P&H HC reiterates that when appropriate forum is provided under SARFAESI Act, this Court stands injuncted from interfering with any matter arising out of proceedings under said Act

Read Order: M/s Gramin Utthan Siksha Samiti through its Chairman v. District Magistrate, Gurugram and another

Tulip Kanth

Chandigarh, September 24, 2021: The Punjab and Haryana HC has dismissed a petition filed under Article 226 of the Constitution, for quashing of the impugned order dated August 4,2021, passed by the District Magistrate, Gurugram, directing the concerned Tehsildar to provide official assistance for taking and delivering physical possession of the property as described in the said order to the respondent-Bank.

Herein, the petitioner, a registered Samiti, has been running an educational institution in the name of M.D. Senior Secondary School for imparting education and other related services. The petitioner had availed total financial assistance amounting to Rs.1.89 crores from the Bank.

Against the said loan, the petitioner had mortgaged the property as described in the order dated August 4,2021.The petitioner had been regularly paying the instalments but due to scarcity of funds, it could not pay some of the instalments of loan amount timely and therefore, its account became irregular.

On an application filed under Section 14 of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act) by the respondent-Bank, the District Magistrate, Gurugram, directed initiation of the proceedings for taking possession of the property in question.

The petitioner’s counsel submitted that the District Magistrate, Gurugram, had wrongly allowed the application filed by Bank without considering the facts and circumstances of the case. It was further submitted that the petitioner never received any notice under Section 13(2) of the SARFAESI Act.

The Court enumerated the principles, regarding the scope of functions of the District Magistrate while exercising powers under Section 14 of the SARFAESI Act, which have been laid down in the judgment of this Court in Allahabad Bank, Branch at Industrial Area A, Link Road, Ludhiana Vs. District Magistrate, Ludhiana and others (CM No. 3178-CWP of 2021 IN CWP No. 4916 of 2020). The principles mentioned in Allahabad Bank’s case (supra) are-

(i) District Magistrate would not involve in any process of adjudication of any inter se rights of the parties, while examining any application under Section 14 of the Act, 2002.

(ii) Proviso to Section 14 makes it mandatory to record satisfaction by the District Magistrate which is to be restricted with regard to the factual correctness of the 9-point affidavit to be filed by the secured creditor. It cannot examine the legal validity of the steps so taken by the secured creditor as depicted in the affidavit. If the borrower is aggrieved of such steps the remedy would be to approach the DRT.

(iii) If any person is aggrieved of the order of the District Magistrate, the aggrieved person can approach the Debts Recovery Tribunal, under Section 17 of the Act, 2002 as an order passed under Section 14 is in pursuance to the steps provided under Section 13(4).

(iv) In case, if the District Magistrate fails to pass the order in terms of what is provided under Section 14 of the Act, 2002 or if the same is not being implemented, the secured creditor would have the remedy of invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India.

(v) After the order is passed by the District Magistrate, the officer so deputed to execute the said order under Section 14 (1A) of the Act, 2002 would also complete the process of its execution within 60 days from the date of receipt of such order. Further in case if for any reason, the order is unable to be executed, the officer shall report the matter back to the District Magistrate, who would then pass such suitable orders as the situation may warrant.

(vi) Though, there is no provision for an advance notice to be given to the occupant / owner of the property before taking physical possession, but it would be desirable, that an advance notice of at least 15 days be served on the occupant before taking physical possession by the officer so deputed by the District Magistrate, so that persons to be dispossessed are not caught unawares.

Keeping in view the above-said principles as laid down in Allahabad Bank’s case (supra),  the Division Bench of Justice Jaswant Singh and Justice Sant Parkash was of the considered view that the petitioner has efficacious remedy available before the appropriate authority i.e. Debt Recovery Tribunal.

The law in this regard is settled that when appropriate forum is provided under the SARFAESI Act, this Court stands injuncted from interfering with any matter arising out of the proceedings under the SARFAESI Act, noted the Bench.

While observing that the petitioner will be relegated to avail its alternative remedy available before the appropriate forum, in accordance with law, the Court dismissed this writ petition.