Bombay High Court

Bombay High Court: While deciding the instantwrit petition wherein the issue was regarding transgression of Additional District Magistrate’s jurisdiction under Section 14 of the SARFAESI Act; the Division Bench of A.S. Doctor and K.R. Shriram, JJ., observed that the jurisdiction of the Designated Authority under Section 14 of the SARFAESI Act is purely ministerial and limited only to assisting secured creditors in taking possession of secured assets and nothing more. “Section 14 of the SARFAESI Act does not contemplate much less empower the DA to even consider much less adjudicate upon any objections raised by Borrower or anybody else”.

Brief Facts– In September 2014, the borrowers approached one Religare Finvest Limited for Rs.6 crore loan and the same was issued by the Religare on 30-09-2014. Subsequently, borrowers committed defaults in repayment of the said loan and hence, Religare declared the borrowers’ account as a Non-Performing Asset. Thereafter, they issued a notice on 31-03-2018 under Section 13(2) of the SARFAESI Act, entreating borrowers to pay the amount within sixty days.

Later, in September 2018, Religare assigned all its rights to Phoenix ARC (P) Ltd., (the petitioner) by a deed of assignment .A second SARFAESI notice was sent to the borrowers, however, the borrowers in reply denied their liability.

Petitioner filed an application under Section 14 of SARFAESI Act seeking the assistance of the Additional District Magistrate, Nashik for taking the physical possession of the secured assets. On 10-08-2020, the second respondent who was a tenant at secured asset premises of the company, intervened the proceedings. The ADM via his Order dated 27-08-2021, declined to assist the petitioner and ordered that further orders regarding possession and mortage would be decided after the termination of tenancy rights of the second respondent. .

Aggrieved with the afore-stated Order, the petitioner approached the High Court.

Contentions: The Petitioner contended that the ADM’s order was in excess of jurisdiction under Section 14 of the SARFAESI Act. It was sumbitted that Section 14 was only limited to assisting the secured creditors to obtain the secured assets and nothing more.

  • Observations: The Court strictly observed that the impugned Order is yet another instance of the Designated Authorities under Section 14 of the SARFAESI Act not only failing and/or neglecting to exercise their jurisdiction but instead, and regrettably acting in excess of and contrary to the jurisdiction vested in them under Section 14. “Such conduct on the part of the DA is now common place and is being impugned repeatedly before this Court. This is despite the fact that the scope of Section 14 as also the jurisdiction of the DA thereunder is not only clear from a plain reading of Section 14 but has since been emphasized in several judgements of the Supreme Court as well as this Court”.

  • It was observed that jurisdiction of the CMM/DM under Section 14 of the SARFAESI Act is purely ministerial and limited only to assisting secured creditors in taking possession of secured assets. The Court pointed out that it is implicit in Chapter III of the SARFAESI Act that the DA on finding that the secured creditor has complied with Section 14 must act promptly and with due dispatch in ensuring that possession of the secured asset is recovered as quickly as possible.

  • The Court highlighted the objective of SARFAESI Act which is to enable secured creditors to enforce their security interest without the intervention of the Court or Tribunal.

  • The Bench expressed their shock at the observations made by the ADM. Where on one hand the ADM held the petitioner’s application under Section 14, SARFAESI to be legally valid, but in the same vein, denied relief to the petitioner, thereby derailing the objective of the SARFAESI Act.

“We find that the DA under Section 14 of the SARFAESI Act claim powers which they do not have under Section 14 and proceeds to pass orders which are completely contrary to the provisions of Section 14 and the very object and purpose of Chapter III of the SARFAESI Act. We find that the conclusion reached by ADM in the impugned order is a prime example of this very worrying trend”.

Decision: With the afore-stated observations, The Court held that the impugned Order passed by the ADM is patently illegal and contrary to Section 14.

It was alsoheld that the ADM had transgressed the jurisdiction vested in him under Section 14 . Thus the impugned order was quashed and set aside. [Phoenix ARC Pvt. Ltd. v. The State of Maharashtra, 2022 SCC OnLine Bom 1710, decided on 03-08-2022]

Advocates who appeared in this case :

Petitioner- Prathmesh Kamat along with Jyoti Sanap, I/by V. Deshpande & Company

Respondents: S.D. Vyas, GP, ‘B’ Panel for Respondent No.1-State;

Durgesh Rege, for the Respondent Nos.2(a) to 2(d);

Mayank Bagla i/by Jainish Jain, for the Respondent Nos.3 to 9.

*Sucheta Sarkar, Editorial Assistant has reported this brief.

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