Authority: Supreme Court of India

Order Date: 02 September 2026

Case Overview

  • Parties: Appellant – Kotak Mahindra Bank Limited (KMBL); Respondents – Trupti Sanjay Mehta, Sanjay Walchand Mehta, Manohar Govind Sable (deceased) and heirs, Poorti Rent a Car and Logistics Pvt. Ltd. and its directors Jagdish B. Khurana & Sucheta J. Khurana. The case also involves City Financial Consumer Finance Limited (CFCFL), an NBFC, and the Reserve Bank of India (RBI) as a respondent.
  • Background: KMBL acquired loan accounts from CFCFL (an NBFC not notified as a "financial institution" under SARFAESI at the time of loan creation) in 2012‑2014. The loans were secured by residential properties. KMBL invoked SARFAESI provisions (Sections 13 & 14) to issue demand notices, take possession of the secured assets, and initiate recovery actions.
  • Procedural History:
  • The Mehtas challenged KMBL’s SARFAESI actions in the Debts Recovery Tribunal (DRT), which held KMBL could not invoke SARFAESI. The DRT order was upheld by the Debts Recovery Appellate Tribunal and the Bombay High Court.
  • KMBL filed writ petitions in the Supreme Court. Interim orders directed status‑quo, deposits by the Mehtas, and temporary restoration of possession.
  • Parallel appeals arose from the Sables (who had taken loans from CFCFL) and Poorti Rent a Car (loan of ₹2.98 cr). Both parties contested KMBL’s SARFAESI enforcement.
  • Legal Question: Whether a bank, defined under Section 2(1)(c) of the SARFAESI Act, can invoke the Act to recover a debt it has assigned from an NBFC that was not a "financial institution" under Section 2(1)(m) at the time the loan was created.
  • Key Precedents Cited: M.D. Frozen Foods Ltd. v. Hero Fincorp Ltd. and Indiabulls Housing Finance Ltd. v. Deccan Chronicle Holdings Ltd. – both holding that the SARFAESI Act applies to existing loan agreements irrespective of the lender’s status at the time of loan creation, and that a successor‑in‑interest (including a bank) may enforce the Act.
  • Court’s Reasoning: The Court emphasized the purposive interpretation of the SARFAESI definitions, noting that the Act was enacted to facilitate speedy recovery of live, owing debts. It rejected the borrowers’ argument that the debt’s status could not change merely because it was assigned to a bank. RBI’s guidelines supporting banks’ acquisition of NPA assets were also considered.

Final Outcome

  • Civil Appeal No. 8531 of 2015 is allowed; the Bombay High Court judgment dated 16‑07‑2015 is set aside.
  • SLP (C) 33113 of 2018 (Mehtas) and SLP (C) 9399 of 2022 (Poorti Rent) are dismissed.
  • The Mehtas are directed to deposit a further ₹25 lakh with KMBL within eight weeks, without prejudice to the final decision on their SARFAESI application (S.A. No. 39 of 2014, now restored before the DRT).
  • KMBL’s right to invoke Sections 13 and 14 of the SARFAESI Act for the Sables’ secured property is affirmed; the Sables may pursue other legal remedies.
  • The secured property of Poorti Rent a Car was sold in 2023; no further relief is required.
  • All pending impleadment/intervention applications are dismissed; each party bears its own costs.

Topics: SARFAESI Act, Bank Debt Recovery