DM has no power to adjudicate upon DM application

DM has no power to adjudicate upon the DM application moved by the bank.

In this commercial era, when the NPA is mounting day by day, for banks & financial institutions to recover the NPA amount is a foremost concern. But the indifferent attitude of the District Magistrate in giving the DM permission on time raises further concern. The question which arises for consideration is whether the DM has a power to adjudicate the case under SARFAESI Act?  Whether the DM can act as if he or she is the High Court Judge ? After my considerable research in this area, the Hon’ble High Courts has held that DM exercises only judicial function which is ministerial in nature. There is difference between the judicial function and adjudication function.

Many times it has been seen that DM is prolonging the order for one reason and the other or in the cases where the DM permission has been granted but the police authorities or revenue authorities are not cooperating at all with the bank, the bank shall immediately resource to the legal proceeding by filing a writ in the Hon’ble High Court. There are numerous instances where the Hon’ble High Courts have issued contempt proceedings against the authorities for not proving the necessary support as envisaged in SARFAESI Act.

Sec.14 does not confer power to District Magistrate for deciding any dispute of any borrower. Hence for this reason, service of any notice to the borrower is not contemplated in Sec. 14 of the Act (as no adjudication of dispute has to take place before the DM). It is manifest that Sec 14 confers only ministerial function to the Magistrate which cannot be called in question in any court or before any authority. Sec 14 is procedural in nature and merely empowers DM to assist the secured creditor in taking possession of the secured assets and it does not clothe the DM with the power to adjudicate in respect of any dispute pertaining to secured assets.

Taking symbolic possession under Sec.13(4) is not a condition precedent for invoking Sec 14 of SARFAESI Act.  The Division Bench of Madras High Court in Hemabhushan Vs. ICICI Bank Ltd. Ors. : CDJ 2010 MHC 3378 held that, right to invoke Sec.14 of the Act is independent of the provisions of Sec.13(4) and powers of the Magistrate under Sec 14 are only ministerial, non-adjudicatory in nature, final and cannot be called in question in any Court or before any Authority. The Magistrate is required only to verify from the Bank / FI whether notice under Sec 13(2) of the Act is given or not whether the secured assets fall within the jurisdiction of the Magistrate.

District Magistrate while considering an application under section 14 need not issue any notice to borrower or any person. No prior notice to borrower before taking possession u/s 13(4) after service of 60 days demand notice or even prior to invocation of Sec.14 of the Act is even required. No hearing of borrower or guarantor by the Magistrate is contemplated in the Act as held by Tensile Steel Ltd. & Anr. Vs. Punjab & Sindh Bank & Ors. AIR 2007Guj 126.

It is very much clear that absolutely no power, jurisdiction, competence or expertise is intended or vested with the District Magistrate to deal with any claim as to the nature of the property in question or as to the merits or demerits with regard to other aspects involved in connection with loan transaction, but for considering whether the property in question in respect of which assistance is sought is a secured asset or not.

No notice to the borrower or Auction Purchaser is necessary. There is no statutory requirement to issue any notice prior to issuance of notice under sec.13(4) or before invoking assistance under Sec. 14 of the Act. Issuing notice to the borrower is alien to the special statute viz. SARFAESI Act since no adjudication nor roving enquiry is contemplated under Sec.14 of SARFAESI Act. (State Bank of India Vs. Kathikkai Tea Plantations & Ors. 2009 (2) DRTC 738 Mad.)It is well settled law that at the stage of Sec 14, there is no adjudication of any issues. The authorities have to only render assistance to the secured creditor to recover possession (Arjun Urban Co-operative Bank Ltd, Sholapur Vs Chief Judicial Magistrate, Solapur 2009(5)MHLJ 380 (Bom)

The requests made under Sec.14 have to be disposed of expeditiously else the secured creditor may suffer loss or damages if any to the secured assets on account of delay.

Gaurav Goel :- The author is the lawyer at Punjab & Haryana High Court.




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