Civil Suit for Declaration as Null and Void barred u/s 34 of SARFAESI Act when Bank Account declared as NPA: Allahabad HC

The Allahabad High Court has ruled that civil suits challenging NPA classifications are barred under Section 34 of SARFAESI Act when the debt involves secured assets. Justice Rohit Ranjan Agarwal dismissed a borrower's attempt to nullify an NPA declaration through civil court, affirming that specialized debt recovery tribunals (DRTs) hold exclusive jurisdiction. The case involved a ₹9 crore term loan where the borrower alleged wrongful NPA tagging due to technical defaults. The judgment reinforces that banks have discretion in NPA classification per RBI guidelines, not subject to civil court review. This strengthens lenders' recovery processes while preventing parallel litigation in different forums. Legal experts note this streamlines recovery but caution borrowers to promptly use DRT mechanisms for grievances. The ruling may impact thousands of pending civil suits against NPA classifications, particularly by MSME borrowers. Banks welcome this as reducing frivolous litigation that delays recoveries, though some consumer rights advocates argue it limits redressal options for genuine cases of wrongful classification.