Dispose pleas for possession of secured assets in 30 days: HC

The division bench of justice Nitin Jamdar and justice Abhay Ahuja was hearing several petitions filed by L&T Finance, TJSB Sahakari Bank and the National Co-operative Bank complaining about the inordinate delay in deciding their applications under section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 for taking possession of the secured assets.

Mumbai: Noticing that 21,546 applications for possession of secured assets were pending with district magistrates (DM) across Maharashtra, the Bombay high court recently said that all applications by secured creditors shall be disposed of DMs in 30 days and the order for possession of secured assets should be implemented in next four weeks to speed up the process of recovery of outstanding loans.

The court accepted their contention that section 14 of the SARFAESI Act casts an obligation upon chief metropolitan magistrates (CMM) and DMs to assist secured creditors in taking possession of the secured asset – to enable them to recover outstanding bad loan amounts from their debtors. (Getty Images)

The division bench of justice Nitin Jamdar and justice Abhay Ahuja was hearing several petitions filed by L&T Finance, TJSB Sahakari Bank and the National Co-operative Bank complaining about the inordinate delay in deciding their applications under section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 for taking possession of the secured assets.

The court accepted their contention that section 14 of the SARFAESI Act casts an obligation upon chief metropolitan magistrates (CMM) and DMs to assist secured creditors in taking possession of the secured asset – to enable them to recover outstanding bad loan amounts from their debtors.

The bench said judgments pronounced by the Supreme Court on the issue make it clear that the powers of the CMM or the DM under Section 14 are merely administrative and do not involve pronouncing any judgment on the borrower’s objections to the secured creditor taking possession of the secured assets.

“At this stage, the CMM/DM does not need to adjudicate any dispute between the borrower, third parties, and the secured creditor concerning the secured assets,” the court said, adding that, “Once all requirements under section 14 are met, the CMM/DM has a statutory obligation to promptly assist the secured creditor.”

During hearing on the petitions, the court was informed that 21,564 applications under section 14 were pending across Maharashtra, most of which were pending for months and a sizable proportion for years together.

Commenting on the enormous delay, the court said any delay in deciding the applications would be unacceptable, as the enactment emphases on expediency. “Therefore, such an enormous backlog of applications in Maharashtra is inconsistent with the objectives of the Act and defeats the legislative intent,” the bench added.

Observing that pendency of a large number of applications hinders recovery of bad loans, which has a significant impact on the financial health of the country, the court directed that all applications under section 14 of the SARFAESI Act must be disposed of in 30 days and each of these orders shall be implemented and executed within four weeks of the passing of the order.

The bench has also directed the CMM/DMs to maintain proper details and records of the applications, disposal, implementation of the orders and submit monthly statistics to the Divisional Commissioner on or before the seventh day of the following month.