Collusion between Bank Officials and Builders – SARFAESI Act – a Case Study

I strongly believe that implementing the provisions of the SARFAESI Act, 2002 making a good balance between the object and the interests of the borrower is a very complicated exercise. There are so many judgments on the provisions of the SARFAESI Act, 2002 and still certain areas remain complicated. I would like to share a typical case presented to me in the recent past and the facts of the case are as follows:

Facts:

Mr.A is a Senior Software Engineer working in a reputed Company and by availing a loan from “L” Bank; he has purchased a building property in a City (hereinafter referred to as “first loan”). Mr.A was paying all his installments to the Bank in respect of his first loan. Thereafter a builder has approached Mr.A to purchase another property through the Bank “L”. Though the documents were presented by the builder to Mr.A, Mr.A has believed the Bank Officials and requested the Bank officials to look into all the legalities and details about the property. Mr.A was assured by the Bank Officials that he can buy the property. After the specific assurance from the officials of the Bank “L”, Mr.A has purchased another property in the City through the Bank “L” (hereinafter referred to as the ‘second loan’). While Mr.A was paying all the installments in respect of the two loans, he has received a notice from a third person and in respect of his second property and he was shocked to know that his second property doesn’t actually belong to the builder. Apart from the loan amount, Mr.A has also paid substantial amount of money to the ‘builder’. Though Mr.A was not used to do enquiries and not faced with any litigation in life, Mr.A is forced to do his independent enquiry regarding the second property and he finally found that he was cheated by the Bank Officials and the Builder. Mr.A found that the Bank Officials of “L” has actually helped the builder knowingfully that the builder can not sell the property and do not possess any title over the property. Immediate to the occurrence of fraud, Mr.A has approached some professionals to file a criminal case at the Bank Officials and the real estate people, but, soon he has realized the difficulties in approaching the authorities and getting justice from the Courts. Mr.A has also spent substantial amount of money on the litigation to bring the fraudulent officials of “L” and the builders to book. While the process of pursuing a criminal case against the Bank Officials of “L” and the builder was going on, surprisingly Mr.A has received a notice from “L” bank asking to repay the loan amount in respect of the Second Loan and he has also seen a demand in the demand notice from the Bank that if Mr.A does not pay the Second Loan Amount, then, they proceed against the First Loan Property. Mr.A is literally shocked as to why he has to pay the Second Loan Amount as he was literally cheated by the Bank Officials itself and he is also shocked as to how the Bank can proceed against his First House Property as he was paying all the installments in respect of his First Loan. Mr.A expressing an opinion that all his hard earned money is invested in the property and he can not venture loosing the property. Mr.A has come to the stage that only suicide will be a solution for him under these circumstances.

Analysis:

If we look at the problem above it is really complicated. The Bank Officials or the Bank is concerned at getting the installments or getting the outstanding due in respect of the two loans sanctioned to Mr.A. The Bank is not concerned at the fraud played by some of their officials while getting the loan sanctioned to Mr.A. The Bank sought to blame Mr.A for not scrutinizing the papers presented by the builder carefully. In the given case above, Mr.A has in fact received a notice under section 13 (2) of SARFAESI Act, 2002 in respect of the second loan, however, the First House Property is shown as liable to be attached in the event of failure to pay the outstanding due. On this point, “L” Bank may not have any point as there is no secured asset in fact to straight away take possession of the First House Property of the “A” as he has not defaulted any installments and the Bank is only concerned with the Second Loan. But, the larger issue is as to what is the remedy available to the Borrower Mr.A and is it correct to say that the DRT is not concerned with the fraud played by the Bank Officials if the appeal is presented to the DRT finally. The settled legal position under section 17 of SARFAESI Act, 2002, as perceived, is that the DRT will only look into as to whether there are any procedural lacunae on the part of the Bank while invoking the provisions of the SARFAESI Act, 2002. If we apply that yard-stick, Mr.A may have to face numerous problems and may be confused as to how to expose his case and get justice. If Mr.A approaches the High Court, the High Court may say that alternative remedy is available and Mr.A can not approach Civil Court in view of the specific bar under section 34 of the SARFAESI Act, 2002.

