Civil Courts Barred From Granting Injunctions Against SARFAESI Actions Even If Partition Suit Is Maintainable: Kerala High Court

"The second limb of the provision acts as a fall-back safety-net to arrest the mischief that it seeks to do... the second limb of Section 34 prohibits any injunction to be issued by the civil court in respect of any action taken or to be taken in pursuance of any power conferred by or under the SARFAESI Act." Kerala High Court has clarified that even if a civil suit for partition involving a secured asset is maintainable, the Civil Court is strictly prohibited by the second limb of Section 34 of the SARFAESI Act from granting an interim injunction against recovery measures.

A bench of Justice S. Manu, in its judgment, observed that the legislature specifically incorporated a separate embargo on injunctions to shield recovery proceedings from being interdicted by any court or authority.

The primary question before the court was whether Section 34 of the SARFAESI Act imposes an absolute bar on Civil Courts granting injunctions against actions taken by a secured creditor. The Court was also called upon to determine if the two limbs of Section 34 must be read independently and how the conjunction "and" between them should be interpreted.

Two Distinct Limbs Of Section 34 SARFAESI Act

The Court conducted an intricate analysis of Section 34 of the SARFAESI Act, noting that the provision contains two distinct limbs of prohibition. The first limb bars a Civil Court from "entertaining" any suit or proceeding regarding matters that a Debt Recovery Tribunal (DRT) is empowered to decide. The second limb, however, specifically mandates that "no injunction shall be granted by any court" in respect of any action taken or to be taken in pursuance of the Act.

The Court observed that Section 34 does not place a total embargo on the very entertainment of civil suits if the proceedings are pending under the SARFAESI Act. The restriction applies only to matters that can be adjudicated by the DRT. However, the Court emphasized that the second part of the section operates independently to prevent any court from putting SARFAESI proceedings on hold through injunctions.

Disjunctive Interpretation Of The Conjunction "And"

The Court delved into the principles of statutory interpretation regarding the word "and" used to join the two limbs of Section 34. It noted that while "and" is typically a coordinating conjunction used conjunctively, it must be read disjunctively here to ensure that every word of the statute has force and effect. The Court held that reading the two limbs as a single unit would render the second limb redundant if the suit itself was already hit by the first limb.

To support this, the Court cited the Supreme Court decisions in Ishwar Singh Bindra v. State of U.P. and Municipal Corporation of Delhi v. Tek Chand Bhatia, which established that conjunctions can be read as their opposites to carry out the clear legislative intent. The Court concluded that the second limb regarding injunctions was resolutely incorporated to prevent courts from interdicting recovery proceedings, even in suits that might not be hit by the first limb.

Legislative Intent To Shield Recovery Proceedings

The Court highlighted that the overriding effect of the SARFAESI Act under Section 35 must be considered alongside Section 34. The intention of the legislature was clearly to shield the proceedings under the Act from being delayed or stopped by orders of injunction issued by Civil Courts. Justice Manu remarked that any other view would go against the established principles of interpretation and the specific objective of the SARFAESI Act.

The Bench referred to the landmark ruling in Mardia Chemicals v. Union of India, noting that the Supreme Court had already explained the object of the SARFAESI Act. The High Court stated that accepting the appellant's contention would allow litigants to bypass the statutory bar by filing partition suits, thereby defeating the manifest intention of the legislature to ensure immunity for recovery actions from civil court interference.

Distinguishing Precedents On Non-Secured Assets

The appellant had heavily relied on the Supreme Court's decision in Central Bank of India v. Prabha Jain and other High Court rulings to argue that Civil Courts possess inherent authority to pass interim orders. However, the High Court distinguished these cases, noting that they often dealt with properties that were not "secured assets" or situations where the DRT lacked the power to grant specific reliefs like partition.

The Court observed that while the DRT may not have the power to partition properties, this does not automatically authorize a Civil Court to grant an injunction against a secured creditor. In the present case, the property was indisputably a secured asset. Therefore, the Court held that the facts and circumstances in the cited precedents were substantially different and could not be mechanically applied to the instant case.

The High Court concluded that although the Trial Court's reasoning had some flaws regarding the application of certain precedents, its ultimate conclusion was correct. The application for interim injunction filed by the appellant was held to be not maintainable as it was directly hit by the second limb of Section 34 of the SARFAESI Act. Consequently, the appeal was dismissed, and the Trial Court's order was upheld.

Date of Decision: 08 July 2026