How banks misuse sarfaesi act provisions for loan recovery. Jun 06, 2015 even otherwise, the borrower can file an appeal to the debt recovery tribunal under section 17 of sarfaesi act, 2002 questioning the measures initiated by the bank under section 4 of the act and the borrower can expose as to how the bank has not followed the rbi guidelines when it comes to classifying the account as npa. Jan 22, 2016 the chief metropolitan magistrate, however, dismissed the application and held that when the secured creditor takes action under section or 14 of the sarfaesi act to recover the possession of the secured interest and recover the loan amount by selling the same in public auction, then it is not open for the court to grant an injunction under. In section 2 in clause h after subclause ib insert the following.
As per the proviso to section 14 of the sarfaesi act, if the secured creditor files application along with an affidavit duly affirmed by the authorized officer of the secured creditor declaring the facts from i. Amendment to sarfaesi act introduced in 20 brought out certain changes in the act wherein under section 14 compulsory filing of an affidavit by the secured creditor through their authorised officer with the district magistrate chief metropolitan magistrate, as the case may be, to take possession of the secured assets. Section of sarfaesi overrides section 68 and 69 of the transfer of property act, 1882 the act, 1882 but not all its provisions in relation to the rights of the lessee, under a valid lease agreement, which is created prior to the receipt of notice, under section 2, by the borrower. The submission made by the learned counsel for the respondents that section 14 cannot be read in isolation and has to be viewed in the context of all other provisions of the act, such as sections 468, 15, 17, 18 rule 89 of sarfaesi rules and section 55 of the transfer of property act. I have got doubt whether under sarfaesi act can the bankfinancial institutions execute a sale certificate under section 89 of the registration act, 1908 as the section provides to execute a sale certificate only to courts under c. Legal position under section 34 of sarfaesi act, 2002. No power to refuse assistance vests with the district magistrate. When a tenant approaches the court or the tribunal seeking protection of his rights and questioning the action being taken by the bank using section 14 of sarfaesi act, 2002, the court or the tribunal used to look into or emphasize as to. The opening words of sub section 1 of section 14 of the sarfaesi act also provides that if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of the act, the secured creditor may take the assistance of the chief metropolitan magistrate or the district magistrate. Dec 21, 2010 even without ordering notice and upon looking at the simple averments in the application by the bank under section 14 of the sarfaesi act, 2002, the metropolitan magistrate court or the district court will provide the needed assistance to the bank for taking physical possession of the property. Jurisdiction of chief judicial magistrate to entertain application.
State bank of india, the madras high court had taken a view that for the purpose of. The secured creditors have, therefore, made a request under section 14 1 of the sarfaesi act to the chief metropolitan magistrate, mumbai, to take possession of the premises and hand over the possession of the premises to the secured creditors in accordance with the provisions of section 14 of the sarfaesi act. Such person occupying the premises, when the tenancy has been determined, can only be treated as a tenant in sufferance. Procedure under the sarfaesi act, 2002 aishmghrana. Kotak mahindra bank ltd vs the state of maharashtra through. In other words, the borrower is informed in advance that if the liabilities are not discharged within the stipulated period, the secured creditor will be resorting to any of the remedies available under sub section 4 of section of the act and may file an application under section 14 and the magistrate may pass an order under section 14. Sep 03, 2017 the court was, therefore, considering the question whether a secured creditor is entitled to invoke the provisions of section 14 of the act subsequent to the sale of an immovable property over. Sarfaesi act is without intervention of the court or tribunal.
Sc to examine cjms power to entertain applications under. Important case law on securitisation act high court and. Section 14 in the securitisation and reconstruction of. Securitisation and reconstruction of financial assets and enforcement of security interes t sarfaesi act, 2002. A tenant who was inducted into the property after the bank has issued a notice of default and made a demand for payment under section 2 of the sarfaesi.