Point to be noted:

The case presented above in the light of legal complications emphasizes the need for DRT to look into various connected issues in an appeal filed by the borrower or any aggrieved under section 17 of SARFAESI Act, 2002.

Note: the views expressed are personal and the facts do not exactly represent any of the case being handled by me at present.

Can a borrower dispute the outstanding due under section 17 of SARFAESI Act, 2002?

We all aware of the object behind SARFAESI Act, 2002 and it is to enable the banks to recover the debts speedily and to enable the banks to reduce NPAs. Despite lot of criticism that SARFAESI Act, 2002 is draconian law and it enables the Banks to harass the borrowers, Banks suffer to recover their dues in the absence of a special legislation like SARFAESI Act, 2002. It is for sure that no Bank can recover their dues speedily if they have to approach the Civil Court for recovery of debt. We all know as to how to prolong the matters before a Civil Court for years. Thus, the object behind SARFAESI Act, 2002 is laudable. However, it is very often pointed-out that the Banks misuse the provisions of SARFAESI Act, 2002 with ulterior motive and it is also a known fact that the Banks apply the provisions of SARFAESI Act, 2002 mechanically. SARFAESI Act, 2002 is an interesting litigation though there is confusion and complication with many judgments on various issues and by failing to understand the law in the right perspective. No borrower should compromise with his rights and he can very well protect his rights through appropriate forum though the Bank proceeds under the provisions of SARFAESI Act, 2002. There are many interesting and complicated issues under SARFAESI Act, 2002 and one of the interesting aspects is as to whether the borrower can dispute the outstanding due with the Bank. As everybody feels, the Bank never makes any demand for repayment without proper Statement of Account. However the legislation requires the Bank officials to look into the objections of the borrower in reply to the demand notice and law requires the law officials to apply their mind while considering the objections from the borrower. While in some cases, the Bank gives a detailed reply to the objections raised by the borrower, the Bank mechanically either ignores or rejects the objections. After the process of demand under section 13 (2) of the Act and after addressing the objections from the borrower, the Bank proceeds to take ‘symbolic possession’ of the secured asset by sending a notice to the defaulter under section 13 (4) of the Act. While the law says that no borrower can challenge the demand notice under section 13 (2), the Act provides the borrower a right to file an appeal under Section17 of the Act challenging the notice under section 13 (4) and subsequent steps. Not only can the borrower, any person aggrieved can prefer an appeal to the concerned Debt Recovery Tribunal under section 17 of the SARFAESI Act, 2002. Now the issue is as to what the Debt Recovery Tribunal should look into while considering the Appeal filed by the borrower or any aggrieved under section 17 of the SARFAESI Act, 2002? The settled proposition is that the Debt Recovery Tribunal has to see as to whether the Bank has followed the procedure prescribed under the SARFAESI Act rightly or not. The proposition can not be interpreted and seen that the DRT will only look at the form of notice under section 13 (2), the requirements, the reply to the objections if any and the statutory periods. The DRT should look into all connected issues in an appeal under section 17 of SARFAESI Act, 2002. The DRT should look into as to whether the Account has really become NPA or not, the terms of loan, the mortgage, the subsequent agreements between the Bank and the borrower and plethora of other issues as raised by the borrower in an appeal under section 17 of SARFAESI Act, 2002. Once the Bank initiates proceeding under the provisions of SARFAESI Act, 2002, the borrower may not be able to approach the High Court in view of alternative remedy and is not permitted to approach the Civil Court in view of the specific bar under section 34 of the SARFAESI Act, 2002. As such, the remedy provided under section 17 of SARFAESI Act, 2002 should be effective to the borrower.

