Can a secured creditor respond to a representation by a borrower, in response to a notice issued to him under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), beyond the mandatory period of 15 days (as stipulated under Section 13 (3A) of SARFAESI Act)?
This interesting question came before the High Court of Delhi (High Court) in the case of Kannu Aditya India Limited (Company or Petitioner) Vs State Bank of India (SBI).
The Petitioner filed a writ petition to set aside the reply dated October 14, 2018 from the SBI issued under Section 13 (3A) of the SARFARESI Act (the said reply was in response to the representation made by the Company against the notice issued by the SBI under Section 13(2) of the SARFAESI Act, which was received by the Company after expiry of the mandatory period of 15 days of receipt of such representation by the SBI),
The High Court observed that the intent of legislature, while introducing sub-section (3A) was to ensure that objections/representations of a borrower against any action for enforcement of security interest are considered before a secured creditor proceeds to take possession of the secured assets in terms of Section 13(4) of the SARFAESI Act.
Further, while interpreting the intent of the legislature, the High Court observed that merely because the requirement of a secured creditor to consider a representation or an objection raised by the borrower has been held to be mandatory does not necessarily mean that the period within which the lender must respond as specified under Section 13(3A) of the SARFAESI Act is also to be construed as mandatory. The intention of parliament in providing a time period of 15 days in section 13 (3A) was to ensure that the secured creditors respond within reasonable time and hence the said time period is directory in nature.