Sarfaesi - Technical Objections

2020 SCeJ 1910

SUPREME COURT OF INDIA

 27.10.2020

 

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Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 13(2)  - Technical defect in the demand notice  - When the action has been taken by the competent authority as per the procedure prescribed by law and the person affected has a knowledge leaving no ambiguity or confusion in initiating proceedings under the provisions of the SARFAESI Act by the secured creditor, in our considered view, such action taken thereof cannot be held to be bad in law merely on raising a trivial objection which has no legs to stand unless the person is able to show any substantial prejudice being caused on account of the procedural lapse as prescribed under the Act or the rules framed thereunder - With a caveat that it always depends upon the facts of each case to decipher the nature of the procedural lapse being complained of and the resultant prejudiced if any, being caused and there cannot be a straitjacket formula which can be uniformly followed in all the transactions - Borrower (borrower) did not deny advancement of loan, execution of Facility Agreement, their liability and compliance of the procedure being followed by the secured creditor (appellant) prescribed under the SARFAESI Act –  Notice issued on letter head of sister company and wrong stamp used  -  It is not the case of the borrower that there was any iota of confusion in their knowledge regarding the action being initiated in the instant case other than the secured creditor under the SARFAESI Act for non-fulfillment of the terms and conditions of the Facility Agreement or any substantial prejudice being caused apart from the technical objection being raised while the demand notice under Section13(2) was served under the SARFAESI Act or in the proceedings in furtherance thereof no interference by the High Court in its limited scope of judicial review was called for. #2020 SCeJournal 1910 

 

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 13(2)  - Use of letter head of sister concern and wrong seal being put at one stage on the notice by the authorised signatory due to some human error - Objection raised by the borrower was trivial and technical in nature. #2020 SCeJournal 1910

Loan facility with "L&T Housing Finance Ltd." -  Notice under Sections 13(2) and 13(4) issued not been validly issued in the name of the appellant ("L&T Housing Finance Ltd.") instead the name of the company has been mentioned as "L&T Finance Ltd." - From inception, when the proposal of taking a term loan from the appellant was furnished and accepted the letterhead which was used for the purpose clearly indicates that on the top of the letterhead towards right, it reflects "L&T Finance (Home Loans)" and on the bottom towards left, is of "L&T Housing Finance Ltd." – The borrower from the initial stage are aware of the procedure which is being followed by the appellant in its correspondence while dealing with its customers and that is the same practice being followed by the appellant when demand notice was served at a later stage - Demand notice in explicit terms clearly indicates the execution of the Facility Agreement between the L&T Housing Finance Ltd. - Notice under Section 13(2) of the SARFAESI Act was served on the same pattern of the letterhead which is being ordinarily used by the appellant in its correspondence with its customers without leaving any iota of doubt is in reference to the non-fulfillment of the terms and conditions of the Facility Agreement executed between the parties and even the schedule of security profile which has been annexed thereto  - Even in the reply to the demand notice which was served by the borrower through their counsel in compliance to Section 13(3A) of the SARFAESI Act, there was no confusion left in reference to the correspondence taken place between the appellant (secured creditor) and the borrower (borrower) tendering their justification and assigning reasons for which compliance could not have been made and no objection was indeed raised by the borrower in regard to the defect if any, in the demand notice which was served by the secured creditor i.e. "L&T Housing Finance Ltd." in compliance to the provisions of the SARFAESI Act - For the first time, a feeble attempt was made in raising the alleged technical objection in a Securitisation Application filed before the DRT and succeeded - Borrower (borrower) did not deny advancement of loan, execution of Facility Agreement, their liability and compliance of the procedure being followed by the secured creditor (appellant) prescribed under the SARFAESI Act –  We are of the view that the objection raised by the borrower was trivial and technical in nature and the appellant (secured creditor) has complied with the procedure prescribed under the SARFAESI Act, more so, when the borrower are unable to justify the error in the procedure being followed by the appellant(secured creditor) to be complied with in initiating proceedings under the SARFAESI Act -  Submission that the notice under Section 13(2) of the Act was served by the authorised signatory of "L&T Finance Ltd." and that was not the secured creditor in the facts of the case, in our considered view, is wholly without substance for the reason that "L&T Finance Ltd." and "L&T Housing Finance Ltd." are the companies who in their correspondence with all its customers use a common letterhead having their self-same authorised signatory, as being manifest from the record and it is the seal being put at one stage by the authorised signatory due to some human error of "L&T Finance Ltd." in place of "L&T Housing Finance Ltd." -  More so, when it is not the case of the borrower that there was any iota of confusion in their knowledge regarding the action being initiated in the instant case other than the secured creditor under the SARFAESI Act for non-fulfillment of the terms and conditions of the Facility Agreement or any substantial prejudice being caused apart from the technical objection being raised while the demand notice under Section13(2) was served under the SARFAESI Act or in the proceedings in furtherance thereof no interference by the High Court in its limited scope of judicial review was called for.