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2025 (3) TMI 1055 - HC - Indian LawsTime limit for taking action by the Chief Metropolitan Magistrate or the District Magistrate under Section 14 of the Act is mandatory or not - Chief Metropolitan Magistrate or the District Magistrate can proceed to dispose of the application under Section 14 of the Act after expiry of the statutory time period - HELD THAT - The District Magistrate / Chief Metropolitan Magistrate does not become functus officio if steps under Section 14 of the Act cannot be conclusively taken within the stipulated time period of thirty days or the extended time period of sixty days. The aforesaid authorities will still have jurisdiction to take steps under Section 14 and they do not become functus officio as pleaded by the borrower. The primary object of the Act being recovery of debts owing to banks and financial institutions in a timely manner a time limit was inserted in the Act by way of an amendment with effect from 1st September 2016. The secured creditor will be left remediless if the District Magistrate or the Chief Metropolitan Magistrate for any reason whatsoever fails to act within the aforesaid time period. The secured creditor will be required to restart the process under Section 14 all over again which in turn will lead to further delay in recovery of the loan amount. There is no reason as to why a secured creditor will be made to suffer financially due to inaction or non-action or delayed action on the part of the statutory authorities. The very purpose and object of the Act will be frustrated if the recovery process fails. The same will aid in unjust enrichment of the borrower and financial loss to the secured creditor. The Act prescribes a remedy to the secured creditor to recover the unpaid loan amount by taking possession of the secured asset. If the secured creditor is not able to take possession of the mortgaged asset then the lender will not be in a position to recover the dues. Merely holding the documents of the mortgaged asset will not serve the purpose. It is only when the mortgaged property is sold that the lender will get an opportunity to recover the dues unpaid by the borrower - There cannot be two opinions that the Section 14 authorities ought to have taken steps within the stipulated time period but in the same breath it has to be held that failure to take steps within the prescribed timeline cannot be said to be a fatal one. The right of the secured creditor will be severely impacted if any other interpretation is given to the said provision. A borrower is liable to repay the loan taken from the financial institution and he does not have any right to object to any step taken by the lender to recover its dues. To uphold the sanctity and object of the Act the writ petition is liable to be allowed and is accordingly allowed. The District Magistrate is directed to dispose of the application of the bank made under Section 14 of the Act in accordance with law at the earliest but positively within four weeks from the date of communication of this order. Conclusion - i) The time limit under Section 14 of the SARFAESI Act is directory not mandatory. Failure to act within the prescribed period does not render the District Magistrate functus officio. ii) The primary objective of the SARFAESI Act is the timely recovery of debts and this objective should guide the interpretation of procedural timelines. iii) The secured creditor should not suffer due to the inaction of statutory authorities and the recovery process should not be unduly delayed. Petition allowed.
ISSUES PRESENTED and CONSIDERED
The primary issue addressed in this case is whether the time limit prescribed under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) for the Chief Metropolitan Magistrate or the District Magistrate to take action is mandatory. Additionally, the court considered whether these authorities lose jurisdiction to act on the application after the expiry of the prescribed time period. Another issue raised was the maintainability of the writ petition in the original side jurisdiction of the Calcutta High Court, given that the respondent authorities are located outside this jurisdiction. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: Section 14 of the SARFAESI Act mandates that the District Magistrate or the Chief Metropolitan Magistrate, upon receiving an affidavit from the Authorized Officer, must pass suitable orders to take possession of the secured assets within thirty days from the application date. If unable to do so, they may extend this period to sixty days, provided they record reasons for the delay. Precedents considered include the Supreme Court's decisions in C. Bright vs. District Collector & Ors., Balkrishna Rama Tarle vs. Phoenix Arc Private Limited & Ors., and R.D. Jain & Company vs. Capital First Limited & Ors., as well as decisions from the Division Bench of the Calcutta High Court and the Delhi High Court. Court's interpretation and reasoning: The Court emphasized the objective of the SARFAESI Act, which is the timely recovery of debts owed to banks and financial institutions. It interpreted the time limits set in Section 14 as directory rather than mandatory, aligning with the Supreme Court's ruling in C. Bright. The Court reasoned that strict adherence to the time limit would leave secured creditors without remedy if the District Magistrate fails to act promptly, thus frustrating the Act's purpose. Key evidence and findings: The Court found that the District Magistrate had not acted within the prescribed time frame, but this did not render the authority functus officio. The Court noted the absence of consequences for non-compliance within the stipulated time in the Act, supporting the interpretation that the time limits are directory. Application of law to facts: The Court applied the legal principles from C. Bright and concluded that the District Magistrate retains the authority to act on the bank's application under Section 14, despite the delay. The decision prioritized the Act's objective over a literal interpretation of the time limit. Treatment of competing arguments: The borrower argued that the time limit is mandatory, relying on Balkrishna Rama Tarle and R.D. Jain. However, the Court dismissed this view, emphasizing the need to uphold the Act's purpose. The State's argument that the time limit is directory was supported by the Court's interpretation. Conclusions: The Court concluded that the District Magistrate must act on the bank's application under Section 14 and directed the authority to dispose of the application within four weeks. The Court also addressed the jurisdictional issue by permitting the conversion of the writ petition from the original side to the appellate side. SIGNIFICANT HOLDINGS The Court held that:
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