K.M. Vijayan vs Kottayam District Co-Operative Bank Ltd.

K. Vinod Chandran, J.—The petitioners assail the securitisation proceedings initiated, on the ground that the loan availed of, was less than Rupees One lakh.

The learned counsel for the respondent-Bank, however, seeks to sustain the action of the Bank on the ground that, as provided in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity "SARFAESI Act"), the nomenclature covers not merely the amount availed of as the loan, but includes the interest and any amounts receivable under the loan account.

The petitioners rely on Section 31(h), which excludes "any security interest for securing repayment of any financial asset not exceeding one lakh rupees" from the application of the SARFAESI Act. The learned counsel for the petitioners also points to the statement of objects and reasons, which referred to "loans not exceeding Rupees One lakh".

The learned counsel for the respondent-Bank, however, refers to the definition clause, more specifically Section 2(1)(l), which defines "financial asset", to mean debt or receivables and also provides for inclusion of items more specifically mentioned in clauses (i) to (vi). "Debt", as defined under the above provision, is assigned the meaning "it has in clause (g) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993" [for brevity "RDDBFI Act"] by Section 2(1)(ha). The definition of debt as per the RDDBFI Act is extracted hereunder: "S. 2(g) "debt" mens any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application".

Since "debt" includes any interest payable; and the "financial asset", defined under the SARFAESI Act, has been given the meaning of debt or receivables; necessarily the Bank would be entitled to proceed against the petitioners'' property under the SARFAESI Act in the present proceedings. In such circumstance, the writ petition is found to be devoid of merit.

However, considering the impecunious circumstances of the petitioners, it is directed that the proceedings under SARFAESI Act shall be kept in abeyance on condition of the petitioners settling the entire loan in eight equal monthly instalments. The respondent-Bank shall quantify the dues as on 15.07.2014 and issue a statement of accounts, in accordance with which the instalments shall be paid. The 1st instalment shall be paid on or before 07.08.2014 and thereafter; the due date of instalments falling on the 07th of each succeeding month. If default is committed in two consecutive instalments, then the recovery proceedings shall revive and continue. On the satisfaction of the dues as per the statement, the Bank shall give a statement of the future interest from 15.07.2014 and the same shall be settled as the 9th instalment.

The writ petition stands disposed of as above. No costs.