Mr. M N Kumar Vs Assets Care and Reconstruction Enterprise Limited (Acre)

MR VENKATA KRISHNA S/O REDDEPPA, AGED ABOUT 56 YEARS, R/AT VILLA NO.003, PRESTIGE OZONE, NEAR FORUM VALUE MALL, WHITEFIELD MAIN ROAD, WHITEFIELD, BENGALURU-560066

¶14

MR C S MOHAN S/O LATE C V SRINIVAS RAO, AGED ABOUT 69 YEARS, R/AT BRIHATI, NO.318, 7^TH MAIN ROAD, 6^TH SECTOR,

¶15

H.S.R. EXTENSION,

¶16

2 - NC: 2026:KHC:9154 WP No. 17494 of 2025

¶17

HC-KAR

¶18

BENGALURU-560034 SENIOR CITIZEN BENEFIT NOT CLAIMED

¶19

…PETITIONERS

¶20

(BY SMT. JAYNA KOTHARI SR, COUNSEL FOR SRI. NAVEEN CHANDRA V., ADVOCATE)

¶21

AND:

¶22

ASSETS CARE AND RECONSTRUCTION ENTERPRISE LIMITED (ACRE) A COMPANY ESTABLISHED UNDER THE PROVISIONS OF THE SARFAESI ACT 2002 HAVING ITS CORPORATE OFFICE AT UNIT NO.502, C WING, ONE BKC, PLOT NO.C-66, G-BLOCK, BANDRA KURLA COMPLEX, MUMBAI-400051 HAVING ITS REGISTERED OFFICE AT 14^TH FLOOR, EROS CORPORATE TOWER, NEHRU PLACE, NEW DELHI-110019 REPRESENTED BY CHAIRMAN OF BOARD AND INDEPENDENT DIRECTOR, MR SUNIL KUMAR CHATURVEDI AND HEAD OF THE ASSET MANAGEMENT, MR AMITH KEDIA.

¶23

M/S LGCL PROPERTIES PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE COMPANIES ACT 1956 HAVING ITS REGISTERED OFFICE AT NO.12/1, REST HOUSE ROAD, BENGALURU-560001 REPRESENTED BY ITS DIRECTOR, MR GIRISH PURAVANKARA.

¶24

…RESPONDENTS

¶25

(BY SRI. THAPO SHRESHTA., ADVOCATE FOR R1)

¶26

3 -

¶27

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶28

HC-KAR

¶29

THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT ORDER OR DIRECTION IN THE NATURE OF WRIT OF CERTIORARI OR ANY OTHER WRIT TO QUASH THE SYMBOLIC POSSESSION NOTICE BEARING No.ACRE/LGCL/2024-25 DATED 23.10.2024 PRODUCED HEREIN AS ANNEXURE-L AND REJOINDER DATED 29.11.2024 PRODUCED HEREIN AS ANNEXURE-N, ISSUED BY THE 1^ST RESPONDENT. ISSUE A WRIT, ORDER OR DIRECTION IN THE NATURE OF WRIT OF CERTIORARI TO QUASH THE SYMBOLIC POSSESSION OF THE SCHEDULE B PROPERTY TAKEN BY THE 1^ST RESPONDENT VIDE NOTICE DATED 23.10.2024 (ANNEXURE-L) UNDER THE PROVISIONS OF THE SARFAESI ACT AS BEING ILLEGAL, ARBITRARY AND IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND IN VIOLATION OF ARTICLE 14 OF THE CONSTITUTION OF INDIA; AND ETC;

¶30

THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

¶31

CORAM: HON'BLE MR. JUSTICE ASHOK S.KINAGI

¶32

ORAL ORDER

¶33

The petitioners filed this writ petition seeking the following reliefs:

¶34

A. Issue a Writ, Order or Direction in the nature of Writ of Certiorari or any other writ to quash the Symbolic Possession Notice bearing no. ACRE/LGCL/2024-25 dated 23.10.2024 produced herein as ANNEXURE-L and Rejoinder dated 29.11.2024 produced herein as ANNEXURE-N, issued by the 1st Respondent;

