Bombay High Court
Citron Infraprojects Limited, Through … vs Ifci Limited, Through Its Authorised … on 29 April, 2026
Author: Manish Pitale
Bench: Manish Pitale
2026:BHC-OS:11039-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 14684 OF 2026
M/s. Citron Infraprojects Limited,
through its Director and Authorised Signatory
Gopal Lohiya & Anr. ... Petitioners
Versus
IFCI Limited, through its
Authorised Officer & Ors. ... Respondents
******
Mr. Yohaan Limathwalla a/w Ms. Ravleen Sabharwal (through
V.C.), Ms. Aarushi Yadav (through V.C.), Mr. Prakash Tandon
(through V.C.) and Ms. Yashi Bhatt i/by R. S. Justicia Law
Chambers for the Petitioners.
Mr. Charles De Souza a/w Mr. Nikhil Rajani i/by M/s. V.
Deshpande and Co. for Respondent No.1.
******
CORAM : MANISH PITALE AND
SHREERAM V. SHIRSAT, JJ.
DATE : 29th APRIL 2026
Order (Per Justice Manish Pitale) :
. The subject matter of challenge in this writ petition is an
order passed by the Debts Recovery Tribunal-II, Mumbai (DRT),
whereby interlocutory application bearing IA No. 981 of 2026 has
been rejected. The said application was filed in pending
Securitisation Application No. 487 of 2025. By the said
interlocutory application, the petitioner No.1 had prayed for stay
of taking over of possession of a property (secured asset) at the
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wpl-14684.26.docsteps taken under the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(Securitisation Act).
2. The petitioners have filed this petition directly, without
taking recourse to the alternative remedy of filing an appeal before
the Debts Recovery Appellate Tribunal (DRAT) on the ground that
respondent No.1 (secured creditor) could not have taken recourse
to the provisions of the Securitisation Act, due to Section 31(j)
thereof and that the DRT failed to appreciate that the entire action
of respondent No.1 was rendered without jurisdiction.
3. Considering the rival stands taken before this Court, detailed
reference to facts is not necessary, other than stating that the
respondent No.1, upon defaults committed by the petitioner No.1
in repayment of credit facilities, was constrained to issue notice
dated 30.09.2021 under Section 13(2) of the Securitisation Act.
Thereafter, when the petitioner No.1 failed to discharge its
liability in full within the period specified in the notice under
Section 13(2) of the Securitisation Act, respondent No.1 was
constrained to take action under Section 13(4) thereof and took
symbolic possession of the secured asset. The matter proceeded to
the Magistrate under Section 14 of the Securitisation Act, who
passed an order dated 18.08.2025 for taking physical possession
of the secured asset.
4. At this stage, on 24.09.2025, the petitioner No.1 filed the
said securitisation application and when the order passed by the
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Magistrate under Section 14 of the Securitisation Act was on the
verge of being executed, the said IA No. 981 of 2026 was filed in
the pending securitisation application.
5. The petitioner No.1 contended that interim stay was
necessary as the respondent No.1 could not have taken recourse to
the provisions of the Securitisation Act. Firstly, on the ground that
registration of the security interest of respondent No.1 in the
Central Registry of Securitisation Asset Reconstruction and
Security Interest of India (CERSAI) was obtained after the action
under the Securitisation Act had been undertaken. Secondly, it was
contended that even though at the time of issuance of notice under
Section 13(2) of the Securitisation Act, the amount due was more
than 20% of the principal amount and interest thereon, in the
light of payments made by the petitioner No.1 after initiation of
action under Section 13(2) of the Securitisation Act, the amount
due had clearly gone below 20% and therefore, further action
under the Securitisation Act was not sustainable.
6. The DRT rejected both the grounds and on that basis,
rejected the interlocutory application by the impugned order.
