Case Note & Summary
The Supreme Court dismissed a special leave petition filed by Petitioners against a Bombay High Court order that had directed police assistance to take possession of a school which was a secured asset. The petitioners had obtained financial assistance from Respondents but defaulted on repayment of about Rs. 5.06 crore. A notice under Section 13(2) of the SARFAESI Act was issued in September 2021, followed by multiple broken promises, undertakings, and a Memorandum of Understanding. The High Court, noting the petitioners' conduct of trespassing after possession was handed over, directed police assistance and restrained the petitioners from entering the asset. The Supreme Court initially stayed the High Court order but later, on 19th August 2025 and 23rd September 2025, passed workable arrangements to protect students' interests, including appointment of an Administrator. However, the petitioners failed to cooperate with the Administrator and continued to admit students despite orders. The Court found the petitioners in contempt but did not initiate proceedings, instead directing closure of the school from 1st May 2026, issuance of transfer certificates to students, and delivery of vacant possession to the secured creditor with police assistance. The secured creditor was directed to obtain a fresh valuation report before auction. The special leave petition was dismissed with costs of Rs. 1 lakh payable to the secured creditor.
Headnote
A) SARFAESI Act - Enforcement of Security Interest - Section 13 - Default and Possession - Borrowers who failed to repay debt of Rs. 5.06 crore and repeatedly breached undertakings and court orders are not entitled to any further indulgence - Court directed closure of school and delivery of vacant possession to secured creditor with police assistance (Paras 3-14). B) Contempt of Court - Wilful Disobedience - Repeated Breach of Orders - Petitioners acted in wilful and deliberate disobedience of orders dated 19th August 2025 and 23rd September 2025 by not permitting Administrator to assume charge and by admitting students despite restraint - Court refrained from contempt proceedings but warned of strict action for future non-compliance (Paras 10, 12, 18). C) Education Law - Closure of School - Protection of Students' Interests - Final examinations having been conducted and parents informed, Court directed closure of school from 1st May 2026 and issuance of transfer certificates to students for enrollment in nearby schools (Paras 11, 13). D) SARFAESI Act - Valuation of Secured Asset - Fresh Valuation Report - Since petitioners were in possession at time of earlier valuation, secured creditor must obtain fresh valuation from Government valuer before auction (Para 15).
Issue of Consideration
Whether the petitioners, who had defaulted in repayment and repeatedly breached court orders, should be allowed to continue running the school on the secured asset, and what directions are necessary to enforce the secured creditor's rights and protect students' interests.
Final Decision
The Supreme Court dismissed the special leave petition, directed closure of the school from 1st May 2026, ordered issuance of transfer certificates to students, granted liberty to secured creditor to obtain police assistance for possession, directed fresh valuation report before auction, recalled appointment of Administrator, and imposed costs of Rs. 1 lakh on petitioners payable to secured creditor.
Law Points
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act
- 2002
- Section 13
- Contempt of Court
- Wilful Disobedience
- Closure of School
- Possession of Secured Asset
- Administrator
- Transfer Certificates
- Valuation Report
