Dcb Bank Ltd. Lko. Thru. Authroized Representative Mr. Lokesh Mittal v. Mohd. Aqil And Another

Capital First Ltd. & Ors. (Civil Appeal No. 175/2022) decided on 27.07.2022, this Court had an occasion to consider the powers exercisable by District Magistrate/Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act. After considering the object and purpose of Section 14 of the SARFAESI Act and the Scheme of the Act under Section 14, it is observed and held in paragraphs 7 to 9 as under:- 3 A227 No. 6116 of 2025 "7. Now so far as the powers exercisable by DM and CMM under Section 14 of the SARFAESI Act are concerned, statement of objects and reasons for which SARFAESI Act has been enacted reads as under:- "STATEMENT OF OBJECTS AND REASONS The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of nonperforming assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court. Acting Reconstruction of Financial Assets and Enforcement of Security Securitisation suggestions, Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers 4 A227 No. 6116 of 2025 take possession of securities, sell them and reduce nonperforming assets by adopting measures for recovery or reconstruction." Thus, the underlying purpose of the SARFAESI Act is to empower the financial institutions in India to have similar powers as enjoyed by their counterparts, namely, international banks in other countries. One such feature is to empower the financial institutions to take possession of securities and sell them. The same has been translated into provisions falling under Chapter III of the SARFAESI Act. Section 13 deals with enforcement of security interest. Sub-Section (4) thereof envisages that in the event a default is committed by the borrower in discharging his liability in full within the period specified in subsection (2), the secured creditor may take recourse to one or more of the measures provided in subsection (4). One of the measures is to take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset. That, they could do through their "authorised officer" as defined in Rule 2(a) of the Security Interest (Enforcement) Rules, 2002.

7.1 After taking over possession of the secured assets, further steps to lease, assign or sale the same could also be taken by the secured creditor. However, Section 14 of the SARFAESI Act predicates that if the secured creditor intends to take possession of the secured assets, must approach the CMM/DM by way of an application in writing, and on receipt of such request, the CMM/DM must move into action in right earnest. After passing an order thereon, he/she (CMM/DM) must proceed to take possession of the secured assets and documents relating thereto for being forwarded to the secured creditor in terms of Section 14(1) read with Section 14(2) of the SARFAESI Act. As noted earlier, Section 14(2) is an enabling provision and permits the CMM/DM to take such steps and use force, as may, in his opinion, be necessary.

7.2 At this stage, it is required to be noted that along with insertion of sub-section (1A), a proviso has also been inserted in 5 A227 No. 6116 of 2025 sub-section (1) of Section 14 of the SARFAESI Act whereby the secured creditor is now required to comply certain conditions and to disclose that by way of an application accompanied by affidavit duly affirmed by its authorised officer in that regard. Sub-Section (1A) is in the nature of an explanatory provision and it merely restates the implicit power of the CMM/DM in taking services of any officer subordinate to him. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the insertion of sub-section (1A) is not to invest a new power for the first time in the CMM/DM as such.

8. Thus, considering the scheme of the SARFAESI Act, it is explicit and crystal clear that possession of the secured assets can be taken by the secured creditor before confirmation of sale of the secured assets as well as post-confirmation of sale. For taking possession of the secured assets, it could be done by the "authorised officer" of the Bank as noted in Rule 8 of the Security Interest (Enforcement) Rules, 2002.

8.1 However, for taking physical possession of the secured assets in terms of Section 14(1) of the SARFAESI Act, the secured creditor is obliged to approach the CMM/DM by way of a written application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action. The statutory obligation enjoined upon the CMM/DM immediately move into action after receipt of a written application under Section 14(1) of the SARFAESI Act from the secured creditor for that purpose. As soon as such an application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the SARFAESI Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. As mandated by Section 14 of the SARFAESI Act, the CMM/DM has to act within the stipulated time limit and pass a suitable order for the purpose of taking possession of the secured assets within a period of 30 days from 6 A227 No. 6116 of 2025 the date of application which can be extended for such further period but not exceeding in the aggregate, sixty days. Thus, the powers exercised by the CMM/DM is a ministerial act. He cannot brook delay. Time is of the essence. This is the spirit of the special enactment. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken the CMM/DM himself/herself or through any officer subordinate to him/her, including the advocate commissioner who is considered as an officer of his/her court. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. Thus, we reiterate that the step to be taken by the CMM/DM under Section 14 of the SARFAESI Act, is a ministerial step. While disposing of the application under Section 14 of the SARFAESI Act, no element of quasi-judicial function or application of mind would require. The Magistrate has to adjudicate and decide the correctness of information given application and nothing more. Therefore, Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets.