If we look at the question as to whether the borrower can dispute the outstanding due in an appeal under section 17 of SARFAESI Act, 2002, I would strongly feel that the DRT can and should look into all issues and including the dispute with regard to the validity of the claim. Upon the specific plea from the borrower with regard to the claim of the Bank, the DRT can follow its own procedure as prescribed and can give a finding. It is true that normally no Bank official will commit a mistake in arriving at the outstanding due as the Banks will be systematic in maintaining records and as they will strictly follow the guidelines prescribed by the Reserve Bank of India. However, on the presumption that the Bank will never commit a mistake in calculating outstanding due, the borrower can not be denied of his right to challenge the outstanding claimed by the Bank. It is true that the DRT can not do a roving inquiry into the all allegations with regard to the outstanding amount, however, if the borrower is specific and clear in disputing the outstanding amount claimed by the Bank, then, the DRT is bound to look into it and can give a ruling in favour of the borrower if he is right in his contention. Banks and Bank officials do commit mistakes at times and the borrower should not be suffered on the illogical notions that the Banks or Bank Officials will never commit mistakes. If the DRT restricts the grounds to be taken by the borrower in an appeal under section 17 of SARFAESI Act, 2002, then, where does he go if he is aggrieved by some illegal action of the Bank in the course. Supposing a case where the Bank claims 56 lakhs instead of the actual outstanding of 46 lakhs, where do a borrower go asking for the rectification of the mistake committed by the Bank and we can not expect that every borrower is highly educated. As such, there are issues and despite the presumption that the Banks or Bank officials will not commit any mistakes in calculating the outstanding due, the borrower should be allowed to raise all objections in his appeal under section 17 of SARFAESI Act, 2002. When it comes to granting the relief or asking the Bank not to proceed further, the DRT may have to look into various issues into consideration.

Note: the views expressed are my personal.

SARFAESI ACT, 2002 and various complicated issues?

We all know the object of SARFAESI Act, 2002 and it is to assist the Banks in realization of their debt through proceeding against the “Secured Asset”. There are people and professionals supporting SARFAESI Act, 2002 on the ground that in the absence of such a stringent legislation, it is very difficult to deal with the defaulters and they, in the course, become habitual defaulters. On the other hand, purely based on the experience and difficulties, there are people and professionals criticizing the SARFAESI Act, 2002 as it will enable the Banks to harass the borrowers and defeat the interests of the borrowers by harping on technicalities. There are so many judgments on various issues and provisions of SARFAESI Act, 2002 from time to time. Still, in my opinion, there tend to be complicated issues while dealing with a “secured asset” using the provisions of SARFAESI Act, 2002. The process of realization of debt using the provisions of SARFAESI Act, 2002 appears to be simple as follows:

1. Based on the guidelines issued by the Reserve Bank of India, the Bank can classify an Account as NPA and once the account of the borrower becomes NPA, the Bank can proceed with taking action under the provisions of SARFAESI Act, 2002.

2. After classifying an account as NPA, the Bank issues a notice under section 13 (2) of the Act demanding the borrower to settle all the outstanding dues as mentioned in the notice.

3. The borrower can reply to the notice under section 13 (2) of the Act and place his objections to the demand. The Bank should deal with the objections of the borrower and can send a reply.

4. Once the Bank completes the process of issuance of notice under section 13 (2) and dealing with the objections, the Bank can proceed with taking possession of the “secured asset” under section 13 (4) of the Act.

5. As stated in the Act, the borrower can file an appeal challenging the notice issued under section 13 (4) of the Act and the DRT can pass interim orders and can ask the Bank not proceed further.

6. If there is no restraint from the DRT, then, the Bank can further proceed with taking physical possession of the property and can proceed with auctioning the property in accordance with the provisions of the Act an the rules thereunder.

7. If the Bank could auction the property in accordance with the rules, the Bank will first realize the outstanding dues of the borrower and the remaining amount will be given to the borrower. If the amount realized through auction is not sufficient to meet the outstanding dues, then, the Bank proceeds further against the borrower.

