In a recent writ petition filed under Articles 226 and 227 of the Constitution of India, the petitioner sought to challenge various legal orders arising from the proceedings under the SARFAESI Act, 2002. The petition primarily contested the decision of the Debt Recovery Appellate Tribunal (DRAT), which directed the petitioner to deposit 25% of the outstanding dues before hearing the appeal, and the issue of clubbing two distinct loans — one of the petitioner and another involving her son’s business — for the purpose of SARFAESI proceedings. The case delves into complex aspects of loan defaults, property mortgages, and procedural compliance under the SARFAESI framework.
Background:
The petitioner had availed a home loan of Rs. 3 crore from the respondent bank on 20th September 2017. The loan was to be repaid in 180 EMIs of Rs. 3.31 lakh each. Despite making consistent payments, the petitioner defaulted on a few payments, particularly in December 2023. The bank, citing the loan as a Non-Performing Asset (NPA), initiated recovery proceedings under the SARFAESI Act, which led to a series of legal actions, including auction notices, demand notices, and the taking of possession of the mortgaged property.
While the petitioner had made partial payments towards the loan, she requested the bank to restructure the loan instead of proceeding with recovery. However, despite the payments, the bank continued with the proceedings, prompting the petitioner to challenge the actions in court.
Key Legal Contentions:
The petitioner’s primary contention revolved around the clubbing of two separate loan accounts — one for her personal home loan and the other for her son’s business. The petitioner argued that these loans were distinct, and the bank had erred in amalgamating them for the purpose of calculating the total outstanding dues. This miscalculation led to an unfair pre-deposit requirement, which the petitioner claimed was unjustified.
Another significant legal issue raised was the timeline of the SARFAESI notice and the declaration of the loan as NPA. The petitioner claimed that the bank’s actions were impermissible, as the loan had not been declared NPA before the notice under Section 13(2) of the SARFAESI Act was issued. The petitioner contended that this procedural error vitiated the entire recovery process.
Court’s Analysis:
Upon examining the legal arguments and documents presented by both parties, the court addressed several key points. First, the court assessed the validity of the pre-deposit requirement imposed by DRAT. The tribunal had directed the petitioner to deposit 25% of the total outstanding amount, which included debts from both the petitioner’s home loan and the business loan of her son. The petitioner argued that the correct amount should only consider the home loan portion, not the combined sum of both loans.
However, after reviewing the documents, the court found no conclusive evidence to support the petitioner’s claim that the property was mortgaged only for the enhanced amount of Rs. 2.5 crore. The documents suggested that the mortgaged property secured the entire Rs. 10 crore extended as part of the business loan facility to the son. Thus, the court upheld the DRAT’s calculation of the total outstanding amount.
Regarding the procedural issue raised by the petitioner concerning the NPA declaration and the SARFAESI notice, the court determined that this issue needed further examination by the appellate tribunal on the merits of the case. The court refrained from addressing this matter in detail, as it was intertwined with factual aspects that were best suited for a hearing by the DRAT.
Conclusion:
The writ petition was ultimately dismissed, with the court reiterating that disputed factual issues, such as the validity of loan clubbing and the quantum of the outstanding debt, should be resolved by the appellate authority. The court found that the petitioner’s claim of only needing to pay a pre-deposit on the home loan amount did not hold, as the loan accounts were properly treated as a single unit by the bank. Therefore, the petitioner was directed to comply with the pre-deposit requirement set by the DRAT as a pre-condition for hearing the appeal.
This case highlights the complex interplay of procedural aspects under the SARFAESI Act, particularly in cases where multiple loans are involved. It also underscores the importance of maintaining clarity in loan documentation and the need for debtors to address defaults promptly to avoid such legal entanglements.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