9. Thus, in view of the scheme of the SARFAESI Act, more particularly, Section 14 of the SARFAESI Act and the nature of the powers to be exercised by learned Chief Metropolitan Magistrate/learned District Magistrate, the High Court in the impugned judgment and order has rightly observed and held that the power vested learned Chief Metropolitan Magistrate/learned District Magistrate is not by way of persona designata." It thereafter went on to observe as under:- "Thus, the powers exercisable by CMM/DM under Section 14 of the SARFAESI Act are ministerial step and Section 14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets. In that view of the matter once all the 7 A227 No. 6116 of 2025 requirements under Section 14 of the SARFAESI Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner. At that stage, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings under Section 17 of the SARFAESI Act, before Debts Recovery Tribunal."

6. In view of the aforesaid dictum of the Supreme Court holding that the power exercised by the CMM/DM under section 14 of the SARFAESI Act is a ministerial act, he cannot brook delay and time is an essence and also that no element of quasi judicial function or application of mind is required and the Magistrate has merely to ascertain that the application in the affidavit fulfills the requirement of Section 14 of SARFAESI Act and nothing more, the process adopted by the courts in the present case by registering the application as a complaint, fixing dates for hearing and adjourning the same without assigning any reason, appears to be in clear violation of the law laid down by the Hon'ble Supreme Court, in the case of Balakrishna Rama Tarle followed by a Division Bench of this Court in the case of Bank of Baroda (Supra).

7. Learned counsel for the petitioner has placed reliance on a judgement rendered by a Division of Bench of this Court in the case of PNB Housing Finance Ltd. Vs. State of UP and others: Neutral Citation No. - 2024:AHC-LKO:75623-DB, wherein the Division Bench of this Court has held that," the District Magistrate or the Chief Metorpolitan Magistrate may authorize any officer subordinate to him (i) to take possession of such assets and documents relating thereto; and (ii) to forward such assets and documents to the secured creditor. This makes intention of the legislature clear, that, it is the District Magistrate or the Chief Metropolitan Magistrate (who in the State of U.P. would be the Chief Judicial Magistrate) are obliged to take possession of such assets and documents relating thereto, 8 A227 No. 6116 of 2025 and to forward such assets & documents to the secured creditor. Therefore, it is not the secured creditor who after obtaining an order under Section 14 of the Act, 2002 who is supposed to run from pillar to post or to the police personnel to get the order executed, it is the obligation of the aforesaid officer. Further, for the purpose of securing compliance with the provisions of Sub-section (1) of the Act, 2002, the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. This also makes it clear that it is the statutory obligation of the District Magistrate or the Chief Metropolitan Magistrate / Chief Judicial Magistrate, to take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. In fact, a separate execution case or enforcement case need not be registered either by the District Magistrate or the Chief Judicial Magistrate, but after passing of requisite orders under Section 14 of the Act, 2002, its execution should also be ensured and after possession has actually been handed over to the secured creditor, only then the proceedings under Section 14 should be consigned and treated as concluded, not prior to it."

8. Accordingly, the instant petition is allowed. The court of Additional Chief Judicial Magistrate, C.B.I. (Ayodhya Prakaran) Lucknow is directed to dispose of the application under Section 14 of the SARFAESI Act filed by the petitioner, which is registered as case No.77218 of 2025 without any delay, keeping in view the provisions contained in Section 14 of the SARFAESI Act and the law laid down by the Hon'ble Supreme Court in the case of Balakrishna Rama Tarle (supra) and by the Division Bench of this Court in the case of Bank of Baroda (supra) and also to take necessary action for enforcement of its order, keeping in view the direction issued by this Court in the case of PNB Housing Finance Ltd. (supra). . October 14, 2025 Preeti (Subhash Vidyarthi,J.) PREETI GAUTAM High Court of Judicature at Allahabad, Lucknow Bench