7. Mr. Yohaan Limathwalla, the learned counsel appearing for
the petitioners submitted that the DRT failed to appreciate the
admitted facts on record and wrongly rejected the interlocutory
application for stay filed on behalf of the petitioners. It was
submitted that recourse to the provisions of the Securitisation Act
was no longer available to the respondent No.1 by operation of
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Section 31(j) of the Securitisation Act and therefore, on this short
ground, the impugned order deserves to be set aside.
8. On the first ground pertaining to CERSAI registration, it
was claimed that although the notice under Section 13(2) was
issued on 30.09.2021, the CERSAI registration was dated
30.10.2025. The same was obtained after the securitisation
application was filed by the petitioner No.1 before the DRT,
thereby demonstrating that in the light of the amended provisions
of the Securitisation Act, particularly Section 26D thereof, the
respondent No.1 could not have proceeded against the petitioners.
Reliance was placed on full Bench judgment of this Court in the
case of Jalgaon Janta Sahakari Bank Ltd. & Anr. vs. Joint
Commissioner of Sales Tax and Anr., 2022 SCC OnLine Bom
1767.
9. On the second ground, it was submitted that during the
pendency of the action initiated on 30.09.2021 by the respondent
No.1, while issuing notice under Section 13(2) of the
Securitisation Act, and till the Magistrate passed the order under
Section 14 thereof, the petitioner No.1 had paid about Rs.4.74
crores to the respondent No.1, as a consequence of which the
amount due had fallen below the threshold of 20% indicated in
Section 31(j) of the Securitisation Act. It was submitted that the
moment this happened, the respondent No.1 was no longer
entitled to continue its action under the provisions of the
Securitisation Act, which the DRT failed to appreciate. In support
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of the said contention, reliance was placed on judgment of the
Punjab and Haryana High Court in the case of Renu Gupta & Anr.
vs. Debt Recovery Tribunal-II, Chandigarh & Ors., 2013 SCC
OnLine P&H 11038 and judgment of Madras High Court in the
case of Ensquare Engineering India (P) Ltd. vs. Authorised Officer,
Union Bank of India, 2017 SCC OnLine Mad 37788.
10. On the other hand, Mr. Charles De Souza, learned counsel
appearing for respondent No.1 (secured creditor) submitted that
there was no substance in both the grounds raised on behalf of the
petitioners and that the impugned order passed by the DRT was
clearly justified. As regards CERSAI registration, it was submitted
that although there could be no quarrel with the proposition of
law relied upon by the petitioners, on facts, the contention of the
petitioners is not sustainable. It was submitted that the CERSAI
registration report annexed to the petition itself records that such
registration dated back to 01.03.2016 and that it was merely
downloaded on 30.10.2025, which the petitioners mistook as the
date of registration. On this ground, it was submitted that the first
contention raised on behalf of the petitioners deserves no
consideration.
11. As regards the second ground, it was submitted that the
interpretation sought to be foisted on behalf of the petitioners on
Section 31(j) of the Securitisation Act, was in the teeth of the
scheme of the said statute. Attention of this Court was invited to
Section 13(4) of the Securitisation Act, which specifically uses the
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words ‘borrower fails to discharge his liability in full’. It was
submitted that the situations indicated in Section 31 of the
Securitisation Act, where the provisions of the said statute would
not apply, are to be examined at the threshold, when recourse is
taken to the Securitisation Act and not after the process has been
triggered. Reliance was placed on judgment of Andhra Pradesh
High Court in the case of Azam Foods Products Pvt. Ltd. vs. Debt
Recovery Appellate Tribunal & Ors., 2010 SCC OnLine AP 399.
On this basis, it was submitted that the writ petition deserved to
be dismissed.
12. Having heard the learned counsel for the rival parties, we
find that two specific grounds have been raised on behalf of the
petitioners in order to claim that the impugned order, rejecting
their interlocutory application for stay, deserves to be set aside.
