[Loan Default] Acts Of Bank Officials While Taking Possession Of Building Protected Under Section 32 Of SARFAESI Act: Kerala High Court

The Kerala High Court on Monday held that the acts of bank officials in connection with taking possession of a building or an apartment under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 are protected under Section 32 of the Act, if they are done in good faith.

The Court was considering a petition filed by officials of Punjab National Bank for quashing an FIR filed by an apartment owner under several sections of the Indian Penal Code including Section 442 (house trespass) and Section 448 (punishment for house trespass). The bank had proceeded against the de facto complainant under the SARFAESI Act for defaulting in loan repayment. The complainant alleged that the bank officials entered the building without his consent and ought to be prosecuted for trespass.

A single bench of Justice K Babu quashing the FIR observed,

“Though the action taken by the officials of the bank under the SARFAESI Act is neither unquestionable nor treated as sacrosanct under all circumstances but if there is discrepancy in the manner the officials have proceeded, it will always be open to assail it in the forum provided. However, as far as those acts are concerned, the officials are protected from criminal prosecution under Section 32 of the SARFAESI Act. Therefore, registration of FIR under Section 442 read with Section 448 of IPC against the petitioners is an abuse of the process of law which is liable to be quashed.”

The Court observed that the acts of the bank officials were in good faith as per the provisions of the SARFAESI Act and under directions of the Chief Judicial Magistrate. “The acts done by the officials are part of things done for the execution of statutory and lawful responsibilities.” the Court noted.

The FIR was filed by the de facto complainant who had purchased an apartment in a project called ‘Tuffnel Park’ by availing a housing loan of Rs.40 lakhs from Punjab National Bank. Later, the complainant received information that the apartment building was constructed on paddy land without getting the necessary environmental clearance. The complainant also claimed that there were issues related to water supply and electricity in the building. Apart from Sections 442 and 448, the petitioners were also booked under Sections 406, 409, 420, 120-B read with Section 34 of the Indian Penal Code.

The complainant alleged that the builder and the bank officials colluded to proceed with the illegal construction with dishonest intention. He claimed that the officials of the bank sanctioned loan for the construction of the project on paddy land despite being fully aware of it.

The Court noted that for quashing proceedings under Section 482 of the Cr.P.C. the High Court does not have jurisdiction to examine the correctness of the allegations per se. The Court also observed that the petitioners failed to show that the acts relating to the offences under Sections 406, 409, 420, 120-B read with Section 34 of the IPC were done in good faith under the provisions of the SARFAESI Act. Hence the Court refused to quash the FIR with regard to offences under the said sections .

“In the present case, the FIR reveals cognizable offences. The correctness or otherwise of the allegations levelled in the FIR is a matter to be tested during the course of the investigation.” the Court observed.

The Court also held that the final report of the Police under Section 173(2) of Cr.P.C. which stated that no offence appears to have been committed by the Petitioners was not a ground for the Court to exercise its power under Section 482 of Cr.P.C.

Counsel for the Petitioners: Advocates Madhu Radhakrishnan, Nelson Joseph, M D Joseph and Deepak Ashok Kumar

Counsel for the De Facto Complainant: Adv. Aysha Abraham

Public Prosecutor: Adv. Pushpaletha M K

Case Title: Pnb Housing Finance Ltd. V. State Of Kerala

Citation: 2023 LiveLaw (Ker) 229

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