Clause 20 section 30a power of adjudicating authority to impose penalty. Amendment to sarfaesi act introduced in 20 brought out certain changes in the act wherein under section 14 compulsory filing of an affidavit by the secured creditor through their authorised officer with the district magistrate chief metropolitan magistrate, as the case may be, to take possession of the secured assets is introduced. Full text of supreme court judgement on sarfaesi act greater kashmir 1. Section of the act gives power to the secured creditor even to evict the tenant. Supreme court explains sarfaesi act in latest judgement. The honble kerala high court at ernakulam, in its recent judgment dated. Jun 27, 2018 the appellant, a secured creditor, invoked the jurisdiction of the district magistrate under section 14 of the sarfaesi act. Drts023 drt1 chennai judgment on dismissal of oa subsequent to invoking securitization act in the matter of tetrahedron ltd vs indian bank decided on 08. It is our observation that the banks have been overenthusiastic in taking recourse to safraesi act provisions as a first resort of recovering the micro, small and medium enterprises msme loans, mostly violating guidelines of reserve bank of india rbi. Shreesh chadha 4th year ballb student, jindal global law school sonipat in the statement of object and reasons of the securitization and reconstruction of financial assets and enforcement of security interest act,2002hereinafter sarfaesi,2002 or act,2002, it is stated that the recovery of loans was a slow process which consequently resulted in the mounting levels of.
Pertinently, sub section 1a of section 14 does not bar the appointment of advocates as receivers. As matters stood thus, an application was filed by. Important case law on securitisation act high court. The authorized officer prefers an application request to the jurisdictional cmm. Can the bank initiate sarfaesi proceedings against guarantors.
Central bank of india and others date of judgment 150218 bench. Nov 29, 2018 the bombay high court has held in axis bank v madhav prasad aggarwal and ors appeal no 360 of 2017 vide order dated 26 october 2018 that under the restriction set out in section 34 of the securitisation and reconstruction of financial assets and enforcement of securities interest act, 2002 act sarfaesi act, a civil court is barred. Pursuant to which the amendment bill 2016 propose for omission of the section 28 of the sarfaesi act. Chief metropolitan magistrate or district magistrate to assist secured creditor in taking possession of secured asset. Calcutta hc read judgment to read the entire article, get a premium account. Sarfaesi act, 2002 order of district magistrate under. The present appeal is filed against the final judgment passed by the delhi high court whereby the division. Point no ix of section 14 of sarfaesi act to be affirmed in the affidavit being filed by the authorised officer of the secured creditor states, that the provisions of this act and the rules made thereunder had been.
Section 3a of the sarfaesi act is mandatory and omission to consider representation is fatal. In the principal act, in section 2, in sub section 1, i after clause b, the following clause shall be inserted, namely. In the latest judgement, the supreme court has analyzed the provisions of the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 hereinafter referred to as the sarfaesi act for recovery of the loan amounts, along with interest, which are payable by deccan chronicle holdings limited to indiabulls housing finance limited read more. Sarfaesi securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 is an act which came in 2002 to allow banks and other financial institutions to recover their nonperforming assets npas or bad loans without the intervention of the court. No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a debts recovery tribunal or the appellate tribunal is empowered by or under this act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power. Secured creditor cannot invoke section 14 of sarfaesi act after sale of secured asset. The supreme court has held that in recovering secured property from nonperforming assets npas, a secured creditor is bound to consider representations, if any, made by the debtor under section 3a, after the initiation of proceedings under section of the sarfaesi act.
The petitioners, as a secured creditor, then filed an application to the district magistrate under section 14 of the sarfaesi act and pending the disposal of the case, the petitioners filed a writ petition in the honble high court, where it had sought a direction upon the district magistrate to consider and dispose of the application filed by it. Vide the impugned judgment, the honble high court has directed the. Against the order passed by the district magistrate, the respondents preferred a challenge before the debts recovery tribunal who declined to exercise jurisdiction, holding that an application under section 17 of the act. Sc to examine cjms power to entertain applications under sec. Even without ordering notice and upon looking at the simple averments in the application by the bank under section 14 of the sarfaesi act, 2002, the metropolitan magistrate court or the district court will provide the needed assistance to the bank for taking physical possession of the property. Supreme court rules on mandatory procedure under the sarfaesi act. As no payment was forthcoming, a possession notice under section 4 of the sarfaesi act was issued on 18. Section 4a of the companies act, 1956 1 of 1956 states that each of the.
