Kerala High Court bars civil suit for lessee after DRT loss

The Kerala High Court has ruled that a lessee cannot file a civil suit to restrain a secured creditor from proceeding under the SARFAESI Act after having already lost a similar claim before the Debt Recovery Tribunal (DRT).

In the case involving IFCI Limited and Hotel Mythri, the mortgagor had executed a nine-year lease for the property while a mortgage was already in place. Following the initiation of proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the lessee approached the DRT. However, the DRT dismissed the lessee’s application in December 2024.

Despite the adverse DRT order, the lessee subsequently filed a civil suit in the Sub Court, Nedumangad, seeking a prohibitory injunction to prevent eviction. The Kerala High Court overturned a lower trial court decision that had allowed the suit, stating that the matter was barred by the SARFAESI Act and the principles of res judicata. The Court noted that the 2016 amendments to the SARFAESI Act specifically provide for tenants to raise grievances before the Tribunal, making the subsequent civil suit an abuse of the legal process.