L And T Housing Finance Limited vs. Trishul Developers and Anr. - (Supreme Court) (27 Oct 2020)

Proceedings initiated under SARFAESI Act by the secured creditors cannot be nullified merely on basis of technical defects and procedural lapses unless substantial prejudice was caused to the defaulte

MANU/SC/0793/2020

Banking

The instant appeal is directed against the impugned judgment passed by the Division Bench of the High Court wherein the High Court while reversing the finding returned by the Debt Recovery Appellate Tribunal in its order upheld the order of the Debt Recovery Tribunal quashing the demand notice dated 14th June, 2017 served on the Respondents (borrower) under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( SARFAESI Act) followed with the possession notices dated 9th November, 2017 and 10th November, 2017.

Learned counsel for the Appellant further submits that, the proceedings initiated under the SARFAESI Act would not nullify on the mere technicality as being pointed out and the High Court without appreciating the material on record has reversed the finding returned by the DRAT in its extraordinary jurisdiction under Article 226 & 227 of the Constitution, 1950 and if two views are possible, unless found to be perverse it was not justified for the High Court to reverse the finding of fact supported by the material on record and that needs interference of this Court.

Notably from the very inception at the stage, when the proposal of taking a term loan from the Appellant was furnished by the Respondents vide their application dated 15th May, 2015 and accepted by the Appellant vide sanction letter dated 7th August, 2015 (P1), 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.” with their registered office in Mumbai and this has been duly signed by the authorised signatory of the borrower for Trishul Developers and by its guarantors.

It manifests from the record that, the Respondents 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 dated 16th December, 2016 was served at a later stage.

The Respondents (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. In the facts and circumstances, 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, 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.

The objection raised by the Respondents was trivial and technical in nature and the Appellant (secured creditor) has complied with the procedure prescribed under the SARFAESI Act. The impugned judgment passed by the High Court is hereby quashed. Appeal allowed.

Tags : PROCEDURE INITIATION COMPLIANCE