Civil Court’s Status Quo Order in Family Dispute Cannot Be Used to Stall Bank’s SARFAESI recovery Proceedings against bank’s secured asset, Rules Court
Jodhpur: The Rajasthan High Court has held that a status quo order passed in a collateral civil dispute cannot stall recovery proceedings under the SARFAESI Act, particularly when the secured creditor was not a party to the civil suit.
Justice Sameer Jain held that the District Magistrate’s role under Section 14 of the SARFAESI Act is limited to facilitating possession. The DM cannot put the Bank’s recovery proceedings on hold simply because a related dispute is pending before a civil court.
The case concerned an industrial plot in RIICO Industrial Area, Pali, purchased by Kana Ram, proprietor of Laxmi Polyfab Industries, in 2016.
Kana Ram stood as a personal guarantor for a cash-credit facility of approximately ₹7 crore and a car loan and mortgaged the property by depositing its original title deeds with PNB. After the borrower’s account was declared an NPA, the Bank initiated SARFAESI proceedings and approached the District Magistrate for physical possession.
Family Dispute Couldn’t Stop PNB’s Recovery
The property subsequently became the subject of a partition dispute and on which the civil court passed a status quo order concerning the property.
PNB sought to be impleaded in the civil proceedings, but its application was rejected as the Bank was held to be a non-necessary party. Despite this, the District Magistrate kept the Bank’s Section 14 application pending, relying on the civil court’s interim order.
Court observed that ‘Bank Cannot Be Bound by an Order Passed in Proceedings to Which It Was Not a Party’
The High Court held that since PNB was not a party to the civil proceedings, it could not be bound by the interim order passed therein.
DM’s Role Under Section 14 Is Administrative, Not Adjudicatory
The Court reiterated that proceedings under Section 14 SARFAESI Act are administrative and non-adjudicatory in nature. The authority handling the Bank’s Section 14 application cannot decide ownership disputes or other issues pending in a separate civil case.
Finding a “fundamental error of jurisdiction” the Court allowed the writ petition and allowed the PNB to purpure possession proceedings.