The various steps, in brief, as stated above may appear to be very simple, but, practically, there exist so many difficulties and it will be extremely difficult to make a balance between the object of the Act and the interests of the borrower thought the legislation itself is sought to make a good balance in this regard. The complicated issues, according to me, can be as follows:

1. Assuming a case that the borrower takes a stand that he never received a notice under section 13 (2) of the Act or any other subsequent notice, then, how to deal with the issues?

2. Assuming a case that the borrower seriously disputes the outstanding as claimed under section 13 (2) of the Act, then, can the DRT adjudicate the outstanding due and if it can, what is the procedure?

3. Is it acceptable or reasonable to say that the determination of outstanding due by the Bank after considering objections from borrower is final?

4. Assuming a case that the borrower could not find anything illegal when it comes to taking steps under section 13 (2) and section 13 (4) of the Act, then, will it stop the borrower in questioning the subsequent illegalities in taking physical possession of the property or conducting the action etc.?

5. Is it correct to support the powers of the Magistrate Court in providing assistance to the Bank in taking physical possession of the property without giving any notice to the borrower or without having any look into the entire case?

6. Assuming a case that the borrower challenges the notice issued by the Bank under section 13 (4) of the Act and the Bank proceeds with taking further steps, what is the procedure to be followed in taking note of further proceedings of the Bank or illegalities committed by the Bank?

7. Is it correct to say that the borrower should proceed to question the illegalities of the Bank if any at each and every state though his appeal challenging the Bank’s notice under section 13 (4) of the Act is pending?

8. What happens if the sale of the property gets concluded and the borrower wins his appeal finally under section 17 of the Act?

9. Is it logical to say that the borrower should deposit a minimum of 25 % of the outstanding due under any circumstance if he challenges an order of DRT before DRAT?

I have just highlighted few complicated issues and some complicated issues are now settled through various judgments of constitutional courts from time to time. Still, there exist complications. After reading discussions in various judgments, the object of the provisions of SARFAESI Act, 2002, the interests of the borrowers, the allegations on some Bank officials, according me, the settled issues under SARFAESI Act, 2002 are as follows:

a. It is difficult to lay propositions under SARFAESI Act, 2002 when it comes to the rights of the borrower and the powers of the Tribunal. It will depend upon the facts and circumstances of each and every case.

b. There is no doubt that the borrower can dispute the outstanding due and can raise all objections in his appeal to the DRT. However, the objections to the notice issued under section 13 (2) of the Act, the seriousness of the objections and the documentary proof will be looked into in this regard.

c. The borrower can approach the DRT at any stage under the provisions of SARFAESI Act, 2002, however, he has to explain as to why he has remained silent to the notice under section 13 (4) of the Act. While it is true that the borrower can approach the DRT challenging the action initiated by the Bank under section 13 of the Act at any stage, the DRT will look into all facts in detail and will decide the issue.

d. There is no need to file an appeal at each and every stage and in a pending appeal the borrower can bring the subsequent illegalities to the notice of the DRT and can obtain appropriate orders.

e. According to me, the borrower can even challenge the order of the Magistrate Court before the DRT and the DRT can stay the order of the Magistrate Court too. This proposition may go against the clear legal provision; however, the complications are to be addressed.

f. Technicalities will not come in the way of DRT granting interim orders and if the DRT is convinced, then, the borrower can get necessary restraint orders from the DRT.

g. The DRT can set-aside the sale of the property too even if it is concluded and the rights of the borrower over the property will remain intact as per law.

