SARFAESI Act | Once Demand Notice Is Served During Borrower’s Lifetime, Creditor Can Proceed Without Fresh Notice To Legal Heirs: Kerala High Court

The Court was hearing a writ petition filed by a legal heir of a deceased guarantor, challenging proceedings initiated by the Bank of Maharashtra under Section 14 of the SARFAESI Act for taking physical possession of the secured property.

A Bench of Justice Basant Balaji, while stating that “once the demand notice under Section 13(2) is duly served during the borrower’s lifetime and the mandatory 60-day period expires without the liability being discharged, the bank’s right to invoke Section 14 proceedings becomes absolute”, accordingly held that in the case at hand, “the initial demand notice was duly served during the borrower’s lifetime and the statutory 60-day period expired without repayment, the creditor is legally entitled to proceed with the possession of secured assets without issuing additional notices to the legal heirs”.

Advocate Gigimon Issac appeared for the petitioner, while Advocate T.A. Prakash represented the respondent Bank.

Background

One of the respondents, who stood as guarantor for a loan availed by a partnership firm, passed away after statutory notices under Sections 13(2) and 13(4) of the SARFAESI Act had already been issued and served. The secured asset was inherited by the petitioner upon the guarantor’s demise.

Subsequently, the Bank initiated proceedings under Section 14 of the SARFAESI Act and an Advocate Commissioner was appointed to take physical possession of the secured property. The petitioner challenged these proceedings, contending that in the absence of a fresh demand notice under Section 13(2) issued to the legal heirs, the proceedings were void and violative of principles of natural justice.

Court’s Observation

The High Court examined the statutory scheme of the SARFAESI Act and noted that Section 14 is invoked only after the borrower fails to discharge the liability within sixty days of service of a demand notice under Section 13(2).

The Court observed that in the present case, the demand notice under Section 13(2), the measures under Section 13(4), and the order under Section 14 were all issued and served during the lifetime of the deceased guarantor. There was no dispute that the mandatory statutory procedure had been validly completed before his death.

Relying upon precedents of the Jammu & Kashmir and Ladakh High Court in Sundri and Ors. v. The Jammu and Kashmir Bank Ltd and its own earlier decisions in Authorised Officer v. Devi Prasad, the Court held that once a valid demand notice is served and the statutory sixty-day period expires without repayment, the secured creditor’s right to proceed under Section 14 becomes absolute.

The Court held that the SARFAESI Act does not mandate issuance of a second round of notices to legal heirs in such circumstances. It further observed that the death of the borrower or guarantor after completion of statutory steps does not invalidate the proceedings nor obligate the bank to recommence the process under Section 13(2).

“Based on the facts and circumstances, supported by relevant judicial precedents, this Court finds no necessity for issuing a second round of notices under the Act, given that the procedures under Sections 13(2), 13(4), and 14 were validly initiated and served during the lifetime of the deceased fifth respondent”, the Court concluded.

Conclusion

The Court rejected the petitioner’s challenge regarding the necessity of a fresh notice and disposed of the writ petition, while leaving liberty with the petitioner to raise any other permissible contentions before the appropriate statutory forum.

Cause Title: Abhijith B. v. Bank of Maharashtra & Ors. (Neutral Citation: 2025:KER:91045)

Appearances

Petitioner: Advocate Gigimon Issac

Respondents: Advocate T.A. Prakash

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