Madras High Court Issues Statewide Directions For Timely Disposal Of SARFAESI Pleas Seeking Aid In Taking Possession

The Madras High Court on Friday issued a comprehensive set of statewide directions governing applications under Section 14 of the SARFAESI Act.

The Court observed that delays by designated authorities defeat the legislation's objective of enabling expeditious recovery of secured assets and reducing non-performing assets (NPAs).

Section 14 of the SARFAESI Act enables banks and other secured creditors to seek the assistance of a Chief Metropolitan Magistrate, Chief Judicial Magistrate or District Magistrate for taking physical possession of secured assets when possession cannot be obtained directly.

The provision is commonly invoked after a borrower defaults and the secured asset is sought to be taken over or handed to an auction purchaser.

The directions were issued by a Bench comprising Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan while dealing with a petition filed by Vijayanand Srinivasan, the successful auction purchaser of Villa No. 75 at Palm Villas in Nallambakkam Village, sold by Punjab National Bank under the SARFAESI Act.

Although the bank had received the entire sale consideration and issued a sale certificate on June 3, 2025, physical possession of the property had not been handed over. The bank informed the Court that its application under Section 14, filed before the Chief Judicial Magistrate, Chengalpattu, in August 2025, had not yet been numbered. It further submitted that around 200 cases remained pending before the court for registration and disposal.

Taking note of a growing number of petitions complaining of delays and excesses in Section 14 proceedings, the Court said the problem had become widespread.

"The State of Tamil Nadu is no exception to this phenomenon. This Court has been inundated with writ petitions filed by various banks, financial institutions and asset reconstruction companies aggrieved by the inaction or excess of jurisdiction by the Designated Authorities under Section 14 of the SARFAESI Act. Such avoidable litigation not only burdens this Court, but also defeats the very purpose of the SARFAESI Act, which is a special legislation enacted with the specific object of enabling expeditious recovery of secured assets to reduce non-performing assets (NPAs) in the banking sector."

The Court accordingly issued the following directions applicable to all Chief Metropolitan Magistrates, Chief Judicial Magistrates, and District Magistrates exercising powers under Section 14 across Tamil Nadu:

1. Applications filed by secured creditors under Section 14 must be registered immediately and cannot be listed for arguments on registration or subjected to pre-registration hearings.
2. Authorities must confine their scrutiny to whether the secured asset falls within their territorial jurisdiction, whether notice under Section 13(2) has been served on the borrower, whether the application is accompanied by the affidavit required under Section 14(1), and whether any exception under Section 31 of the Act applies.
3. Proceedings under Section 14 are ministerial and not adjudicatory. Authorities cannot decide disputes between secured creditors, borrowers or third parties, which fall within the jurisdiction of the Debt Recovery Tribunal.
4. Borrowers, mortgagors, guarantors and third parties generally need not be issued notice before orders are passed under Section 14. Authorities may also use force where necessary to secure compliance.
5. Orders on Section 14 applications must be passed within 30 days of filing. In exceptional circumstances, the period may be extended up to a maximum of 60 days after recording reasons in writing.
6. Authorities may authorise subordinate officers or appoint Advocate Commissioners to take possession of secured assets and hand them over to secured creditors.
7. Where a person in possession claims tenancy or lease rights that existed before the property was mortgaged, authorities must follow the law laid down by the Supreme Court. Such occupants must be given an opportunity to present their case, but the inquiry should be confined to verifying whether the tenancy claim is genuine and should not hold up the proceedings indefinitely.
8. Tenants, occupants and other persons aggrieved by action taken under the SARFAESI Act can approach the Debt Recovery Tribunal under Section 17. The Court said authorities should make a note of this statutory remedy in their orders.
9. If an application remains undecided beyond the time prescribed under the Act and the matter reaches the High Court, the authority concerned will have to explain the delay. The Court cautioned that unexplained delays may invite adverse remarks and appropriate consequential orders.
10. The Registrar General of the High Court was directed to circulate the judgment through Principal District and Sessions Judges to Metropolitan Magistrates, Chief Judicial Magistrates and Additional Chief Judicial Magistrates exercising jurisdiction under Section 14.
11. The Chief Secretary of Tamil Nadu was directed to circulate the judgment among District Magistrates and Additional District Magistrates across the State to avoid delays and unnecessary litigation.

The Court reiterated that authorities exercising powers under Section 14 are not expected to adjudicate disputes.

"The nature of the inquiry under Section 14 of the SARFAESI Act is ministerial and not adjudicatory. The Designated Authority is not required and is indeed prohibited from adjudicating upon any dispute between the secured creditor and the borrower, or between the secured creditor and any third party," the bench observed.

The case arose from Srinivasan's purchase of Villa No. 75 at Palm Villas in Nallambakkam Village through a Punjab National Bank auction. Although the bank had received the entire sale consideration and issued a sale certificate on June 3, 2025, physical possession of the property had not been handed over.

The bank informed the Court that its application under Section 14, filed before the Chief Judicial Magistrate, Chengalpattu, in August 2025, had not yet been numbered. It further submitted that around 200 similar applications were pending before the court.

Relying on the Supreme Court's decisions in R.D. Jain & Company v. Capital First Ltd. and Balkrishna Rama Tarle v. Phoenix ARC Pvt. Ltd., the High Court reiterated that authorities acting under Section 14 are required only to verify statutory compliance and facilitate possession of secured assets and cannot adjudicate disputes between parties.

Disposing of the petition, the Court directed the Chief Judicial Magistrate, Chengalpattu, to take up Punjab National Bank's pending Section 14 application and decide it within 30 days in accordance with the Act and the directions laid down in the judgment