On the complicated issue of dealing with the sale of the property in auction and the rights of the auction purchaser under the provisions of SARFAESI Act, 2002, the Hon’ble High Court of Delhi, in a judgment dated 01-11-2010 in W.P. (C) Nos. 13152 of 2009 & 5317 of 2010 between M/S. Ram Murty Pyara Lal & Others Vs. Central Bank Of India & Others, was pleased to observe as follows:

“9. To this aspect we have no doubt in our minds that the provisions of the SARFAESI Act will apply because the said Act is a special Act dealing with respective rights and obligations with respect to proceedings to be taken thereunder. It is trite that a special legislation will prevail over a general legislation. We need not burden our judgment with case laws on this point and which indeed are legion. The provisions of the SARFAESI Act will therefore prevail in case of any conflict and inconsistency of any provision therein with any provisions of the Transfer of Property Act and the CPC. That being so, various judgments which have been cited on behalf of the petitioners under the provisions of the Transfer of Property Act and the CPC would not apply at all. We are, therefore, not referring to those judgments and distinguishing them individually.

10. We have already reproduced the provisions of Section 13(8) and Section 17 sub sections (2) to (4) above. Section 13 sub section (8) in plain language provides that no steps with regard to the transfer or sale of secured assets can take place if dues of the secured creditors together with cost charges and expenses incurred are tendered to the secured creditor at any time before the date fixed for sale/transfer. However, sub sections (2) to (4) of Section 17 provide that the DRT in the proceedings under Section 17 has the right to declare whether the action of the secured creditor taken under Section 13(4) is or is not in accordance with the provisions of the SARFAESI Act. In case, the DRT comes to the conclusion that the action taken by the secured creditor is not in accordance with the provisions of the SARFAESI Act and the rules framed thereunder, then, by virtue of sub section (3), DRT can declare the actions taken pursuant to Section 13(4) as invalid and pass necessary orders including of cancellation of the auction sale proceedings and restoring the possession of the secured asset to the borrower. Thus, a conjoint reading of the provisions of Section 13(8) on one hand and sub sections (2) to (4) of Section 17 on the other hand, bring out the position that although the right of redemption is to be ordinarily exercised before the date fixed for sale of transfer, however, even if the auction sale proceedings take place but in case the borrower succeeds in the S.A. under Section 17, the auction sale proceedings can be cancelled and since fresh auction sale may have to be conducted the right of redemption can again be exercised at that stage when a fresh date will be fixed for sale/transfer. There is a vital difference in this legal position and the legal position which emerges under the provisions of Order 21 of the CPC. Whereas under relevant rules and sub rules of Order 21 of CPC, and as interpreted by the Supreme Court, even if a decree is set aside a bonafide purchaser for value at an auction sale proceedings gets a complete title in case he purchases the property without any notice of any dispute or claims with respect to the auctioned property, however under the SARFAESI Act, the DRT has complete powers under the provisions of sub sections (2) to (4) of Section 17 to set aside the auction sale and restore back the possession of the secured asset to the borrower. Clearly, therefore, the auction sale proceedings are not final under the SARFAESI Act unless the S.A. of the borrower under Section 17 is decided. A purchaser at an auction sale cannot claim title merely because the auction sale proceedings for concluded in his favour and a necessary sale certificate issued as the same as per subsections (2) to (4) of Section 17 is subject to final decision on an S.A filed under Section 17.

