Physical Possession of Defaulter’s Property by Secured Creditor – An Analysis

Abstract

The SARFAESI Act (Securutisation and reconstruction of financial assets and enforcement ofsecurity interest Act) 2002 enables the creditor banks and financial institutions to recover theoutstanding loanamount due in a simple way. They can conduct auction sale of the mortgagedresidential and commercial properties without intervention of court. Once if a loan Account is overduefor 90 days, it will be classified as Non performing asset. S.13 of the act prescribes the procedure fortaking symbolic possession of the mortgaged property and S.14 prescribes the procedure for taking physical possession with the help of a magistrate to recover the defaulted amount by auction sale.The main admiring feature of this act is the power given to the creditor banks and financial institutions to bring the property for sale without filing suit and execution petition in the court.Therefore the tedious work of filing civil suit and to obtain Judgment after completion of appeal was reduced. In S.14 of the act,the creditor has to file application before the Chief MetropolitanMagistrate or District Magistrate seeking assistance for taking physical possession of the secured asset. Though S.14 clearly says that no court shall question the authority of the magistrate, I have analysed in this article the power given to the magistrate in passing order and the interpretationdelivered by various high courts and debt recovery tribunals in the process of exercise of powers bythe magistrate in ordering physical possession.