SARFAESI Act | Not Mandatory For Borrowers To Sign Securitisation Application When They Have Signed Vakalatnama: Rajasthan HC

The Rajasthan High Court has set aside the order of the Debt Recovery Tribunal (“DRT”) where a Securitisation Application (“SA”) submitted by the petitioner was rejected, after being initially entertained, on the ground that not all the borrowers had signed the SA. The court opined that it was not mandatory for all the applicants to sign the same or the supporting affidavit.Justice Anoop Kumar Dhand observed that once the petition was entertained at the threshold in 2020 and an interim order was passed, the same should have been decided on merits after being kept pending for more than 5 years, instead of being rejected on such technical counts. The loan was sanctioned in favour of all the petitioners, and when the amount was not repaid, proceedings were initiated under the SARFAESI Act. Against this, an SA was preferred by the petitioners before the DRT under the signature and affidavits of one of the borrowers, while the rest of the borrowers had signed the Vakalatnama. This SA was entertained and an interim order was also passed, only to be rejected after 5 years on a technical count that the SA was not signed by all the borrowers. Against this order, the petition was filed before the Court. It was the case of the petitioners that there was no such rule stating that each and every applicant was required to sign the petition. Since the Vakalatnama was submitted on behalf of all the borrowers, the rejection order was required to be set aside. After hearing the contentions, the Court held that, “Counsel for the respondents has failed to satisfy this Court whether it is mandatory for all the petitioners/ applicants to sign the petition and submit individual affidavits in support of the SA before the DRT.”Reference was made to the Supreme Court case of Sathyanath & Anr. Vs. Sarojmani in which it was held that all the procedural rules were handmaidens of justice and their object was to advance the cause of justice. No party should be denied the opportunity of participating in the process of justice on technicalities. The Court took into account the fact that the Vakalatnama was signed by all the borrowers, and the petition was not dismissed at the threshold, rather an interim order was also passed. In this light, the Court held that the DRT had acted in defiance of the fundamental principles of judicial process. Once the petition was entertained in 2020, and was kept pending for more than 5 years, it should not have been rejected on technical counts, rather should have been decided on merits. Accordingly, the DRT order was set aside, and the matter was remitted to DRT for final disposal possible within 2 months. Title: Kishan Lal Sharma & Ors. v Laxmi India Fineleasecap Pvt LtdCitation: 2025 LiveLaw (Raj) 298Click Here To Read/Download Order

SARFAESI Act | Not Mandatory For Borrowers To Sign Securitisation Application When They Have Signed Vakalatnama: Rajasthan HC

Nupur Agrawal

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SARFAESI Act | Not Mandatory For Borrowers To Sign Securitisation Application When They Have Signed Vakalatnama: Rajasthan HC

Nupur Agrawal

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