SARFAESI Recovery Not Subject to National Trust Committee Approval for Disabled Ward’s Property: Kerala HC [Read Order]

The Kerala High Court held that financial institutions proceeding under the SARFAESI Act, 2002 are not required to obtain prior approval from the Local Level Committee constituted under the National Trust Act, 1999, even when the secured property includes a share belonging to a person with disability.

The petitioners, Banaseer Banu and Nasreen Fathima, legal heirs of late Muhammed Ismail, had mortgaged two residential properties to secure business loans for their partnership firm,  PAJ Traders. Following default, the bank issued a Section 13(2) notice demanding ₹42.69 lakh and later conducted an e‑auction of one property for ₹1.09 crore.

When the bank moved to sell the family’s residence through a fresh sale notice dated 05‑03‑2025, the petitioners approached the High Court seeking to quash the notice, arguing that the sale violated the protective provisions of the National Trust Act.

Counsel for the petitioners contended that the bank could not deal with the property without the Committee’s approval, as the second petitioner’s guardian had already sought permission to sell her share. The bank, however, relied on the Supreme Court’s ruling in State Bank of India v. Union of India (2026 SCC OnLine SC 202) to argue that the SARFAESI Act, being a later special enactment with a non‑obstante clause, prevails over the National Trust Act.

The Court observed that while its earlier decision in Sabarinathan K. v. District Collector, Palakkad [2021 (5) KHC 651] empowered the Local Level Committee to grant or refuse sanction to a guardian dealing with a ward’s assets, no such obligation exists for statutory authorities acting under the SARFAESI Act. “No restriction of any kind has been imposed upon Courts, Tribunals, or other statutory authorities from dealing with the properties of wards in the manner prescribed by law,” the judgment noted.

Citing Supreme Court precedents including Phoenix ARC Pvt. Ltd. v. Vishwa Bharati Vidya Mandir (2022 KHC OnLine 6040) and South Indian Bank Ltd. v. Naveen Mathew Philip (2023 KHC OnLine 6435), the Court reiterated that writ petitions challenging SARFAESI proceedings are not maintainable when an alternative remedy before the Debt Recovery Tribunal (DRT) is available.

Justice P.V. Balakrishnan, delivering judgment on June 10, 2026, held that the bank was not required to obtain prior sanction from the Local Level Committee constituted under the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, before proceeding against the property in which the second petitioner, a person with mental disability had an undivided share.

Accordingly, the writ petition was dismissed, with liberty to the petitioners to approach the DRT for appropriate reliefs.

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