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Dear All,
The Hon’ble High Court of Bombay (“High Court”) in Phoenix ARC Private Limited & Anr. v. The State of Maharashtra & Ors. (Bombay High Court: Writ Petition No. 9749 of 2021; dated 3rd August 2022) has held that the jurisdiction of the Chief Metropolitan Magistrate / District Magistrate (“CMM/DM”) under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) is purely ministerial and is limited to assisting secured creditors in taking possession of secured assets, and nothing more. It does not contemplate or empower the Designated Authorities (“DA”) to consider / adjudicate any objections raised by a borrower or any other party while deciding such an application.
The High Court further highlighted the following principles regarding adjudication of an application under Section 14 of the SARFAESI Act:
1) DA is only required to ascertain that the secured asset falls within its jurisdiction and the secured creditor has complied with the requirements of Section 13(2) and 14(I)-(IX) of the SARFAESI Act.
2) It does not empower the DA to consider / adjudicate upon any objections raised by a borrower or any other party.
3) It does not envisage any notice to be given to or any reply to be filed by the borrower / third party to the application or to even hear them.
4) No adjudication onthe legality / validity of the mortgage or quantum of debt or issues such as limitation is required.
5) Remedy under Section 17 of the SARFAESI Act is available to the borrower or a third party, if they are aggrieved.
The High Court relied upon its earlier decision of Asset Recovery Corporation India Ltd. v. State of Maharashtra & Ors. (Writ Petition No. 8561 of 2010; dated 30th August 2011) to reinforce that no adjudication is contemplated while deciding an application under Section 14 of the SARFAESI Act and if the requirements of Section 13(2) and 14(I) to (IX) of the SARFAESI Act have been met, the DA cannot refuse to pass an order under Section 14 of the SARFAESI Act.
https://www.livelaw.in/pdf_upload/phoenix-v-state-of-maharashtra-432090.pdf