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2021 (10) TMI 1390 - HC - Indian LawsHandover of physical possession of the property - assignment of debt - Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - HELD THAT - It is not in dispute that the respondent No.1 passed the order under Section 14 on 10.9.2018 whereas the petitioner has entered into the Deed of Assignment with the original lender on 5.11.2019. On perusal of the provision of sub-section (4) of Section 5 of the SARFAESI Act, it is clear that on the date of acquisition of financial asset by the petitioner under subsection (1) of Section 5, if any suit, appeal or other proceeding of whatever nature relating to the said financial asset is pending by or against the bank or financial institution, then only the same shall continue in the name of the petitioner who has acquired the debt by way of assignment from the original lender. Admittedly in the facts of the case, the order under Section 14 of SARFAESI Act is passed on 10.9.2018 prior to the date of Deed of Assignment on 5.11.2019. Therefore, it cannot be said that the proceedings under Section 14 of SARFAESI Act relating to the financial assets which are subject matter of the proceedings, were pending on the date of acquisition of financial assets under sub-section (1) of Section 5 of the SARFAESI Act - the respondent No.1 could not have directed the petitioner to approach the Debts Recovery Tribunal, but the petitioner is required to file a fresh application under Section 14 of the SARFAESI Act and the petitioner could also not have requested the respondent No.1 to substitute the name of the petitioner in the order passed under section 14 on 10.9.2018 prior to the date of Deed of Assignment. The petitioner is directed to file fresh application under Section 14 of the SARFAESI Act to get the assistance of the respondent No.1 for taking over the possession of the assets of the borrower to realise the debts which it has been assigned by way of Deed of Assignment dated 5.11.2019 - the petition is disposed of.
Issues:
1. Interpretation of Section 5(4) of the SARFAESI Act regarding the substitution of an Assignee of the debt. 2. Validity of the order passed under Section 14 of the SARFAESI Act in relation to the Deed of Assignment executed by the petitioner. Analysis: Issue 1: Interpretation of Section 5(4) of the SARFAESI Act The petitioner sought a writ of mandamus to substitute their name in an order passed under Section 14 of the SARFAESI Act. The petitioner argued that as per Section 5(4) of the Act, the name substitution was necessary since they acquired the debt of the original lender after the order was passed. The petitioner contended that they had the right to step into the shoes of the original lender and enforce orders passed in favor of the lender. Issue 2: Validity of the order under Section 14 of the SARFAESI Act The respondent, on the other hand, argued that the District Magistrate becomes functus officio after passing an order under Section 14 of the Act. The respondent claimed that since the order was passed before the Deed of Assignment, there was no obligation to implement the order in favor of the petitioner. The respondent highlighted that Section 5(4) of the SARFAESI Act only applies to pending proceedings at the time of the Deed of Assignment. The Court observed that the order under Section 14 was passed before the Deed of Assignment, and therefore, the provisions of Section 5(4) did not apply in this case. The Court referred to Section 5(4) which states that if any suit or proceeding related to the financial asset is pending at the time of acquisition, the assignee can continue the proceedings. Since no such pending proceedings were present in this case, the Court held that the petitioner needed to file a fresh application under Section 14 of the SARFAESI Act to seek assistance for taking over the borrower's assets to recover the debts assigned through the Deed of Assignment. In conclusion, the impugned order was quashed, and the petitioner was directed to file a fresh application under Section 14 of the SARFAESI Act. The Court disposed of the petition with this direction, thereby clarifying the application of Section 5(4) of the SARFAESI Act in the context of the petitioner's case.
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