The Division Bench of the Allahabad High Court (Lucknow bench) comprising Justices Rajan Roy and Manish Kumar was hearing a petition and observed that the Petitioner's challenge to the order passed under Section 14 of the SARFAESI Act was not maintainable, as the remedy for the petitioner lies under Section 17 of the SARFAESI Act, and the issues can be raised before the Debt Recovery Tribunal.
The High Court heard arguments from the petitioner, Hindustan Petroleum Corporation Ltd., as well as the State and the opposing party, M/s Shiv Geet Sales Pvt. Ltd. The petitioner challenged an order passed by the District Magistrate under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) regarding leased property.
The petitioner argued that the lease was executed prior to the mortgage of the property and that the bank and the District Magistrate erred in taking action under the SARFAESI Act without hearing the petitioner.
The bank contended that the petitioner had a remedy under Section 17 of the SARFAESI Act and that the writ petition was not maintainable. The bank also stated that the lease had been terminated, while the petitioner claimed that the termination occurred after the impugned order.
The High Court observed that proceedings under Section 14 of the SARFAESI Act, 2002 are non-adjudicatory and can be challenged under Section 17 of the same Act. The High Court held that the petitioner had a remedy under Section 17 of the SARFAESI Act and that the High Court should not entertain a writ petition challenging an order under Section 14 of the Act.
The High Court also noted that the lease termination issue could be raised before the Debt Recovery Tribunal. The High Court referred to a recent decision by the Supreme Court that clarifies the procedure under Section 14 of the SARFAESI Act:
"The Supreme Court held that taking possession of secured assets is a ministerial act and must be carried out promptly by the District Magistrate or Chief Metropolitan Magistrate upon receipt of a written application from the secured creditor."
The High Court concluded that the powers of the Magistrate in this regard are not quasi-judicial but rather administrative, and the borrower's objections can be raised before the Debts Recovery Tribunal in proceedings under Section 17 of the SARFAESI Act. As a result, the writ petition was dismissed as not maintainable, and the petitioner was advised to pursue the remedy available under Section 17 of the SARFAESI Act.