- High Court of Allahabad held that the Chief Metropolitan Magistrate (CMM) or District Magistrate (DM) acting under Section 14 of Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 shall not be required to give notice to the borrower during decision stage or while passing order related to possession of the secured asset.
- A bench comprising Justices Sunita Agarwal and Vipin Chandra Dixit noted that proceedings before CMM or DM under the act are ministerial and hence they are under no liability to give a hearing to the borrower.
- The High Court noted that when assisting a secured creditor in taking possession of secured assets, there shall arise no question of dealing with rival claims.
- The CMM or DM may immediately move into action post receipt of a written application from a secured creditor under Section 14 of the SARFAESI Act.
- There are two essential elements to be considered before passing an order under Section 14:
- The secured asset must fall under territorial jurisdiction
- Notice to be given as under Section 13(2)
- The assistance can be sought by a secured creditor after actual physical possession of the secured asset is not given by the borrower or authorized officer.
- The court in the present case was dealing with the validity of an order passed by the Additional District Magistrate, Ghaziabad, and Additional District Magistrate, Varanasi under Section 14.
- The issue was that the orders passed under Section 14 were given no notice or opportunity to hear granted to petitioners; hence, the order was impugned for violating principles of natural justice.
- The Court referred to a series of decisions delivered by the Supreme Court and High Courts and decided that the purpose of taking possession or control of any secured asset by the creditor in furtherance to recover his secured debt under Section 13(4) would be of execution proceeding.
- When the secured creditor is unable to obtain actual possession of immovable property by other means, a written request is to be given to CMM/DM for possession under Section 14, within whose jurisdiction the secured asset is.
- Citing the Supreme Court’s ruling in the case of R.D. Jain and Co. Vs Capital First Ltd, the court observed that no opportunity to hear is to be provided to the borrower at this stage.
- The order passed by CMM/DM should be duly served to the borrower before forcible dispossession. The date for such forcible action if necessary by the Magistrate is to be intimated to the borrower to allow him sufficient time to remove his belongings.
- If a hearing is denied to the borrower then he will have no remedy.
- Court held that borrower has the remedy to challenge the measurements taken by the secured creditor and the order passed by the Debt Recovery Tribunal under Section 14 of SARFAESI Act.
- It was held by the court that the natural justice principles apply before the secured creditor initiates coercive measures against the borrower under Section 13(4) at stage 13(3A).
- No further opportunity of hearing can be given to the borrower at the stage of Section 13(4) or Section 14 if he was given an opportunity before the initiation of coercive measures and after calling to pay dues of the secured creditor.
- The petition was dismissed upholding the judgment of the Division Bench of Allahabad High Court in Kumkum Tentiwal Vs State of UP.
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