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2016 (7) TMI 763 - HC - Indian LawsSection 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - right of creditors - Held that - Section 14 of the Act of 2002 requires that where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, request in writing to the Chief Metropolitan Magistrate or the District Magistrate to take possession of such property. For taking possession of the assets mortgaged itself, in no way require that the borrower or guarantor should be heard. District Magistrate while issuing certificate under Section 14 of the Act of 2002 is performing non-adjudicatory ministerial function. It has been held in Jawahar Singh s case (2015 (8) TMI 1304 - CALCUTTA HIGH COURT) that Section 14 of the Act of 2002 only provides an avenue for the secured creditor when faced with resistance by the borrower or anyone else, or when the borrower simply refuses to surrender possession, to seek administrative assistance of District Magistrate to facilitate taking of possession of a secured asset for sale and to recover its due.
Issues:
Challenge to the impugned order passed by the District Magistrate under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 regarding the impleadment of legal heirs of a deceased guarantor. Analysis: The High Court of Rajasthan addressed the challenge to the impugned order dated 02.07.2014 passed by the District Magistrate, Jaipur, in a case filed by the Union Bank of India under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The case involved M/s. Precious Enterprises Private Limited, which had taken a loan from the petitioner-bank with guarantors. After the guarantor, Ballabh Das Jhalani, passed away, the District Magistrate ordered the legal heirs to be impleaded. The petitioner argued that only one legal heir, Suresh B. Jhalani, was necessary as per a registered Will. On the other hand, another legal heir contended that all sons of the deceased guarantor should be included as necessary parties. The petitioner relied on legal precedents to support the argument that Section 14 of the Act does not require notice to borrowers/guarantors during the application process. The Court emphasized that the purpose of Section 14 is to facilitate the secured creditor in taking possession of the mortgaged property without the need for a hearing for borrowers or guarantors. In a detailed analysis, the Court referred to a judgment from the Calcutta High Court regarding the principles of natural justice concerning Section 14 of the Act. The Court highlighted that the legislative intent behind the SARFAESI Act is quick recovery of secured debts without extensive procedural requirements. It was noted that the Act does not mandate compliance with natural justice at the stage of Section 14 application consideration. The Court emphasized that the District Magistrate's role in issuing a certificate under Section 14 is ministerial and non-adjudicatory, aimed at assisting the secured creditor in taking possession of the asset for sale and debt recovery. The judgment underscored that the Act does not necessitate a hearing for borrowers or guarantors during the possession-taking process. Consequently, the High Court held that the impugned order by the District Magistrate was not legally sustainable and set it aside. The Court allowed the legal heirs of the deceased guarantor to present their grievances before the District Magistrate if they choose to do so. The parties were directed to appear before the District Magistrate on a specified date for further proceedings, and the petition was disposed of accordingly.
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