¶35

B. Issue a Writ, Order or Direction in the nature of Writ of Certiorari to quash the

¶36

4 - NC: 2026:KHC:9154 WP No. 17494 of 2025

¶37

HC-KAR

¶38

symbolic possession of the Schedule B Property taken by the 1st respondent vide Notice dated 23.10.2024 (Annexure-L) under the provisions of the SARFAESI Act as being illegal, arbitrary and in violation of the principles of natural justice and in violation of Article 14 of the constitution of India;

¶39

C. Issue writ of mandamus or any other appropriate writ directing the 1st Respondent to release the Schedule B Property from the mortgage and charges forthwith; and

¶40

D. Grant any other relief which this Hon'ble Court deems fit in the circumstances of the case in the interest of justice and equity.

¶41

Brief facts, leading rise to the filing of this writ petition are as follows:

¶42

The petitioners are the owners of the schedule A property and they had entered into a Joint Development Agreement (for short ‘JDA’) with respondent No.2 for developing the Schedule A property into a residential project known as “LGCL Luxuriate” under which respondent No.2 would get 50% of the total saleable constructed super built-up area, being the B schedule property.

¶43

5 -

¶44

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶45

HC-KAR

¶46

The petitioners and respondent No. 2 entered into a

¶47

joint development agreement on 16.04.2012. The petitioners executed a general power of attorney in favour of respondent No.2 on the same day. The commencement certificate for the project was obtained on 29.10.2015 initiating 24 months construction with an additional six months grace period. The construction period including the grace period under the joint development agreement ended on 29.04.2018.

¶48

Respondent No.2 did not complete the project. The loan agreement executed between PHL Fininvest Private Limited (now Piramal Enterprises Limited) (hereinafter “PHL”) and a third party, LGCL Urban Homes (India) LLP (Borrower) in which Mr. Girish Purvankara was obligator 1, Mrs. Rashmi Puravankara was obligator 2, respondent No.2 LGCL Properties Private Limited was obligator 3,

¶49

6 - NC: 2026:KHC:9154 WP No. 17494 of 2025

¶50

HC-KAR

¶51

Lalith Gangaadhar Constructions Private Limited was obligator 4 and LGCL Urban Homes Private Limited (confirming party). A deed of hypothecation was executed for an amount of ₹65,00,00,000/mortgaging the respondent No.2’s rights and interests in the schedule property to Piramal Enterprises Limited. IDBI Trusteeship Services Limited was appointed as a security Trustee to act on behalf of and for the benefit of the lender.

¶52

On 07.02.2022, a supplementary deed of hypothecation executed for an additional loan of ₹16,00,000/-. Form No. CHG-1 was filed again. Even in this respondent No.2 mortgaged the Developer's share and interest in the schedule property to PHL Fininvestment Private Limited. The petitioners issued a termination letter to respondent No.2 on 05.07.2022 as the respondent No.2 committed breach of its terms of the joint

¶53

7 -

¶54

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶55

HC-KAR

¶56

development agreement and also revoked the general power of attorney. The petitioners sent a legal notice to PHL on 16.08.2022 demanding cancellation of all mortgages and return of title documents.

¶57

On 08.09.2022, the PHL responded to the legal notice, denying the claims and asserting the mortgage was valid under the joint development agreement. PHL assigned the loan of the borrower being LGCL Urban Homes (India) LLP together with the rights, title and interest in the suit schedule property to respondent No.1 under a registered assignment agreement. This was also not informed to the petitioners.