13. We find on a perusal of the documents on record that the
first ground pertaining to CERSAI registration is unsustainable on
the face of the record. A perusal of the CERSAI registration report
annexed to the petition itself shows that the respondent No.1
obtained registration of its security interest in the present case on
01.03.2016. The report specifically records that the security
interest was created in the respondent No.1 on 04.02.2016 and
that it was registered with the CERSAI Registry on 01.03.2016.
The date 30.10.2025 pertains only to the date of downloading of
the report. The petitioners have mistakenly proceeded on the basis
that the date of downloading of the report is the date of
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registration, leading to the erroneous submissions made before the
DRT and this Court.
14. Once this aspect becomes clear on facts, applying Section
26D of the Securitisation Act and the law laid down by the full
Bench of this Court in the case of Jalgaon Janta Sahakari Bank
Ltd. & Anr. vs. Joint Commissioner of Sales Tax and Anr. (supra),
since the petitioner No.1 has CERSAI registration dating back to
01.03.2016, there is no impediment in the respondent No.1
proceeding to take action under the provisions of the
Securitisation Act. Hence, the first ground raised on behalf of the
petitioners is rejected.
15. As regards the second ground, it would be necessary to refer
to Section 31 of the Securitisation Act, which reads as follows :
“31. Provisions of this Act not to apply in certain cases.–
The provisions of this Act shall not apply to–
(a) a lien on any goods, money or security given by or
under the Indian Contract Act, 1872 (9 of 1872) or the Sale
of Goods Act, 1930 (3 of 1930) or any other law for the time
being in force;
(b) a pledge of movables within the meaning of section 172
of the Indian Contract Act, 1872 (9 of 1872);
(c) creation of any security in any aircraft as defined in
clause (1) of section 2 of the Aircraft Act, 1934 (24 of 1934);
(d) creation of security interest in any vessel as defined in
clause (55) of section 3 of the Merchant Shipping Act, 1958
(44 of 1958);
(e) ********
(f) any rights of unpaid seller under section 47 of the Sale
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of Goods Act, 1930 (3 of 1930);
(g) any properties not liable to attachment (excluding the
properties specifically charged with the debt recoverable
under this Act) or sale under the first proviso to sub-section
(1) of section 60 of the Code of Civil Procedure, 1908 (5 of
1908);
(h) any security interest for securing repayment of any
financial asset not exceeding one lakh rupees;
(i) any security interest created in agricultural land;
(j) any case in which the amount due is less than twenty
per cent. of the principal amount and interest thereon.”
16. The aforesaid provision is found in the chapter pertaining to
miscellaneous provisions. A proper reading of Section 31(j) of
Securitisation Act makes it clear that the moment the amount due
exceeds 20% of the principal amount and interest thereon, the
secured creditor like the respondent No.1 herein, is well within its
rights to take recourse to the provisions of the Securitisation Act.
Section 13 pertains to enforcement of security interest. Once the
threshold of Section 31(j) is crossed, a secured creditor is entitled
to enforce the security interest. Section 13(4) of the Securitisation
Act specifically provides for the measures that can be undertaken
by the secured creditor, which include taking possession of the
secured assets, taking over the management of the business of the
borrower, appointing any person to manage the secured assets, the
possession of which is taken over and even to issue notice to any
person who has acquired any of the secured assets from the
borrower, to pay the secured creditor, so much of the money as is
sufficient to pay the secured debt. It is crucial to note that Section
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13(4) of the Securitisation Act provides that if the borrower fails
to discharge his liability ‘in full’ within the period specified in the
notice issued under sub-section (2) of Section 13, the secured
creditor is entitled to take recourse to the aforementioned
measures.
17. Thus, it is abundantly clear that in order to avoid the
measures which the secured creditor is entitled to undertake under
sub-section (4) of Section 13 of the Securitisation Act, the
borrower has to discharge its liability ‘in full’ within the period
specified in sub-section (2) of Section 13 of the Securitisation Act.
It is therefore only logical to conclude that any part payment by
the borrower would not save it from the measures which the
secured creditor is entitled to undertake under Section 13(4) of
the Securitisation Act.
