SC: Judicial Interference Must Not Undermine SARFAESI Framework

In a recent ruling the Hon’ble Supreme Court of India in the case of LIC Housing Finance Ltd. v. Nagson and Company & Ors., [SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 7979/2025] dated July 15, 2025, held that High Courts must refrain from granting unreasoned interim reliefs in writ proceedings challenging measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. It reaffirmed that such interference undermines the statutory scheme intended for expeditious enforcement by secured creditors.

The case arose from proceedings initiated by LIC Housing Finance Limited, the secured creditor, under Section 13(2) of the SARFAESI Act through two demand notices issued to Nagson and Company and Others, the borrower, calling upon it to discharge outstanding liabilities of Rs. 41 crores and Rs. 31 crores, respectively. The borrower approached the Karnataka High Court by way of a writ petition, where the High Court restrained the secured creditor from proceeding further under the Act, subject to the payment of only Rs. 5 crores by the borrower. The High Court granted relief without citing reasons, despite substantial dues. Although the borrower belatedly complied with the deposit condition, interim protection was continued. For over thirty months, the writ petition remained pending, allowing the borrower to stall enforcement without adjudication.

The Supreme Court expressed concern over this state of affairs and recalled its settled position in United Bank of India v. Satyawati Tondon & Ors., [(2010) 8 SCC 110], dated July 26, 2010, cautioning High Courts against unwarranted interference in SARFAESI matters. The Court observed that despite repeated pronouncements emphasizing judicial self-restraint in such cases, some High Courts continue to pass orders that frustrate the statutory remedies available to secured creditors. The Court noted that granting protection without recording just and sufficient reasons not only contravenes the statutory framework but also erodes institutional credibility. It was particularly critical of the prolonged pendency of the writ petition, coupled with the subsistence of unreasoned interim relief, which had the effect of insulating the defaulting borrower from recovery action for over two and a half years. Accordingly, the Supreme Court directed the High Court to dispose of the matter expeditiously.

This ruling reaffirms that high courts must exercise writ jurisdiction with restraint in matters under special statutes like the SARFAESI Act.