not an asset available for attachment under that provision. Since the Recovery Officer’s attachment of the pre-deposit was therefore beyond the scope of Section 28(4) and contrary to law, the Court exercised its discretion under Article 226.

The writ appeal was allowed, and Ext.P7 order of attachment issued by the Recovery Officer was set aside.