A secured creditor loses its rights under the SARFAESI Act upon the auction of mortgaged property, precluding further claims for possession under the same Act.

ORDER

Per: Justice Vivek Rusia

With the consent of parties, heard finally.

1. The petitioner / Punjab National Bank has filed the present petition under Article 226 of the Constitution of India seeking direction to respondent No.1 to execute the order dated 11.11.2022 passed by the Additional District Magistrate, Agar Malwa in exercise of power conferred under section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short 'SARFAESI Act').

2. The petitioner extended the credit facility to M/s Ruchi Agri Fresh Private Limited vide sanction letter dated 24.7.2015. On 31.3.2021, the account was declared non-performing asset due to default in repayment of loan.

3. A notice under section 13(2) of the SARFAESI Act was issued for recovery of the outstanding balance of Rs.1,01,98,107.68/-. Thereafter, possession notice under 13(4) of the SARFAESI Act was issued on 2.9.2021 and symbolic possession of the mortgaged property was taken by the Bank.

4. In order to take the possession of the mortgaged property, the Bank filed an application before the Additional District Magistrate. Vide order dated 11.11.2022, the Tehsildar was directed to provide assistance to the petitioner in order to take possession of the property.

5. After the aforesaid order, in order to recover the loan amount, the petitioner / Bank proceeded with the sale of mortgaged property. After the auction sale, two sale certificates dated 17.01.2023 have been issued in favour of the auction purchaser. The details are given in para - 5.8 of the petition and the certificates are filed as Annexure-P/5 along with this writ petition. According to the petitioner, the borrower has not handed over the possession of the aforesaid property to them, therefore, the present petition is filed seeking direction to respondent No.2 to execute the order dated 11.11.2022.

6. Section 13 of the SARFAESI Act provides that any security interest created in favour of any secured creditor may be enforced, without the intervention of the Court or Tribunal, by such creditor in accordance with the provision of this Act. In case, the borrower fails to discharge is liability in full within the period specified in sub-section (2), the secured creditor may take recourse either to take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale or to take over the management of business of the borrower including the right to transfer. If the measures are taken under section 13(4)(a), the secured creditor may approach the Chief Metropolitan Magistrate or District Magistrate to seek assistance in taking possession of the secured assets for the purpose of sale or transfer under the provisions of this Act.

7. For ready reference, section 13 of the SARFAESI Act is reproduced below:

''13. Enforcement of security interest - ( 1 ) Notwithstanding anything contained in section 69 or section 69-A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the Court or tribunal, by such creditor in accordance with the provisions of this Act.

( 2 ) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).

Pr