Capital First Ltd. & Ors. (Civil Appeal No. 175/2022) decided on 27.07.2022, this Court had an occasion to consider the powers exercisable by District Magistrate/Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act. After considering the object and purpose of Section 14 of the SARFAESI Act and the Scheme of the Act under Section 14, it is observed and held in paragraphs 7 to 9 as under:- 3 A227 No. 6116 of 2025 "7. Now so far as the powers exercisable by DM and CMM under Section 14 of the SARFAESI Act are concerned, statement of objects and reasons for which SARFAESI Act has been enacted reads as under:- "STATEMENT OF OBJECTS AND REASONS The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of nonperforming assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court. Acting Reconstruction of Financial Assets and Enforcement of Security Securitisation suggestions, Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers 4 A227 No. 6116 of 2025 take possession of securities, sell them and reduce nonperforming assets by adopting measures for recovery or reconstruction." Thus, the underlying purpose of the SARFAESI Act is to empower the financial institutions in India to have similar powers as enjoyed by their counterparts, namely, international banks in other countries. One such feature is to empower the financial institutions to take possession of securities and sell them. The same has been translated into provisions falling under Chapter III of the SARFAESI Act. Section 13 deals with enforcement of security interest. Sub-Section (4) thereof envisages that in the event a default is committed by the borrower in discharging his liability in full within the period specified in subsection (2), the secured creditor may take recourse to one or more of the measures provided in subsection (4). One of the measures is to take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset. That, they could do through their "authorised officer" as defined in Rule 2(a) of the Security Interest (Enforcement) Rules, 2002.

7.1 After taking over possession of the secured assets, further steps to lease, assign or sale the same could also be taken by the secured creditor. However, Section 14 of the SARFAESI Act predicates that if the secured creditor intends to take possession of the secured assets, must approach the CMM/DM by way of an application in writing, and on receipt of such request, the CMM/DM must move into action in right earnest. After passing an order thereon, he/she (CMM/DM) must proceed to take possession of the secured assets and documents relating thereto for being forwarded to the secured creditor in terms of Section 14(1) read with Section 14(2) of the SARFAESI Act. As noted earlier, Section 14(2) is an enabling provision and permits the CMM/DM to take such steps and use force, as may, in his opinion, be necessary.

7.2 At this stage, it is required to be noted that along with insertion of sub-section (1A), a proviso has also been inserted in 5 A227 No. 6116 of 2025 sub-section (1) of Section 14 of the SARFAESI Act whereby the secured creditor is now required to comply certain conditions and to disclose that by way of an application accompanied by affidavit duly affirmed by its authorised officer in that regard. Sub-Section (1A) is in the nature of an explanatory provision and it merely restates the implicit power of the CMM/DM in taking services of any officer subordinate to him. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the insertion of sub-section (1A) is not to invest a new power for the first time in the CMM/DM as such.

8. Thus, considering the scheme of the SARFAESI Act, it is explicit and crystal clear that possession of the secured assets can be taken by the secured creditor before confirmation of sale of the secured assets as well as post-confirmation of sale. For taking possession of the secured assets, it could be done by the "authorised officer" of the Bank as noted in Rule 8 of the Security Interest (Enforcement) Rules, 2002.

8.1 However, for taking physical possession of the secured assets in terms of Section 14(1) of the SARFAESI Act, the secured creditor is obliged to approach the CMM/DM by way of a written application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action. The statutory obligation enjoined upon the CMM/DM immediately move into action after receipt of a written application under Section 14(1) of the SARFAESI Act from the secured creditor for that purpose. As soon as such an application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the SARFAESI Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. As mandated by Section 14 of the SARFAESI Act, the CMM/DM has to act within the stipulated time limit and pass a suitable order for the purpose of taking possession of the secured assets within a period of 30 days from 6 A227 No. 6116 of 2025 the date of application which can be extended for such further period but not exceeding in the aggregate, sixty days. Thus, the powers exercised by the CMM/DM is a ministerial act. He cannot brook delay. Time is of the essence. This is the spirit of the special enactment. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken the CMM/DM himself/herself or through any officer subordinate to him/her, including the advocate commissioner who is considered as an officer of his/her court. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. Thus, we reiterate that the step to be taken by the CMM/DM under Section 14 of the SARFAESI Act, is a ministerial step. While disposing of the application under Section 14 of the SARFAESI Act, no element of quasi-judicial function or application of mind would require. The Magistrate has to adjudicate and decide the correctness of information given application and nothing more. Therefore, Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets.

