Civil Court Cannot Grant Injunction Against SARFAESI Proceedings Even If Suit Property Title Is Disputed: Madhya Pradesh High Court

"The legislature intended that no injunction should be issued by any court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the SARFAESI Act or under the RDBFI Act, 1993." Madhya Pradesh High Court, in a ruling dated October 1, 2026, has reaffirmed that civil courts lack the jurisdiction to grant temporary injunctions against financial institutions initiating recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

A single bench presided over by Justice Sandeep N. Bhatt observed that the bar under Section 34 of the SARFAESI Act is absolute and operates even in cases where a plaintiff alleges an interest in the mortgaged property.

The petitioner, claiming a one-third share in a property mortgaged by her deceased brother to a bank, filed a civil suit challenging the validity of the mortgage and the gift deed through which her brother had purportedly acquired the property. While the trial court initially granted an interim injunction, the lower appellate court reversed the order, citing the statutory bar under Section 34 of the SARFAESI Act. The petitioner moved the High Court under Article 227 of the Constitution to challenge this reversal, contending that the bank could not proceed against her share of the property.

The primary question before the court was whether a civil court can exercise its jurisdiction to grant temporary injunctions against recovery proceedings initiated by a financial institution under the SARFAESI Act. The court was also tasked with determining whether a plaintiff’s claim of ancestral or coparcenary interest in a mortgaged property provides sufficient legal ground to bypass the jurisdictional bar established under Section 34 of the Act.

Scope of Section 34 of the SARFAESI Act

The High Court emphasized that the legislative intent behind the SARFAESI Act was to streamline the recovery process for financial institutions without judicial interference. Referencing Central Bank of India vs. Prabha Jain, the court noted that the second part of Section 34 is wide enough to debar any court or authority from issuing an injunction against actions taken under the Act or the Recovery of Debts and Bankruptcy Act, 1993 (RDBFI Act).

"Apparently, the legislature intended that no injunction should be issued by any court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the SARFAESI Act or under the RDBFI Act, 1993," the bench observed.

Non-Interference with Bank’s Statutory Rights

The court rejected the petitioner's argument that her alleged one-third share in the property necessitated an injunction. It held that allowing such litigation to stall bank recovery proceedings would frustrate the objective of the legislation. The bench clarified that even if the suit is maintainable for the purpose of seeking a declaration of title, the civil court is categorically barred from restraining the lender from exercising its power of sale or auction to recover dues.

"Once there is a lien of the financial institution on the property by way of mortgage, the device of filing a suit will not prevent the defendant from fulfilling their obligation of repayment or the rights of the financial institution to recover their dues," the court remarked, noting that any such injunction would unfairly prejudice the interest of the financial institution.

Limited Scope Under Article 227

The court further noted that the findings of the lower appellate court were consistent with established legal principles. Invoking the standards laid down in Shalini Shyam Shetty vs. Rajendra Shankar Patil, the bench reiterated that the supervisory jurisdiction under Article 227 is not an appellate jurisdiction and should be exercised sparingly. It held that because there was no patent perversity or manifest failure of justice in the appellate court’s order, there was no ground to interfere.

Availability of Alternative Remedies

Finally, the court observed that even if the petitioner successfully proves her title in a full-fledged trial, her interest could be adequately compensated in terms of money. Consequently, the High Court found no infirmity in the lower appellate court's order and dismissed the petition, reinforcing the supremacy of the SARFAESI Act’s recovery mechanism over civil litigation in matters of mortgaged assets.

Date of Decision: 01 October 2026