IFCI Limited Vs Hotel Mythri (Kerala High Court)
Lessee Cannot Knock at Civil Court After Losing Before DRT: Kerala High Court Terms Suit an Abuse of Process
The Kerala High Court has held that a lessee claiming rights under a lease created after the mortgage cannot institute a civil suit to restrain the secured creditor from proceeding under the SARFAESI Act, particularly after the lessee has already invoked the remedy before the Debt Recovery Tribunal and suffered an adverse order. The Court held that such a suit was barred by the SARFAESI Act, hit by the principles of res judicata and amounted to an abuse of the process of law.
IFCI Limited was the secured creditor holding a mortgage over the property concerned. During the subsistence of the mortgage, the mortgagor executed a registered lease deed in favour of Hotel Mythri for a period of nine years. When IFCI initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the lessee approached the Debt Recovery Tribunal-II, Ernakulam, by filing S.A. No. 174 of 2020.
The DRT considered the lessee’s claim but dismissed the securitisation application on 5 December 2024. Notwithstanding the adverse order, the lessee thereafter instituted O.S. No. 11 of 2025 before the Sub Court, Nedumangad, seeking a prohibitory injunction restraining IFCI from taking further measures under the SARFAESI Act and from evicting it from the secured asset by invoking Section 14.
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