Bank's Right To Recover Becomes Absolute Once Demand Notice Is Served In Borrower's Lifetime, Fresh Notice To Legal Heirs Not Needed: Kerala HC

The Kerala High Court, in a recent judgment, held that the statutory right of a bank to recover dues from a borrower under the SARFAESI Act becomes absolute once the demand notice is duly served during his lifetime and the mandatory 60-day period expires without the liability discharged.

There was no need for the bank to issue fresh notices under the Act for the legal heirs of the deceased borrower, it was held.

Justice Basant Balaji was considering a plea preferred by the legal heir of a deceased person, who had stood as a guarantor for a loan advanced by a bank to a firm.

“Section 14 of the Act provides a statutory remedy for the bank to recover dues from a borrower. 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.”

Before the demise of the deceased, there was a default in repayment and the bank started recovery proceedings under the SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002).

Later, the guarantor died, and the property secured in the proceeding belonged to the deceased and the same was inherited by the petitioner. The bank proceeded with the recovery and an Advocate Commissioner was appointed, who then issued a possession notice. The guarantor passed away, less than 4 months later.

The Advocate Commissioner informed the magistrate about the death of the guarantor but no action was taken. Subsequently, there was a petition before the magistrate to stay the proceedings and restrain the Commissioner from taking physical possession but the same was not formally considered. Only an oral direction to defer possession for a limited time was granted.

At this juncture, the petitioner approached the High Court and argued that fresh proceedings have to initiated in view of the death of the previous property owner. He submitted that the coercive proceedings were advanced against him without issuing fresh demand notice. According to him, this amounted to violation of the principles of natural justice since he was not granted an opportunity of being heard.

The bank countered by arguing that the SARFAESI Act does not provide for issuance of fresh notice to deceased borrower/guarantor's legal heirs. Reliance was placed on Mst. Sundri and Ors. v. The Jammu and Kashmir Bank Ltd. to support the argument.

The Court looked into Authorised Officer v. Devi Prasad [2019 KHC 7606], where the same position was settled.

It observed:

“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…the specific challenge regarding the necessity of fresh notice is hereby rejected.”

However, the Court clarified that the petitioner is free to raise any other arguments regarding procedural illegalities before the appropriate statutory forum. It thus disposed of the plea.

Case No: WPC 33994/2025

Case Title: Abhijith B. v. Bank of Maharashtra and Ors.

Citation: 2025 LiveLaw (Ker) 854

Counsel for the petitioner: Gigimon Issac

Counsel for the respondents: T.A. Prakash

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