Civil Suit for Declaration as Null and Void barred u/s 34 of SARFAESI Act when Bank Account declared as NPA: Allahabad HC [Read Order]

Reinforcing the exclusive jurisdiction of the Debts Recovery Tribunal (DRT) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, the Allahabad High Court has held that a civil suit seeking to declare proceedings under the SARFAESI Act as “null and void” is expressly barred by Section 34 of the Act once a borrower’s account has been classified as a Non-Performing Asset (NPA).

The judgment was passed by a division bench comprising Justice Saumitra Dayal Singh and Justice Donadi Ramesh in Civil Misc. Writ Petition No. 17465 of 2025 filed by Canara Bank. The petition challenged the maintainability of a civil suit filed by the borrower in the District Civil Court, seeking a declaration that the SARFAESI proceedings initiated by the bank were invalid.

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The bench noted that once a secured creditor declares a borrower’s loan account as NPA and initiates steps under Section 13(4) of the SARFAESI Act—such as taking possession of secured assets—the appropriate legal remedy for an aggrieved borrower lies exclusively before the Debts Recovery Tribunal under Section 17 of the Act.

The High Court clarified that Section 34 of the SARFAESI Act categorically bars civil courts from entertaining any suit in respect of matters for which the DRT or the Appellate Tribunal is empowered to determine. It held that civil jurisdiction cannot be invoked to seek a declaration that directly or indirectly impedes the bank’s lawful recovery proceedings under SARFAESI.

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“The Commercial Court did not err in considering the admissions made by the plaintiff  itself and, hence, the submission advanced that the Commercial Court has rejected the plaint by taking into consideration the defence raised by the Bank, has no substance.” the Court observed.

It was thus held that, “the order passed by the Commercial Court rejecting the injunction application as well as plaint under Order VII Rule 11 C.P.C. does not suffer from any error of fact and/or law.”

To Read the full text of the Order CLICK HERE

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