SARFAESI procedure to be mandatorily followed by creditors

The Supreme Court recently ruled out that a secured creditor is bound to consider the representation of the debtor before taking over  the mortgaged properties of a debtor under the Securitisation ( “SARFAESI”) Act. Also stated that this procedure is mandatory under Section 13 of the Act. The dispute in this case was between Blue Coast Hotels Ltd of Goa. The debtor industrial Financial Corporation of India the lender, and ITC Ltd, the auction purchaser. The debtor company defaulted’ in repayment of the loan.

Resultantly notices were published and the property was auctioned. The debtor meanwhile invoked Section 13A of the Act that provides for it to make representations which the creditor must consider. The High Court held that this opportunity was not given to the debtor. Whereas, it was noticed that several opportunities were given to the debtor to repay the debt to which they didn’t respond positively. Thus, the creditor has fulfilled the mandatory requirement and the auction in favour of ITC was valid.