S.14 SARFAESI Act | Possession Delivery Warrant Of Secured Asset Not Subject To Third Party Rights: Karnataka High Court
The Karnataka High Court has said that once the property is said to be a secured property (secured asset), it would be subject to Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) and cannot be made subject to rights of any third parties.
The court said that any person having any interest in the secured interest cannot agitate that claim before the magistrate exercising powers under Section 14, but he has to avail remedy under Section 17 by filing appeal before the Debts Recovery Tribunal.
For Context, Section 14 of the Act pertains to Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.
Justice Suraj Govindaraj held thus while allowing a petition filed by State Bank of India, Assets Recovery Management Branch, which had approached the court seeking to set aside an "observation/direction" made by the Senior Civil Judge and CJM in its 29.04.2025 order.
The trial court had allowed the bank's plea for taking physical possession of the concerned secured assets. The trial court had however held that the "possession delivery warrant is not binding on the 3rd parties, if they are in possession of the property in any of the capacity". Against this, the bank moved the high court.
Perusing Section 14 of the Act the high court held that actions of the Magistrate in respect of an application under Section 14 is "ministerial in nature", and there is no adjudicatory power exercised by the Magistrate.
The court said that when application under Section 14 is filed, there is no requirement to issue any notice to the debtor or anyone else.
There is also no requirement for Magistrate to consider any objection filed by any interested party in respect of action taken under Section 14 and hence the magistrate in the present case could not have made the observation that the possession delivery warrant would not be binding on third parties if they are in possession of the property in any of the capacity, the court said.
“Once the property is said to be a secured property, the said property being a secured asset would be subject to SARFAESI Act and cannot be made subject to any rights of any of the third parties.”
The bank argued that as being a secured creditor, the asset being a secured asset, there could be no such restriction which can be imposed. Moreover, once the power and authority under Section 13 of the SARFAESI Act is exercised by a secured creditor in respect of a secured asset, the secured creditor can enforce the security interest in respect of the entire secured asset and no other person can be said to have any interest in such secured asset.
The bench referring to Section 14 said, there being no notice which is required to be issued, the question of considering any objection would also not arise.
It said “Even if a debtor or anyone claiming under the debtor or independently were to voluntarily come before the CMM or the DM while an application under Section 14 of the SARFAESI Act were being considered, such a claim is not required to be considered in terms of Section 14 of the SARFAESI Act, since the order to be passed by the CMM or the DM is to be so done within a time-bound manner.”
Further, it said “That does not mean that any person who is aggrieved by the order has no remedy, inasmuch as Section 17 of the SARFAESI Act deals with application against measures to recover secured debts.”
Stating that section 17 of the SARFAESI Act, dealing with application against measures to recover secured debts, which would also include recovery of possession the court held “I am of the considered opinion that any person or entity aggrieved by any action either under Section 13 or 14 of the SARFAESI Act could avail the remedy available under Section 17 of the SARFAESI Act.”
Setting aside the observation the high court directed implementation of the trial court order without reference to the observation under question.
Appearance: Advocate Nandsih Patil for Petitioner.
Citation No: 2025 LiveLaw (Kar) 304
Case Title: State Bank of India AND M/s Swait Agencies & Others
Case No: WRIT PETITION NO. 105775 OF 2025