SARFAESI Act - NPA due to Bank’s mistake or possession without due process of law: remedies available to the Borrower?
In many cases, while going through the history of a NPA account, we have noted that the account was running well in the early years but has turned out to be a non performing asset (NPA) due to mistake on part of the Bank. The law provides remedies to the borrower and guarantors in such cases where bank is a party to convert a standard account to an NPA one.
In fact, the SARFAESI Act, 2002 was enacted to entrust the quasi-judicial powers to the Banks, where by it became paramount duty of the Authorized Officers appointed by the Banks under the SARFAESI Act to work as per scheme of Law provided under the Constitution of India. They are, in no way, vested more powers than the judicial system endows to the Judicial Courts. In other words, the Office of Authorized Officer is the created by the statute – the SARFAESI Act; and the Authorized Officers are not above the statute. The Authorized Officers are not supposed to favour the Banks or to circumvent the queries of the borrowers, guarantors or even of those who are third parties having interest in the mortgaged properties in any manner, what so ever it may be, even though they have not been served with the Notice under section 13(2) or Section 13(4) of the SARFAESI Act.
The possession taking powers entrusted by the SARFAESI Act also assumes that the Bank has not committed any negligence or mistake in the course of its business relations with the borrowers or guarantors.
Often, due to shortage of Judicial Officers in the Courts and Tribunals, the process of recovery was delayed. Therefore, it is understandable that to expedite the ‘Due process of Law’ the Banks need a special legislation and in fulfillment of that very need our learned Parliamentarians enacted like SARFAESI Act, 2002, whereby, the well-educated Senior Officers of the Bank were entrusted with administration of the Judicial Part of the Act, by way of entrusting them unfettered executive powers to complete the due process of law at their own end before taking the possession of mortgaged properties and only upon full satisfaction that no illegality or highhandedness is going to be committed they may proceed to take symbolic and physical possession of the mortgaged properties u/s 13(4) of the SARFAESI Act. But SARFAESI Act does not allows shortcuts to circumvent or by-pass the Indian Judicial System which is based on providing ‘equal opportunity to both the parties’ and the ‘due process of law’ enshrined under the Principles of Natural Justice’ in Indian Constitution.
Since, they cannot be equated with Judiciary the exercise of powers require the meticulous fulfillment of certain procedures in letter and spirit, without which not only the entire exercise can be nullified by the Competent Tribunals and Courts, vested with the Supervisory Powers under the Act, even at its final stage but if the exercise of such powers is found to be under malaise or negligence the appropriate accountability can also be fixed. Section 32 does not extend blanket immunity to the Authorized Officers, but it only saves them for the errors committed in their bona-fide acts only. Authorized Officer are not justified for not providing an effective remedy to the borrowers or guarantors or the interested third parties, sin case they have a genuine grievance.
The Bank will sanction credit facilities on specific terms. In the course of prolonged dealing between Bank and the Customer; not only the borrowers, but the Banks too can commit blunders. To err is to human, minor routine errors which are unintentional and without negligence can always be excused, but both the sides are equally responsible for blunders and no provision of SARFAESI Act provides immunity from such blunders to the Banks which have ruined the running business to the level of NPA.
It may be true that that the Bank is supposed to defeat the unfair attitude of the borrower, but, it does not empower the Bank to commit unfair attitude with the borrower. If the borrower raises a considerable legal point, the same is to be considered and the Indian Law provides the due opportunity of being heard even to those who are charged with heinous crimes. A judge is always to hear both the parties and pronounce the judgement not on the basis of what he thinks as a person, but on the basis of pleadings, evidences and the matter put on record.
The Authorized Officer is bound by the same procedure of Law. He is required by law to support the logic, and it cannot be said that the legal point or right being raised by the borrower/person can be ignored without any reason.
Just because, the Bank says a particular thing against a particular person or without substance, the same cannot be the justified before the Judicial System in the long run.