17. In view of the above, we hold that the right of redemption claimed by the petitioners will depend upon success of the proceedings initiated by the petitioners under Section 17 of the SARFAESI Act. In case, the petitioners finally fail, then it will not have a right of redemption, however, in case the petitioners succeed in the proceedings under Section 17 and orders are passed for setting aside the auction sale in terms of sub-section (2) to (4) of Section 17, then in such a case, it will be open to the petitioners to claim right of redemption. The conclusion which emerges is this that in case the borrower succeeds in its petition under Section 17, then, the DRT can pass orders under sub-sections 3 and 4 of Section 17 canceling the auction sale proceedings. In case, the auction sale proceedings are cancelled because the action of the bank/financial institution is found to be violative of various provisions of the SARFAESI Act and the Rules framed there under, it is possible that a fresh auction may have to be conducted. In case a fresh auction of the mortgaged property has to be conducted then, a fresh date will be fixed for auction sale and it is at that stage that again Section 13 sub-section 8 will come into play and at which stage, the borrower can seek to exercise its right of redemption of the mortgaged property. Therefore, everything will turn upon the success or failure of the petitioners in the petition under Section 17 of the Act when the same reaches finality. Presently, the stage of the proceedings under Section 17 is that, and as already stated above, the same has been dismissed by the DRT and a statutory appeal under Section 18 is pending before the DRAT. Therefore, if the petitioners succeed in its appeal under Section 18 before the DRAT, the petitioners can exercise a right of redemption because fresh auction sale proceedings may have to be conducted and when so required to be conducted, once again a date will have to be fixed for sale/transfer/auction and before which date, the petitioners can seek to pay all the dues of the bank in terms of Section 13(8) of the SARFAESI Act.”

Note: the views expressed are my personal and I have dealtwith the issues in brief being aware of the complications in the subject.

"SARFAESI" proceeding - the Jurisdiction of High Court?

Despite the effort made by the legislature to keep the recovery of debts by the Bank very simple and clear when the debt is secured, there exist few complications in law dealing with the recovery of secured debt under SARFAESI Act, 2002. The constitutional validity of the provisions of the SARFAESI Act were challenged before the Constitutional Courts and the courts have made it very clear that SARFAESI Act, 2002 is constitutionally valid though certain provisions required a re-look. Initially, when the act came to force, many writ petitions were filed challenging the action initiated by the Bank under the provisions of SARFAESI Act, 2002 and even a notice under section 13 (2) of the Act was challenged before the High Court in many cases. But, slowly, the practice has changed and the constitutional courts now exercise restraint when a writ petition is filed challenging the action initiated by the Bank under SARFAESI Act, 2002.

Despite the dismissal of many writ petitions pertaining to SARFAESI proceedings on the ground of alternative remedy before the Debt Recovery Tribunals, we used to see the High Court coming so heavily on the Bank at times commenting upon their illegality in proceeding against the borrower using the provisions of SARFAESI Act, 2002. I have personally seen some cases where the borrower is left with no effective remedy before the Debt Recovery Tribunal compelling the borrower to approach the High Court under Article 227 of the Constitution of India more often and under Article 226 of the Constitution of India at times. Obviously, the SARFAESI Act is meant to provide for speedy recovery of debt and even the adjudication of debt is conferred on the Bank or Bank officials unusually. The only justification, in my opinion, justifying the tough provisions under SARFAESI Act, 2002 in favour of the Bank is the delay and technicalities before the Civil Courts.

Nobody can support an action by the borrower to evade the payment to the Bank or to delay the payment unreasonably. But, at the same time, the Bank can be reasonable to the borrower in recovering the due, but, it is seen at times where the Bank scrupulously follow the technicalities in classifying the account of the borrower as NPA. The strict action by the Bank while recovering the debt despite knowing the commercial realities and the bonafides of the borrower at times, leads the borrower to find ways to technically attack the Bank and to litigate the issue. I personally support the provisions of SARFAESI Act, 2002 as it can be useful for the Bank to effectively deal with the borrowers with malafide intention. It can never be said that the Bank is always right though it can be right in most of the times. As the Bank is also run by human beings, they tend to make mistakes and there can also be malafides on the part of the Bank or the Bank officials. In many cases, there were serious allegations on the Bank or the Bank officials while dealing with the secured asset and many feel that the Bank officials at times, side with the real estate people or the investors.

