Section 14 of the SARFAESI Act, 2002 is a directory provision; The remedy under Section 14 does not become redundant if DM is unable to take possession of secured assets within time limit: SC

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C. Bright v. The District Collector & Ors.

Civil Appeal No. 3441 of 2020.

Decided on 5.11.2020

Bench: L.Nageswara Rao, Hemant Gupta, Ajay Rastogi, JJ.

Facts: The present appeal arises out of challenge to the order of Kerala High Court where it held that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) mandating the District Magistrate to deliver possession of a secured asset within 30 days, extendable to an aggregate of 60 days upon recorded reasons in writing, is a directory provision.

The Supreme Court upheld the decision of the Kerala High Court.

Issue: Does inability to take possession of secured assets within time limit renders the District Magistrate Functus Officio?

Held: The court held that keeping the objective of the SARFAESI Act in mind, the time limit to take action by the District Magistrate has been fixed to impress upon the authority to take possession of the secured assets. However, inability to take possession within time limit does not render the District Magistrate Functus Officio.

The time limit is to instill a confidence in creditors that the District Magistrate will make an attempt to deliver possession as well as to impose duty on the District Magistrate to make an earnest effort to comply with the mandate of the statute to deliver the possession within 30 days and for reasons to be recorded within 60 days. The remedy under Section 14 of the SARFAESI Act is not rendered redundant if the District Magistrate is unable to handover the possession. The District Magistrate will still be enjoined upon, the duty to facilitate delivery of possession at the earliest.

Issue: Is Section 14 of the SARFAESI Act a mandatory provision or directory provision?

Held: Section 14 of the SARFAESI Act is not to be interpreted literally without considering the object and purpose of the Act. If any other interpretation is placed upon the language of Section 14, it would be contrary to the purpose of the Act.

      The court also held that the interim orders should generally not be passed without hearing the secured creditor as interim orders defeat the very purpose of expeditious recovery of public money. The borrowers and other aggrieved persons invoking the jurisdiction of the High Court under Articles 226 or 227 of the Constitution of India without availing the alternative statutory remedy should first resort to affective alternative remedies.



[14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.-

(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is r quired to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or as the case may be, the District Magistrate shall, on such request being made to him-

(a) take possession of such asset and documents relating thereto; and

(b) forward such asset and documents to the secured creditor. (2) For the purpose of securing compliance with the provisions of sub- section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.]


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