Sarfaesi section 2 delay of 14 days in filing application drt declined to condone the delay appellant approached the high court who relegated the appellant to debt recovery appellate tribunal high court also directed the appellant to deposit 25% of the amount covered by the 2 notice matter has been pending before this court for the last two years interest of justice. The present appeals revolve around whether section 14 of the insolvency and bankruptcy code, 2016, which provides for a moratorium. The opening words of sub section 1 of section 14 of the sarfaesi act also provides that if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of the act, the secured creditor may take the assistance of the chief metropolitan magistrate or. Section 14 of sarfaesi act role and powers of district magistrate. Remedy available to a borrower or guarantor against whom the district magistrate has passed an order under section 14 5. This article shall deal with material faqs on section 14 of the. The secured asset was thereafter evaluated and was brought to.
The important case law on securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 act no. The creditor must consider and, if not found acceptable, may reject the same after giving sufficient reasons for doing so before proceeding with action mandated under section 4 of the act. Jul 11, 2016 the amendment bill, 2016 provides for insertion of new clause i. The compliance, if not proved without any reasonable doubt, then the proceedings are unsustainable in the eye of law, as it would amount to arbitrary exercise of the powers conferred under section 14.
The submission made by the learned counsel for the respondents that section 14 cannot be read in isolation and has to be viewed in the context of all other provisions of the act, such as sections 468, 15, 17, 18 rule 89 of sarfaesi rules and section 55 of the transfer of property act is acceptable. An act to regulate securitisation and reconstruction of financial assets and. A conjoint reading of section 21cv of the sarfaesi act, section 56ci read with section 5 of the act of 1949 and the notification dated 2812003, it is quite vivid that the sarfaesi act would be applicable to the cooperative banks which includes central cooperative bank and primary co. Tenancy rights and action under sarfaesi act, 2002.
The very impugned judgment in the present proceedings was referred to. Section 17 of sarfaesi act provides remedy before drt against. Such leasestenancies would be invalid as the sarfaesi act itself under section. Restrictive remedy under section 14 of the sarfaesi act. The high court observed that the intent of legislature, while introducing subsection 3a was to ensure that objectionsrepresentations of a borrower against any action for enforcement of security interest are considered before a secured creditor proceeds to take possession of the secured assets in terms of section 4 of the sarfaesi act. Manish makhija vs central bank of india on 15 february, 2018. Section 3a was inserted after the judgment of the supreme court in mardia chemicals vs. Therefore, in any case, section sarfaesi act bars entering into such tenancy beyond january, 2012. Sep 08, 2017 the submission made by the learned counsel for the respondents that section 14 cannot be read in isolation and has to be viewed in the context of all other provisions of the act, such as sections 468, 15, 17, 18 rule 89 of sarfaesi rules and section 55 of the transfer of property act is acceptable. The judgment was passed by a single judge bench of justice rajiv shakdher in a challenge to an order passed by a chief metropolitan magistrate cmm appointing an advocate as a receiver to take possession of a secured asset under section 14 1a of sarfaesi. Sir if reply by debtor is filed in 68 days instead of 15 days what happens as in the case of blue coast hotels judgement by hon. Important points of sarfaesi act, 2002 debt recovery. When property purchased under the sarfaesi act, the purchaser.
Section 26e of sarfaesi act, 2002 and 31b debt recovery. Powers of the district magistrate is essentially administrative and he has no adjudicatory powers. The said po drt ruled that oa filed by the bank is not maintainable as the. I was concentrating and writing on few complicated issues under sarfaesi act, 2002. State of kerala, ilr 2008 4 ker 863 it was held that a chief judicial magistrate is also authorized by law to act under the provisions of section 14 of the sarfaesi act.