¶58

The petitioners received an intimation notice from the respondent No.1- ACRE, stating it was taking the symbolic possession of respondent No.2’s interest in the schedule property under Section

¶59

8 -

¶60

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶61

HC-KAR

¶62

13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (for short ‘SARFAESI Act’). A Notice was held due to failure on part of the borrowers /guarantors /mortgagors /pledgors, including the respondent No.2 to repay the loan amount. Respondent No.1 would be taking challenge the symbolic possession of the property owned by the petitioners. The petitioners sought for removal of property from SARFAESI Act proceedings. The respondent No.1 replied to the response raised by the petitioners, raising objections and claiming that they hold charge over other property. Hence, this petition.

¶63

Respondent No.1 filed a statement of objections. It is contended that in the loan agreement dated 15.09.2020, PHL Financial Investment Private Limited advanced financial assistance in the form of

¶64

9 -

¶65

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶66

HC-KAR

¶67

a term loan amounting to ₹ 65,00,00,000/-, out of which an amount ₹ 53,61,69,644/- was disbursed on the terms and conditions contained in the first loan agreement. The assignment agreement dated 27.03.2023, executed between Piramal Enterprises Limited and the answering respondent (Assignment Agreement) i.e. respondent No.1. The loan facility was provided under the first loan agreement, was to be repaid within 36 months from the first disbursement dated 28.09.2020. It is contended that pre-borrower has provided the following securities by way of instrumental which were executed in favour of security trust and it is also contended that respondent No.2 has created mortgage on the developer's share as per clause 14.2 of the joint development agreement. Respondent No.1 advanced on the petitioners, it is submitted that respondent No.2 committed a default. Hence, respondent No.1 has initiated

¶68

10 -

¶69

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶70

HC-KAR

¶71

proceedings under SARFAESI Act to recover the amount advanced to the petitioners. The action of the respondent in issuing notice is just and proper. Hence, prays to dismiss the petition against respondent No.1.

¶72

Heard Smt. Jayna Kothari, learned Senior counsel for the petitioners and learned counsel for respondent No.1.

¶73

Learned senior counsel appearing for the petitioners submits that petitioners neither borrowers nor guarantors. The petitioners have entered into a joint Development Agreement with respondent No.2 on 16.04.2012 and the petitioners never authorized the respondent No.2 to obtain the loan by mortgaging the petitioners’ property. The petitioners have entered into joint development agreement with the developer and not with respondent No.2. There is no agreement between the petitioners and

¶74

11 -

¶75

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶76

HC-KAR

¶77

respondent No.2. Respondent No.1 without verifying the documents properly advanced the loan to the respondent No.2 and got executed a deed of hypothecation in respect of the properties owned and possessed by the petitioners.

¶78

Respondent No.2 had no right to create any charge over the property belongs to the petitioners. Respondent No.1 committed an error in advancing the loan to respondent No.2 and the proceedings initiated under SARFAESI Act in respect of the properties owned and possessed by the petitioners is illegal. Hence, on these grounds, she prays to allow the petition.

¶79

Per contra , learned counsel for respondent No.1 submits that there is an assignment clause 31.1 in the Joint Development Agreement. He submits that developer is entitled to assign all its rights under the agreement in favour of any of its group, firms,

¶80

12 -

¶81

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶82

HC-KAR

¶83

companies etc., As per the terms of clause 31 and

¶84

31.1. i.e., assignment, respondent No. 2 by mortgaging created a charge over the property. Hence, he submits that respondent No. 1 is justified in initiating proceedings under the SARFAESI Act to recover amount advanced to respondent No.2. He also submits that the writ petition filed by the petitioners is not maintainable as the petitioners have got efficacious remedy under Section 17 of the SARFAESI Act. Hence, on these grounds, he prays to dismiss the petition.

¶85

Perused the records, and considered the submissions of the learned counsel for the parties.

¶86

It is an undisputed fact that the petitioners and respondent No.2 have entered into a joint development agreement for the purpose of developing the property of the petitioners. The

¶87

13 -

¶88

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶89

HC-KAR

¶90

petitioners have produced the joint development

¶91

agreement marked as Annexure B.

