Facts of the Case

The petitioner, Janseer K.A., proprietor of M/s Sky Traders, had availed two credit facilities from Union Bank of India, namely a Term Loan and a Cash Credit Loan. Due to financial difficulties, the petitioner defaulted in repayment of the loan amounts.

Consequently, the bank initiated recovery proceedings under the provisions of the SARFAESI Act and issued a demand notice under Section 13(2). The bank also proceeded with measures for recovery, including auction proceedings relating to the secured asset.

Instead of challenging the legality of the SARFAESI proceedings, the petitioner limited the relief sought before the High Court to grant sufficient time for repayment of the outstanding dues through instalments.

Issues Involved

  1. Whether the High Court should interfere with SARFAESI recovery proceedings when the borrower seeks only instalment facility.
  2. Whether equitable relief could be granted by permitting repayment of the outstanding dues through monthly instalments.
  3. Whether coercive recovery proceedings should remain suspended during the repayment period.

Petitioner's Arguments

  • The petitioner admitted the loan liability and default.
  • The petitioner did not press for setting aside the SARFAESI proceedings.
  • The petitioner requested the Court to grant reasonable instalments to repay the entire outstanding dues.
  • The petitioner sought protection from coercive recovery proceedings during the repayment period.

Respondents' Arguments

The respondent bank submitted that:

  • The petitioner had committed default in repayment of both loan accounts.
  • The total outstanding liability was ₹46,78,272/- as on the date of hearing.
  • Recovery proceedings under the SARFAESI Act had already been initiated.
  • However, as a matter of indulgence, the bank was willing to accept repayment through a limited number of instalments.

Court Order / Findings

After hearing both parties, the Kerala High Court observed that considering the circumstances of the case, an opportunity should be granted to the borrower to regularize the loan account.

Accordingly, the Court directed:

  • The petitioner shall repay ₹46,78,272/- together with accrued interest, costs and applicable bank charges.
  • The repayment shall be made in 18 equal monthly instalments.
  • The first instalment shall be paid on or before 16 September 2022.
  • Every subsequent instalment shall be paid on or before the 16th day of every succeeding month.
  • If the petitioner defaults in payment of any one instalment, the bank shall be free to continue recovery proceedings in accordance with law.
  • Till compliance with the instalment schedule, all coercive recovery proceedings shall remain in abeyance.

The writ petition was disposed of accordingly.

Important Clarification

This judgment does not invalidate or quash the SARFAESI proceedings initiated by the secured creditor.

The Kerala High Court exercised its discretionary writ jurisdiction only to grant equitable relief by allowing repayment through instalments while safeguarding the bank's right to continue recovery in case of default.

The decision reiterates that where borrowers demonstrate willingness to clear outstanding dues, courts may extend limited equitable protection without interfering with statutory recovery proceedings.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785566827_2512compressed.pdf  

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