Case Note & Summary
The petitioner, Mr. Latif Yusuf Manikkoth, filed a writ petition before the Bombay High Court challenging the possession notice issued by the Bank of Baroda (originally Dena Bank) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The petitioner had stood as a guarantor for a loan taken by Alaska Creations Private Limited, which defaulted on the loan. The bank initiated proceedings under the SARFAESI Act and issued a possession notice against the petitioner's property. The petitioner contended that he was only a guarantor and not a borrower, and therefore, the SARFAESI Act could not be invoked against him. He also argued that the bank had not complied with the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The court, after hearing the parties, held that the definition of 'borrower' under Section 2(1)(f) of the SARFAESI Act includes a guarantor, and thus, the bank was entitled to proceed against the petitioner. The court further held that the petitioner had an alternative statutory remedy under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal, and therefore, the writ petition was not maintainable. The court dismissed the writ petition and the interim application, granting the petitioner liberty to approach the Debt Recovery Tribunal under Section 17 of the SARFAESI Act.
Headnote
A) SARFAESI Act - Definition of 'Borrower' - Guarantor as Borrower - Section 2(1)(f) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The court held that the definition of 'borrower' under Section 2(1)(f) includes a guarantor, and therefore, the petitioner, who stood as a guarantor for the loan, is liable to be proceeded against under the SARFAESI Act. (Paras 5-6) B) SARFAESI Act - Alternative Remedy - Maintainability of Writ Petition - Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The court held that when an alternative statutory remedy under Section 17 of the SARFAESI Act is available, a writ petition under Article 226 of the Constitution is not maintainable. The petitioner was directed to avail the remedy before the Debt Recovery Tribunal. (Paras 7-8) C) SARFAESI Act - Possession Notice - Validity - Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The court declined to interfere with the possession notice issued by the bank, as the petitioner had an efficacious alternative remedy under Section 17 of the Act. (Para 8)
Issue of Consideration
Whether a guarantor can be treated as a 'borrower' under the SARFAESI Act, 2002, and whether a writ petition is maintainable against a possession notice issued under the SARFAESI Act when an alternative statutory remedy under Section 17 of the Act is available.
Final Decision
The writ petition and interim application are dismissed. The petitioner is at liberty to approach the Debt Recovery Tribunal under Section 17 of the SARFAESI Act.
Law Points
- Guarantor is a borrower under SARFAESI Act
- Alternative remedy under Section 17 SARFAESI Act is efficacious
- Writ petition not maintainable when statutory remedy available
- No interference with possession notice under SARFAESI Act
