'Time Is Of Essence': Delhi High Court Asks CMMs To Ensure Prompt Uploading Of Orders Passed U/S 14 Of SARFAESI Act

The Delhi High Court has asked all the Chief Metropolitan Magistrates in city courts to ensure that the orders passed by them under Section 14 of the SARFAESI Act, 2002 are promptly uploaded after they are passed.

Justice Amit Bansal was of the view that time is of essence in proceedings initiated under the Act and that it's purpose would be frustrated if there are delays in implementing orders passed under the Act. 

Sec. 14 of the Act provides that where the possession of any secured asset is required to be taken by the secured creditor or if such asset is required to be sold or transferred, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate to take possession.

"Accordingly, it would be expedient and in the interest of justice that all CMMs in Delhi ensure that the orders passed by them under Section 14 of the Act are promptly uploaded after the said orders are passed," the Court directed. 

The Court also directed that a copy of the order be forwarded to all Principal District and Sessions Judges for circulation to all CMMs for compliance in proceedings under Section 14 of the SARFAESI Act, 2002.

The development came while the Court was dealing with two petitions seeking appropriate directions to the Courts of CMM in district courts to follow uniform procedure while adjudicating applications under sec. 14 of the Act.

The petitioner had pointed out the difficulty faced by the secured creditors on account of the orders being passed by the CMM under sec. 14 of the Act not being uploaded in a timely manner.

"This results in delay in secured creditors taking steps in terms of the said orders or taking legal remedies in respect of the said orders. There is merit in the contention of the counsel for the petitioner. Time is of essence in proceedings initiated under the Act. The purpose behind the Act would be frustrated if there are delays in implementing orders passed under the Act," the Court said.

The facts of the matter were that the respondents, being the borrowers availed financial assistance from the petitioner company and created security interest by way of equitable mortgage in relation to immovable properties. However, consequent to the defaults in repayment of dues by the respondents, their accounts were declared Non-Performing Assets (NPA).

The CMM order was challenged on the ground that it had directed the petitioner to file an affidavit regarding the current status of the possession of the properties in question. 

It also held that the petitioner was required to disclose on affidavit whether the properties in question were in possession of a tenant or a third party other than the respondents borrowers in light of the judgment of the Supreme Court in Harshad Govardhan Sondagar vs International Assets Reconstruction Co. Ltd. & Ors (2014) 6 SCC 1.

While setting aside the impugned order, the Court was of the view that the direction given to the petitioner to provide the details on affidavit in respect of the current status of the occupation of the properties was wholly without jurisdiction.

"The CMM has wrongly relied upon the judgment of the Supreme Court in Harshad Govardhan Sondagar supra which was a judgment passed to protect the interest of the bonafide tenant in occupation of the property in question and cannot come to the aid of a borrower in default. It is noted in the said judgment that the secured creditor has to state in his affidavit accompanying the application under Section 14 of the Act that secured asset is not in possession of a lessee under a valid lease made prior to the creation of the mortgage by the borrower or made in accordance with Section 65A of the Transfer of Property Act prior to receipt of notice under Section 13(2) of the Act," the Court added.

With the aforesaid observations, the petitions were disposed of.

Case Title: CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LIMITED v. RAJEEV CHAWLA & ANR.

Click Here To Read Order