Kerala High Court Grants Relief to Borrower Facing Coercive Proceedings Under SARFAESI Act

Background

A borrower approached the Kerala High Court seeking relief from coercive proceedings initiated by the Kerala Bank Limited under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The borrower had defaulted on a mortgage loan and the bank had issued a notice to auction the secured assets.

Legal Question

The legal question before the court was whether the borrower was entitled to relief from the coercive proceedings in light of his financial hardship.

Arguments Presented

Borrower's Arguments:

• The borrower argued that he had initially made repayments promptly but had faced financial difficulties later on.
• He requested the bank to allow him to repay the overdue amounts in easy monthly installments.
• He claimed that he was still in a position to clear the dues if given sufficient time.

Bank's Arguments:

• The bank denied the borrower's claims and stated that he had deliberately defaulted on the loan.
• The bank argued that it had repeatedly reminded the borrower to clear the dues but he had failed to do so.
• The bank contended that it had no choice but to proceed against the borrower under the SARFAESI Act.

Court's Analysis and Reasoning

The court noted that the borrower had provided substantial security to safeguard the bank's interest.

The court also considered the borrower's financial hardship and the fact that the default in repayment had occurred lately due to reasons beyond his control.

The court held that in the facts and circumstances of the case, it was appropriate to grant the borrower a short and reasonable time to clear off the liability.

Decision

The court disposed of the writ petition with the following directions:

• The borrower was directed to remit the overdue amount in eight consecutive equal monthly installments along with interest and other charges.
• If the borrower defaulted on any payment, the bank was at liberty to continue with the coercive proceedings.
• The borrower was also directed to pay current EMIs along with the aforesaid payments.
• If the borrower made payments as directed, the coercive proceedings would stand deferred.

Significance

The decision of the Kerala High Court provides relief to borrowers who are facing financial hardship and are unable to repay their loans. The court's decision recognizes the importance of balancing the rights of lenders and borrowers and ensures that borrowers are not subjected to undue hardship.