Court dismisses Citron Infraprojects' plea against IFCI Limited under Securitisation Act, emphasizing full liability doctrine
Mumbai, April 29, 2026 - In a significant ruling, the Bombay High Court has dismissed the writ petition filed by M/s Citron Infraprojects Limited against IFCI Limited, affirming the secured creditor's right to proceed with actions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act). The petition sought to challenge the actions taken by IFCI Limited under the Act, arguing that payments made after the initiation of proceedings brought the outstanding liability below the threshold of 20% of the principal amount, as specified under Section 31(j) of the Act.
The Division Bench of Justice Manish Pitale and Justice Shreeram V. Shirsat ruled that the threshold condition of liability exceeding 20% is relevant only at the initiation of proceedings. Once the proceedings are initiated, subsequent payments by the borrower do not halt the creditor's right to continue with the enforcement measures under Section 13(4) of the Act unless the liability is discharged in full.
The judgment emphasized the legislative intent behind the Securitisation Act, which aims to facilitate the recovery of non-performing assets by allowing secured creditors to enforce their security interests. The court stated that the doctrine of full liability is crucial to prevent borrowers from thwarting the enforcement process through partial payments.
Citron Infraprojects had contended that the registration of IFCI's security interest in the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) was obtained after the action under the Act was initiated, rendering the proceedings invalid. However, the court found that the registration was validly completed on March 1, 2016, with the date of downloading the report on October 30, 2025, being irrelevant to the validity of the registration.
The court also dismissed Citron's reliance on judgments from other High Courts that supported the view that the threshold under Section 31(j) applies throughout the enforcement process. The Bombay High Court reiterated that once the threshold is satisfied at the initiation of proceedings, the secured creditor's right to enforce the security interest remains unaffected by partial payments.
The court's decision is a reminder of the robust framework provided by the Securitisation Act to secure creditors, ensuring the swift recovery of debts while maintaining the integrity of the financial sector.
Bottom line:-
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 31(j) - Threshold condition of liability exceeding 20% of principal amount and interest thereon is relevant only at the initiation of proceedings - Payments made subsequently do not halt proceedings once initiated.
Statutory provision(s): Section 13(2), Section 13(4), Section 31(j), Section 26D of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
M/s. Citron Infraprojects Limited v. IFCI Limited, (Bombay)(DB) : Law Finder Doc id # 2892365
