S. 17 SARFAESI Act | No Bar On Preferring Consolidated Application By Tenants Under Different Lease Deeds: Kerala High Court

The Kerala High Court has recently held that there is no bar under the SARFAESI Act against preferring a consolidated Securitisation Application by tenants under different lease deeds if they are challenging the same secured creditor's action.

The judgment was passed by Justice Mohammed Nias C.P. while considering an Original Petition preferred against the order (Exhibit P8) passed by the Registrar of the Debts Recovery Tribunal (DRT), Ernakulam.

Facts

The four petitioners in the case are tenants of the same borrower, who is occupying the secured asset. They preferred a single, consolidated Securitisation Application under Section 17 of the Securitisation and Regulatisation of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) before the DRT. However, the Registrar passed an order refusing to register the same on the sole ground that separate applications must be filed by each tenant.

For context, Section 17 of the SARFAESI Act provides that any person, including a borrower, may make an application to the DRT on being aggrieved by any measure taken by the secured creditor or his authorised officer under Section 13(4) of the Act. A secured creditor may take any recourse, including taking possession of the secured assets, taking over management of the business of the borrower, etc. under Section 13(4) of the Act in case the borrower fails to discharge his liability in full.

Finding

The Court looked into the provisions that prescribe the procedural format for applications under Section 17, namely Rule 13A of the Security Interest (Enforcement) Rules, 2002 (the Rules) read with Appendix X of the Rules.

The learned Single Judge, thereafter, noted that there is no express bar against filing of consolidated applications. It observed:

“Crucially, neither the Act nor the Rules contains any express prohibition against multiple aggrieved persons filing a single, consolidated application. The absence of such a prohibition suggests that the legislature did not intend to bar joint applications. This interpretation aligns with the general legal principle that procedural rules should facilitate, rather than obstruct, access to justice.”

The Court was of the opinion that it is overly rigid to insist on separate applications when the grievances arose from the same cause of action. The same applies even if the cause of action arose from different lease deeds.

The Court felt that insistence on separate applications would lead to repetitive pleadings, conflicting interim orders, and unnecessary delays. This, according to the Court, defeats the purpose of a summary adjudication mechanism under Section 17.

The learned Single Judge relied on the judgment in Mardia Chemicals Ltd. v. Union of India (2004) to find that the DRT should avoid hyper-technical objections that obstruct substantive justice, which in this case was expeditious resolution of disputes through consolidated application.

The Court further observed:

“…Procedural rules should be interpreted to facilitate dispute resolution while ensuring timely and diligent pursuit of legal remedies. Procedural law is not to be tyrant but a servant, not an obstruction but an aid to justice.”

Thus, the Court allowed the original petition and set aside Ext. P8 order of the Registrar. The Registrar was directed to number the consolidated application. Further, a direction was given to the DRT to consider the case of the petitioners on merits.

Case No: OP (DRT) No. 287 of 2024

Case Title: Moideen Koya & Ors. v. M/S.Pegasus Assets Reconstruction Co. Pvt. Ltd. & Anr.

Citation: 2025 LiveLaw (Ker) 351

Counsel for the Petitioners: O.D. Sivadas

Counsel for the Respondents: Renjith.R

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