Allahabad High Court: Borrowers Can’t Use Tenants to Escape Liability After SARFAESI Orders

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The Allahabad High Court has made it clear: once an order under Section 14 of the SARFAESI Act, 2002 is passed in favor of a bank, a borrower cannot try to “wiggle out” of liability by using a tenant to obtain relief from a civil court.

The Case at a Glance

A petition was filed by Axis Bank before the High Court, seeking possession of a mortgaged property in Dhoulana, District Hapur. Although the Debt Recovery Tribunal (DRT) had already granted possession to the bank under Section 14, the tenant of the borrower managed to get a stay order from the civil court, preventing the transfer of possession.

This prompted the bank to approach the High Court for intervention.

Court’s Ruling

The bench comprising Justice Shekhar B. Saraf and Justice Praveen Kumar Giri held that:

  • Any tenancy created after a mortgage, without the bank’s permission, is subject to Section 65A of the Transfer of Property Act.
  • Such tenancies can only be validated or challenged before the Debt Recovery Tribunal (DRT), not in a civil court.
  • If tenants want to assert their rights, they must file an application under Section 17 of the SARFAESI Act, which specifically provides a mechanism for redress.

The Court also emphasized that civil suits are barred in cases involving measures taken under Section 13(4) of SARFAESI Act.

Precedent and Observations

The Court relied on earlier rulings, including the Supreme Court’s decision in Bajarang Shyamsunder Agarwal vs. Central Bank of India, which clarified that unauthorized tenants cannot block recovery measures by banks.

In this case, since the tenant had already moved an application under Section 17 before the DRT, the High Court observed that the stay obtained from the civil court was non-est in law (legally void).

Key Takeaway

This judgment reinforces the principle that:

✅ Banks have the right to recover secured assets once SARFAESI orders are passed.

✅ Borrowers cannot misuse tenancy claims to delay or obstruct recovery.

✅ Civil courts have no jurisdiction in such matters – the proper forum is the DRT.

By closing this loophole, the Allahabad High Court has ensured that borrowers cannot use tenants as a shield to evade repayment obligations.



Contact Ghamdaan Law Firm

If you are involved in a debt recovery dispute and need expert legal guidance, our skilled team of DRT/DRAT lawyers in Delhi is here to protect your interests.

✅ Specialised Expertise – Strong knowledge of debt recovery laws, SARFAESI Act, and banking regulations.
✅ Balanced Representation – Representing both financial institutions and borrowers.
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Take the right legal step – contact Ghamdaan Law Firm today for a confidential consultation.




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