A writ petition has been filed before the Delhi High Court seeking protection of borrowers from the rigours of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act) and the RDB Act, 1993, due to defaulting on loan accounts because of adverse conditions caused by the Covid-19 pandemic.
The matter had been listed earlier before a single judge bench but vide order dated May 31, it was directed to be listed before the Division Bench of Chief Justice D.N. Patel and Justice Jyoti Singh.
The petitioner, along with his company, Auto Needs India Pvt. Ltd. and others, had secured loan from IDFC First Bank Ltd and were regular in repayment and servicing of the loan account. However, on 04.02.2020, due to certain factors beyond the control of the petitioner/ borrower, the loan account was declared NPA.
Thereafter, the petitioner availed his statutory remedy under Section 17 of the SARFAESI Act, 2002, pending adjudication before Ld. DRT-III, Delhi. The Ld. DRT, vide order dated 23.l2.2020, directed the petitioner to pay certain amounts, failing which the IDFC First Bank would be free to takeover physical possession of the mortgaged property.
Further, a Contempt Notice was issued against the Petitioner and others by Ld.DRT vide order dated 26.2.2021, failing to appreciate the distress and financial loss which has been compounded due to Covid-19 pandemic. On 07.04.21, the said bank issued a notice for physical possession, and on 09.04.21, physical possession was taken over by the bank officials. Further, on 05.05.21, the said bank issued a sale/auction notice to the Petitioner/borrower and others stating that it would sell the mortgaged property on 11.06.2021.
In light of the above, the plea prays for quashing of sale/auction notice dated 05.05.21 or in the alternative a direction to Ld. DRT-II, New Delhi, to hear and decide the case of the petitioner as per rules and procedures set out in the SARFAESI Act,2002 and in accordance with the RBI guidelines.
The plea states that the declaration dated 04.02.2020 was illegal and violative of the guidelines and notifications issued by the RBI. The plea further states that Ld.DRT also failed to appreciate the fact that the borrower company, being a MSME, was subject to compliance of various RBI notifications. The petition contends that there is no authoritative guideline for declaring an account as NPA during the pandemic.
The plea also contends that if borrowers/litigants are unable to approach the Ld. DRTs due to the pandemic, it is imperative that balance of equity will have to be met by directing the banks and financial institutions to refrain from taking coercive action.