2011 (8) TMI 1207 - HC - Indian Laws

Court converts petition to public interest litigation over bank loan recovery involving public money. Guidelines issued to streamline process, address delays.

International Asset Reconstruction Company Private Limited Versus Union of India

The court converted a petition into a public interest litigation due to the involvement of public money in banks' loan recovery. Acknowledging delays in ... - Issues Involved:1. Maintainability of the petition as public interest litigation.2. Pendency and delay in disposal of applications under Section 14 of the SARFAESI Act.3. Legal framework and interpretation of Section 14 of the SARFAESI Act.4. Practical difficulties faced by District Magistrates (DMs) and Chief Metropolitan Magistrates (CMMs) in disposing of applications.5. Guidelines to streamline the procedure for handling applications under Section 14 of the SARFAESI Act.Detailed Analysis:1. Maintainability of the Petition as Public Interest Litigation:The court observed that although banks and financial institutions appeared to be serving their personal interests by seeking possession of secured assets, the involvement of public money justified the petition's conversion into public interest litigation. The court emphasized that the recovery of loans advanced by banks is in the public's interest, making the petition maintainable as public interest litigation.2. Pendency and Delay in Disposal of Applications under Section 14 of the SARFAESI Act:The court acknowledged the significant backlog of applications under Section 14 of the SARFAESI Act in various districts, particularly in Mumbai, Pune, and Thane. The data presented by the petitioners, covering the period from 1/1/2005 to 31/12/2010, was undisputed by the State. The court noted that the disposal of these applications often takes an excessively long time, necessitating appropriate directions for expeditious disposal.3. Legal Framework and Interpretation of Section 14 of the SARFAESI Act:The court referred to several Supreme Court judgments, including Transcore v. Union of India, Mardia Chemicals Limited v. Union of India, and United Bank of India v. Satyawati Tondon, to elucidate the legal framework of the SARFAESI Act. It was emphasized that the functions performed by DMs and CMMs under Section 14 are ministerial in nature, requiring no hearing for borrowers or issuance of notices. The court reiterated that Section 14 does not permit adjudication of disputes and that the remedy under Section 17 is available for grievances.4. Practical Difficulties Faced by DMs and CMMs:Reports from the CMM, Esplanade, Mumbai, and DM, Thane, highlighted practical difficulties such as heavy workload, lack of staff, and infrastructural facilities contributing to delays. The court acknowledged these challenges but stressed that they should be addressed at the government level or administratively, without overlooking the need for timely disposal of applications under the SARFAESI Act.5. Guidelines to Streamline the Procedure:To address the issues and streamline the procedure, the court laid down specific guidelines in addition to those established in Trade Well v. Indian Bank. These guidelines include:- Banks/Financial Institutions must annex a copy of the notice issued under Section 13(2) of the SARFAESI Act with proof of dispatch and an affidavit of service.- Applications must state that the secured assets are within the jurisdiction of the concerned DM/CMM.- The office of the DM/CMM must verify compliance with requirements within 15 days of application filing.- No notice is required to be issued to the borrower or any other person at the time of hearing the application.- Applications must be disposed of within two months from the date of proper presentation.- Orders must authorize taking physical possession of secured assets with reasonable force and direct police assistance.- A panchnama and inventory of secured assets must be drawn before handing over possession.Conclusion:The petition was disposed of with the issuance of guidelines to ensure the expeditious handling of applications under Section 14 of the SARFAESI Act. The Registrar General was directed to send a copy of the judgment to all DMs and CMMs within the court's jurisdiction.