Section 14 SARFAESI Act - CMM/DM Not Required To Adjudicate Disputes Between Borrower/ Third Party And Secured Creditor: Supreme Court

The Supreme Court observed that, while considering an application under Section 14 SARFAESI Act, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets.

Once all the requirements under Section 14 of the SARFAESI Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets, the bench of Justices MR Shah and observed.

In this case, in an application filed by Secured Creditor under Section 14 SARFAESI Act, the District Magistrate/designated authority observed that unless and until the secured creditor terminates the tenancy rights of the third person by following due procedure of law and further orders regarding possession of the mortgaged property then and then only an application under Section 14 of the SARFAESI Act will be decided. The Bombay High Court, allowing the writ petition, set aside this order.

In appeal, the issue raised before the Apex Court bench was whether whether while exercising the powers under Section 14 of the SARFAESI Act, the District Magistrate/designated authority could have passed such an order that unless and until the secured creditor terminates the tenancy rights of the third person by following due procedure of law and further orders regarding possession of the mortgaged property then and then only an application under Section 14 of the SARFAESI Act will be decided?

The court, referring to the scope of powers of Chief Metropolitan Magistrate/learned District Magistrate under Section 14 SARFAESI Act, observed:

"..The powers exercisable by CMM/DM under Section 14 of the SARFAESI Act are ministerial step and Section 14 does not involve any adjudicatory process qua 16 points raised by the borrowers against the secured creditor taking possession of the secured assets. In that view of the matter once all the requirements under Section 14 of the SARFAESI Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner. At that stage, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings under Section 17 of the SARFAESI Act, before Debts Recovery Tribunal."

The bench agreed with High Court has rightly directed the designated authority to proceed further with the application under Section 14 of the SARFAESI Act, and to dispose of the same in accordance with the provisions of Section 14 of the SARFAESI Act.

Case details

Balkrishna Rama Tarle (D) vs Phoenix ARC Private Limited | 2022 LiveLaw (SC) 799 | SLP(C) 16013 OF 2022 | 26 September 2022 | Justices MR Shah and Krishna Murari

Headnotes

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ; Section 14 - The powers exercisable by CMM/DM under Section 14 of the SARFAESI Act are ministerial step and Section 14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets - Once all the requirements under Section 14 of the SARFAESI Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner-  At that stage, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings under Section 17 of the SARFAESI Act, before Debts Recovery Tribunal. (Para 5.2)

Precedent - A judgment cannot be interpreted and applied to fact situations by reading it as a statute. One cannot pick up a word or sentence from a judgment to construe that it is the ratio decidendi on the relevant aspects of the case. (Para 7)

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