Court Holds Section 28(4) of Recovery of Debts and Bankruptcy Act Does Not Permit Attachment of Statutory Pre-Deposit Made Under SARFAESI Act; Writ Petition Under Article 226 Upheld
In a significant judgment delivered on August 31, 2026, the Kerala High Court (Division Bench comprising Chief Justice Soumen Sen and Justice Syam Kumar V.M.) quashed the order of the Recovery Officer under Section 28(4) of the Recovery of Debts and Bankruptcy Act, 1993 (RDDB Act), which had attached the statutory pre-deposit made by the appellant, E.T. Firoz, during the pendency of an appeal before the Debt Recovery Tribunal (DRT).
The appellant, E.T. Firoz, challenged the attachment of a substantial pre-deposit amounting to Rs. 3,95,50,000/- lying with the DRT Chennai, which was deposited under the second proviso to Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The Recovery Officer’s order was contested on the ground that such an attachment was beyond the scope of Section 28(4) of the RDDB Act.
The respondents, including the Recovery Officer and the secured creditor bank, contended that the proper remedy for challenging the attachment order was an appeal under Section 30 of the RDDB Act or revision under Article 227 of the Constitution of India, and questioned the maintainability of the writ petition filed under Article 226.
The High Court, after detailed examination, clarified the legal position by relying on the Supreme Court’s precedents, including Radhey Shyam and Another v. Chhabi Nath and Others (2015) and the recent Ajit Singh v. State of Rajasthan (2026). It was observed that while ordinarily orders of tribunals can be challenged under Article 227 or statutory appeals, the writ jurisdiction under Article 226 cannot be outrightly denied, especially where issues of law of wider public importance arise.
The Court emphasized that Section 28(4) of the RDDB Act is akin to a garnishee proceeding, which does not contemplate the attachment of a statutory pre-deposit made under the SARFAESI Act. The latter enjoys a special protection and cannot be subjected to attachment under the garnishee-like provisions of Section 28(4). The Court noted that the Recovery Officer’s attachment order was “palpably erroneous and contrary to law.”
Further, the Court acknowledged that though the appellant could have challenged the order under Article 227 or by statutory appeal, directing a fresh proceeding at this juncture would be unfair and would unnecessarily prolong the matter. Therefore, in the larger interest of justice, the Court exercised its writ jurisdiction and quashed the impugned order.
This judgment lays down an important precedent that statutory pre-deposits made under the SARFAESI Act cannot be attached by invoking Section 28(4) of the RDDB Act. It also clarifies the scope of writ jurisdiction under Article 226 in matters involving Recovery Officers’ orders under the RDDB Act.
Bottom Line:
Recovery of Debts and Bankruptcy Act, 1993 Section 28(4) Order of Recovery Officer attaching statutory pre-deposit challenged - Held, Section 28(4) is in the nature of a garnishee proceeding and does not permit attachment of statutory pre-deposit made under the second proviso to Section 18 of the SARFAESI Act, 2002. Writ jurisdiction under Article 226 of the Constitution invoked as the exercise of power by the Recovery Officer was palpably erroneous and contrary to law.
Statutory provision(s):
Recovery of Debts and Bankruptcy Act, 1993 Section 28(4), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section 18 (second proviso), Constitution of India Articles 226, 227
