Supreme Court Judgement on Section 14 of SARFAESI Act
The Supreme Court has clarified the nature and scope of the powers exercised under Section 14 of the SARFAESI Act through several key judgments, particularly in recent years.
Supreme Court Findings on Section 14 SARFAESI Act
Nature of Magistrate’s Role: The Supreme Court has held that the function of the District Magistrate (DM) or Chief Metropolitan Magistrate (CMM) under Section 14 is ministerial and administrative, not adjudicatory. The Magistrate is not required to conduct a quasi-judicial inquiry or decide disputes between the borrower and the secured creditor. Their role is limited to verifying whether the procedural requirements and documentation are in order before assisting the secured creditor in taking possession of the secured asset.
No Detailed Adjudication Required: The Magistrate is not expected to scrutinize the correctness of the claims made by the bank or financial institution in detail. Instead, the Magistrate must ensure that the procedural requirements under Section 14 have been met. If satisfied, the Magistrate must assist the creditor in taking possession, potentially with the help of subordinate officers or an advocate commissioner.
Application of Mind Still Required: While the process is ministerial, the Supreme Court and High Courts have emphasized that orders should not be passed mechanically or in a mere "printed format" with blanks filled in. The Magistrate must apply his mind to ensure the application is in order and the legal procedure has been followed.
Jurisdiction of Additional Magistrates: In R.D. Jain & Co. v. Capital First Ltd. (2022), the Supreme Court settled conflicting High Court decisions and held that Additional District Magistrates (ADM) and Additional Chief Metropolitan Magistrates (ACMM) can also exercise powers under Section 14, placing them on the same footing as DM and CMM for this purpose.
Remedy for Aggrieved Parties: If a borrower or third party is aggrieved by the action taken under Section 14, their remedy is to approach the Debts Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act, not to seek adjudication before the Magistrate at the Section 14 stage.
Notable Judgments
Indian Bank v. D. Visalakshi (2019) 20 SCC 47: Confirmed that the Section 14 process is administrative and not adjudicatory.
R.D. Jain & Co. v. Capital First Ltd. (2023) 1 SCC 675: Clarified the jurisdiction of ADMs and ACMMs under Section 14.
Kotak Mahindra Bank vs. Girnar Corrugators Pvt. Ltd. (2023): Reiterated that Section 14 does not involve adjudication of disputes and the Magistrate’s role is ministerial.
| Issue | Supreme Court Position |
|---|---|
| Nature of Magistrate’s Role | Ministerial/administrative, not adjudicatory |
| Adjudication of Borrower’s Objections | Not required at Section 14 stage |
| Jurisdiction of ADM/ACMM | Permitted, same as DM/CMM |
| Remedy for Aggrieved Parties | Appeal to DRT under Section 17 |
| Need for Application of Mind | Required; no mechanical/printed orders |
These judgments ensure that secured creditors can obtain possession of secured assets efficiently, while also maintaining procedural safeguards for borrowers and third parties, whose substantive objections must be raised before the DRT, not the Magistrate.
The Supreme Court has clarified several key aspects regarding Section 14 of the SARFAESI Act through multiple judgments:
Nature of Magistrate’s Role: The Supreme Court has consistently held that the powers exercised by the District Magistrate (DM) or Chief Metropolitan Magistrate (CMM) under Section 14 are ministerial and administrative, not adjudicatory. The Magistrate is not required to adjudicate disputes or decide on the merits of objections raised by borrowers or third parties. Their primary duty is to verify that the procedural requirements have been met by the secured creditor and, if so, to assist in taking possession of the secured assets.
Application of Mind: While the Magistrate’s function is not adjudicatory, the Supreme Court and High Courts have emphasized that the Magistrate must apply their mind to ensure that the application and supporting affidavit comply with the requirements of Section 14. Passing orders mechanically or by simply filling in printed formats without genuine consideration is not justified.
No Requirement for Notice: The DM/CMM is not required to give notice or an opportunity of hearing to the borrower or third parties before passing an order under Section 14. Any objections or disputes regarding possession or title should be raised before the Debts Recovery Tribunal under Section 17, not at the stage of the Section 14 application.
Who Can Exercise Section 14 Powers: In the landmark case of R.D. Jain & Co. v. Capital First Ltd. (2022), the Supreme Court held that Additional District Magistrates (ADM) and Additional Chief Metropolitan Magistrates (ACMM) are also empowered to act under Section 14, clarifying ambiguity that existed due to varying High Court decisions.
Timelines: Section 14(1) mandates that applications be disposed of within 30 days, extendable by a further 30 days for recorded reasons.
No Adjudication of Rights: The Supreme Court in Indian Bank v. D. Visalakshi (2019) and Kotak Mahindra Bank v. Girnar Corrugators Pvt. Ltd. (2023) reiterated that the Magistrate’s role is not to adjudicate disputes between the borrower and the secured creditor or third parties. Disputes must be taken up before the Debts Recovery Tribunal.
Remedy for Aggrieved Parties: If a party is aggrieved by the possession taken under Section 14, the proper remedy is to approach the Debts Recovery Tribunal under Section 17 of the Act.
The Supreme Court has made it clear that Section 14 proceedings are administrative, not judicial, and are meant to facilitate speedy recovery by secured creditors. The Magistrate must ensure procedural compliance but is not required to hear or decide disputes at this stage. Any such disputes must be resolved before the Debts Recovery Tribunal.