Officiallythick

Is the relief provided to the really aggrieved under SARFAESI Act, 2002 effective

Posted on 09 Jun 2011 by admin | Filled under: regulatory-compliance

I had the privilege of appearing in some cases under SARFAESI Act, 2002 both for the Banks and also for the debtors/guarantors. No citizen is allowed to say that they will take loan, execute documents and will not repay the loan to the Bank taking advantage of technicalities and the delay the process in Traditional Courts. As such, though the legislature has felt it necessary to enact a special legislation allowing the Banks to speed-up their recovery process and though the issue of Constitutional validity of the Debt Recovery Laws were challenged, the Apex Court has laudably held that the special enactments meant for speedy recovery or recovery of loan by the Banks are valid though certain observations were made pertaining to certain provisions of the Act. However, under the guise of special law, the rights of the ordinary people should not be ignored and the rights of the people/innocent owners are to be protected at any cost.

Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short "SARFAESI Act"), the Bank can proceed with the recovery process and proceed with the property mortgaged as a security without recourse to traditional Civil Courts. Its true that the Bank may not be able to recover the money from the debtor or it may get unreasonably delayed if they have to approach the Civil Courts for recovery and consequential steps. Many know as to what happens in Civil Courts and many know as to how to delay a Civil Case for so many years. Under SARFAESI Act, 2002, the Bank itself determines the amount of debt when there is a default and proceeds with the property mortgaged in accordance with the provisions of the Act and the concerned regulations. The Bank makes a demand for payment, receives the reply if any, addresses the grievance of the debtor if required and if it is not satisfied with the reply, then, accordingly, the Bank proceeds with auctioning the property in accordance with law and thereby quickens the recovery process. Thus, the object of SARFAESI Act is really laudable if the law is implemented in letter and spirit. But, when there is a clear violation of statutory provisions or when the Bank proceeds against a property unreasonably using the provisions of SARFAESI Act, 2002, then, there should be effective remedy available to the innocent owner of the property. It is true that the Act itself provides a relief to the aggrieved to file an appeal challenging the steps taken by the Bank pursuant to the notice issued by the Bank under section 13 (2) of the SARFAESI Act, 2002, however, many feels that the remedy is not effective despite establishing a clear case against the Banks in many cases. It is also seen that the Debt Recovery Tribunal constituted under the Act which deals with the grievance of the aggrieved, passes conditional order many times while granting stay. It is true that in some peculiar cases, a conditional order can be passed, but, it has become routine as I have seen and heard from my colleagues at the Bar. What can an innocent owner do when he is not provided with an effective remedy against the Bank? He may hesitate to approach the High Court directly as many legal practitioners advice the aggrieved to approach Tribunal as it is likely that the High Court may not entertain a Writ Petition directly and in many cases such Writ Petitions are disposed giving liberty to the aggrieved to approach the Tribunal. It is really understandable and in such cases, the Debt Recovery Tribunal should really be effective and should not invite any criticism, but, everyone knows as to what happens in Debt Recovery Tribunals and Appellate Tribunals. Some presiding officers of the Debt Recovery Tribunals may adopt a different and right approach, but, every legal practitioner can tell or guess as to what happens before the Tribunal. There may be cases where the debtors may try to delay the recovery process by filing cases and nobody sympathizes in those cases and those cases to be dealt with very strictly.

It can not be said that the provisions of the special legislation to be implemented in letter and spirit without thinking at the consequences and it can not be said that the ultimate object of the enactment is to be taken into consideration while dealing with the cases challenging the action initiated by the Bank under SARFAESI Act, 2002. For example, with a very laudable object, the Chapter-XVII was introduced in Negotiable Instruments Act, 1881 making the act of dishonour of cheque an ‘offence' though civil remedy is also available for recovery of money. Section 139 of the N.I.Act says that there would be presumption available in favour of the Complainant that the cheque is issued for discharging a legally enforceable debt. Despite such clear wording and special provisions dealing even with the procedure in cheque bouncing cases, the Courts have interpreted the provisions from time to time protecting the rights of the innocent and providing protection to the innocent against motivated harassment using the special law. As such, the rights of the innocent or the innocent owners or the debtors are to be protected under SARFAESI Act, 2002 and the remedy should really be effective and adjudication to be really logical. I have seen a wonderful judgment of a bench of Madras High Court comprising Hon'ble Mr.Justice F.M.Ibrahim Kalifulla & Justice N.Kirubakaran in W.P. No. 15272 of 2009. It was a case where the High Court has taken a serious view of procedural irregularities committed by the Bank using the provisions of SARFAESI Act and provided an instant relief to the aggrieved.