The Delhi High Court has upheld the validity of a legal provision giving powers to the Chief Metropolitan Magistrate and District Magistrate to take possession of mortgaged property and documents, and forward them to the secured creditor when an application for getting such possession is filed before him.
A writ petition in the High Court had challenged the legality of Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, while contending that it violated the rights enshrined in the Constitution. The section specifies the Magistrate’s powers to deal with the mortgaged assets and documents.
Petitioner Onil Sadh claimed to be a bona fide purchaser of a three-floor property in South Delhi’s East of Kailash without knowledge of the prior alleged mortgage by the previous owner and borrower in favour of Federal Bank Limited. He challenged the bank’s notice as well as the proceedings initiated by the Chief Metropolitan Magistrate under the SARFAESI Act.
A Division Bench, comprising Chief Justice G. Rohini and Justice Jayant Nath, reiterated the Supreme Court’s observations that the impugned provisions of the Act could not be said to be unconstitutional.
“The object of the Act is to achieve speedier recovery of the dues declared as non-performing assets (NPA) and better availability of capital liquidity and resources to help in growth of economy of the country.”
Dealing with the question whether the Chief Metropolitan Magistrate was obliged to issue notice to the petitioner before disposing of the application under Section 14 of the SARFAESI Act, the Court said a secured creditor may, in order to enforce his rights, may take recourse to this procedure.
The Bench directed that if any person has a grievance against an action taken under the SARFAESI Act, the remedy is to file an application under section 17(1) of the Act before the Debt Recovery Tribunal (DRT), Delhi.
The Court also explained that since the NPA Act provides for recovery of possession by non-adjudicatory process, therefore, to say that the rights of the borrower would be defeated without adjudication would be erroneous.
The Court finally held the writ petition as not maintainable because the petitioner had an alternate remedy to approach the DRT, which he had already availed. The parties were directed to maintain status quo on the property till adjudication of the application pending before the DRT.
The Chief Metropolitan Magistrate and District Magistrate have the power to take possession of mortgaged property and documents, and forward them to the secured creditor when an application for getting such possession is filed before him