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District Magistrate Not Vested With Adjudicatory Powers U/S 14 SARFAESI Act, Can Only Render Ministerial Assistance To Creditors: Gujarat High Court

[09 May 2022] Explaining that under Section 26E of the SARFAESI Act, the secured creditor has the first claim over the sale proceeds of secured assets and that the District Magistrate has to provide assistance under Section 14 to the secured creditor to take possession of the asset, the Gujarat High Court has quashed a communication which prohibited the Petitioner-bank from proceedings against the borrower-company. The borrower-company, M/S SSVB Business Limited had availed financial assistance from the Petitioner-bank in 2013 and 2015 and subsequently defaulted in repayment. The Petitioner then issued demand notice under Section 13(2) of the SARFAESI Act for recovery of dues. The Deputy Secretary, Home Department, Gandhinagar passed an order stating that the Borrower-company was involved in illegal activities of financial fraud and therefore, the authority was appointed to attach assets of the company. The company failed to discharge the liability as per the demand notice and thus, the Petitioner filed an application under Section 14 of the Act. However, the District Magistrate passed the impugned order stating that no action can be initiated against the borrowers. Consequently, the Petitioner filed a petition under Article 227 challenging the order. The Petitioner emphasised that when there is a conflict between the local act and the special act, importance is given to the special act which is the SARFAESI Act, in the instant case.

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