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Section 14, SARFAESI Act Does Not Conceive Of Any Notice Being Issued to Borrower or Any Other Person Who May Be Interested in Secured Asset: Madras High Court

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CASE: T. Vellaiyan vs. The Chief Judicial Magistrate & Others 


A Petition was filed under Article 226 of the Constitution to issue Writ of Certiorarified Mandamus, to call for the records relating to the order of the first respondent, the Chief Judicial Magistrate, dated 09.07.2020. 


This petition was filed to call for the records relating to the order of the first respondent, the Chief Judicial Magistrate. It was to quash the same as illegal and direct the Respondents not to take possession or auction or evict the petitioner without following the due process of law for:

  1. The Properties measuring of Acer 0.12 cents, 0.04 cents, 0.06 cents, 0.12 cents in Kattuveppilaipatty village.
  2. RCC building
  3. Seventeen rooms with electricity connection, water connection, electric motor, lights, fans, bureau, chairs, and tables; and,
  4. All other apparatus connected within the limit Kattuveppilaipatty Panchayat and Valapady Panchayat Union and within the limits of Sub Registration District of Valapady and Registration District of Salem-East. 

The petition pertained to the status of the second respondent, The Branch Manager secured creditor, and the permissibility of the second respondent to invoke the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 

The petition was inspired by the recent judgment of the Madras High Court declaring REPCO Bank to not be a bank or financial institution to be able to claim itself as a secured creditor to invoke the provisions of the said Act of 2002.  

However, REPCO Home Finance Limited, even if it might be a subsidiary of REPCO Bank or otherwise associated with REPCO Bank or promoted by REPCO Bank, was a juristic entity on its own. There was no dispute that by a notification dated November 10, 2003, the Central Government had notified REPCO Home Finance Company as a financial institution and, as such, had entitled to invoke the provisions of the said Act of 2002. The issue had been dealt with in at least two previous judgments of this Court, but, in view of the contentions raised by the Petitioner, the same had to be reiterated.


The Petitioner contended that though REPCO Home Finance Limited had indicated in its counter-affidavit that it was registered with the National Housing Bank and had been notified by the Central Government to be a financial institution, REPCO Home Finance Limited might not be a company to be qualified for notification under the relevant provision.

Court’s Observation

The Court had observed that the petition was misconceived and the desperation of the petitioner was evident from the utterly frivolous case sought to be made out. 

Section 2 (1)(m) of the Act defined a financial institution. Sub-clause (iv) under such provision permitted any other institution or non-banking financial company as defined in Section 45-I (f) of the Reserve Bank of India Act, 1934 was to be notified by the Central Government as a financial institution for the purpose of the Act of 2002. Such notification had been published and remained unchallenged from 2003.

The contention raised by the Petitioner was unacceptable. REPCO Home Finance Limited appeared to be a company in the very use of the word ‘Limited’ as part of its name which was a requirement under the Companies Act and also a warning to the rest of the world to be aware that the shareholders of such juristic entity have limited liability towards the creditors of such juristic entity. It was only in special circumstances that the word ‘Limited’ may be dropped from the name of a company, upon special permission in such regard after been obtained.

The Court opined that there was no doubt that the Petitioner was a debtor who had failed to discharge the repayment obligations in respect of credit facilities obtained from the REPCO Home Finance Limited.

The petitioner sought to challenge the request made by the secured creditor to an appropriate authority under Section 14 of the Act of 2002. Even such aspect of the challenge was utterly misconceived once it was seen that the creditor was a secured creditor within the meaning of the definition of such expression in the Act of 2002.

Under Section 14 of the Act of 2002, a secured creditor has been defined in the said Act may approach such of the executive functionaries as indicated in the relevant provision for assistance to take possession of the secured asset for the sale or the like thereof. Such provision had been repeated in several orders passed by this Court, had not conceived of any process of adjudication. 

The provision was for administrative assistance to be extended to a secured creditor to obtain the secured asset. The secured creditor had to furnish certain declarations and once the declarations had been furnished, the authority approached with the request under Section 14 of the Act had to accept the contents of the declarations at face value and proceed to extend the assistance sought in accordance with law within the time-frame mentioned in the provision. At any rate, Section 14 had not conceived of any notice being issued to the borrower or any other person who may be interested in the secured asset.

The remedy of Petitioner was before the appropriate Debts Recovery Tribunal. However, borrowers who failed to repay did not choose to approach the Debts Recovery Tribunal since borrowers were usually required to make a deposit of the amount claimed by the secured creditor before being permitted any say. There was no doubt that it was for such reason that the Petitioner had approached the Writ Court.

Court’s Decision

The Court had held that since there was an efficacious alternative remedy available to the Petitioner and since it was evident that the principal ground urged that REPCO Home Finance Limited was not a secured creditor within the meaning of the relevant expression in the Act of 2002 was without basis, the petition was thus dismissed. 

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