S. 14 SARFAESI Act | DM/CJM Obligated To Take Possession Of Secured Asset, Forward It To Secured Creditor: Allahabad HC

The Allahabad High Court has observed that as per the mandate of Section 14 of the SARFAESI Act, 2002, it is the statutory obligation of the District Magistrate or the Chief Judicial Magistrate concerned to take possession of secured assets and documents and to forward such assets & documents to the secured creditor.

A bench of Justice Rajan Roy and Justice Brij Raj Singh clarified that the secured creditor is not supposed to run from pillar to post or to the police personnel to get the order executed after obtaining an order under Section 14 of the 2002 Act; instead, it is the obligation of the DM/CJM to get the same executed.

The Court also added that a separate execution or enforcement case need not be registered either by the DM or the CJM as after passing the requisite orders under Section 14 of the Act, 2002, its execution should also be ensured.

The division bench said that the proceedings under Section 14 should be consigned and treated as concluded only after the possession of the secure asset has been handed over to the secured creditor, not before it.

The court made these observations while noting that in many cases, after passing such orders, the DM or the CJM leave the secured creditor to the mercy of the police personnel, as if it is the secured creditor who has to get the order enforced through the police, which, the Court clarified, is not the correct legal position.

The division bench also directed the Additional Chief Standing Counsel to communicate this order to the Chief Secretary, UP, for circulation amongst the District Magistrates in the State of UP. Likewise, the Court directed the order to be circulated to the Director of the Judicial Training Research Institute.

Our readers may note that according to Section 14 of the SARFAESI Act, banks/financial institutions and reconstruction companies have the right to take possession of the secured asset and it is the responsibility of the concerned District Magistrate/Chief Metropolitan Magistrate to hand over the possession of such secured asset to the financial institutions with the help of the police.

This provision states that if a secured creditor needs to take possession or sell a secured asset, they may request the Chief Metropolitan Magistrate (CMM) or District Magistrate (DM) to do so. Upon receiving the request, the CMM/DM must take possession of the asset and related documents and forward them to the secured creditor.

The case before the HC

The court was essentially dealing with a writ plea filed by Pnb Housing Finance Ltd. through its authorised representative seeking execution/enforcement of the order passed under Section 14 of the SARFAESI Act, 2002, claiming that actual physical possession of the secured asset had not yet been provided to the petitioner, who is the secured creditor.

The Court noted that there was no interim order, though the borrower had challenged the order under Section 17 of the Act, 2002, before the Debt Recovery Tribunal.

In these circumstances, the Court noted when there is no stay, it is for the officer who has passed the order to ensure its execution in terms of Section 14 (1-A), (2) & (3) of the Act, 2002

However, the Court clarified that there is no requirement to issue notice to the Borrower in such proceedings under Section 14. Still, the occupant of the secured asset should be given a reasonable time of at least 15 days to vacate the premises so that he may shift his belongings.

Against this backdrop, the Court granted liberty to the petitioner to move an application before the Chief Judicial Magistrate, who has passed the order, who shall take cognizance for enforcement of his orders in terms of the aforesaid provisions, and then ensure its execution/enforcement at the earliest.

The Court clarified that this order was being passed without prejudice to the borrower's rights, who had preferred an application under Section 17 of the Act 2002.

The Court directed the CJM to verify whether the Debt Recovery Tribunal has made an interim order in favour of the borrower and, after that, proceed to enforce his orders. 

Advocates Nitesh Kumar Tripathi and Saumya appeared for the petitioner.

Additional Chief Standing Counsel Raj Bux Singh appeared for the state.

Case title - Pnb Housing Finance Ltd. Lko. Thru. Authorised Representative Mr. Surya Prakash Mishra vs. State Of U.P. Thru. Prin. Secy. Home U.P. Lko. And 8 Others

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