¶92

From the perusal of Annexure B- joint development agreement, the petitioners never authorized respondent No. 2 to obtain loan facilities from any of the Bank. There is a clause in the joint development agreement regarding borrowings at clause 19.1 which provides that, developer shall, on execution of the issuing agreement, is entitled to obtain financial facilities from banks, financiers, financial companies or other financial institutions, required for construction of the residential blocks by depositing the title deeds of the schedule property and on the security of the development rights of the developer. Provided, however, there shall be no personal liability on the owners in regard to any such debts and in the event of any default in the repayment of the debt incurred by the developer,

¶93

14 -

¶94

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶95

HC-KAR

¶96

recovery shall be enforced only against the developer and the developer’s share. The owners are not liable to answer any liability created by the developer any time and further the amounts that will be borrowed by the developer shall be for the purpose of construction of the residential complex and not for any other purposes. The owners shall render all necessary co-operation to the developer including signing of documents as may be required from time to time at the cost of the developer to enable the developer to secure such loans for construction.

¶97

Clause 19.1 provides that developer is entitled to obtain financial facilities from the banks etc. only for the construction of residential blocks by depositing the title deeds of the schedule property and on the security of the development rights of the developer and there shall be no personal liability on the

¶98

15 -

¶99

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶100

HC-KAR

¶101

owners in regard to any such debts and the owners

¶102

are not liable to answer any liability created by the developers in time and the amount that will be borrowed by the developer shall be for the purpose of construction of residential blocks and not any

¶103

other purposes .

¶104

The petitioners issued a termination notice on 16.08.2022 stating that respondent No. 2 has failed to comply the terms of a joint development agreement. Till 2022, respondent No.2 has not completed the construction and even the basement of the proposed 13 storied building. Respondent no. 2 has not complied with the terms and conditions of the MOU. The petitioners raised an arbitral dispute and the arbitrator has passed an award in A.C .No.9 of 2019. As per the award dated 17.06.2020, LGCL was required to pay an amount of ₹ 21,05,000/- as

¶105

16 -

¶106

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶107

HC-KAR

¶108

compensation and a direction to market and sell seven of the petitioners’ share of the apartments.

¶109

From the perusal of clause 19.1 of the joint development agreement, that developer acting on behalf of the representations of the owners has agreed to develop at its costs and expenses. The schedule property by constructing residential apartment in accordance with scheme formulated by the parties and delivered to the owners or their nominees, owner's share. It is contended that as per the terms of joint development agreement, respondent No.1 had no right in accepting the title deeds for the schedule property from LGCL i.e., respondent No. 2, as respondent No.1 has not properly considered the provisions of the joint development agreement before accepting the title deeds pertaining to the schedule property and requested to cancel and set aside all the mortgages,

¶110

17 -

¶111

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶112

HC-KAR

¶113

charges, encumbrances, liens, claims etc. of any kind of the schedule property, as same is not permitted under the joint development agreement on account of joint development agreement being terminated by the petitioners.

¶114

Respondent No.2 i.e., PHL replied to the notice dated 16.08.2022 denying the averments made in the legal notice regarding assignment in favour of respondent No.2 and the petitioners were aware about financial transaction between respondent nos. 1 and 2. Apart from going through the joint development agreement referred above, respondent

¶115

No.2 had no right to create any charge or encumbrance in and over the schedule property until physical possession of completed apartment was delivered to the petitioners. There is nothing on record to show that as on the date of sanction of alleged loan, respondent No.2 had either completed

¶116

18 -

¶117

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶118

HC-KAR

¶119

structure or had obtained any possession of the apartments described in the schedule, so as to justify the stand taken by the respondent No.1 and that it had advanced the loan on the charge of apartment fallen to the share of respondent No.2 in terms of the aforesaid joint development

¶120

agreement.

