Borrower or Third Party need not be Informed While Adjudicating Application preferred by the Secured Creditor under SARFAESI Act: Rajasthan HC [Read Judgment]

While hearing the case of Anil Kumar Sotwal, Rajasthan High Court recently held that there is no need to give notice to the borrower or third party while adjudicating the application preferred by the secured creditor under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI).

In the instant case, the Assessee, an individual took a loan amounting to Rs.2,47,00,000 from Aditya Birla Housing Finance Ltd. by mortgaging a house during the financial year.

During the financial year, the account of the Assessee was declared as Non-Performing Asset (NPA). Thereafter, a notice under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was issued by the authority.

However, the respondent Aditya Birla Housing Finance Ltd moved an application under Section 14 of the SARFAESI Act before the District Magistrate. Accordingly the district magistrate while exercising powers under section 14 of the SARFAESI Act passed the order and the possession of the property in question was taken by the respondents and the same was put to e-auction.

The Assessee challenged the order passed by the District Magistrate while exercising powers under Section 14 of the SARFAESI Act and the notice issued by the Authorized Officer for the respondent under Rule 8(6) of the Security Interest Rules, 2002 and accordingly filed a writ petition against the said order.

After analyzing the above narrated facts and circumstances, High Court Judge Vijay Bishnoy observed that “the writ petition filed by the Assessee is liable to be dismissed on the ground of availability of alternate remedy of filing appeal under Section 17 of the SARFAESI Act. The Court further observed that as per section 14 of the SARFAESI Act, there is no requirement of giving notice either to the borrower or to the third party while adjudicating the application preferred by the secured creditor”.

While dismissing the petition, the Court also declared that a borrower has a remedy of filing an appeal under section 17 of the SARFAESI Act if he is aggrieved by any measure for taking possession of the secured asset, but the present case would not fall under the said condition.