Delays in Section 14 Proceedings Criticized; Directions Issued for Compliance within 30 Days
In a significant ruling, the Allahabad High Court has directed district magistrates and chief metropolitan magistrates to adhere to statutory timelines for the disposal of applications under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The court emphasized that applications must be decided within 30 days, extendable up to 60 days only under extraordinary circumstances.
This directive came in response to a series of writ petitions filed by M/s Hinduja Housing Finance Ltd., which highlighted the administrative delays in securing possession of properties post-default by borrowers. The petitioner, a registered housing finance company, argued that such delays not only violate statutory timelines but also undermine the legislative intent of expeditious recovery of secured assets.
The court, presided by Justices Ajit Kumar and Swarupama Chaturvedi, underscored the administrative nature of the magistrate's role under Section 14, which is confined to verifying compliance with statutory requirements. The judgment reiterated that the magistrate's function is not adjudicatory and emphasized the need for swift action to maintain the effectiveness of the SARFAESI Act.
In its judgment, the court referred to past Supreme Court rulings, including NKGSB Cooperative Bank Limited v. Subir Chakravarty, to highlight the legislative intent behind the SARFAESI Act, which aims to empower financial institutions with powers akin to those of international banks. The court also cited the importance of timely enforcement to protect the financial system and the public exchequer.
The High Court directed that quarterly reports on the status of pending applications be submitted to the Registrar General of the High Court, ensuring transparency and accountability in the enforcement process. This move aims to address the routine delays in obtaining possession of secured assets, a concern raised in numerous similar petitions.
Bottom Line:
SARFAESI Act, 2002 - Applications under Section 14 must be decided within the statutory timeline of 30 to 60 days to ensure expeditious possession of secured assets, as delays undermine the purpose of the Act and statutory rights of secured creditors.
Statutory provision(s): SARFAESI Act, 2002 Sections 14, 26D, 26E
M/s Hinduja Housing Finance Ltd. v. State of U.P., (Allahabad)(DB) : Law Finder Doc Id # 2836543