¶121

Respondent No. 2 has not produced any records to

¶122

show that respondent No. 2 completed the aforesaid apartment within time stipulated in the joint development agreement and also grace period and further, respondent No.2 has not produced any records to show that any proof of delivery of possession or completed apartment of the petitioners. It cannot be presumed that respondent had derived any legal right to offer the schedule property or any part of it including apartment described in B schedule as a security for the loan

¶123

19 -

¶124

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶125

HC-KAR

¶126

availed by respondent No.2. As a result, respondent No. 1 had not derived any security interest in respect of the schedule property, which it could enforce towards the recovery of the loan advanced to respondent No.2.

¶127

Respondent No.1 initiated the proceedings under SARFAESI Act by issuing symbolic possession. In order to consider the case on hand, it is necessary to examine Section 13 of the SARFAESI Act, which reads as follows:

¶128

13. Enforcement of security interest .—(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act.

¶129

(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of

¶130

20 -

¶131

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶132

HC-KAR

¶133

secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).

¶134

1 [Provided that— (i) the requirement of classification of secured debt as non-performing asset under this sub-section shall not apply to a borrower who has raised funds through issue of debt securities; and

¶135

(ii) in the event of default, the debenture trustee shall be entitled to enforce security interest in the same manner as provided under this section with such modifications as may be necessary and in accordance with the terms and conditions of security documents executed in favour of the debenture trustee.]

¶136

(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower

¶137

21 -

¶138

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶139

HC-KAR

¶140

[(3A) If, on receipt of the notice under subsection (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate 3 [within fifteen days] of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:

¶141

Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A.]

¶142

(4) In case the borrower fails to discharge his liability in full within the period specified in subsection (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:—

¶143

(a) take possession of the secured assets of the borrower including the right to transfer by way

¶144

22 -

¶145

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶146

HC-KAR

¶147

of lease, assignment or sale for realising the secured asset;

¶148

4 [(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:

¶149

Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:

¶150

Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt;]

¶151

(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;

¶152

(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much

¶153

23 -

¶154

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶155

HC-KAR

¶156

of the money as is sufficient to pay the secured debt.

¶157

(5) Any payment made by any person referred to in clause (d) of sub-section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower.

¶158

1 [(5A) Where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any officer of the secured creditor, if so authorised by the secured creditor in this behalf, to bid for the immovable property on behalf of the secured creditor at any subsequent sale.

¶159

(5B) Where the secured creditor, referred to in sub-section (5A), is declared to be the purchaser of the immovable property at any subsequent sale, the amount of the purchase price shall be adjusted towards the amount of the claim of the secured creditor for which the auction of enforcement of security interest is taken by the secured creditor, under subsection (4) of section 13.

¶160

(5C) The provisions of section 9 of the Banking Regulation Act, 1949 (10 of 1949) shall, as far

¶161

24 -

¶162

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶163

HC-KAR

¶164

as may be, apply to the immovable property acquired by secured creditor under sub-section (5A).]

¶165

(6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.

¶166

(7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.

¶167

25 -

¶168

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶169

HC-KAR

¶170

2 [(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,—

¶171

(i) the secured assets shall not be transferred by way of lease assignment or sale by the secured creditor; and

¶172

(ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this subsection, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.]

¶173

(9) 1 [Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in the case of] financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of

¶174

26 -

¶175

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶176

HC-KAR

¶177

such right is agreed upon by the secured creditors representing not less than 2 [sixty per cent.] in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors:

¶178

Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956):

¶179

Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen's dues with the liquidator in accordance with the provisions of section 529A of that Act:

¶180

Provided also that liquidator referred to in the second proviso shall intimate the secured creditor the workmen's dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956) and in case such

¶181

27 -

¶182

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶183

HC-KAR

¶184

workmen's dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen's dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimate dues with the liquidator:

¶185

Provided also that in case the secured creditor deposits the estimated amount of workmen's dues, such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator:

¶186

Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any.

¶187

Explanation.—For the purposes of this subsection,— (a) “record date” means the date agreed upon by the secured creditors representing not less than 2 [sixty per cent.] in value of the amount outstanding on such date; (b) “amount outstanding” shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor.

¶188

28 -

¶189

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶190

HC-KAR

¶191

(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.

