Kerala High Court on Loan Settlement under SARFAESI Act.

Headnote:

The Kerala High Court directed a housing finance company to consider a borrower’s representation for settling loan dues, treating it as a request for full and final settlement. The Court adopted a lenient approach considering the petitioner’s age and previous liberty granted to clear the dues, emphasizing that financial institutions must decide such representations promptly and fairly under the SARFAESI Act framework.

Background:

1. The petitioner, Sreelekha (61 years), was a co-applicant in a housing loan availed by her daughter from Sundaram Home Finance Ltd.
2. Following default in repayment, the lender initiated proceedings under the SARFAESI Act, 2002, and issued a sale notice dated 21.08.2025 (Ext. P1) for auction on 15.09.2025.
3. Subsequently, the lender took physical possession of the property. Alleging that the petitioner had forcefully re-entered the premises, a criminal case (C.C. No. 817/2024) was registered.
4. The lender then filed W.P.(C) No. 18765/2024 seeking police aid for repossession, which was allowed. The petitioner’s review petition (R.P. No. 898/2024) was dismissed, but she was granted liberty to clear the entire dues within one month.
5. The petitioner later submitted a representation dated 02.09.2025 (Ext. P2) seeking permission to pay in installments, which she later limited to a request for full settlement of dues.

Court’s Observations:

1. Justice Basant Balaji observed that Ext. P2 representation was still pending consideration before the lender.
2. The Court noted that despite previous opportunities, the petitioner had not approached the respondents earlier for settlement within the timeline fixed in the earlier proceedings.
3. Nevertheless, considering the pendency of the representation and the principle of fair consideration under SARFAESI Act procedures, the Court found it appropriate to dispose of the petition with directions rather than dismissal.

Decision:

1. The Court disposed of the writ petition with a direction to the 1st respondent (Sundaram Home Finance Ltd.) to:
2. Treat Ext. P2 as a request for settlement of the outstanding loan amount; and
3. Take an appropriate decision within one month from the date of the judgment.
4. The order reflects the Court’s effort to balance recovery rights of financial institutions with the borrower’s opportunity for fair redress.

Legal Provisions Discussed:

1. SARFAESI Act, 2002 – Sections governing enforcement of security interest and borrower’s right to representation.
2. Article 226, Constitution of India – Writ jurisdiction of the High Court to ensure fairness in quasi-judicial and administrative actions.

Citation: 2025:KER:81909

Case: Sreelekha v. Sundaram Home Finance Ltd. & Anr.

Court: High Court of Kerala at Ernakulam

Coram: Hon’ble Mr. Justice Basant Balaji

Date of Decision: 30 October 2025

Writ Petition (Civil) No.: 33771 of 2025