NTA Committee's Approval Not Needed Before SARFAESI Action Against Property Of Person With Disability: Kerala HC

The Kerala High Court has held that a secured creditor proceeding under the SARFAESI Act is not required to obtain prior permission from the Local Level Committee constituted under the National Trust Act before proceeding against property in which a ward (a person with specified disabilities) has an interest.

Justice P.V. Balakrishnan made the observation while dismissing a writ petition challenging SARFAESI proceedings initiated by Canara Bank against secured assets in which the second petitioner, an intellectually differently abled person represented by her guardian, held an undivided share.

In Sabarinathan K. v. District Collector, Palakkad, the High Court had recognised the Local Level Committee's authority to grant or refuse sanction to a guardian seeking to deal with a ward's assets. Referring to that ruling, the Court observed:

“The afore dictum does not, in any manner, indicate that any obligation has been cast upon Courts, Tribunals, or other statutory authorities to seek permission from the Local Level Committee prior to dealing with the property of the ward, in accordance with law. Put differently, no restriction of any kind has been imposed upon Courts, Tribunals, or other statutory authorities from dealing with the properties of wards in the manner prescribed by law.”

The dispute arose from recovery proceedings initiated by Canara Bank against properties mortgaged as security by a partnership firm. Muhammed Ismail, the husband of the first petitioner and father of the second petitioner, was originally a partner of the firm. The firm had availed financial assistance from the Bank by mortgaging two properties.

Muhammed Ismail died on October 22, 2020. Following his death, his interest in the mortgaged properties devolved upon his heirs.

After the loan fell into default, the Bank started proceedings under the SARFAESI Act. A writ petition challenging the same was filed by the petitioners.

The first petitioner, who had been appointed guardian of the second petitioner, argued that the Bank could not proceed against the property without permission from the Local Level Committee constituted under the National Trust Act.

According to them, such permission was required because the second petitioner held an undivided share in the property.

Canara Bank disputed the contention and maintained that no such permission was required.

The principal issue before the Court was whether the secured creditor was required to obtain prior permission from the Local Level Committee before proceeding against the second petitioner's interest in the property under the SARFAESI Act.

Examining Sabarinathan, Justice Balakrishnan noted that the earlier decision was concerned with guardians appointed under the National Trust Act and recognised the Committee's authority to grant or refuse sanction to a guardian seeking to deal with a ward's assets.

The Court ruled that the earlier decision did not impose any obligation on courts, tribunals or statutory authorities to obtain permission from the Committee before dealing with a ward's property in accordance with law. Nor did it place any restriction on such authorities from dealing with a ward's property in the manner prescribed by law.

The Court therefore held, “I am of the considered view that the 2nd respondent is under no obligation to obtain sanction or permission from the Local Level Committee constituted under the National Trust Act before proceeding to deal with the properties of the ward under the SARFAESI Act.”

The judgment also noted that the Supreme Court has repeatedly held that writ petitions challenging SARFAESI proceedings should ordinarily not be entertained where an effective alternative remedy is available before the Debt Recovery Tribunal.

Holding that any grievance against the recovery proceedings could be raised before the Debt Recovery Tribunal, the Court dismissed the writ petition.

For Petitioners: Advocates Binoy Vasudevan, Sreejith Sreenath, K.V Rajeswari, Sushama Devi M ans Rincy Khader

For Respondents: Advocates N Manoj Kumar, GP, M Gopikrishnan Nambiar, SC and V Ramkumar Nambiar, Amicus Curiae