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Only The Secured Creditor Can Initiate Action Against The Borrower Under SARFAESI Act

IN THE HIGH COURT OF KARNATAKA AT BENGALURU, WRIT PETITION NO.22137 OF 2019 (GM-DRT), BETWEEN TRISHUL DEVELOPERS vs AND 1. L & T HOUSING FINANCE LIMITED, the developer had borrowed Rs 20 crore from L & T Housing Finance Limited, on default of payments received a notice from L & T Financial services, which is not a secured creditor. 

However, the finance company argued that Trishul developers had in its reply to the demand notice sent on the letter head of L & T Financial services, admitted that they have secured a loan and it was never their intention to avoid payments of any legitimate dues.

DRT quashed the demand notice but the same was allowed on appeal by the DRAT. On appeal the High Court setting aside the order of the DRAT held that it is well-settled principles that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and only the secured creditor, and no other person or entity, can initiate action against the borrower under the Secularization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFAESI).

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