Introduction:

In Abhijith B. v. Bank of Maharashtra and Ors. [2025 LiveLaw (Ker) 854], the Kerala High Court addressed the legal question of whether a bank is required to issue fresh demand notices under the SARFAESI Act, 2002 after the death of a borrower or guarantor, before continuing recovery proceedings. Justice Basant Balaji examined a plea filed by the legal heir of a deceased individual who had acted as a guarantor for a loan provided to a firm. The petitioner challenged the continuation of coercive proceedings initiated by the bank under the SARFAESI Act after the death of the guarantor, arguing that fresh notices should be served to him in order to ensure compliance with the principles of natural justice. The deceased had defaulted on loan repayment during his lifetime, and the bank had duly initiated proceedings under Section 13(2) of the SARFAESI Act by serving a demand notice, after which the mandatory 60-day period for repayment expired without the liability being discharged. The bank subsequently appointed an Advocate Commissioner, who issued a possession notice and reported the death of the guarantor to the magistrate, but no further formal proceedings were suspended. The petitioner contended that pursuing recovery without issuing fresh notices to him as the legal heir violated his rights and amounted to procedural impropriety.

Arguments:

The petitioner, Abhijith B., argued that once the original borrower or guarantor passed away, the statutory recovery proceedings should be restarted afresh to provide him an opportunity to respond as the legal heir. He claimed that the coercive measures, including the appointment of the Advocate Commissioner and issuance of possession notice, were directed at him without any formal hearing or notice, violating principles of natural justice. The petitioner maintained that he had not been part of the initial proceedings and therefore had no chance to represent his position, challenging the validity of the bank’s actions post the death of the guarantor. He relied on the premise that inheritance of property and liabilities necessitates due process before coercive recovery action can continue, emphasizing that issuing fresh notices is essential to avoid any procedural illegality and to safeguard the rights of the legal heir.

The Bank of Maharashtra, on the other hand, contended that the SARFAESI Act does not mandate issuance of fresh demand notices to legal heirs after the borrower’s death. The bank relied on Section 14 of the Act, which grants the bank the statutory right to recover dues once a valid demand notice has been served and the 60-day period has expired. Counsel for the bank argued that the statutory procedure initiated during the lifetime of the deceased was sufficient to make the bank’s right to invoke Section 14 proceedings absolute, and no subsequent notices to heirs are required. The bank also cited judicial precedents, including Mst. Sundri and Ors. v. The Jammu and Kashmir Bank Ltd. and Authorised Officer v. Devi Prasad [2019 KHC 7606], which established that once the statutory procedures under Sections 13(2), 13(4), and 14 are validly initiated and the repayment obligation remains unsatisfied, continuation of recovery proceedings post the borrower’s death does not necessitate fresh notices. The bank further argued that coercive proceedings directed toward the property of the deceased, now inherited by the legal heir, are permissible under the Act as the obligation to repay the loan binds the estate of the deceased, and therefore the continuation of proceedings against the property was legally valid.

Court’s Judgment:

After considering the rival submissions, Justice Basant Balaji held that once a demand notice under Section 13(2) of the SARFAESI Act has been duly served during the lifetime of the borrower and the 60-day statutory period expires without the liability being discharged, the bank’s right to recover dues under Section 14 becomes absolute. The Court emphasized that the Act does not contemplate issuing fresh notices to legal heirs of a deceased borrower or guarantor. Relying on judicial precedents, the Court observed that the statutory scheme permits the bank to proceed against the property of the deceased, inherited by legal heirs, without restarting the notice procedure, as the statutory obligations created during the lifetime of the borrower extend to the estate. The Court specifically noted: “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.”

The High Court clarified that the petitioner remains free to raise other arguments pertaining to alleged procedural irregularities or illegalities before the appropriate statutory forum, but the challenge regarding issuance of fresh notice was dismissed. The Court’s reasoning underscores the legislative intent behind the SARFAESI Act to provide banks with swift and effective remedies to recover defaulted dues, without unnecessary procedural delays, even in cases where the borrower dies and property passes to legal heirs. The judgment reinforced the principle that statutory rights conferred under the SARFAESI Act are absolute once the statutory conditions are fulfilled during the borrower’s lifetime, and further notices are not mandated by law for heirs. Accordingly, the Kerala High Court disposed of the petition, upholding the bank’s right to continue recovery proceedings against the inherited property without issuance of a fresh demand notice.