S.14 SARFAESI Act Confers Ministerial Powers On Magistrate, Not Required To Adjudicate Disputes Qua Secured Asset: Rajasthan High Court

Rajasthan High Court has recently held that the powers of a CMM/DM under Section 14 of the SARFAESI Act are ministerial and do not allow adjudication of a dispute regarding the secured asset that subsists between the borrower, secured creditor or any third party.

The single-judge bench of Justice Anoop Kumar Dhand underscored that the 'satisfaction of the magistrate' as contemplated in Section 14 means examining the factual correctness of assertions made in the affidavit. The court cannot delve into the legal niceties of the dispute involved except to assist the secured creditor in obtaining the possession as well as the documents related to the secured asset, it was observed by Justice Dhand.

“…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 of 2002, before Debts Recovery Tribunal”, the bench sitting at Jaipur opined.

In the case at hand, court observed that the magistrate had wrongly assumed the role of an adjudicating authority by going into the aspects of whether the agricultural land was mortgaged or not and the DLC (District Level Committee) rates of the concerned land. Referring to the apex court decisions in M/s R.D. Jain and Co. Vs. Capital First Ltd. & Ors. (2022) and NKGSB Cooperative Bank Limited Vs. Subir Chakravarty & Ors. 2022 LiveLaw (SC) 212, the High Court clarified that the Magistrate is required to pass an order swiftly after verification of compliance of all formalities by the secured creditor. It cannot cause unnecessary delay in ordering to take possession of the secured assets and forwarding the relevant documents to the creditor.

In NKGSB Cooperative Bank, the Supreme Court held that time is of the essence and spirit of the special enactment of SARFAESI Act. Similarly, in M/s R.D. Jain and Co, it was held that Section 14 of the Act requires the CMM/DM to act within the stipulated time limit. The Magistrate should pass a suitable order to take possession of the secured assets within 30 days from the date of application, which can be extended for such further period but not exceeding in the aggregate, sixty days, the apex court had held back in 2022.

Stating the above reasons, the Jaipur bench has remitted the matter back to the District Magistrate for fresh consideration by re-registering the application filed under Section 14 on its original number, and by confining itself to the limits specified in the enactment.

The High Court also warned against CMMs/DMs digressing from the established principles of law under the SARFAESI Act. The court also directed the registry to send a copy of the current order to the Additional Chief Secretary/Principal Secretary (Department of Revenue).

The counsel appearing for the petitioner bank, Advocate Jamesh Bedi, had argued that the Magistrate was only required to see whether secured assets fell within its territorial jurisdiction and whether notice under Section 13(2) of the SARFAESI Act of 2002 was furnished. The impugned order was passed by the Magistrate on 09.01.2023.

Case Title: Jammu and Kashmir Bank Limited v. M/s Trunks and Roots & Ors.

Case No: S.B. Civil Writ Petition No. 19747/2023

Citation: 2024 LiveLaw (Raj) 52

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