The Supreme Court has directed the permanent closure of a school run by defaulting borrowers and permitted the secured creditor to take possession of the property for auction under the SARFAESI Act, citing repeated non-compliance and contemptuous conduct by the management.
The bench of Justice Dipankar Datta and Justice Satish Chandra Sharma observed that the petitioners had shown “utter disregard to the rule of law” and had even prevented the Administrator from assuming charge. The State authorities supported these claims, confirming non-cooperation and continued defiance by the management.
The order came in Chaitanya Bahuuddeshiya Shikshan Prasarak Mandal & Ors. v. Auxilo Finserve Pvt. Ltd. & Ors., where the Court dismissed the Special Leave Petition filed by the school management and upheld strong enforcement measures against them.
The dispute arose after the petitioners defaulted on repayment of financial assistance amounting to approximately ₹5.06 crore, following which proceedings were initiated under Section 13 of the SARFAESI Act. Despite multiple undertakings before the High Court, the Debts Recovery Tribunal, and even the Supreme Court, the petitioners consistently failed to honour their commitments.
The Court noted a pattern of conduct where the petitioners gave repeated assurances to repay dues but failed to act, even after entering into a Memorandum of Understanding and seeking extensions. It also took serious note of their failure to comply with earlier directions to inform parents about discontinuation of academic activities and their obstruction in handing over control to an Administrator appointed to safeguard students’ interests.
Balancing student welfare with enforcement of creditor rights, the Court noted that final examinations had already been conducted and parents had been informed about alternative nearby schools. In this backdrop, it ordered that the school be closed permanently with effect from May 1, 2026. The management was directed to immediately issue transfer certificates to all students to enable their admission elsewhere.
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The Court further granted liberty to the secured creditor to seek police assistance to take peaceful possession of the secured asset. It directed local authorities, including the Superintendent of Police, to ensure implementation of the order and prevent any interference by the petitioners. Upon taking possession, the creditor has been allowed to proceed with auction of the property, subject to obtaining a fresh valuation from a government valuer.
Importantly, the Court recalled the appointment of the Administrator, noting that the institution did not receive government grants and that continued intervention was no longer necessary in light of the closure order.
While the Court refrained from initiating immediate contempt proceedings, it issued a stern warning to the petitioners against any further obstruction, making it clear that any non-compliance would invite strict action. The petitioners were also directed to pay costs of ₹1 lakh to the secured creditor.
Case Details
Case Title: Chaitanya Bahuuddeshiya Shikshan Prasarak Mandal & Ors. Versus Auxilo Finserve Pvt. Ltd. & Ors.
Citation: JURISHOUR-889-SC-2026
Case No.: Special Leave Petition (C) No. 19540 Of 2025
Date: 22/04/2026
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