Duty Cast Upon CMM Or DM To Assist Secured Creditor In Obtaining Possession & Documents Related To Secured Assets: SC

The Supreme Court has observed that when all the requirements under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act are complied with by the secured creditor, it is the duty cast upon the Chief Metropolitan Magistrate (CMM) or District Magistrate (DM) to assist the secured creditor in obtaining the possession and documents related to the secured assets.

The Bench of Justice MR Shah and Justice Krishna Murari observed "…once all the requirements under Section 14 of the SARFAESI Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner."

The Court further noted that at that stage, the CMM or DM is not required to adjudicate the dispute between the borrower and the secured creditor and or between any other third party and the secured creditor with respect to the secured assets.

"At that stage, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings under Section 17 of the SARFAESI Act, before Debts Recovery Tribunal.", the bench held.

In this case, the secured creditor had filed an application under Section 14 of the SARFAESI Act seeking assistance of designated authority– District Magistrate, Nashik, for taking physical possession of the secured assets.

The petitioner herein claiming to be a tenant in respect of the ground floor plus first floor showroom along with service station on a part of the secured assets sought to intervene in the said proceedings filed under Section 14 of the SARFAESI Act.

The designated authority declined to assist the secured creditor in taking possession of the secured assets and kept the said application pending by observing that after termination of the tenancy rights of the petitioner by the Finance Company by following due procedure of law the further orders regarding possession of the mortgage property will be decided.

Upon an appeal before the High Court, the High Court set aside the Order passed by the designated authority by observing that such an order is beyond the scope and ambit of the powers to be exercised under Section 14 of the SARFAESI Act.

Aggrieved, petitioners approached Supreme Court.

Senior Advocate Vinay Navare appeared for petitioners.

The Supreme Court held that "…the powers exercisable by CMM/DM under Section 14 of the SARFAESI Act are ministerial step and Section 14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets."

The Court held that once all the requirements under Section 14 of the SARFAESI Act are complied with by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets.

The Court held that "The High Court has rightly directed the designated authority to proceed further with the application under Section 14 of the SARFAESI Act, and to dispose of the same in accordance with the provisions of Section 14 of the SARFAESI Act."

Accordingly, the Special Leave Petition was dismissed.

Cause Title- Balkrishna Rama Tarle Dead Thr LRS & Anr v. Phoenix ARC Private Limited & Ors.

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