DRT & SARFAESI: Can a borrower dispute the outstanding due under section 17 of SARFAESI Act, 2002?

We all aware of the object behind SARFAESI Act, 2002 and it is to enable the banks to recover the debts speedily and to enable the banks to reduce NPAs. Despite lot of criticism that SARFAESI Act, 2002 is draconian law and it enables the Banks to harass the borrowers, Banks suffer to recover their dues in the absence of a special legislation like SARFAESI Act, 2002. It is for sure that no Bank can recover their dues speedily if they have to approach the Civil Court for recovery of debt. We all know as to how to prolong the matters before a Civil Court for years. Thus, the object behind SARFAESI Act, 2002 is laudable. However, it is very often pointed-out that the Banks misuse the provisions of SARFAESI Act, 2002 with ulterior motive and it is also a known fact that the Banks apply the provisions of SARFAESI Act, 2002 mechanically. SARFAESI Act, 2002 is an interesting litigation though there is confusion and complication with many judgments on various issues and by failing to understand the law in the right perspective. No borrower should compromise with his rights and he can very well protect his rights through appropriate forum though the Bank proceeds under the provisions of SARFAESI Act, 2002. There are many interesting and complicated issues under SARFAESI Act, 2002 and one of the interesting aspects is as to whether the borrower can dispute the outstanding due with the Bank. As everybody feels, the Bank never makes any demand for repayment without proper Statement of Account. However the legislation requires the Bank officials to look into the objections of the borrower in reply to the demand notice and law requires the law officials to apply their mind while considering the objections from the borrower. While in some cases, the Bank gives a detailed reply to the objections raised by the borrower, the Bank mechanically either ignores or rejects the objections. After the process of demand under section 13 (2) of the Act and after addressing the objections from the borrower, the Bank proceeds to take ‘symbolic possession’ of the secured asset by sending a notice to the defaulter under section 13 (4) of the Act. While the law says that no borrower can challenge the demand notice under section 13 (2), the Act provides the borrower a right to file an appeal under Section17 of the Act challenging the notice under section 13 (4) and subsequent steps. Not only can the borrower, any person aggrieved can prefer an appeal to the concerned Debt Recovery Tribunal under section 17 of the SARFAESI Act, 2002. Now the issue is as to what the Debt Recovery Tribunal should look into while considering the Appeal filed by the borrower or any aggrieved under section 17 of the SARFAESI Act, 2002? The settled proposition is that the Debt Recovery Tribunal has to see as to whether the Bank has followed the procedure prescribed under the SARFAESI Act rightly or not. The proposition can not be interpreted and seen that the DRT will only look at the form of notice under section 13 (2), the requirements, the reply to the objections if any and the statutory periods. The DRT should look into all connected issues in an appeal under section 17 of SARFAESI Act, 2002. The DRT should look into as to whether the Account has really become NPA or not, the terms of loan, the mortgage, the subsequent agreements between the Bank and the borrower and plethora of other issues as raised by the borrower in an appeal under section 17 of SARFAESI Act, 2002. Once the Bank initiates proceeding under the provisions of SARFAESI Act, 2002, the borrower may not be able to approach the High Court in view of alternative remedy and is not permitted to approach the Civil Court in view of the specific bar under section 34 of the SARFAESI Act, 2002. As such, the remedy provided under section 17 of SARFAESI Act, 2002 should be effective to the borrower.

If we look at the question as to whether the borrower can dispute the outstanding due in an appeal under section 17 of SARFAESI Act, 2002, I would strongly feel that the DRT can and should look into all issues and including the dispute with regard to the validity of the claim. Upon the specific plea from the borrower with regard to the claim of the Bank, the DRT can follow its own procedure as prescribed and can give a finding. It is true that normally no Bank official will commit a mistake in arriving at the outstanding due as the Banks will be systematic in maintaining records and as they will strictly follow the guidelines prescribed by the Reserve Bank of India. However, on the presumption that the Bank will never commit a mistake in calculating outstanding due, the borrower can not be denied of his right to challenge the outstanding claimed by the Bank. It is true that the DRT can not do a roving inquiry into the all allegations with regard to the outstanding amount, however, if the borrower is specific and clear in disputing the outstanding amount claimed by the Bank, then, the DRT is bound to look into it and can give a ruling in favour of the borrower if he is right in his contention. Banks and Bank officials do commit mistakes at times and the borrower should not be suffered on the illogical notions that the Banks or Bank Officials will never commit mistakes. If the DRT restricts the grounds to be taken by the borrower in an appeal under section 17 of SARFAESI Act, 2002, then, where does he go if he is aggrieved by some illegal action of the Bank in the course. Supposing a case where the Bank claims 56 lakhs instead of the actual outstanding of 46 lakhs, where do a borrower go asking for the rectification of the mistake committed by the Bank and we can not expect that every borrower is highly educated. As such, there are issues and despite the presumption that the Banks or Bank officials will not commit any mistakes in calculating the outstanding due, the borrower should be allowed to raise all objections in his appeal under section 17 of SARFAESI Act, 2002. When it comes to granting the relief or asking the Bank not to proceed further, the DRT may have to look into various issues into consideration.

Note: the views expressed are my personal.