SARFAESI Act- HC To See If 'Efficacious' Remedy Available To Borrowers

(MENAFN- Kashmir Observer) Srinagar- The High Court of J&K and Ladakh has entertained a batch of petitions for deciding them on merits as to whether its intervention would be necessary for“efficacious” remedy available to borrowers and the guarantors under“Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002” (SARFAESI Act).

“Unless the adjudicating forum is readily, easily and regularly available, it can prejudicially affect their right to easy access to justice which appears to be in the position in the present cases where a large number of petitioners have approached this Court alleging irregular/malafide/illegal acts on the part of the Banks/ financial
institutions by violating provisions of the SARFEASI Act,” said a bench of Chief Justice N. Kotiswar Singh and Justice Wasim Sadiq Nargal while holding as“maintainable” at least 46 writ petitions filed by borrowers and the guarantors questioning, amongst others, that though there is a statutory remedy available, it is of a limited nature and not efficacious.


“We hold that these writ petitions are maintainable. However, since we have only decided on the preliminary issue as the issue of maintainability of these petitions, we will have required to decide on the merit of each case as to whether our intervention under Article 226 of the Constitution would be necessary for which we will take up these writ petitions individually and consider the pleas taken therein separately,” the court said and directed that all these please be listed again after a month during which time it directed authorities concerned to file their respective affidavits.

“An endeavour will be made to dispose of these writ petition individually as expeditiously as possible, considering the fact that the interim orders passed by this Court will have huge financial
implications as the Banks may feel that they have been denied speedy recovery of the secured debts.”

The court said that though the grounds of challenge made by the debtors ultimately may be found to be without merit, yet if such challenges are genuine and valid and if no effective redressal mechanism is readily, regularly and easily available, it can cause grave prejudices and injustices to such borrowers/debtors.

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“Therefore, providing a redressal forum which is easily, readily and regularly available to the borrowers/aggrieved persons is sine qua non for effective and just implementation of SARFAESI Act.”

The court said that it is mindful of the fact that SARFAESI Act is a stringent piece of legislation enacted“to protect the interest of the creditors and for better management of the economy of the nation where a large number of borrowers default in making timely payment, rendering the accounts and assets non-performing which has a cascading effect on the economy of the country.”“These stringent provisions have been made for the benefit of financial
institutions/secured creditors to have easy access to the secured assets of the borrowers for speedy liquidation of debts,” the court said, adding,“While such a public policy cannot be doubted and the vires of this Act has been already upheld by the Apex Court, it does not necessarily mean that the genuine bonafide interest of the borrowers should be ignored or sacrificed.”

In fact, the court said, there may be occasions where the financial
institutions/Banks may not have proceeded strictly in accordance with provisions of SARFAESI Act which may lead to challenges by the borrowers and guarantors or the aggrieved persons.

“Under the circumstances, because of the stringent provisions of the Act, it is incumbent upon the authorities to provide equally efficacious redressal forum which is readily, easily and regularly available which will provide relief in a speedy and convenient manner, so that the borrowers and such aggrieved parties can promptly, without undue difficulties, challenge those acts which would have the effect of dispossessing their properties”. However, the court said, if the redressal forum is not effective, efficacious and readily available, sometimes grave injustice can be caused to the borrowers and debtors, in which event, this High Court can step in to prevent injustice by invoking extraordinary jurisdiction under Article 226.

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