The legality of the proceeding was challenged by the respondent therein. The section 14 of the sarfaesi act mentions only two officers who can exercise the powers, namely, the chief metropolitan magistrate or the district magistrate. Supreme court rules on mandatory procedure under the. Is the period of 15 days stipulated under section 3a. No extraordinary right is created in favour of the secured creditor by virtue of section 14. Restrictive remedy under section 14 of sarfaesi act vinod. As the notice under section 2 sarfaesi act was issued on 30. There are about 11 chief metropolitan magistrates at bangalore.
Provided that the decision of the reserve bank, whether the change in. Oct 25, 2017 that the order of moratorium us 14 shall have effect from 30. The latest supreme court judgments for march 2020 with complete details of case numbers, parties name, judge names and headnotes. Whether any special right is created in favour of the creditor by virtue of an order under sec. Chief judicial magistrate is authorized to entertain. No bar on advocates being appointed as receivers under. This judgement comes as a welcome decision to the creditors as now they can enforce securities of the personal guarantors even in cases where. Dec 15, 20 sangameswara rao dhupam may 9, 2011 reply.
The writ petition was allowed by the division bench by setting aside the order by which the commissionerreceiver was appointed holding that the bank cannot bypass the provision of section 4 of the sarfaesi act before invoking section 14 thereof. Nov 27, 2018 the petitioner filed a writ petition to set aside the reply dated october 14, 2018 from the sbi issued under section 3a of the sarfaresi act the said reply was in response to the representation made by the company against the notice issued by the sbi under section 2 of the sarfaesi act, which was received by the company after expiry. A tenant who was inducted into the property after the bank has issued a notice of default and made a demand for payment under section 2 of the sarfaesi act. The insertion of sub section 1a in section 14 of sarfaesi act, the only change that has been brought about is that the district magistratecmm has now the discretion to appoint even their subordinate officers as receivers. Apr 03, 2014 the secured creditors have, therefore, made a request under section 14 1 of the sarfaesi act to the chief metropolitan magistrate, mumbai, to take possession of the premises and hand over the possession of the premises to the secured creditors in accordance with the provisions of section 14 of the sarfaesi act. Secured creditor cannot invoke section 14 of sarfaesi act. Is the period of 15 days stipulated under section 3a of. Sarfaesi act judgmentscases drt, advocates, lawyers.
Section 34 in the securitisation and reconstruction of. Dec 14, 2017 sc to examine cjms power to entertain applications under sec. Security interest act, 2002 for short, the sarfaesi act a distress sale was made by. Union of india, 2008 scc online ker 201 and radhakrishnan v. Drts00 stands for drt legal solutions00 and is the citation for judgments on this web site. All about securitisation and reconstruction of financial. Thereafter an application was filed by the bank under section 14 of the securitisation act, before the learned metropolitan magistrate at mumbai, who passed an order. Auction purchaser can challenge the action of forfeiting its deposit by secured creditor before drt27. Full text of supreme court judgement on sarfaesi act. As per the judgement passed by calcutta high court and upheld by the apex court, the bank can not issue sale notice under sarfaesi act unless physical possession of the said property has been taken by the bank through dm against its application filed us 14 of sarfaesi act,2002. Further, the honble supreme court held that issuing notices to guarantor under section 2 and 4 and filed an application under section 14 of the sarfaesi act without first initiating action against the borrower for recovery of the outstanding dues is permissible. In this connection the judgment of high court of judicature at madras in. Aug 15, 2012 where an immoveable property secured to the bank is occupied by the borrower or is let out by him, the bank approaches the jurisdictional cmm under section 14 of sarfaesi act. Section 14 in the securitisation and reconstruction of financial assets andenforcement of security interest act, 2002 14.
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