Kerala High Court Directs Deferred Repayment Plan in Loan Recovery Case

Kerala Remedies Vs Union of India (Kerala High Court)

This case involves Kerala Remedies contesting coercive proceedings initiated by DCB Bank for the recovery of a financial advance under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The petitioners received a business loan of ₹58 lakhs in 2019 but faced difficulties in repayment due to factors like floods and the COVID-19 pandemic.

The petitioners requested the bank to allow them to repay the overdue amounts in easy monthly instalments, but the bank proceeded with coercive measures instead. The petitioners argued they could clear the dues if given sufficient time.

The bank, however, contested the petitioners’ claims, asserting that they defaulted on repayment despite reminders and requirements to clear the dues. Consequently, the bank initiated coercive proceedings, issuing notices to the petitioners.

During the court proceedings, the bank’s counsel suggested that if the petitioners could make a substantial payment soon and clear the balance overdue amount immediately thereafter, a short breathing time could be granted to settle the dues.

Considering the arguments from both sides, the court decided to dispose of the writ petition by directing the petitioners to remit ₹1 lakh by a specified date and the balance overdue amount in subsequent equal monthly instalments. If the petitioners comply with these directions, the sale of secured assets will be deferred, and coercive proceedings will be halted. However, if the petitioners default on the payments, the bank will be allowed to continue with coercive measures. Additionally, the petitioners are required to pay current EMIs along with the directed payments to avoid further proceedings.

This judgment offers a reasonable solution by providing the petitioners with an opportunity to clear their dues in manageable instalments while allowing the bank to enforce its rights if the petitioners fail to comply with the court’s directives.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The petitioners have approached this Court aggrieved by the coercive proceedings for recovery of financial advance made by the DCB Bank to the petitioners, invoking the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

2. The Bank paid ₹58 lakhs to the petitioners as Business Loan in the year 2019. The petitioners state that though the petitioners made remittances promptly during the initial repayment period of the financial advance, they could not pay the repayment instalments promptly later due to flood and Covid-19 pandemic. The repayment of loan fell into arrears later. It happened due to reasons beyond the control of the petitioners.

3. Though the petitioners requested the Bank to permit the petitioners to repay the overdue amounts in easy monthly instalments, the Bank authorities were not yielding. The authorities, instead, started coercive proceedings, invoking the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Security Interest (Enforcement) Rules, 2002 and issued Exts.P1 and P3 notices.

4. The petitioners state that they are still in a position to clear the overdue amounts towards the loan, if sufficient time is given to clear the dues in easy monthly If the respondents are permitted to continue with the coercive proceedings and auction the secured assets provided by the petitioners, they will be put to untold hardship and loss.

5. Standing Counsel entered appearance on behalf of the Bank and denied all the statements made by the petitioners. On behalf of the respondents, it is submitted that the loan was given to the petitioners in the year 2019. The petitioners committed default in repaying the loan.

6. The Bank repeatedly reminded the petitioners and required them to clear the dues. The petitioners deliberately omitted to do so. In the circumstances, the Bank had no other go, than to proceed against the petitioners invoking the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The impugned Exts.P1 and P3 notices were issued in these circumstances. The petitioners have not advanced any legal reasons to thwart the coercive proceedings initiated by the Bank.

7. The Standing Counsel, however, submitted that if the petitioners are ready and willing to make a substantial payment soon and remit the balance overdue amount immediately thereafter, a short breathing time can be granted to the petitioners to clear the dues. The Standing Counsel submitted that the outstanding amount due to the Bank from the petitioners as on 02.04.2024 is ₹80,80,137/-and the overdue amount as on 02.04.2024 is ₹8,31 ,393/-.

8. I have heard the counsel for the petitioners and the Standing Counsel representing the Bank.

9. The specific case of the petitioners is that the petitioners have been making the repayment and maintaining the loan account initially. The default in repayment of the account occurred lately due to reasons beyond the control of the petitioners. The petitioners have provided substantial security which will safeguard the interest of the Bank.

10. In the facts and circumstances of the case, I am inclined to dispose of the writ petition giving a short and reasonable time to the petitioners to clear off the liability.

11. The writ petition is therefore disposed of with the following directions:

(i) The petitioners shall remit an amount of ₹1 lakh on or before 12.04.2024.

(ii) The petitioners shall remit the balance overdue amount in subsequent consecutive seven equal monthly instalments thereafter, along with accruing interest and other Bank charges, if any.

(iii) If the petitioners remit ₹1 lakh as directed above, sale shall stand deferred.

(iv) If the petitioners commit default in making payments as directed above, the respondents will be at liberty to continue with coercive proceedings against the petitioners in accordance with law.

(v) The petitioners shall also pay current EMIs along with the aforesaid payments.

(vi) If the petitioners pay the amount as directed above, any coercive proceedings against the petitioners will stand deferred.