Financial liability under SARFAESI must exist before proceedings can be maintained against a person, the Bombay High Court noted.

SARFAESI and recovery proceedings can be maintained only where the person proceeded against has a legally cognisable financial liability, such as that of a borrower, guarantor, assignee, agent, or a legal successor to the guarantor's estate. Where the notice does not invoke the guarantee against the person concerned, and the materials show that only the deceased guarantor's legal representatives were proceeded against while the petitioner neither inherited property nor succeeded to the liability, no enforceable nexus exists. In that situation, the Tribunal lacks jurisdiction against such person and the proceedings are liable to be quashed.

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Issues: Whether proceedings under the SARFAESI and recovery regime could be maintained against a person who was neither the borrower nor the guarantor and who had not succeeded to the guarantor's estate, and whether such proceedings were without jurisdiction as against him.

Analysis: The liability under the SARFAESI Act and the Recovery of Debts and Bankruptcy Act must arise from a financial relationship, namely, a borrower, assignee, agent, guarantor, or a person who has stepped into the guarantor's shoes by succession to the estate. The notice issued by the Bank did not invoke the guarantee against the petitioner. The materials showed that the legal representatives who had succeeded to the estate were separately proceeded against, while the petitioner had not inherited any property or liability from the deceased guarantor. In the absence of such succession or financial nexus, no enforceable liability could be fastened on the petitioner, and the Tribunal could not assume jurisdiction against him.

Conclusion: The proceedings against the petitioner were without jurisdiction and were liable to be quashed.

Ratio Decidendi: Proceedings under the SARFAESI and recovery laws can be maintained only against a person having a legally cognisable financial liability arising from borrower, guarantor, or succession to the guarantor's estate; absent such nexus, the proceedings are without jurisdiction.

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