The Allahabad High Court’s Lucknow Bench, comprising Justice Rajan Roy and Justice Brij Raj Singh, delivered a significant judgment on October 25, 2024, emphasizing the urgent need for timely disposal of applications under Section 14 of the SARFAESI Act, 2002. In the case Bank of Baroda vs. State of Uttar Pradesh and Others (WRIT-C No. 8867 of 2024), the court strongly criticized administrative delays, declaring that the ministerial duties under the Act must not “brook delay,” as time is the essence of such proceedings.
Case Background
The petitioner, Bank of Baroda (earlier Vijaya Bank), represented by Advocate Shailendra Singh Rajawat, approached the High Court seeking direction for the disposal of its Section 14 application pending before the District Magistrate (DM), Amethi, since 2022. The application sought assistance in taking possession of secured assets for recovery of non-performing assets (NPAs).
The respondent, represented by Additional Chief Standing Counsel Manish Mishra, acknowledged the delay but attributed it to procedural bottlenecks, including repeated adjournments and lack of presence of advocates on scheduled hearing dates.
Despite over two years of pendency and 28 fixed hearing dates, the District Magistrate failed to take decisive action. The bank argued that such delays defeated the purpose of the SARFAESI Act, which aims to facilitate speedy recovery of debts by secured creditors.
Key Legal Issues
1. Nature of Proceedings Under Section 14 of the SARFAESI Act:
The court clarified that the proceedings under Section 14 are ministerial in nature. The DM or Chief Metropolitan Magistrate (CMM) is tasked with verifying the secured creditor’s compliance with the procedural requirements and assisting in the possession of secured assets. It is not a forum for adjudication or resolution of disputes.
2. Requirement of Notices to Borrowers:
The court firmly stated that issuing notices to borrowers or third parties in Section 14 applications is unnecessary. Such notices delay the recovery process and are contrary to the judgments of the Supreme Court, including Balakrishna Rama Tarle vs. Phoenix ARC Pvt. Ltd. and C. Bright vs. District Collector.
3. Time-Bound Disposal:
Section 14 prescribes a timeline of 30 days for the disposal of applications, extendable to 60 days for justifiable reasons. The court condemned the repeated adjournments and lack of administrative urgency, terming them a violation of the statutory intent.
Court’s Observations
In a strongly worded judgment, the bench underscored the foundational principles of the SARFAESI Act. Justice Rajan Roy remarked:
“The powers exercised under Section 14 are ministerial. Time is of the essence, and this is the spirit of the special enactment. Such duties cannot brook delay.”
The court was highly critical of the District Magistrate, Amethi, for treating the application as a judicial proceeding requiring extensive hearings. The bench further observed:
“The step to be taken by the CMM/DM under Section 14 is ministerial, not quasi-judicial. Adjudication is not required; satisfaction with procedural compliance is sufficient.”
Directions Issued
1. Disposal of Pending Application:
The court directed the DM, Amethi, to dispose of the application within one month, strictly adhering to the procedural framework and judicial precedents under the SARFAESI Act.
2. Communication and Compliance Monitoring:
– The Chief Secretary of Uttar Pradesh was instructed to circulate the judgment to all District Magistrates and Additional District Magistrates responsible for SARFAESI applications.
– A mechanism for monitoring the disposal of such applications was recommended to ensure accountability.
3. Implementation of Passed Orders:
Noting the high volume of writ petitions seeking implementation of previously passed orders under Section 14, the court emphasized the responsibility of officers to ensure prompt execution.
Legal Precedents Cited
The court relied on several authoritative rulings to underscore its findings:
– Balakrishna Rama Tarle vs. Phoenix ARC Pvt. Ltd.: The Supreme Court held that Section 14 proceedings are ministerial and do not involve adjudication of disputes.
– C. Bright vs. District Collector: Time is of the essence, and the statutory timeline must be adhered to without fail.
– Standard Chartered Bank vs. Noble Kumar: The satisfaction of the Magistrate is limited to verifying the affidavit and procedural compliance by the secured creditor.
The judgment also referenced Article 141 of the Constitution, affirming that the law declared by the Supreme Court is binding on all courts and authorities across the country.
