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SUPREME COURT OF INDIA
M.R. SHAH, KRISHNA MURARI, JJ.
Balkrishna Rama Tarle Dead Thr LRS & Anr. - Appellants
Versus
Phoenix ARC Private Limited & Ors. - Respondents
Special Leave Petition No. 16013 of 2022
Decided on : 26-09-2022
(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 14 – Possession of secured asset – Assistance of designated authority – Time is of essence and this is spirit of special enactment – Powers exercisable by CMM/DM under Section 14 of SARFAESI Act are ministerial step – It cannot brook delay – Time is of essence and this is spirit of special enactment – Section 14 does not involve any adjudicatory process qua points raised by borrowers against secured creditor taking possession of secured assets – Once all requirements under Section 14 of SARFAESI Act are complied with/satisfied by secured creditor, it is duty cast upon CMM/DM to assist secured creditor in obtaining possession as well as documents related to secured assets even with help of any officer subordinate to him and/or with help of Advocate Commissioner – At that stage, CMM/DM is not required to adjudicate dispute between borrower and secured creditor and/or between any other third party and secured creditor with respect to secured assets and aggrieved party to be relegated to raise objections in proceedings under Section 17 of SARFAESI Act, before Debts Recovery Tribunal – High Court has rightly directed designated authority to proceed further with application under Section 14 of SARFAESI Act – Special Leave Petition dismissed. (Paras 5.2 and 8)
(B) Precedent – Ratio decidendi – A judgment cannot be interpreted and applied to fact situations by reading it as a statute – One cannot pick up a word or sentence from a judgment to construe that it is ratio decidendi on relevant aspects of the case. (Para 7)
Facts of the case:
Short question which is posed for consideration of this Court is whether while exercising the powers under Section 14 of SARFAESI Act, District Magistrate/designated authority could have passed such an order that unless and until 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 application under Section 14 of SARFAESI Act will be decided?
Findings of Court:
High Court has not committed any error in passing the judgment and order and directing designated authority to dispose of the application under Section 14 of the SARFAESI Act.
Result : Special Leave Petition dismissed.
The provided legal document primarily discusses the powers and scope of the authorities under Section 14 of the SARFAESI Act, emphasizing that the assistance of the Chief Metropolitan Magistrate or District Magistrate in taking possession of secured assets is a ministerial act that does not involve adjudication of disputes or questions regarding tenancy or ownership rights (!) (!) . It clarifies that once all formalities and requirements are satisfied by the secured creditor, the authority is obliged to assist in possession without delay, and any objections or disputes should be raised through the appropriate legal channels, such as proceedings under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal (!) .
Regarding the specific issue of whether CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) registration is necessary, the document does not explicitly address the registration requirements of CERSAI. However, the emphasis on formalities, compliance, and procedural correctness implies that registration with the appropriate authorities, such as CERSAI, is an integral part of establishing the validity and enforceability of security interests under the SARFAESI framework. The requirement for secured creditors to create and document security interests properly suggests that registration, including with CERSAI, is a procedural necessity to ensure the security interest is valid, enforceable, and recognized by the law (!) (!) .
In summary, while the document does not explicitly state that CERSAI registration is mandatory, the procedural context and the emphasis on formalities indicate that proper registration, including with CERSAI, is a crucial step in the security interest creation process to uphold legal enforceability and compliance with statutory requirements.
ORDER :
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 03.08.2022 passed by the High Court of Judicature at Bombay in Writ Petition No. 9749/2021, by which the Division Bench of the High Court has allowed the said writ petition preferred by the respondent No. 1 herein - secured creditor and has set aside order dated 27.08.2021 passed by the designated authority under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act, 2002) and directed the designated authority under Section 14 of the SARFAESI Act to dispose of the application under Section 14 of the SARFAESI Act afresh, legal heirs of original respondent No. 2 claiming 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 of Rs. 5,83,22,866/. That thereafter, the secured creditor took symbolic possession of the secured assets under Section 13(4) of the SARFAESI Act. On 21.09.2019, the same was intimated to the borrowers vide their letter dated 21.09.2019. A public notice was also issued by the secured creditor in two newspapers in compliance with the provisions of the Security Interest (Enforcement) Rules, 2002. That thereafter, the secured creditor filed an application under Section 14 of the SARFAESI Act seeking assistance of designated authority - respondent No. 3 herein - District Magistrate, Nashik, for taking physical possession of the secured assets. The petitioner herein - original respondent No. 2 claiming to be a tenant in respect of the ground floor plus first floor showroom along with service station on a part of the secured assets bearing Nos. 465 and 463 sought to intervene in the said proceedings filed under Section 14 of the SARFAESI Act. The petitioner placed reliance upon an order dated 20.04.2018 passed in Regular Civil Suit No. 58/2018 filed by him against one of the borrowers, whereby one of the borrowers was restrained from dispossessing him from the said premises. At this stage, it is required to be noted that neither the borrower(s) nor the petitioner(s) instituted any proceedings before the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act against the steps taken under Section 13 of the SARFAESI Act. That thereafter, the designated authority passed the following order dated 27.08.2021 and declined to assist the secured creditor in taking possession of the secured assets and kept the said application pending by observing that after termination of the tenancy rights of the petitioner by the Finance Company by following due procedure of law the further orders regarding possession of the mortgage property will be decided. The order dated 27.08.2021 is as under:
1. In consideration of the reasons recorded in the above referred issues and conclusions, the Applicatio
(1) Possession of secured asset – Powers exercisable by CMM/DM under Section 14 of SARFAESI Act are ministerial step – Section 14 of SARFAESI Act does not involve any adjudicatory process qua points ....
Point of Law : Nature of powers to be exercised by learned Chief Metropolitan Magistrate/learned District Magistrate, High Court in impugned judgment and order has rightly observed and held that powe....
The District Magistrate's role under Section 14 of the SARFAESI Act is ministerial, requiring prompt action without adjudicating disputes between parties.
Authorized officer is not expected to adjudicate the contentious issues raised by the concerned parties but only verify the compliance referred to in the first proviso of Section 14 and being satisfi....
The court clarified that the jurisdiction of the relevant Authority under Section 14 of the SARFAESI Act is limited to assisting a secured creditor in recovering possession of secured assets from a d....
The power of a designated magistrate under the recovery statute to facilitate possession of secured assets is purely ministerial, not adjudicatory. It requires no prior notice to debtors, no pre-regi....
The central legal point established in the judgment is that the jurisdiction of the DA under Section 14 of the SARFAESI Act is limited to assisting secured creditors in obtaining possession of the se....
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