"A District Magistrate, After Passing An Order Under Sec.14 Of The SARFAESI Act Does Not Have Any Jurisdiction To Review, Recall Or Modify It": Punjab and Haryana HC

The Divison Bench comprising Justice Ramachandra Rao and Justice H.S. Madaan held that a District Magistrate, after passing an order under Sec.14 of the SARFAESI Act,2002 has no jurisdiction to review or recall it.

Discussing the nature and scope of Section 14 of the SARFAESI Act, the court held that the motive behind the act is to provide machinery to the financial institutions to take possession of secured assets of borrowers/guarantors and sell them in case of default and section 14 has been enacted to give effect to this intent of taking possession of the Secured Asset.

The court relied on the judgment of Asset Reconstruction Company (India) Limited v. State of Haryana, wherein it was held that there is no provision under the SARFAESI Act that empowers the District Magistrate or the Chief Metropolitan Magistrate to review, recall or modify his order.

The powers exercisable by a District Magistrate under Section 14 are the creation of a Statute. Those powers are required to be exercised within the four corners of the said provision. In the case in hand, the then-District Magistrate, Sonepat rightly exercised such power and passed the order dated 08.02.2016 thereby directing his subordinate officer, namely, Naib Tehsildar-cum-Executive Magistrate to take possession of the secured assets and hand over the same to ARCIL. It could not be disputed by the learned State counsel or senior counsel for the borrowers that there is no provision under the SARFAESI Act under which the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, can review, recall or modify his order.

The court relied on another judgment of the High Court where a similar question came up for consideration and the court in that case also held that the District Magistrate has absolutely no jurisdiction to review his order passed under SARFAESI Act.

"Be that it may, we are of the considered opinion that the District Magistrate has absolutely no jurisdiction to review his order dated 24.06.2013 passed under the Act, 2002 specifically when the order was subjected to challenge before the Debt Recovery Tribunal and such application was dismissed by a reasoned order holding therein that the borrower had not approached the Tribunal with clean hands. If they were not satisfied they had the remedy of approaching the Appellate Tribunal under Section 18 of the Act, 2002. We are, therefore, more than satisfied that such order of the District Magistrate cannot be permitted to stand on record."

By relying on different cases, the court held that the district magistrate does not have jurisdiction to review his order passed under SARFAESI Act.

Another issue dealt with by the court was whether the absence of husband and daughter of the deceased borrower as parties in the application under Section 14 of the SARFAESI Act would justify the non-enforcement of the said order? The court took into the notice, facts of the case that the deceased borrower, her son, husband, and her daughter signed the loan agreement with the petitioner. The property was in the name of the deceased borrower. The court stated that on the death of the deceased borrower, her children would succeed to her property under Section 15 of the Hindu Succession Act,1956.

On this issue, the court held that even if the deceased borrower had died prior to the passing of the order, there could not be any abatement of the proceeding because her estate is represented by her son Paramjeet Singh who is one of the legal heirs. In order to answer the question as to whether there would be abatement of a suit if all legal heirs of a deceased are not impleaded, the court referred to the case of Mohammed Hussain (Dead) by LRs and Others v. Occhavlal and others and held that when the personal law is governing the absent heir the heir impleaded represents his interest in the estate of the deceased, the decree would be binding on all the persons interested in it.

Ordinarily, a Court does not regard a decree binding upon a person, who was not impleaded in the action but, one of the important exceptions to the said Rule is that where by the personal law governing the absent heir, the heir impleaded represents his interest in the estate of the deceased, the decree would be binding on all the persons interested in the estate; if there be a debt justly due and no prejudice is shown to the absent heir, the decree in an action where the plaintiff has after bona fide inquiry impleaded all the heirs known to him will ordinarily be held binding upon all persons interested in the estate.

Applying the said principle to the present case, the court held that proceeding under Section 14 of the SARFAESI Act is not akin to a suit since no adjudication is permitted by the District Magistrate but, the principle laid down in the aforesaid decision would apply.

No doubt proceeding under Section 14 of the SARFAESI Act is not akin to a suit since no adjudication is permitted by the District Magistrate but, the principle laid down in the aforesaid decision would equally apply on the sole ground that the husband and other legal heirs of the deceased Saroj Rani were not on record, the process of execution of the order passed under Section 14 of the SARFAESI Act could not have been stopped by second respondent. This is because respondent No.5 was already on record in the said proceedings, and he represented the estate of the deceased; and the order against him would be binding on all the other heirs or persons interested in the estate of the deceased.

For the above reasons, the Writ Petition was allowed, and the order of the DM was set aside.

Case Title: Shriram Housing Finance Limited v. State of Haryana and others.

Citation: 2022 LiveLaw (PH) 38

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