K. Karunanithi v. Axis Bank & Ors.

What happened

A secured creditor bank, which holds properties mortgaged in its favour and has started proceedings under the SARFAESI Act, filed WP (Crl.) (MD) No. 2639 of 2025 for a writ of mandamus restraining the State authorities from taking action under the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997 in respect of those properties, and an interim order of 19 December 2025 restrains attachment of them. A depositor applied to be impleaded as the seventh respondent, saying that with his wife and daughter he had deposited ₹49 lakh with the financial establishment, that more than 2,645 depositors had suffered loss from its default, and that any order on attachment, sale, custody, accounting or distribution of the proceeds would affect his claim, so that his presence was necessary. The writ petitioner opposed, saying that the writ petition concerns only whether the mortgaged properties can be proceeded against under the Act when the bank has started proceedings under the SARFAESI Act, that the applicant produced no material of his deposit and did not even say he is a depositor, that the financial establishment has raised no claim against the properties, and that the applicant has no legally enforceable interest in them.

Questions before the court

• Is a depositor of a financial establishment a necessary or proper party to a secured creditor's writ petition about action over the properties mortgaged to it under the TNPID Act?

Why the court ruled this way

The main writ petition was brought by the secured creditor with a specific and limited grievance, against the proceedings under the Act in respect of the mortgaged properties (paragraph 12). The applicant claims an independent monetary claim as a depositor against the financial establishment, which by itself confers no enforceable right over the subject properties, and he claims no right, title or interest in them, so that his claim, if any, is against the establishment and not against the mortgaged properties (paragraphs 13–14). His apprehension that an order in the writ petition may affect his eventual recovery is not a ground for impleading him, and the question of priority between the secured creditor and depositors can be considered in appropriate proceedings in accordance with law (paragraph 15). He is therefore neither a necessary nor a proper party (paragraph 16).

Controlling point

A depositor whose claim is against the financial establishment and who has no right in the mortgaged properties is neither a necessary nor a proper party to the secured creditor's writ petition over those properties, and the question of priority between the secured creditor and depositors is for appropriate proceedings.

Order and next steps

The Court dismissed the application for impleadment, and made clear that the dismissal does not prevent the applicant from pursuing any remedy available in law to recover the amount he says he deposited or from participating in any statutory proceedings for the distribution of the assets or proceeds, subject to the orders of the competent authority or Court.

Practical implications

A depositor who wants to protect his claim should pursue the proceedings for recovery from the financial establishment and for the distribution of its assets, and be ready to show his deposit, rather than seeking to join a secured creditor's challenge over mortgaged properties.

Limits of this ruling

• The Court decided only the impleadment application and did not decide the merits of the secured creditor's writ petition, the priority between the secured creditor and the depositors, or the validity of the applicant's deposit, which the bank said was not proved.