Court rules that SARFAESI Act procedures completed during borrower's lifetime remain valid, dismissing plea for fresh notices post demise.
In a significant judgment, the Kerala High Court has ruled that banks are not required to issue fresh notices to the legal heirs of a deceased guarantor if the statutory procedures under the SARFAESI Act were duly completed during the lifetime of the borrower or guarantor. The ruling came in the case of Abhijith B versus Bank of Maharashtra, where the petitioner, a legal heir of the deceased guarantor, challenged the bank's recovery proceedings.
Justice Basant Balaji presided over the matter concerning the recovery proceedings initiated by the Bank of Maharashtra under the SARFAESI Act against the legal heirs of Mr. Babu, the deceased guarantor for a loan. The bank had previously initiated proceedings against the borrower and guarantor, issuing notices under Sections 13(2), 13(4), and 14 of the Act.
The petitioner contended that the bank was advancing coercive recovery actions without issuing fresh notices under Section 13(2) after the guarantor's demise, thereby violating the principles of natural justice. However, the bank argued that the SARFAESI Act does not necessitate issuing new notices to legal heirs if due process was followed during the lifetime of the borrower or guarantor.
Citing precedents, including the judgments from the High Court of Jammu and Kashmir and Ladakh, and Kerala High Court's decision in Authorised Officer v. Devi Prasad, the court observed that the initial notice served under Section 13(2) fulfilled the statutory requirements. The bank's right to enforce security under Section 14 becomes absolute once the 60-day period following the demand notice expires without the liability being discharged, irrespective of the borrower's death.
Justice Balaji emphasized that the death of the borrower does not abate the recovery proceedings initiated under the SARFAESI Act. Legal heirs, stepping into the shoes of the borrower, can only resist action on grounds available under the law. The court dismissed the writ petition, affirming the validity of the bank's actions and allowing the petitioner to pursue any other procedural irregularity claims before the appropriate statutory forum.
Bottom Line:
SARFAESI Act - Validity of recovery proceedings initiated against legal heirs of deceased guarantor - Once due process under Sections 13(2), 13(4), and 14 of the SARFAESI Act is completed during the lifetime of the borrower or guarantor, the bank is not required to issue fresh notices to legal heirs before proceeding to recover dues.
Statutory provision(s): SARFAESI Act, 2002 Sections 13(2), 13(4), and 14
Abhijith B v. Bank of Maharashtra, (Kerala) : Law Finder Doc Id # 2830372