There are so many complicated issues in a SARFAESI proceeding. It is very difficult to adjudicate the correctness of the debt and the Bank will have an upper hand when it comes to adjudication. There were cases where the Bank attempts to take physical possession of the secured asset by approaching the concerned court under section 14 of the SARFAESI Act, 2002 even without issuing a notice under section 13 (4) of the Act. I don’t understand as to why the Bank or the Bank officials should find ways to misuse the provisions of the SARFAESI Act, 2002 completely ignoring the need of fairness. In most of the cases, it is very difficult for the borrower to question the validity of the action taken by the Bank under the provisions of SARFAESI Act, 2002. The borrower may have to take lot of risk while challenging the action taken by the Bank under section 13 (4) of the Act or the further steps. The challenge to the Bank action before the Debt Recovery Tribunal is costly for the borrower and it is usual to see the Tribunal impose a condition to deposit some money while granting stay. It is also alleged that the borrower is not heard effectively by the Tribunal or by the Appellate Tribunal. I have interestingly observed some cases before the Debt Recovery Appellate Tribunal where it is claimed by the borrower that they had to pay the entire debt amount to the Bank through deposits or the statutory deposits and it speaks volumes about the cost involved in challenging the action initiated by the Bank under the provisions of SARFAESI Act, 2002.

I had to focus so much on section 14 of the SARFAESI Act, 2002 which provides that the Bank can seek the assistance of the concerned officials in taking physical possession of the secured asset. If the permission is granted by the Magistrate under section 14, then, the Bank will immediately take physical possession of the property. A proceeding under section 14 is considered ministerial and the Magistrate need to do an inquiry though it has to look as to whether the Bank has issued a notice under section 13 (2) etc. Again, the Magistrate dealing with an application by the Bank under section 14 of SARFAESI Act, 2002 need not even give a notice to the borrower. This is an interesting provision in my opinion. In my opinion, a proceeding under section 14 is in the nature of an execution proceeding before the Civil Court which follows Civil Procedure Code. In an ordinary Civil Suit, the filing of an execution petition need to provide many details to the Court and especially it has to convey to the Court that the judgment-debtor did not file an appeal; the limitation for filing statutory appeal has expired etc. There is no such requirement under section 14 of the SARFAESI Act, 2002 which in my opinion requires a change really.Again, there is a specific bar that the no court or the authority should entertain a challenge to the order of the Magistrate under section 14 of the Act. It is really confusing as to where to go when the order of the Magistrate under sect6ion 14 is wrong on the face of it.

I have seen a case in the recent past. The Debt Recovery Tribunal has granted an unconditional stay in favour of the borrower and the stay was vacated by the Tribunal suo motu and the borrower wanted to challenge the order of the Debt Recovery Tribunal before the Debt Recovery Appellate Tribunal. Practically, the filing of appeal before the Debt Recovery Appellate Tribunal may consume some time and what if the Bank gets an order under section 14 in the meanwhile while the borrower is entitled to prefer an appeal and the limitation to file an appeal doesn’t expire. This is only an example. In another case, the Debt Recovery Appellate Tribunal keeps adjourning the Appeal and the application seeking stay and in the meanwhile the Bank proceeds further. This situation compels the borrower to move the High Court under section 227 seeking for a direction and in my opinion, it is unavoidable.

Thus, it is very clear that though the object of SARFAESI Act, 2002 is laudable, still, the act requires a re-look from the angle of providing a reasonable and effective remedy to the borrower. Given the complications and the rights of the borrower, in my personal opinion, the High Court may feel it reasonable to entertain a writ petition in respect of a SARFAESI proceeding though it exercises the writ jurisdiction in respect of SARFAESI proceedings sparingly. I have seen the trend where the High Court had entertained writ petitions in respect of a SARFAESI proceeding, seen the trend where the High Court dismissed the writ petitions in respect of SARFAESI proceeding on the ground of alternative remedy, and in my opinion, now the law is settled. It is very difficult to lay a proposition that the High Court can not entertain a writ petition in respect of a SARFAESI proceeding under all circumstances. Situations may warrant the High Court to deal with a SARFAESI proceeding at times though the writ jurisdiction is to be exercised by the High Court in respect of SARFAESI proceedings sparingly.

Note: the views expressed are my personal and no intention to insult the system.