HC allows six petitions on instance of State Bank of India
Shimla, Dec 20
The Himachal Pradesh High court allowed the six writ petitions filed by State Bank of India against the state government and others, as the bank challenged the recovery proceedings after failure to repay the the loan amount as the accounts of the borrowers were declared NPA by the bank.
In the recent judgment, the Himachal Pradesh High Court provided clarity on the powers of District Magistrates under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The court emphasized the ministerial nature of the District Magistrate’s role, limiting it to assisting secured creditors in taking possession of secured assets.
The case, involving multiple writ petitions filed by the State Bank of India against the State of Himachal Pradesh & Others, highlighted instances where District Magistrates were found to be exceeding their jurisdiction. The borrowers had availed financial assistance from the petitioner-Bank, leading to the classification of their accounts as non-performing assets (NPAs) when they failed to repay the loans.
Allowing the petition filed by State bank of India, a division bench of Justice Tirlok Chauhan and Justice Bipin Chander Negi stated “ Thus, it is clearly evident from the aforesaid exposition of law that the nature of power under Section 14 of the Act is executory and ministerial in nature and not adjudicatory.
In a 13 page order they added,” However, the matter cannot be left to rest here, for our experience has been otherwise as we find that in several cases, that have come before the Court, the District Magistrates are disposing of applications under Section 14 of the Act without granting assistance to secure creditors in recovering possession of their secured assets and what is still worse is that the District Magistrates are granting relief (s) directly or indirectly to borrowers or third parties in flagrant and blatant violation of law, more particularly, when the borrowers or third parties have not even contested the steps taken by the secured creditors under Section 13 of the Act for enforcement of their securing interest by filing any application before the concerned Debt Recovery Tribunal (DRT) under Section 17 of the Act,” directed the court.
The court cited two recent Supreme Court decisions (R.D. Jain and Company vs. Capital First Limited and Kotak Mahindra Bank Limited vs. Girnar Corrugators Private Limited) to reinforce the interpretation of Section 14 of the SARFAESI Act. It underscored that the District Magistrates should act promptly and without delay to facilitate the recovery of possession of secured assets by secured creditors.
In the order, the bench directed District Magistrates to adhere strictly to the law and sent a copy of the order to the Chief Secretary of the Government of Himachal Pradesh for circulation among all District Magistrates and relevant authorities.
The respondents were directed to decide the applications filed by the petitioner-Bank under Section 14 within specified time limits, with an emphasis on recording reasons for any delays.
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