18. The aforesaid provision makes it clear that once the
threshold indicated in Section 31(j) of the Securitisation Act is
satisfied i.e. the amount due exceeds 20% of the principal amount
and interest thereon and the secured creditor initiates the
proceedings by issuing notice under Section 13(2) of the
Securitisation Act, to avoid precipitate action under Section 13(4)
thereof, the borrower has to discharge its liability ‘in full’. In other
words, part repayments made after triggering of the action under
Section 13(2) of the Securitisation Act, whereby the amount due
may dip below 20% of the principal amount and interest thereon,
would not halt the process and in any case, it cannot disentitle the
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secured creditor from continuing the action under the provisions
of the Securitisation Act. We find substance in the contention
raised on behalf of the respondent No.1 (secured creditor) that
Section 31 of the Securitisation Act indicating as to cases where
provisions of the said statute will not apply concerns situations
only at the threshold and once they are satisfied at the threshold,
midstream during the action being pursued by the secured
creditor, it cannot be disentitled merely because some payments
are made by the borrowers that may even dip the amount due
below 20% of the principal amount and interest thereon.
19. The said interpretation is in line with the objects and reasons
for which the Securitisation Act was enacted. The Narasimham
Committee and the Andhyarujina Committee were constituted by
the Central Government for the purpose of examining banking
sector reforms considering the need for changes in the legal system
in respect of the slow pace of defaulting loans and the mounting
levels of non-performing assets of banks and financial institutions.
It was found that the existing framework requiring banks and
financial institutions to institute recovery proceedings was not
sufficient and that it was necessary to facilitate securitisation of
financial assets of banks and financial institutions. This was
necessary in the context of the global position and the necessity of
providing a legal framework to keep pace with the changing
commercial practices and financial sector reforms. It would be
against the purpose of the enactment of the Securitisation Act to
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hold that upon some payments made after notice under Section
13(2) thereof, that may dip the amount due below 20% of the
principal amount and interest thereon, the secured creditor would
be relegated to the old existing cumbersome framework of
recovery of dues.
20. Considering the said objects and reasons for which the
Securitisation Act was enacted, it would be inappropriate to accept
the contention raised on behalf of the petitioners that the amounts
repaid after action under the Securitisation Act was initiated by the
respondent No.1 must be taken into consideration to hold that the
respondent No.1 (secured creditor) was no longer entitled to
continue its action under the said statute.
21. We find that the Andhra Pradesh High Court in the case of
Azam Foods Products Pvt. Ltd. vs. Debt Recovery Appellate
Tribunal & Ors. (supra) correctly interpreted the provisions of the
Securitisation Act to reject an identical contention raised before it
on behalf of a borrower. The relevant portion of the said judgment
reads as follows :
“30. Sub-section (2) of Section 13 enables the secured
creditor to enforce the security interest where any borrower
who is under a liability to a secured creditor under a security
agreement defaults in repayment of a secured debt or any
instalment thereof and his account in respect of such debt if
classified by the secured creditor as non-performing asset, to
require the borrower by a notice in writing to discharge in full
his liability to the secured creditor within sixty (60) days from
the date of notice; and where the borrower fails to discharge
in full such liability, the secured creditor is entitled to exercise
all or any of the rights under sub-section (4).
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31. Sub-section (4) of Section 13 enacts that where the
borrower fails to discharge his liability in full within the
period specified in sub-section (2), the secured creditor may
inter alia take possession of the secured assets of the borrower
including the right to transfer by way of lease, assignment or
sale for realizing the secured asset.
32. Since the classes of cases/circumstances enumerated in
Section 31 are excluded from the definition of security
interest, defined in Section 2(zf), it follows that the matrix of
enforcement provisions is inapplicable to the excluded classes
of cases specified in Section 31. On a true and fair
construction of the provisions of Section 13, the inference is
compelling that where enforcement provisions of Section 13
are validly initiated, the secured creditor is entitled to pursue
the enforcement provisions to the logical conclusion by taking
recourse to one or more of the measures enumerated in sub-
section (4) of Section 13 to recover the secured debt, in full.
