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 knowing fully 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.

Points 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.


V. DURGA RAO, Advocate, Madras High Court

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September 2021