Delhi High Court upholds the vires of Section 14 of SARFAESI Act 2002 [Read Judgment]

A writ petition in Delhi High Court Challenged the provisions of section 14 of the SARFAESI Act as violative of Article 14, 21 and 300A of Constitution of India and liable to be declared unconstitutional.

There were two basic contentions by the petitioner, the firstly regarding the Constitutionality of Section 14 and Secondly, whether CMM is obliged to issue notice to the petitioner before disposing off the petition under Section 14 of the Act.

While answering the question regarding constitutionality, the Delhi High Court relied heavily on Judgment of the Supreme Court in Mardia Chemicals Ltd. vs. Union of India, United Bank of India vs. Satyawati Tondon & Ors, TRANSCORE vs. Union of India & Anr., and Kanaiyalal Lalchand Sachdev & Ors. v. State of Maharashtra & Ors.

The Delhi High Court rejected the plea of constitutionality and upheld Section 14 of the SARFAESI Act and reiterated the rule held in Mardia Chemical Ltd case. The Delhi High Court reiterated that ‘The effect of some of the provisions may be a bit harsh for some of the borrowers but on that ground the impugned provisions of the Act cannot be said to be unconstitutional in view of the fact that the object of the Act is to achieve speedier recovery of the dues declared as NPAs and better availability of capital liquidity and resources to help in growth of economy of the country and welfare of the people in general which would subserve the public interest’.

While dealing with the second question regarding the issuance of the notice, the Delhi High Court went on to interpret the provisions with the help of decided case laws. The Court said that ‘Section 14 of the Act provides that the secured creditor  can  file  an  application  before  the  Chief Metropolitan Magistrate or the District Magistrate, within whose jurisdiction, the secured asset or other documents relating thereto are found for taking possession thereof. If any  such  request  is  made,  the  Chief  Metropolitan Magistrate or the District Magistrate, as the case may be, is obliged to take possession of such asset or document and forward the same to the secured creditor. Therefore, it follows that a secured creditor may, in order to enforce his rights under Section13(4), in particular Section13(4)(a), may take recourse to Section 14 of the Act’ . 

In the case of Standard Chartered Bank vs. V. Noble Kumar & Ors. the Supreme Court held that the Magistrate while dealing with an application under section 14(1) is only required to examine the factual correctness of the assertion made in the affidavit accompanying  the  application, therefore after  recording  his  satisfaction  the Magistrate can pass appropriate orders regarding taking possession of the secured assets, the court added.

The Delhi High Court directed that, if any person has a grievance against an action taken under section 13(4) or section 14 of the Act, the remedy is to file an application under section 17(1) before DRT.

The court also explained that the NPA Act provides for recovery of possession by non-adjudicatory process, therefore, to say that the rights of the borrower would be defeated without adjudication would be erroneous.

The Delhi High Court finall held the writ petition not maintainable because the petitioner had an alternate remedy under S. 17 of the act, which the he had already availed.

Image from here.

Read the Judgment here.