The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, provides financial institutions in India with the power to recover their non-performing assets (NPAs) without court intervention. However, borrowers are not left entirely without recourse. They can seek various judicial remedies to protect their rights when banks or financial institutions initiate proceedings under the SARFAESI Act. This article, presented by Finlender, explores the key judicial remedies available to borrowers under this law.
1. Filing an Application with the Debt Recovery Tribunal (DRT)
Under Section 17 of the SARFAESI Act, borrowers have the right to challenge the actions taken by the secured creditor (banks or financial institutions) in the Debt Recovery Tribunal (DRT). If a borrower feels aggrieved by measures like the possession of their secured asset, they can approach the DRT within 45 days of the action being taken. The DRT will evaluate whether the bank’s action was in compliance with the law and consider any grievances the borrower raises. This is a key judicial remedy that offers borrowers an opportunity to present their case and seek redress.
2. Appeal to the Debt Recovery Appellate Tribunal (DRAT)
If a borrower is dissatisfied with the order of the DRT, they can appeal to the Debt Recovery Appellate Tribunal (DRAT) under Section 18 of the SARFAESI Act. This appeal must be filed within 30 days from the date of receipt of the DRT’s order. However, a precondition for filing this appeal is that the borrower must deposit 50% of the amount due to the secured creditor, though this can be reduced to a minimum of 25% at the tribunal’s discretion.
3. Approaching the High Court or Supreme Court
In rare cases where there is a violation of constitutional rights or a failure to adhere to legal procedures under the SARFAESI Act, borrowers can invoke the writ jurisdiction of the High Court under Article 226 of the Indian Constitution or the Supreme Court under Article 32. This is usually a last resort after exhausting all other remedies, as higher courts tend to avoid intervening unless there is a grave violation of law.
4. Stay Orders on Recovery Proceedings
Borrowers can also seek stay orders from the courts to temporarily halt recovery proceedings initiated under the SARFAESI Act. This can be sought in cases where the borrower has strong grounds to contest the legality of the lender’s actions. Courts may grant a stay to ensure that the borrower’s rights are not irreparably harmed while their appeal is being heard.
Conclusion
While the SARFAESI Act empowers banks to recover dues, borrowers have several judicial remedies at their disposal to safeguard their interests. With Finlender’s expertise in financial matters, borrowers can stay informed about their rights and seek appropriate legal recourse when necessary. Whether it’s approaching the DRT, DRAT, or higher courts, borrowers must act within prescribed timelines to ensure their voices are heard and their rights are upheld.