¶192

(11) Without prejudice to the rights conferred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measured specifies in clauses (a) to (d) of sub-section (4) in relation to the secured assets under this Act.

¶193

(12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed.

¶194

(13) No borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.

¶195

29 - NC: 2026:KHC:9154 WP No. 17494 of 2025

¶196

HC-KAR

¶197

The expression “secured assets of the borrower” used in clause (a) of Section 13(iv) leaves no manner of doubt that the secured creditor can proceed to recover the secured debt only by taking possession of the secured assets of the borrower and not of any other person.

¶198

In the instant case, as already discussed above, the petitioners were not the borrowers of the loan from respondent No.1 and respondent No.1 had not derived any security interest over the schedule property. Therefore, none of the measures provided under Section 13(4) of the SARFAESI Act were available to respondent No.1. As a result, the action initiated by respondent No.1 taking a symbolic possession of the schedule property is patently illegal and without authority of law and contrary to Section 13 of the SARFAESI Act.

¶199

30 -

¶200

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶201

HC-KAR

¶202

Respondent No.2 had no right to mortgage or

¶203

create charge over the schedule property. Respondent No.1 could not derive any security interest in respect of the schedule property which could be enforced by taking recourse to Section 13 or Section 13(4) of the SARFAESI Act. Since the schedule property did not avail within the meaning of secured assets “as defined under Section 2(z)(c) of the SARFAESI Act, action of respondent No. 1 to proceed against the property belonging to the petitioners is wholly illegal and beyond the powers conferred on the secured creditor”.

¶204

Admittedly, in the instant case, mortgage deed was executed by respondent No.2. As the ingredients of Section 2(z)(f) is not satisfied as to hold that the schedule property is the secured pay interest of security interest has been created in favour of respondent No.1. Thus, I do not find any legal

¶205

31 -

¶206

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶207

HC-KAR

¶208

grounds to hold that respondent No.1 is entitled to proceed against the properties of the petitioner to recover the outstanding alleged due to it in respect of loan disbursed to respondent No.2.

¶209

In the light of the above discussion, and for the reasons stated therein, I hold that the action initiated by respondent No. 1 under the SARFAESI Act, insofar as the property is belonging to the petitioners described in the schedule are illegal or arbitrary and without authority of law. Consequently, I proceed to pass the following order:

¶210

ORDER

¶211

i. The writ petition is allowed .

¶212

ii. The symbolic possession notice bearing No. ACRE/LGCL/2024-25 dated 23.10.2024 produced vide Annexure L and rejoinder dated 29.11.2024 vide Annexure N and the symbolic possession

¶213

32 -

¶214

NC: 2026:KHC:9154 WP No. 17494 of 2025

¶215

HC-KAR

¶216

of the B schedule property taken by respondent No.1 vide notice dated 23.10.2024 vide Annexure-L are hereby quashed.

¶217

iii. Respondent No.1 is directed to release B schedule property from the mortgage and charge within one month from the date of receipt of certified copy of this order.

¶218

iv. Pending IA(s), if any, shall stand disposed of.

¶219

Sd/(ASHOK S.KINAGI) JUDGE

¶220

SKS CT:KHV

Mr. M N Kumar v. Assets Care and Reconstruction Enterprise Limited (Acre)

Case brief

What is this about?

What did the court decide?

Mr. M N Kumar v. Assets Care and Reconstruction Enterprise Limited (Acre)

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Statutes considered

Procedural history

Parties & counsel

Coram

Case details

Similar cases

Mrs. Bhavani Vs the State of Karnataka

Sri Shadakshari Aradhya B R Vs the State of Karnataka

Panduranga Rao Vs Navodaya Multipurpose Souharda Sahakari Ni. Mangaluru

M/S Annapoorneshwari Enterprises Vs M/S Cosmos

Smt Shobha Vs the Authorized Officer

Mr. F Faiz Ahmed @ Aftab, Vs M/S Sree Krupaavani Realtors