33. Sub-section (8) of Section 13 provides that if the dues
of the secured creditor together with all costs, charges and
expenses incurred by him are tendered to the secured creditor
at any time before the date fixed for sale or transfer, the
secured asset shall not be sold or transferred by the secured
creditor, and no further steps shall be taken by him for
transfer or sale of that secured asset. This provision
considered in the context of the other provisions of Section
13 (referred to above), signals the legislative intent that the
sale or transfer of the secured asset by the secured creditor is
prohibited only where its dues (the liability in full – vide sub-
sections (2) and (4) of Section 13) together with all costs,
charges and expenses incurred are tendered at any time before
the date fixed for the sale or transfer of the secured asset. If
there is no tender of the whole of the liability, the sale or
transfer of the secured asset may proceed.
34. On a true and fair construction of the relevant
provisions of the Act (adverted to above), the provisions of
Section 31 enumerate the classes of cases and circumstances
on fulfilment of which an interest which would otherwise be a
security interest is not so; and in such circumstance no
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enforcement provisions of the Act, including as set out in sub-
section (4) of Section 13 would not thereafter become
inoperative. In the context of Section 31(j) therefore, any
payment made by a borrower to a secured creditor after
issuance of the notice under Section 13(2) would not affect or
invalidate pursuit of the remedies available to a secured
creditor under sub-section (4), even where on giving credit to
such subsequent payments made, the amount due would fall
below 20% of the principal amount and interest thereon. On
this analysis, the provisions of Section 31(j) and in particular
clause (j) thereof are threshold conditions for valid initiation
of processes under the Act for enforcement of the security
interest.”
22. On the other hand, we are unable to agree with the view
adopted by the Punjab and Haryana High Court in the case of
Renu Gupta & Anr. vs. Debt Recovery Tribunal-II, Chandigarh &
Ors. (supra). It is to be noted that in the said judgment, the Punjab
and Haryana High Court did not refer to the crucial words ‘in
case the borrower fails to discharge his liability in full’ in Section
13(4) of the Securitisation Act. The overall scheme of the
Securitisation Act was also not discussed in the said judgment and
therefore, we are unable to agree with the said view.
23. A perusal of the judgment of Madras High Court in the case
of Ensquare Engineering India (P) Ltd. vs. Authorised Officer,
Union Bank of India (supra) shows that the petitioners cannot rely
upon the same. A perusal of the said judgment shows that in the
said case, the bank conceded that the outstanding amount was less
than 20% of the principal amount and interest thereon and
therefore, recourse could not have been taken to the provisions of
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the Securitisation Act.
24. In the present case, the learned counsel for the petitioners
fairly conceded that on the date the notice under Section 13(2) of
the Securitisation Act was issued i.e. 30.09.2021, the amount due
was more than 20% of the principal amount and interest thereon.
The moment this is conceded, the initiation of action under the
Securitisation Act on the part of respondent No.1 cannot be found
fault with. As found hereinabove, once the action is triggered,
unless the borrower/defaulter discharges the liability ‘in full’, the
secured creditor like the respondent No.1 herein is entitled to
continue pursuing action under the provisions of the Securitisation
Act. Therefore, we find no substance even in the second ground
raised on behalf of the petitioners. There is no question of lack of
jurisdiction or authority with the respondent No.1 in the facts and
circumstances of the present case, to continue to pursue action
under the Securitisation Act. In any case, we find that no prejudice
is caused to the petitioners as they are entitled to approach the
DRT in the pending securitisation application, at each stage of the
actions being undertaken by the respondent No.1 in enforcing its
security interest. Therefore, we find no substance in the present
writ petition and it deserves to be dismissed.
25. Accordingly, the writ petition is dismissed. Pending
applications, if any, stand disposed of.
(SHREERAM V. SHIRSAT, J.) (MANISH PITALE, J.)
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