2015 (8) TMI 1304 - HC - Indian Laws

Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - rights of secured creditor - Held that - While sub-section (2) of section 14 permits the CMM/DM to take or cause to be taken such steps and use or cause to be used such force as may, in his opinion, be necessary, sub-section (4) of section 13 or any other sub- section thereof does not authorise a secured creditor to barge into the secured asset for taking its possession by force. I am reminded of the maxim expressio unius est exclusio alterius, meaning whatever has not been included has by implication been excluded. From this is derived the subsidiary rule that an expressly laid down mode of doing something necessarily prohibits doing of that thing in any other manner. It is thus plain and clear that a secured creditor is not authorised to exert force while taking possession and that is left only to the CMM/DM, as the case may be, in the sound exercise of his discretion under sub-section (2) of section 14. If on a request made by the authorised officer to vacate the secured asset the borrower or any person in occupation thereof does not voluntarily surrender possession, the secured creditor would have no other option but to seek the assistance of the CMM/DM under section 14 in the manner prescribed.

Issues Involved:
1. Interpretation and scope of Section 14 of the SARFAESI Act.
2. Requirement of natural justice and hearing before passing orders under Section 14.
3. Amenability of orders under Section 14 to challenge under Section 17 of the SARFAESI Act.
4. Legality of using force for taking possession of secured assets.
5. Remedies available to aggrieved parties, including borrowers and lessees.

Issue-wise Detailed Analysis:

1. Interpretation and Scope of Section 14 of the SARFAESI Act:
The judgment primarily revolves around the interpretation of Section 14 of the SARFAESI Act, which involves the Chief Metropolitan Magistrate (CMM) or District Magistrate (DM) assisting secured creditors in taking possession of secured assets. The court analyzed whether the amendments to Section 14 introduced an adjudicatory process requiring notice to borrowers and other aggrieved parties. The court concluded that the amendments did not fundamentally change the non-adjudicatory nature of Section 14, which remains an administrative process aimed at assisting secured creditors without involving judicial or quasi-judicial functions.

2. Requirement of Natural Justice and Hearing Before Passing Orders Under Section 14:
The court examined the argument that natural justice principles should be read into Section 14, necessitating a hearing for borrowers before orders for possession are passed. The court rejected this contention, emphasizing that the SARFAESI Act's scheme is designed for quick recovery of secured debts without judicial intervention until possession is taken. The court held that the requirement of natural justice is not implied in Section 14, and the CMM/DM is not obligated to provide a hearing to borrowers at this stage.

3. Amenability of Orders Under Section 14 to Challenge Under Section 17 of the SARFAESI Act:
The court addressed whether orders passed under Section 14 can be challenged under Section 17 of the SARFAESI Act. It referred to previous Supreme Court decisions (Kanaiyalal Lalchand Sachdev and V. Noble Kumar) that established the right to challenge such orders before the Debt Recovery Tribunal (DRT). The court concluded that orders under Section 14 are indeed amenable to challenge under Section 17, allowing borrowers to seek redress before the DRT.

4. Legality of Using Force for Taking Possession of Secured Assets:
The court examined whether secured creditors are authorized to use force to take possession of secured assets. It referred to the SARFAESI Act and RBI guidelines, concluding that secured creditors cannot employ force or engage recovery agents to dispossess borrowers. If resistance is encountered, the secured creditor must seek assistance from the CMM/DM under Section 14, who may use reasonable force if necessary. The court reiterated that possession must be taken through legal means, respecting the rule of law.

5. Remedies Available to Aggrieved Parties, Including Borrowers and Lessees:
The court discussed the remedies available to various aggrieved parties, including borrowers and lessees. It highlighted that borrowers can challenge possession orders under Section 17, while lessees have limited remedies under the SARFAESI Act. The court referred to the Supreme Court's decision in Harshad Govardhan Sondagar, which protected the rights of lessees under valid leases, emphasizing that lessees cannot be dispossessed without due process. The court also noted that lessees could challenge possession orders through writ petitions under Articles 226 and 227 of the Constitution.

Individual Writ Petitions:
The court addressed several individual writ petitions challenging orders under Section 14. For instance, in W.P. 11828(W) of 2015, the court dismissed the petition, directing the petitioner to approach the DRT. In W.P. 12210(W) of 2015, the court denied relief to a purchaser of a mortgaged property, emphasizing the need to follow legal procedures. In other petitions, the court reiterated the availability of remedies under Section 17 and the necessity of following due process for taking possession.

Conclusion:
The judgment provides a comprehensive analysis of Section 14 of the SARFAESI Act, clarifying that it remains an administrative process without the requirement of natural justice. It affirms the right to challenge possession orders under Section 17 and emphasizes the prohibition of using force for taking possession, ensuring that legal procedures are followed. The court's detailed examination of individual writ petitions further illustrates the application of these principles in specific cases.

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