2019 (7) TMI 1540 - HC - Indian Laws

District Magistrate's SARFAESI Act time limits are directory, not mandatory. Relief granted to borrowers and creditors.

C. Bright Versus The District Collector, The Authorized Officer, The Tashildhar, Kanyakumari District.

The court held that the time limit under Section 14 of the SARFAESI Act for the District Magistrate to pass orders is directory, not mandatory. The ... Time limit - date of filing of the respective application under Section 14 of the SARFAESI Act - outer limit of 60 days comprising an initial period of 30 days and an extended period of a further 30 days was stipulated by an amendment effected through Act 44 of 2016 which came into force on 01.09.2016 - whether the said time limit is mandatory and, if so, whether the District Collector/District Collector is divested of jurisdiction to decide the application on expiry of 60 days? - HELD THAT:- From Section 14, as amended by Act 44 of 2016, it is clear that the amendment relating to the imposition of time limits uses words such as 'shall' and 'not exceeding 60 days'. Therefore, it is self-evident that the time limit is unambiguous. In light of such unambiguous language, which is both peremptory in form and couched in negative language, the question that arises is whether the Court should, as contended by the learned senior counsel, Mr. Ajmal Khan, treat the time limit as mandatory and not examine the object and purpose of the provision and other factors such as the consequence of non-compliance - therefore, the use of words such as “shall”, which are peremptory in form, and negative language such as “not exceeding 60 days in the aggregate” do not foreclose the necessity to examine the object and purpose or the consequences of non-compliance so as to determine whether the provision is directory or mandatory, and the contention to that effect is not tenable. For the purpose of understanding the object and purpose of the time limit, it is pertinent to examine the Statement of Objects and Reasons of Act 44 of 2016. The object and purpose of the said time limit is to ensure that such applications are decided expeditiously so as to enable secured creditors to take physical possession quickly and realise their dues. Moreover, as stated earlier, the consequences of noncompliance with the time limit are not specified and the sequitur thereof would be that the district collector/district magistrate concerned would not be divested of jurisdiction upon expiry of the time limit. Petition disposed off. Issues Involved:1. Whether the time limit prescribed under Section 14 of the SARFAESI Act is mandatory.2. Whether the District Magistrate has jurisdiction to pass orders after the expiration of the 60-day time limit.3. The maintainability of writ petitions after the introduction of Section 17(4-A) of the SARFAESI Act.4. Compliance with the requirement of filing an affidavit with requisite details under the amended Section 14.Detailed Analysis:1. Whether the time limit prescribed under Section 14 of the SARFAESI Act is mandatory:The primary question was whether the time limit of 60 days for the District Magistrate to pass orders under Section 14 of the SARFAESI Act is mandatory. The court examined the language of the statute, which uses the word 'shall' and negative language 'not exceeding 60 days in the aggregate.' Despite the peremptory language, the court considered the object and purpose of the provision, which is to expedite the process for secured creditors to take possession of secured assets. The court concluded that the time limit is directory and not mandatory, as the non-compliance does not adversely affect the substantive rights of the borrower, guarantor, or lessee but impacts the secured creditor's ability to take possession.2. Whether the District Magistrate has jurisdiction to pass orders after the expiration of the 60-day time limit:The court held that the District Magistrate retains jurisdiction to pass orders even after the 60-day period has lapsed. The absence of specified consequences for non-compliance with the time limit indicates that the provision is directory. The court emphasized that construing the time limit as mandatory would delay the process of taking physical possession of assets, contrary to the purpose of the amendment.3. The maintainability of writ petitions after the introduction of Section 17(4-A) of the SARFAESI Act:The court considered whether writ petitions are maintainable in light of the alternative remedy provided under Section 17(4-A) of the SARFAESI Act. The court referred to various judgments, including the United Bank of India case, which cautioned against High Court interference under Article 226 when an effective alternative remedy is available. The court concluded that borrowers could challenge the taking of possession by filing an appeal before the DRT under Section 17 of the SARFAESI Act.4. Compliance with the requirement of filing an affidavit with requisite details under the amended Section 14:The court held that the requirement of filing an affidavit with requisite details is mandatory. If this requirement is not satisfied, the affected party can initiate proceedings before the DRT to challenge the measure under Section 13(4) of the SARFAESI Act by filing an appeal under Section 17.Conclusion:(a) Writ petitions filed by borrowers challenging orders passed in Section 14 applications on the ground of exceeding the time limit are disposed of, granting liberty to challenge the taking of possession by filing an appeal before the DRT within two weeks from the date of receipt of a copy of the order.(b) The writ petition filed by the secured creditor seeking expeditious disposal of the Section 14 application is allowed, directing the District Collector to dispose of the application within one month from the date of receipt of a copy of the order.(c) No order as to costs in any of the writ petitions.(d) All connected miscellaneous petitions are closed.