Bank Restrained From Taking Possession of The Secured Assets For Not Providing Break Up of Principal And Interest Amount In The Notice U/s 13(2) of SARFAESI Act – Gujarat High Court

• A Petition was filed before the Hon’ble Gujarat High Court, in the matter of M/S Abaj Foods Private Limited vs The Authorized Officer, Punjab, challenging the actions/measures taken by the Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”).
• The Petitioner contended that the Notice under section 13(2) of the SARFAESI Act issued by the Respondent Bank mentioning the balance outstanding as on the date of NPA without giving break up of principal and interest outstanding amount is defective and in contravention of the provisions of the SARFAESI Act.
• In view of the above facts and circumstances, the Hon’ble High Court relied upon the observations made by the Division Bench in the case of Punjab National Bank Vs. Mithilanchal Industries Pvt. Ltd.:

“29. The words used in Section 13(3) of the SARFAESI Act are “details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the Secured Creditor.” So, the notice under Section 13(2) of the SARFAESI Act has to necessarily contain the details on the above two counts.”

• In view thereof, the Hon’ble Court affirmed that as per section 13(3) of the SARFAESI Act, providing details and relevant calculations in respect of the outstanding amount under the heads of principal amount and interest amount is necessary for the purpose of making demand in the notice under section 13(2) of the SARFAESI Act. In fact, section 13 (3A) of the SARFAESI Act gives right to the borrower to make a representation or raise an objection against the notice under section 13(2). Unless the borrower has the details of the amounts being demanded under a notice under section 13(2), the borrower would not be in a position to make any representation or raise any objection. It is only when the amounts under different heads are provided to the borrower that it could raise objection under any of the heads where the borrower finds that the amount quantified is not correct. Without there being any details mentioned in the notice, the very purpose of section 13 (3A) would also be lost to a large extent.
• Thus, the petition was allowed by the Hon’ble Court, and the Bank was restrained from taking any possession of the secured assets of the Petitioners pursuant to the notice issued under section 13(2) of the SARFAESI Act and the actions under sections 13(4) and 14 of the SARFAESI Act till the final disposal of the Securitisation Application pending before the Debt Recovery Tribunal.