Facts of the Case

The petitioners, Latheefa Beevi and M. Sahirsha, approached the High Court of Kerala challenging recovery proceedings initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”).

The recovery proceedings arose from amounts due in respect of a cash credit facility availed by the petitioner. According to the respondent bank, the petitioners had committed default in repayment of the amounts due.

During the course of hearing, the petitioners confined their relief to seeking an opportunity to repay the outstanding liability in instalments rather than pursuing the broader challenge to the recovery proceedings.

The respondent bank submitted before the Court that the total outstanding amount was ₹29,81,048 as on 09 August 2022. Although recovery proceedings had already been initiated, the bank expressed its willingness, as a matter of indulgence, to accept repayment of the outstanding amount in limited instalments.

Issues Involved

The principal issues arising for consideration were:

  1. Whether the petitioners, against whom recovery proceedings had been initiated under the SARFAESI Act for default in repayment of a cash credit facility, could be granted an opportunity to clear the outstanding dues through monthly instalments.
  2. Whether coercive recovery proceedings could be kept in abeyance to enable the petitioners to repay the entire outstanding liability.
  3. What conditions should govern the instalment facility so as to balance the petitioners’ request for time with the respondent bank’s lawful right to recover its dues.

 Petitioners’ Arguments

The petitioners initially approached the High Court challenging the proceedings initiated under the SARFAESI Act for recovery of the amounts due under the cash credit facility.

However, during the hearing, the petitioners confined their request to a limited relief. They sought an opportunity to repay the outstanding amount in instalments.

Thus, the effective request before the Court was for reasonable time and an instalment facility to discharge the outstanding liability and avoid immediate continuation of coercive recovery measures.

 Respondents’ Arguments

The respondent bank submitted that:

  1. The petitioners had committed default in repayment of the amounts due.
  2. The total outstanding amount was ₹29,81,048 as on 09 August 2022.
  3. Recovery proceedings had already been initiated against the petitioners.
  4. Nevertheless, as a matter of indulgence, the bank was willing to accept repayment of the outstanding amount in limited instalments.

The bank’s submission therefore acknowledged the subsisting default and recovery proceedings while expressing conditional willingness to permit repayment over a limited period.

 Court Order / Findings

After hearing the learned counsel for the petitioners and the learned Standing Counsel appearing for the respondent bank, the High Court considered the circumstances of the case, the prevailing situation, and the submissions made by both sides.

The Court held that the petitioners could be granted an opportunity to repay the outstanding amount in fifteen monthly instalments.

Accordingly, the Court directed the respondent bank to accept repayment of the entire outstanding amount of ₹29,81,048, along with applicable bank charges, subject to the following conditions:

1. Repayment in 15 Equated Monthly Instalments

The outstanding amount of ₹29,81,048, together with any accrued interest and costs, was directed to be repaid in fifteen equated monthly instalments.

2. Date of First Instalment

The first instalment was required to be paid on or before 07 November 2022.

3. Subsequent Instalments

Each subsequent instalment was required to be paid on or before the 7th day of every succeeding month.

4. Consequence of Default

The Court expressly clarified that if the petitioners defaulted in payment of any one instalment, the respondent bank would be entitled to proceed in accordance with law.

5. Coercive Proceedings Kept in Abeyance

To enable the petitioners to repay the entire outstanding liability, the Court directed that all coercive proceedings be kept in abeyance.

The writ petition was accordingly disposed of on these terms.

 Important Clarification

This judgment should be understood in its specific factual and procedural context.

The High Court did not record a general finding invalidating the recovery proceedings under the SARFAESI Act. During the hearing, the petitioners themselves confined the relief sought to an opportunity to repay the outstanding amount in instalments.

Further, the respondent bank expressed willingness, as a matter of indulgence, to accept repayment in limited instalments.

Therefore, the operative relief was essentially a conditional repayment arrangement granted in the circumstances of the case.

The protection against coercive recovery was not unconditional or permanent. It was linked to compliance with the Court-directed repayment schedule.

Most importantly, default in even one instalment entitled the respondent bank to proceed in accordance with law.

Accordingly, the judgment should not be interpreted as laying down an absolute proposition that every borrower facing proceedings under the SARFAESI Act is automatically entitled to repayment by instalments. The relief depended upon the circumstances before the Court, the limited relief pursued by the petitioners, and the bank’s willingness to accept payment in limited instalments.

 Sections / Statutory Provisions Involved

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

The judgment expressly concerns proceedings initiated under the SARFAESI Act for recovery of amounts due under a cash credit facility.

Important Note: The judgment, in its operative reasoning, refers generally to proceedings under the SARFAESI Act and does not expressly identify a specific section of the Act as the basis of the Court’s final instalment direction. Therefore, no specific SARFAESI section should be attributed to the judgment beyond what is expressly stated in the order.

Article 226 of the Constitution of India

The matter was instituted as a writ petition before the High Court. However, the judgment text primarily records the challenge to SARFAESI recovery proceedings and the limited request for repayment in instalments.

 Link to Download the Order-https://mytaxexpert.co.in/uploads/1783489196_1430compressed.pdf

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