The Bombay High Court, examined procedural aspects under the SARFAESI Act concerning the non-compliance with the requirements of Section 13(2) and Section 14. The court dismissed the writ petition challenging the Chief Judicial Magistrate's (CJM) order, which had allowed the bank's application for possession of secured assets. The judgment reiterated the ministerial nature of powers under Section 14 and clarified the obligations of creditors and procedural safeguards for borrowers.

Introduction

1. The petitioners challenged the CJM's rejection of their application to obtain copies of the respondent bank's submissions under Section 14 of the SARFAESI Act.

Background

2. The petitioners, operating M/s Shailesh Traders, secured an Open Cash Credit (OCC) loan facility of ₹250 lakhs from the respondent bank, which was later enhanced multiple times.
3. Despite repayment, the loan account was classified as Non-Performing Asset (NPA) on 31.03.2021.

Procedural History

4. The bank issued notices under Sections 13(2) and 13(4) of the SARFAESI Act in 2021, which were later withdrawn after the petitioners challenged them before the Debts Recovery Tribunal (DRT).
5. The bank re-issued notices under Section 13(2) in 2022, followed by filing an application under Section 14 before the District Magistrate, which was dismissed due to deficiencies.

Disputed Issues

6. The petitioners argued that:
   • A second application under Section 14 before the CJM was not maintainable.
   • The application lacked the mandatory affidavit under Section 14.
   • No fresh notice under Section 13(2) was served.

Legal Framework

7. Section 14 allows the District Magistrate (DM) or CJM to assist in taking possession of secured assets without notice or adjudication.
8. Precedents like Trade Well vs Indian Bank and Balkrishna Tarle vs Phoenix ARC confirm the ministerial nature of Section 14 proceedings.

Findings

9. The court observed that:
   • The bank had re-issued a valid notice under Section 13(2) and fulfilled Section 14 requirements.
   • Procedural lapses like the absence of a solemn affirmation could be rectified.
   • The petitioners had not raised objections or challenged the subsequent notice before any authority.

Conclusion

10. The writ petition was dismissed, upholding the CJM's order as compliant with the SARFAESI Act and relevant case law.

Legal Provisions Discussed

• SARFAESI Act, 2002
  • Section 13(2): Issuance of a demand notice for loan repayment.
  • Section 14: Ministerial role of DM/CJM in securing possession of assets.

Ratio Decidendi:

Courts acting under Section 14 of the SARFAESI Act do not perform adjudicatory functions but verify procedural compliance by creditors. Once compliance is established, the courts must assist in asset possession without entertaining objections or providing notice to borrowers.

Subjects:

#SARFAESIAct #HighCourtJudgment #BankingLaw #AssetPossession #LegalProcedure