Section 14 SARFAESI Act: CMM/DM Not Required To Adjudicate Disputes Between Borrower/ Third Party And Secured Creditor: Supreme Court

Section 14 of SARFAESI Act

Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (“SARFAESI Act” or “Act”) provides for judicial assistance to creditors in enforcing their security interest as envisaged under section 13 of the Act.

In this instance, the District Magistrate/designated authority stated in an application filed by the Secured Creditor under Section 14 of the SARFAESI Act that only an application under Section 14 of the SARFAESI Act will be decided if and when the Secured Creditor terminates the tenancy rights of the third party by adhering to due legal procedure and further orders regarding possession of the mortgaged property. 

Facts 

The Bombay High Court annulled this order after granting the writ petition.

The major issue raised was if the District Magistrate/designated authority could have made an order stating that an application under Section 14 of the SARFAESI Act can be made only after the secured creditor has terminated the tenancy rights of the third party by following the proper legal procedure and further orders regarding possession of the mortgaged property were made was brought before the Apex Court bench.

Judgement 

The Supreme Court noted that the CMM/DM is not obligated to resolve any disagreements over the secured assets between the borrower and the secured creditor or between the secured creditor and any other third party while evaluating an application under Section 14 of the SARFAESI Act. 

The CMM/DM is required to help the secured creditor obtain possession of the secured assets as well as the documents pertaining to them, the bench of Justices MR Shah and observed. This is after the secured creditor has complied with or satisfied all of the requirements under Section 14 of the SARFAESI Act.