Case Law Details
SARFAESI Act, 2002 and the Security Interest (Enforcement) Rules, 2002 clearly prove that the sufficient checks have been imposed upon the secured creditor while proceeding with the possession and sale of the secured assets of the borrower. When the action of the secured creditor is challenged by the borrower under Section 17 (1) of the SARFAESI Act, 2002, the secured creditor is required to prove the compliance of all the mandatory provisions of the Act and the Rule before the Debt Recovery Tribunal. If any of the requirements of Act and the Rule is not found to be complied by the Debt Recovery Tribunal, the action of the secured creditor fails against the borrower.
The SARFAESI Act, 2002 is a strict act which requires strict compliance of the provisions provided therein and any deviation in compliance of the provisions renders the action of the secured creditor bad and unsustainable. The Debt Recovery Tribunal is fully empowered to go into the record of the secured creditor regarding the compliance of the provisions of the Act and Rule and the borrower gets an opportunity to see the record of the proceedings initiated and conducted by the bank against him in recovery of debt from him before the Debts Recovery Tribunal.
In the writ petitions filed under Article 226 of the constitution before the High Court, the borrower never gets the opportunity to rebut the action taken by the secured creditor against him and by accepting the liability alleged by the secured creditor, he gets estopped from raising any objection against the action of the secured creditor, in future, since he admits the liability and thereby ratifies all the actions done by the secured creditor against the borrower. Therefore, the remedy under Section 17 of the SARFAESI Act, 2002 before the Debts Recovery Tribunal is a broad remedy available to the borrower/guarantor vis-a-vis the jurisdiction of the High Court under Articles 226 and 227 of the Constitution and he has further opportunity to file further appeal under Section 18 of the Debt Recovery Appellate Tribunal against the order of Debts Recovery Tribunal in case he fails to get any relief under Section 17 of the SARFAESI Act, 2002 from the Debts Recovery Tribunal. The remedy of appeal under Section 18 of the SARFAESI Act, 2002 also eludes a borrower who approaches the High Court under Article 226/227 of the Constitution of India directly against the proceedings under SARFAESI Act, 2002 where the scope of inquiry regarding the action of the secured creditor is very limited. The remedy under Article 226/227 of the Constitution is still available to the borrower after exhaustion of remedies under the SARFAESI Act, 2002.
The Apex Court has interfered and disapproved the action of the secured creditor in proceeding under the SARFAESI Act, 2002 in the case of Mathew Varghese Vs. M. Amritha Kumar and others (2014) 5 SCC 610 ; J. Rajiv Subramaniyan and another Vs. Pandiyas and others (2014) 5 SCC 651. In Mathew Varghese (supra), the Supreme Court disapproved the action of the secured creditor of not notifying the borrower afresh of 30 days clear individual notice of the fresh date of sale after the first sale could not take place and held that the subsequent sale was invalid. Oasis Dealcom Pvt. Ltd. Vs. Khazana Dealcom Pvt. Ltd., (2016) 10 SCC 214.
In J. Rajiv Subramaniyan and another (supra), the sale of the secured assets conducted by the secured creditor by means of a private treaty as required by Rule 8(8) of Rules, 2002 was set aside being violative of the Rule.
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