9. Thus, in view of the scheme of the SARFAESI Act, more particularly, Section 14 of the SARFAESI Act and the nature of the powers to be exercised by learned Chief Metropolitan Magistrate/learned District Magistrate, the High Court in the impugned judgment and order has rightly observed and held that the power vested learned Chief Metropolitan Magistrate/learned District Magistrate is not by way of persona designata." It thereafter went on to observe as under:- "Thus, the powers exercisable by CMM/DM under Section 14 of the SARFAESI Act are ministerial step and Section 14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets. In that view of the matter once all the 7 A227 No. 6116 of 2025 requirements under Section 14 of the SARFAESI Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner. At that stage, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings under Section 17 of the SARFAESI Act, before Debts Recovery Tribunal."

6. In view of the aforesaid dictum of the Supreme Court holding that the power exercised by the CMM/DM under section 14 of the SARFAESI Act is a ministerial act, he cannot brook delay and time is an essence and also that no element of quasi judicial function or application of mind is required and the Magistrate has merely to ascertain that the application in the affidavit fulfills the requirement of Section 14 of SARFAESI Act and nothing more, the process adopted by the courts in the present case by registering the application as a complaint, fixing dates for hearing and adjourning the same without assigning any reason, appears to be in clear violation of the law laid down by the Hon'ble Supreme Court, in the case of Balakrishna Rama Tarle followed by a Division Bench of this Court in the case of Bank of Baroda (Supra).

7. Learned counsel for the petitioner has placed reliance on a judgement rendered by a Division of Bench of this Court in the case of PNB Housing Finance Ltd. Vs. State of UP and others: Neutral Citation No. - 2024:AHC-LKO:75623-DB, wherein the Division Bench of this Court has held that," the District Magistrate or the Chief Metorpolitan Magistrate may authorize any officer subordinate to him (i) to take possession of such assets and documents relating thereto; and (ii) to forward such assets and documents to the secured creditor. This makes intention of the legislature clear, that, it is the District Magistrate or the Chief Metropolitan Magistrate (who in the State of U.P. would be the Chief Judicial Magistrate) are obliged to take possession of such assets and documents relating thereto, 8 A227 No. 6116 of 2025 and to forward such assets & documents to the secured creditor. Therefore, it is not the secured creditor who after obtaining an order under Section 14 of the Act, 2002 who is supposed to run from pillar to post or to the police personnel to get the order executed, it is the obligation of the aforesaid officer. Further, for the purpose of securing compliance with the provisions of Sub-section (1) of the Act, 2002, the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. This also makes it clear that it is the statutory obligation of the District Magistrate or the Chief Metropolitan Magistrate / Chief Judicial Magistrate, to take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. In fact, a separate execution case or enforcement case need not be registered either by the District Magistrate or the Chief Judicial Magistrate, but after passing of requisite orders under Section 14 of the Act, 2002, its execution should also be ensured and after possession has actually been handed over to the secured creditor, only then the proceedings under Section 14 should be consigned and treated as concluded, not prior to it."

8. Accordingly, the instant petition is allowed. The court of Additional Chief Judicial Magistrate, C.B.I. (Ayodhya Prakaran) Lucknow is directed to dispose of the application under Section 14 of the SARFAESI Act filed by the petitioner, which is registered as case No.77218 of 2025 without any delay, keeping in view the provisions contained in Section 14 of the SARFAESI Act and the law laid down by the Hon'ble Supreme Court in the case of Balakrishna Rama Tarle (supra) and by the Division Bench of this Court in the case of Bank of Baroda (supra) and also to take necessary action for enforcement of its order, keeping in view the direction issued by this Court in the case of PNB Housing Finance Ltd. (supra). . October 14, 2025 Preeti (Subhash Vidyarthi,J.) PREETI GAUTAM High Court of Judicature at Allahabad, Lucknow Bench