Clean Hands and SARFAESI: Why Hiding Facts and Bypassing the DRT Can Lead to Dismissal with Costs in Writ Petitions.
In the high-stakes arena of debt recovery, borrowers often look for procedural loopholes to stall the inevitable loss of property. However, a recent judgment by the Bombay High Court (Nagpur Bench) serves as a stern reminder that the shield of the law is only available to those who act with integrity. The case of Vaishali Rahul Gondhane & Ors. v. Central Bank of India highlights a critical intersection between the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and the equitable principles of Writ jurisdiction.
The "Annexure" Trap: Why Attaching Documents Isn't Enough
One of the most significant takeaways from this judgment is the Court's refusal to accept that merely attaching documents to a petition constitutes full disclosure. The petitioners argued that because they had included a "bunch of documents" as annexures, they could not be accused of suppressing facts. The Court, relying on Supreme Court precedents, dismantled this argument. It is the duty of the litigant to candidly state material facts in the body of the petition and the affidavit, rather than expecting the judge to "fish out" facts from a mountain of paperwork.
"It is not for the Court to look into every word of the pleadings, documents and annexures to fish out a fact and it is for the litigant to come up-front and clean with all material facts and it is for the Court to decide the relevance of any fact for arriving at a decision."
The Doctrine of Clean Hands is Absolute
The Court emphasized that Writ jurisdiction under Article 226 is discretionary and equitable. In this case, the petitioners had failed to disclose that they had illegally re-entered the property by breaking locks after the bank had taken possession. Furthermore, they suppressed the fact that a family member had threatened self-immolation to obstruct a court-appointed bailiff. The Court held that such conduct "pollutes the stream of justice", rendering the petitioners ineligible for any relief, regardless of the legal merits of their case.
Banks are Not Private Investigators
A common tactic used by legal heirs is to claim that the bank failed to serve notice on every single successor of a deceased borrower. Here, the petitioners claimed the demand notice was illegal because it was served only on two brothers and not their sister. The Court rejected this, noting that the brothers had been paying installments and were in contact with the bank. It ruled that banks are not expected to conduct exhaustive inquiries to find every legal heir; rather, it is the duty of the heirs to inform the bank of their status and interest in the property.
The 12-Year Limitation Clock
The judgment provides clarity on the timeline for recovery under Section 36 of the SARFAESI Act. The petitioners argued the claim was barred by limitation. However, the Court clarified that since the account was declared a Non-Performing Asset (NPA) in 2014, the bank’s action in 2023 was well within the 12-year limitation period prescribed by the Limitation Act, 1963, for enforcement of a mortgage. This reinforces the long leash given to secured creditors to recover public money.
The "Alternate Remedy" Barrier
Finally, the Court reiterated that the High Court is not a shortcut to bypass the Debts Recovery Tribunal (DRT). Unless there is a flagrant violation of fundamental rights or a total lack of jurisdiction, borrowers must use the statutory machinery provided under the SARFAESI Act. By attempting to invoke Writ jurisdiction without justifying why they skipped the DRT, the petitioners were found to be abusing the process of the Court.
In conclusion, this judgment is a victory for procedural discipline. It warns litigants that technical legal arguments will not save a case if the underlying conduct is marked by suppression and obstruction. For the legal community, it underscores a timeless maxim: if you seek equity, you must come with clean hands.
Case: VAISHALI RAHUL GONDHANE AND OTHERS v. CENTRAL BANK OF INDIA, THR. CHIEF MANAGER/AUTH. OFFICER, NAGPUR AND OTHERS
Law: Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, Limitation Act, Constitution of India.
Citation: 2026:BHC-NAG:6635
Decision Date: 27-04-2026