Right of Tenants to File Joint Plea Under SARFAESI Act Affirmed

In a recent ruling, the High Court of Kerala in the case of Moideen Koya & Ors. v. M/s. Pegasus Assets Reconstruction Co. Pvt. Ltd. & Anr., (2025 SCC OnLine Ker 3645), dated June 4, 2025, held that neither the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, nor Security Interest (Enforcement) Rules, 2002, prohibit joint applications by multiple aggrieved persons and directed that the matter be heard on merits.

The petitioners, four tenants in occupation of portions of a secured asset, were served with a notice of dispossession on June 5, 2024, by an Advocate Commissioner acting under the authority of the secured creditor, the respondent, Pegasus ARC. Aggrieved by the proposed action, the tenants jointly filed a securitisation application before the Debts Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act. The Registrar, however, refused to register the application on the grounds that each tenant should file a separate application, rejecting the consolidated petition purely on procedural grounds.

The High Court rejected this hyper-technical approach referring to Section 17(1) of the SARFAESI Act, the Court emphasized that the provision allows “any person (including borrower)” aggrieved by measures taken under Section 13(4) to approach the Tribunal. The phrase “any person” was interpreted as deliberately broad and inclusive, encompassing third parties such as tenants whose possessory or leasehold rights are threatened by enforcement actions. Importantly, the Court noted that neither the Act nor the Rules contain any express bar on the filing of joint or consolidated applications by multiple aggrieved persons.

Further, the Court underscored the principle that procedural norms are meant to advance the cause of justice, not to defeat it. It held that tribunals, particularly specialised forums such as the DRT, are expected to exercise procedural flexibility in the interest of substantive adjudication. The insistence on individual filings, despite a common cause of action, was seen as unwarranted and potentially leading to conflicting interim orders, duplicative pleadings, and avoidable delays.

The judgment reinforces the proposition that procedural rules must remain subservient to the goal of delivering effective justice. It also serves as a timely reminder that access to forums cannot be curtailed by inflexible interpretations devoid of statutory basis.