Interim restraint on SARFAESI action by a co-operative bank granted after prima facie challenge to its statutory entitlement.

A co-operative bank's use of the SARFAESI Act, 2002 was challenged on the ground that a banking co-operative society could not invoke that remedy, with reference to Sections 56(1)(a) and 56(cc) of the Banking Regulation Act, 1949. At the interim stage, the Calcutta HC found a prima facie case in favour of the petitioners and held that the balance of convenience lay with them. It therefore restrained the bank from taking any further step against the petitioners under the SARFAESI Act until further orders, granting temporary protection from coercive action.

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Issues: Whether a co-operative bank could invoke the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and whether interim restraint ought to be granted against further action under that Act.

Analysis: The challenge was directed against the bank's resort to the SARFAESI Act, 2002 on the ground that a co-operative society carrying on banking business was not entitled to invoke that enactment. The Court noted the reliance placed on prior decisions and the reference to Sections 56(1)(a) and 56(cc) of the Banking Regulation Act, 1949. At the interim stage, the Court held that the petitioners had made out a prima facie case and that the balance of convenience and inconvenience lay in their favour. On that basis, the Court restrained the bank from taking any step against the petitioners under the SARFAESI Act, 2002 until further orders.

Conclusion: The petitioners obtained interim protection against coercive measures under the SARFAESI Act, 2002, and the co-operative bank was temporarily restrained from proceeding further.

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