Supreme Court rules on adjudicating disputes under the SARFAESI Act
It maintained the Bombay High Court had rightly directed the authority to proceed with the secured creditor’s application
The Supreme Court has given its ruling on an application under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act.
The court stated that the chief metropolitan magistrate (CMM) or the district magistrate (DM) are not required to adjudicate the dispute on secured assets between the borrower and the secured creditor and between a third party and the secured creditor.
The bench comprising Justice MR Shah observed that all requirements under the SARFAESI Act were complied with by the secured creditor. Thus, it was the duty of the concerned authority to assist the appellant in obtaining the possession and the documents related to the secured assets.
An application was filed by a secured creditor, whereby the district magistrate observed that unless the creditor terminated the tenancy rights of the third person and ordered the possession of the mortgaged property, only then the application would be decided.
The Bombay High Court had allowed the writ petition and set aside the order, after which the matter reached the apex court.
Justice Shah observed, “The powers exercisable by the CMM/DM under the SARFAESI Act are a ministerial step. It does not involve any adjudicatory process raised by the borrowers against the secured creditor taking possession of the secured assets”.
He added, “Once the requirements are complied with by the secured creditor, it is the duty of the authorities to assist him even if it is with the help of a subordinate officer or an advocate appointed as commissioner. The CMM/DM is not required to adjudicate the dispute before the Debts Recovery Tribunal.”
The bench stated that the high court had rightly directed the designated authority to proceed with the application under the SARFAESI Act.