High Court Rules Magistrate Acts Only Ministerially Under Section 14 SARFAESI; Condition Protecting Third-Party Possession Quashed
- REEDLAW
- Sep 20
- 3 min read
REEDLAW Legal News Network reports: In a pivotal ruling, the Karnataka High Court clarified the limited role of a Magistrate under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. The Court held that the Magistrate performs only a ministerial function and lacks authority to impose conditions safeguarding third-party possession, as such claims must be adjudicated separately before the Debts Recovery Tribunal (DRT) under Section 17.
The Karnataka High Court, Dharwad Bench, Single-Judge Bench of Justice Suraj Govindaraj, while adjudicating a writ petition, ruled that a Magistrate acting under Section 14 of the SARFAESI Act discharges merely a ministerial duty. The Court determined that any condition protecting third-party possession falls outside the Magistrate’s jurisdiction and must be pursued independently before the DRT under Section 17 of the Act.
The High Court examined a writ petition filed by a secured creditor challenging an observation made by the Magistrate while allowing an application under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The secured creditor had advanced financial assistance to the borrower and, after complying with the statutory requirements under Section 13 of the Act, initiated proceedings before the Magistrate to obtain physical possession of the secured asset. The Magistrate allowed the application and appointed an Advocate Commissioner to deliver possession, but inserted a direction that the possession delivery warrant would not be binding on third parties who might be in possession of the property. Aggrieved by this condition, the secured creditor approached the High Court seeking to quash the impugned observation.
The Court noted that the issue of whether a Magistrate acts in an adjudicatory or ministerial capacity under Section 14 of the SARFAESI Act was settled by the Supreme Court in Balkrishna Rama Tarle Dead through LRS and Another v. Phoenix ARC Private Limited and Others, REEDLAW 2022 SC 09202. It was reiterated that the powers exercised by a Magistrate under Section 14 are purely ministerial. Once the secured creditor complies with the statutory prerequisites and files the necessary affidavit, the Magistrate is required to assist in taking possession of the secured asset without adjudicating any disputes or issuing notice to the borrower or third parties. Any person aggrieved by such measures has the remedy of approaching the Debts Recovery Tribunal under Section 17 of the Act.
The High Court held that the Magistrate, while acting under Section 14, had no authority to impose conditions suggesting that third parties in possession of the property might have enforceable rights at that stage. Such an observation was contrary to the ministerial nature of the Magistrate’s function and undermined the secured creditor’s right to possession of the secured asset. It ruled that the secured asset is subject exclusively to the SARFAESI Act and that claims by third parties, if any, must be agitated before the appropriate forum under Section 17.
Accordingly, the Court allowed the writ petition, set aside the portion of the Magistrate’s order stating that the possession delivery warrant was not binding on third parties, and directed that the original order for taking possession be implemented without the impugned observation.
Mr. Nandish Patil, Advocate, represented the Petitioner.
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