Summary
After taking symbolic possession of mortgaged property in Nashik, a secured creditor applied under Section 14 of the SARFAESI Act for help in taking physical possession. A person claiming to be a tenant intervened, and the Additional District Magistrate deferred the application until the creditor ended the tenancy through due process. The Bombay High Court set that aside. Dismissing the tenant's petition, the Supreme Court held that the Magistrate's role under Section 14 is ministerial and time-bound (NKGSB, R.D. Jain). Once the affidavit requirements are met, the Magistrate must assist the creditor and cannot adjudicate disputes with the borrower or third parties, which go to the DRT under Section 17. Harshad Govardhan Sondagar requires only a hearing, and Vishal Kalsaria did not concern Section 14.
Issues
- Whether a District Magistrate acting under Section 14 of the SARFAESI Act may defer assisting the secured creditor until a claimed tenancy is terminated through eviction proceedings.
- Whether Harshad Govardhan Sondagar and Vishal N. Kalsaria required the Magistrate to adjudicate a tenant's rights under Section 14.
Provisions considered
- Section 14, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002On a written application with the prescribed affidavit, the CMM or DM must verify compliance and assist in taking possession within 30 to 60 days. The function is ministerial, not adjudicatory, and does not extend to deciding third-party claims. (¶¶ 5.1, 5.2)
- Section 17, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Objections by borrowers or third parties, including persons claiming tenancy, to steps taken under Section 13(4) must be raised before the DRT. No such proceedings had been filed. (¶¶ 2, 4, 5.2)
- Section 13(2) and 13(4), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002The secured creditor, as assignee, had issued the demand notice and taken symbolic possession, which led to its Section 14 application for physical possession. (¶ 2)
Held
- Under Section 14 the CMM or DM must act promptly on a compliant application and assist in taking possession within the statutory time. This is a ministerial step involving no quasi-judicial adjudication (NKGSB Co-operative Bank, R.D. Jain and Co.). (¶ 5.2)
- The Magistrate cannot adjudicate disputes between the secured creditor and the borrower or third parties at that stage, and aggrieved persons must go to the DRT under Section 17. Keeping the application pending until the tenancy was terminated exceeded the Section 14 power, and the High Court rightly set it aside. (¶ 5.2)
- Harshad Govardhan Sondagar requires only that a person claiming a lease be heard before a decision. It does not require the Magistrate to adjudicate rights. Vishal N. Kalsaria addressed the conflict between the rent law and the SARFAESI Act, not the scope of Section 14, and judgments are not to be read as statutes. (¶¶ 6, 7)
Result
Special leave petition dismissed. The High Court's direction that the designated authority decide the secured creditor's Section 14 application in accordance with law was upheld.