SARFAESI Act, 2002 - order of District Magistrate under section 14 – taking physical possession of Secured Asset - complications?

As everybody knows, separate procedure is laid-down under the provisions of SARFAESI Act, 2002 enabling the Bank to deal with the objections from the borrower with regard to the demand of outstanding due and also taking physical possession of the secured asset preceding the auctioning of the property. There are many complicated and interesting areas under the provisions of SARFAESI Act, 2002 and the Debt Recovery Tribunal may have to deal with the disputes in the light of the precedents laid down by the Constitutional Courts from time to time and also by laying specific emphasis on the allegations leveled by the borrower against the Bank. The legislative intention as can be perceived from various provisions and the procedure prescribed under SARFAESI Act, 2002 can clearly be understood. From the stage of making demand, determination of the amount after considering the objections from the borrower, even the execution of the order of the Bank (logically) is simplified. The demand from the Bank under section 13 (2) of the Act or the reply sent by the Bank to the borrower in reply to the objections can be seen as a decree of a Civil Court. If it is an order of a Civil Court or a decree, then, the Civil Procedure Code prescribes a specific procedure for execution of orders or the decree. In the ordinary course, even at the stage of execution of the order or decree, the Court lays so much emphasis on the order or the decree sought to be executed and even notice is ordered to opposite party and their objections also normally heard. But, when it comes to the execution of the order of the Bank under section 13 (2) of the Act, the procedure prescribed for taking physical possession of the Secured Asset is very simple and the Bank can very easily get the assistance from the police etc. through the Metropolitan Magistrate Court or the District Court. 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. The law is very clear that the order of the Metropolitan Magistrate Court or the District Court is not appeallable and final. The borrowers are at dilemma in many cases as to how to challenge the order of the Magistrate Court and which is the proper forum to get the order of Magistrate Court set-aside when there is a bonafide dispute or a genuine grievance?

What normally happens is that when the borrower fails to get an order of stay of proceedings by the Bank under the provisions of SARFAESI Act, 2002 under section 17 or where there is no restraint from the competent forum, the Bank will proceed with taking physical possession of the property and then proceed with auctioning the same in accordance with the provisions of the Act or the rules made there-under. As such, there can be an argument that the question of approaching the DRT again challenging the order of the Magistrate Court is illogical though the DRT is vested with the powers of restoring the possession back under the provisions of SARFAESI Act, 2002. Though the provisions, the precedents and theory are very clear, there exist practical difficulties even for the genuine borrowers and who has a genuine case against the Bank. As wide powers are conferred under Article 226 and Article 227 of the Constitution of India and though nothing prevents the High Court to entertain a Writ Petition or a Revision Petition against the order passed by the Magistrate Court when the order is erroneous, the High Court normally may dispose of the Petition saying that alternative remedy is available with the DRT under section 17 of the Act. But, logically, what the DRT can do when the order of the Magistrate Court is challenged again before it where already an appeal by the borrower is pending? Again, as there can not be any procedural defect normally with the order passed by the Magistrate Court under section 14, how can the DRT set-aside that order or can the DRT say that the physical possession can not be taken or possession be restored? These are very complicated issues under the provisions of SARFAESI Act, 2002 and the adjudication and redressel to the borrower will depend upon the facts of the case. I would like to explain some two incidents in this regard as follows:

1. In a proceeding under SARFAESI Act, 2002, the Bank has approached the Chief Metropolitan Magistrate and the Court has appointed a Commissioner to inspect the property and file the report. The commissioner appointed by the Court has filed a report saying that he has inspected the property and it was under lock and key. Pursuant to the report by the Commissioner appointed by the Court, the Court has allowed the Bank to take police assistance to break-open the lock and take the physical possession of the property in accordance with law. The Police have come and the Bank Officials have forcibly thrown the residents there out and taken the physical possession of the property and the property was sealed. In this case, the grievance of the borrower is that he is residing at the property continually and at no point of time, the property was locked and he has all clear evidence to substantiate his case. The borrower/resident has approached the High Court highlighting at the entire episode and as to how he was thrown out and the case was pending before the High Court for some time and finally the Writ Petition was disposed of saying that alternative remedy is available before the DRT under section 17. When the borrower approached the DRT again pursuant to the order, the DRT is silent and the appeal is pending. The borrower was forced to run from pillar to post without any redressel or speedy redressel mechanism and in the course, he may loose his case, but, he was kept under dark with the unknown procedures etc. I have seen this issue personally and it exposes the need to get clarity on section 14 of SARFAESI Act, 2002.

2. In another case, the stay granted by the DRT was vacated and the order is challenged before the DRAT. Due to administrative reasons and work pressure and due to the procedure, the DRAT could not look at the Appeal speedily. In the mean time, the Bank has proceeded to approach the Magistrate Court under section 14 to take physical possession of the Secured Asset or the residential property. In the case referred, the borrower’s contention is that he is not the defaulter at all and he is willing to pay to the Bank as agreed. Under these circumstances, what if the Bank takes the physical possession of the property with police assistance? Had there been a procedure to give notice to the borrower under section 14 of the Act, the borrower could have explained his case to the Magistrate Court and the Magistrate Court could have acted accordingly. This is what the normal procedure for execution before the Civil Court. Even if assuming that the detailed procedure under C.P.C is time consuming, a simple procedure could have laid-down under section 14, so that, the precious rights of the borrower could have been protected.

I have just explained few complications when it comes to allowing the Bank to take physical possession of the Bank under section 14 without any notice to the borrower. These are all practical difficulties for the borrower and there can be genuine grievances though a litigant borrower should not be allowed to plead technicalities with ulterior motive.

Note: the views expressed are my personal and a view point.