Facts of the Case

The petitioner, Sunderasan N., aged 73 years, was a guarantor in respect of a loan extended by Tamilnad Mercantile Bank Ltd. to respondents 3 to 5. Certain property belonging to the petitioner was proposed to be sold by the Bank under the provisions of the SARFAESI Act.

The petitioner approached the High Court alleging that the property was being brought to sale without following the proper procedure contemplated under the SARFAESI Act. He relied upon the principal borrower’s business position and referred to Ext. P5, being the GST return filed by the third respondent for April 2022, to contend that the principal borrower had substantial business. The judgment record also shows that the writ petition included, among other exhibits, the GST registration certificate, statement of account, possession notice, sale notice dated 27 September 2022, and the April 2022 GST return.

The petitioner alleged that there was an attempt to sell his property, recover some amount towards the loan liability and thereafter restructure the loan of the principal borrower. According to him, such a course would cause serious prejudice, injury and hardship.

The proposed sale was scheduled for 15 November 2022. The petitioner expressed concern that if he were relegated to the remedy before the Debts Recovery Tribunal, he might not be able to secure an interim order before the scheduled auction.

Issues Involved

  1. Whether the petitioner-guarantor could challenge the proposed sale of his property on the ground that the procedure contemplated under the SARFAESI Act had not been properly followed.
  2. Whether the High Court should directly interfere with the proposed SARFAESI sale when a statutory remedy under Section 17 of the SARFAESI Act was available before the Debts Recovery Tribunal.
  3. Whether urgent protective directions were necessary because the auction was scheduled for 15 November 2022 and the petitioner apprehended that an interim application before the Tribunal might not be decided in time.
  4. Whether the alleged undue haste in proceeding against the guarantor’s property justified a time-bound direction for consideration of interim relief.

Petitioner’s Arguments

The petitioner contended that his property was being brought to sale under the SARFAESI Act without compliance with the proper statutory procedure.

He submitted that he was only a guarantor for the loan granted to respondents 3 to 5 and that the principal borrower had substantial business, as allegedly demonstrated by the GST return filed for April 2022.

The petitioner further alleged that the Bank intended to sell his property, recover a portion of the loan liability and thereafter restructure the principal borrower’s loan. He argued that this would result in serious prejudice, injury and hardship to him.

It was also specifically argued that undue hurry was being shown in bringing his property to sale. Since the auction was fixed for 15 November 2022, the petitioner contended that relegating him to the Debts Recovery Tribunal without any protective arrangement could leave him unable to obtain interim relief before the sale date.

Respondent Bank’s Arguments

The respondent Bank submitted that SARFAESI proceedings had also been initiated against the principal borrower.

The Bank further pointed out that the principal borrower had earlier filed W.P.(C) No. 24580 of 2022 before the Kerala High Court, but that writ petition was subsequently withdrawn with liberty to approach the Debts Recovery Tribunal under Section 17 of the SARFAESI Act.

Thus, the Bank’s submission highlighted the availability of the statutory remedy before the DRT in respect of measures taken under the SARFAESI Act.

Court Order / Findings

After hearing the petitioner and the respondent Bank, the Kerala High Court disposed of the writ petition with a specific time-bound direction.

The Court directed that:

  • If the petitioner filed a Securitisation Application under Section 17 of the SARFAESI Act by 5:00 PM on 08 November 2022;
  • Along with an interlocutory application concerning the sale scheduled for 15 November 2022;
  • The Debts Recovery Tribunal was required to ensure that the interlocutory application was considered and orders were passed before 15 November 2022.

The writ petition was accordingly disposed of with the above direction. Importantly, the Court did not record a final adjudication on the legality of the SARFAESI proceedings or the merits of the proposed sale; instead, it facilitated timely recourse to the statutory forum under Section 17.

Important Clarification

This judgment should not be read as holding that a guarantor’s property can never be proceeded against under the SARFAESI Act, nor as declaring the impugned sale proceedings illegal. The High Court did not finally decide the petitioner’s allegations regarding procedural irregularity, alleged prejudice, the principal borrower’s business capacity, or the alleged proposal to restructure the borrower’s loan after recovery from the guarantor’s property.

The operative significance of the judgment is narrower: where an imminent SARFAESI auction is challenged and the borrower or guarantor is directed to avail the statutory remedy under Section 17, the High Court may issue a time-bound procedural direction requiring the DRT to decide an urgent interlocutory application before the scheduled sale.

Another important clarification is that Ext. P5 GST return was relied upon by the petitioner as part of his factual case regarding the principal borrower’s business activity. The judgment does not record any independent judicial finding that the GST return conclusively established the borrower’s capacity to discharge the secured debt.

Sections Involved

·         Section 17 of the SARFAESI Act, 2002 – Application against measures to recover secured debts

·         SARFAESI enforcement and sale proceedings


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