In a significant ruling that emphasizes the statutory duties of judicial officers, the Allahabad High Court (Lucknow Bench) has clarified the enforcement process under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The bench, comprising Justice Rajan Roy and Justice Brij Raj Singh, underscored the obligation of magistrates to ensure the execution of possession orders, shielding secured creditors from unnecessary procedural hurdles.
The ruling came during the hearing of Writ-C No. 9723 of 2024, filed by PNB Housing Finance Ltd. through its authorized representative, Mr. Surya Prakash Mishra, against the State of Uttar Pradesh and others. The petitioner was represented by Mr. Nitesh Kumar Tripathi and Ms. Saumya, while the respondents were represented by Additional Chief Standing Counsel Shri Raj Bux Singh.
Case Background
The petitioner sought enforcement of an order issued under Section 14 of the SARFAESI Act on September 13, 2024, by the Chief Judicial Magistrate, Lucknow. The order directed possession of a secured asset due to a borrower’s loan default. However, despite the order, the secured asset had not been handed over to the petitioner.
The borrower challenged the possession order by filing an appeal under Section 17 of the Act before the Debt Recovery Tribunal, but no interim stay was granted. Frustrated by the delay, the petitioner approached the High Court to compel execution of the possession order.
Key Legal Issues
The court delved into several critical legal issues:
1. Responsibility for Enforcement: The bench clarified that the responsibility for executing possession orders lies squarely with the magistrates under Section 14 of the SARFAESI Act.
2. Timeliness of Execution: The court highlighted the legislative intent of the SARFAESI Act to facilitate quick and efficient recovery for financial institutions.
3. Rights of Borrowers: While acknowledging the borrower’s right to challenge possession orders, the court stressed that such appeals should not impede the enforcement process unless there is a specific stay order.
4. Role of Police and Procedural Missteps: The judgment critiqued the common practice of leaving creditors to approach police authorities for execution, deeming it a misinterpretation of the magistrate’s obligations.
Court Observations
In its ruling, the court delivered a pointed critique of procedural delays:
“It is not the secured creditor who, after obtaining an order under Section 14, is supposed to run from pillar to post or to the police personnel to get the order executed. It is the obligation of the aforesaid officer [District Magistrate or Chief Judicial Magistrate].”
The court further stated that magistrates must act promptly and decisively:
– Possession orders should be executed immediately after issuance, without requiring separate applications for enforcement.
– If needed, magistrates can authorize subordinate officers to use reasonable force to ensure compliance, as permitted under Section 14(2) of the SARFAESI Act.
– To maintain procedural fairness, a reasonable notice period of 15 days should be given to occupants of the secured asset to vacate voluntarily.
Directions Issued by the Court
The court directed PNB Housing Finance Ltd. to file an application with the Chief Judicial Magistrate to ensure enforcement of the possession order. The magistrate was instructed to:
1. Verify Borrower’s Interim Relief Status: Confirm if the borrower has obtained any stay from the Debt Recovery Tribunal before proceeding.
2. Act Swiftly: Execute the order in line with the SARFAESI Act’s provisions and legislative intent.
Additionally, the court directed the Senior Registrar to circulate its judgment among magistrates across Uttar Pradesh to ensure uniform compliance with the SARFAESI Act. The order was also shared with the Chief Secretary of Uttar Pradesh for further dissemination and with the Director of Judicial Training and Research Institute, Lucknow, for instructional purposes.
Case Details
– Case Title: PNB Housing Finance Ltd. vs. State of Uttar Pradesh and Others
– Case Number: Writ-C No. 9723 of 2024
– Bench: Justice Rajan Roy and Justice Brij Raj Singh
– Petitioner’s Counsel: Mr. Nitesh Kumar Tripathi and Ms. Saumya
– Respondent’s Counsel: Shri Raj Bux Singh, Additional Chief Standing Counsel
