High Court Stays Bank Recovery Against Comatose Debtor, Directs Consideration of Guardianship Under Disability Act

Kochi: In a ruling emphasizing a humanitarian approach alongside statutory recovery procedures, the High Court has directed a competent authority to expeditiously consider an application for limited guardianship for a businessman who is in a comatose state following brain surgery. The Court also ordered a temporary stay on coercive recovery proceedings initiated by a bank against the individual's assets under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

The judgment came on a writ petition filed by the wife of Sri. Mohan V. , a successful entrepreneur who suffered a sudden physical collapse in March 2021 and has since been in a vegetative, comatose state with no cognitive function.

Background of the Case

Prior to his medical emergency, Mohan V. had availed loans totaling over ₹1.6 Crore from a bank between 2019 and 2021 for purchasing land and constructing a commercial building. He had been servicing these loans without default until he became completely incapacitated.

Following his collapse and subsequent brain surgery which left him in a comatose state, loan repayments ceased. The bank initiated recovery proceedings by issuing a notice under Section 13(2) of the SARFAESI Act to Mohan V. and other guarantors.

The petitioner (wife) had previously approached the Court in W.P.(C) No.27904/2022 seeking guardianship, which resulted in a direction to approach the jurisdictional Sub Divisional Magistrate (SDM) for limited guardianship specifically to deal with bank accounts.

Faced with the bank's recovery steps, the petitioner sought a moratorium and rescheduling of the loan, explaining that while there were significant assets (landed properties across multiple states) in her husband's name, she could not access or dispose of them to clear the dues due to his condition and the lack of legal authority. She described the situation as a "Catch 22". The bank, however, proceeded with recovery measures.

To address this impasse and enable the sale of specific properties to settle the debts, the petitioner filed a fresh application (Ext.P6) under Section 14 of the Rights of Persons with Disabilities Act, 2016 (RPwD Act) before the competent authority seeking limited guardianship for disposing of three identified properties.

Legal Framework and Court's Analysis

The Court acknowledged the bank's statutory right to recover the money advanced. However, it took into account the unique and tragic circumstances – the debtor's complete incapacity and status as a person with severe disability as defined under Section 2(s) of the RPwD Act, 2016.

The judgment highlighted relevant provisions of the RPwD Act: * Section 12 mandates that appropriate Governments ensure persons with disabilities can access legal forums without discrimination. * Section 13 affirms the right of persons with disabilities to own/inherit property, control financial affairs, and access credit. * Section 14 provides for the grant of limited guardianship by a District Court or designated authority when a person with disability, even with support, cannot make legally binding decisions. It also allows for total support/guardianship in certain cases and review.

The Court referred to the Kerala Government's guidelines (Ext.P6 Circular dated 03.05.2022) which elaborate on the process for granting limited guardianship under Section 14, confirming that transfer of property of the person with disability can be a subject of such guardianship and that an application can be made by the person with disability or their guardians.

Given that Mohan V. is in a comatose state and entirely incapable of making decisions, including managing his finances or selling assets to discharge debts, the Court found that his failure to maintain the loan account was a direct consequence of his becoming a person with disability. It reasoned that when a person cannot take prudent decisions due to their medical condition, the competent authority under the RPwD Act has a legal duty to consider an application for guardianship aimed at managing assets like disposing of property to clear liabilities.

The Court explicitly stated that while respondents 1 and 2 (the bank) have a statutory right to recover dues, the peculiar situation warranted a humanitarian approach.

The Ruling

Based on these considerations, the High Court disposed of the writ petition with the following directions:

1. The additional 3rd respondent (the competent authority under the RPwD Act, likely the SDM) was directed to consider the petitioner's application (Ext.P6) under Section 14 of the RPwD Act, 2016, and take an appropriate decision thereon as expeditiously as possible, at any rate within a period of one month from the date of the judgment.
2. Respondents 1 and 2 (the bank) were directed to defer coercive proceedings against the petitioner's husband and his assets under the SARFAESI Act for a period of two months.

Implications

The judgment underscores the need for financial institutions and authorities to balance debt recovery laws with the protective provisions of the Rights of Persons with Disabilities Act, particularly in cases involving individuals with severe incapacities. By directing the consideration of guardianship as a mechanism to enable the disabled person's legal heir to manage assets and settle debts, and simultaneously granting a temporary stay on recovery, the Court has provided a crucial window for the family to potentially resolve the financial imbroglio while upholding the dignity and rights of the person with disability. The ruling highlights the humanitarian aspect that courts can consider when applying recovery statutes in exceptional circumstances.