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TMI Blog2022 (9) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... to be the tenant of the mortgaged property, have preferred the present Special Leave Petition. 2. The Religare Finvest Ltd. (hereinafter referred to as the Religare) sanctioned a loan of Rs. 6 crores in favour of the borrowers. The said loan was secured by a registered mortgage created by borrowers in favour of Religare in respect of the property secured assets. The borrowers committed defaults in repayment of the said loan which led to Religare classifying borrowers' account as a Non Performing Asset (NPA). The Religare thereafter, issued a notice dated 13.04.2018 under Section 13(2) of the SARFAESI Act calling upon borrowers to pay the amount then outstanding under the said facility. That thereafter, by a Deed of Assignment dated 29.09.2018, Religare assigned all its right, title, interest, and benefit under the said loan agreement to respondent No. 1 herein - original petitioner No. 1 before the High Court. Thus, respondent No. 1 - original petitioner No. 1 stepped into the shoes of Religare and became the secured creditor and in that capacity issued a notice dated 21.05.2019 under Section 13(2) of the SARFAESI Act to borrowers calling upon borrowers to make payment of a sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 17 of the Securitisation Act, 2002 before Hon'ble Debts Recovery Tribunal, Mumbai. 4. No order as to cost." 2.1 Feeling aggrieved and dissatisfied with the order dated 27.08.2021 passed by the designated authority - Additional District Magistrate, Nashik in not passing any order of assisting the secured creditor in taking possession of the secured assets in exercise of powers under Section 14 of the SARFAESI Act, the secured creditor preferred writ petition before the High Court. By the impugned judgment and order, the Division Bench of the High Court has set aside order dated 27.08.2021 passed by the designated authority/Additional District Magistrate by observing that such an order is beyond the scope and ambit of the powers to be exercised under Section 14 of the SARFAESI Act. That thereafter, the Division Bench of the High Court has directed the designated authority/Additional District Magistrate to hear and dispose of the application under Section 14 of the SARFAESI Act in accordance with the provisions of Section 14 of the SARFAESI Act. 2.2 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court, the third party - petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were under Section 14 of the SARFAESI Act. In the said application under Section 14 of the SARFAESI Act instead of passing any final order to assist the secured creditor in getting the possession of the secured assets and while keeping the said application, the Additional District Magistrate has passed an order that only after the termination of the tenancy rights of the petitioner by the finance company (secured creditor) by following due procedure of law the further orders regarding possession of the mortgage property, the said application shall be decided. The aforesaid order passed by the Additional District Magistrate has been set aside by the High Court which is the subject matter of the present Special Leave Petition. 5. Therefore, the short question which is posed for consideration of this Court is whether while exercising the powers under Section 14 of the SARFAESI Act, the District Magistrate/designated authority could have passed such an order that unless and until the secured creditor terminates the tenancy rights of the third person by following due procedure of law and further orders regarding possession of the mortgaged property then and then only an application u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial assistance has been served on the borrower; (vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for nonacceptance of such objection or representation had been communicated to the borrower; (viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of subsection (4) of section 13 read with section 14 of the principal Act; (ix) that the provisions of this Act and the rules made thereunder had been complied with: Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets [within a period of thirty days from the date of application] [Provided also that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal No. 1637/2022) decided on 25.02.2022, the aforesaid act is a ministerial act. It cannot brook delay. Time is of the essence and this is the spirit of the special enactment. In the recent decision in the case of M/s R.D. Jain and Co. Vs. Capital First Ltd. & Ors. (Civil Appeal No. 175/2022) decided on 27.07.2022, this Court had an occasion to consider the powers exercisable by District Magistrate/Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act. After considering the object and purpose of Section 14 of the SARFAESI Act and the Scheme of the Act under Section 14, it is observed and held in paragraphs 7 to 9 as under: " 7. Now so far as the powers exercisable by DM and CMM under Section 14 of the SARFAESI Act are concerned, statement of objects and reasons for which SARFAESI Act has been enacted reads as under: " STATEMENT OF OBJECTS AND REASONS The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices there are certain areas in which the banking and financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in full within the period specified in subsection (2), the secured creditor may take recourse to one or more of the measures provided in subsection (4). One of the measures is to take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset. That, they could do through their "authorised officer" as defined in Rule 2(a) of the Security Interest (Enforcement) Rules, 2002. 7.1 After taking over possession of the secured assets, further steps to lease, assign or sale the same could also be taken by the secured creditor. However, Section 14 of the SARFAESI Act predicates that if the secured creditor intends to take possession of the secured assets, must approach the CMM/DM by way of an application in writing, and on receipt of such request, the CMM/DM must move into action in right earnest. After passing an order thereon, he/she (CMM/DM) must proceed to take possession of the secured assets and documents relating thereto for being forwarded to the secured creditor in terms of Section 14(1) read with Section 14(2) of the SARFAESI Act. As noted earlier, Section 14(2) is an enabling provision and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the secured assets within a period of 30 days from the date of application which can be extended for such further period but not exceeding in the aggregate, sixty days. Thus, the powers exercised by the CMM/DM is a ministerial act. He cannot brook delay. Time is of the essence. This is the spirit of the special enactment. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself/herself or through any officer subordinate to him/her, including the advocate commissioner who is considered as an officer of his/her court. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. Thus, we reiterate that the step to be taken by the CMM/DM under Section 14 of the SARFAESI Act, is a ministerial step. While disposing of the application under Section 14 of the SARFAESI Act, no element of quasijudicial function or application of mind would require. The Magistrate has to adjudicate and decide the correctness of the informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra) by the learned counsel appearing on behalf of the petitioner is concerned, the same shall not be applicable to the facts of the case on hand, what is observed by this Court in the aforesaid case is the DM/CMM has to give a notice and opportunity of hearing to the person in possession of the secured assets claiming to be a "Class (1) or (2)" lessee of mortgagor/borrower, as well as to secured creditor, consistent with principles of natural justice, and then take a decision. In the said decision, it is not observed that the DM/CMM has to adjudicate the rights between the parties. 7. Now so far as the reliance placed upon the decision of this Court in the case of Vishal N. Kalsaria (supra) by the learned counsel appearing on behalf of the petitioner is concerned, the said decision shall also not be applicable to the facts of the case on hand. In the said decision, the question before this Court was of conflict of claim under the Maharashtra Rent Control Act, 1999 and the provisions of the SARFAESI Act, and which law will prevail. The scope and ambit of the powers to be exercised under Section 14 of the SARFAESI Act were not directly in question before this Court. Even as observe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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