Punjab & Haryana High Court Upholds Ministerial Role of Magistrate under SARFAESI Act Court reaffirms non-adjudicatory function of Magistrates in asset possession cases, dismisses ASREC India Ltd.'s writ petition.
In a significant judgment, the Punjab and Haryana High Court has reaffirmed the ministerial role of Chief Metropolitan Magistrates and District Magistrates under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The division bench, comprising Chief Justice Sheel Nagu and Justice Sanjiv Berry, dismissed the writ petition filed by ASREC (India) Ltd, which sought to challenge the dismissal of its application by the Additional District Magistrate, Ludhiana.
The court underscored that the powers exercised by the Magistrate under Section 14 of the SARFAESI Act are purely ministerial. These powers do not involve adjudication of disputes between borrowers and secured creditors or any third parties. The Magistrate's role is to ensure compliance with statutory formalities before granting possession of secured assets.
ASREC (India) Ltd. had entered into an Assignment Agreement with the original lender, Allahabad Bank (now Indian Bank), acquiring the rights and liabilities related to a loan availed by the respondent borrower. The borrower had defaulted, leading to the account being declared a Non-Performing Asset (NPA), and the secured asset was subject to recovery proceedings under the SARFAESI Act.
The Additional District Magistrate had dismissed ASREC's application under Section 14, citing pending approval of the Assignment Agreement by the Debt Recovery Tribunal (DRT) and prior dismissals of similar applications by the Chief Judicial Magistrate. The High Court, upholding this order, emphasized the necessity for the Magistrate to be satisfied with the compliance of provisions under Section 14 and the legitimacy of the creditor's claim, which was not established due to the pending approval of the Assignment Agreement.
The judgment referenced the Supreme Court's decision in M/s R.D. Jain and Co. v. Capital First Ltd., which clarified that the Magistrate's function under Section 14 is administrative, aimed at facilitating the secured creditor in taking possession without engaging in any adjudicatory process.
The court granted ASREC the liberty to re-file their application under Section 14 after completing the necessary formalities and obtaining requisite approvals. The decision highlights the stringent procedural compliance required under the SARFAESI Act for the enforcement of security interests, ensuring that the process remains fair and within the bounds of law.
Bottom Line:
Under Section 14 of the SARFAESI Act, the powers of Chief Metropolitan Magistrate or District Magistrate are ministerial, not adjudicatory, with the duty to ensure compliance with mandatory requirements and documents before granting possession of secured assets.
Statutory provision(s): Section 14 of the SARFAESI Act, 2002
ASREC (India) Ltd v. State of Punjab (Punjab And Haryana)(DB) : Law Finder Doc Id # 2827001
