Secured Creditor Cannot Invoke Section 14 Of SARFAESI Act After Sale Of Secured Asset: Calcutta HC [Read Judgment]

The Calcutta High Court, on Friday, ruled that a secured creditor cannot maintain an application under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 after issuance of a sale certificate, in order to obtain actual physical possession of the property. Section 14 requires the Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of the secured asset.

The Court was hearing an Appeal filed by the United Bank of India, which had sought a direction to the District Magistrate to consider and dispose of an application filed by it under Section 14 of the Act. It had submitted that despite the fact that it had sold the immovable property in respect of which the application under Section 14 was filed, it was still entitled to maintain the writ petition for the relief prayed for.

The Bank had further contended that since the word ‘transfer’, as used in Section 14, would include an act of taking over of possession, the petitioner as the secured creditor can legitimately invoke the provision even after a conveyance in respect of an immovable property sold, has been executed and registered.

The State, on the other hand, had submitted that once a secured creditor sells an immovable property, it ceases to have any security interest in such secured asset. Consequently, it contended that such secured creditor should not be permitted to invoke the provisions of the Act of 2002.

The Court was, therefore, considering the question whether a secured creditor is entitled to invoke the provisions of Section 14 of the Act subsequent to the sale of an immovable property over which it claims security interest.

Answering the question in the negative, the Court observed that after sale, the secured creditor can no longer claim a security interest over such immovable property as such security interest stands dissolved by the issuance of the sale certificate.

“The contention that, the secured creditor still retains the right to obtain possession of the immovable property, after execution and registration of the deed of conveyance in favour of the purchaser, to be transferred to the purchaser, is misplaced. The transfer of immovable property by way of a sale can be done by a deed of conveyance duly executed, stamped and registered under the Registration Act, 1860. In absence of registration of such deed of conveyance with appropriate stamp, no right, title or interest in an immovable property can be said to be transferred to or vested with the purchaser. A document of title which is not registered, would fall short of the requirements of Sections 54 and 55 of the Transfer of Property Act, 1882. It may give a limited right under Section 53A of the Transfer of Property Act, 1882 at best,” Justice Debangsu Basak, thereafter, observed.