NPAs Huge Burden On Public Exchequer, DMs Can't Unnecessarily Delay Passing Orders U/s 14 SARFAESI Act: Punjab & Haryana High Court

The Punjab & Haryana High Court has held that Non-Performing Assets (NPAs) are a huge burden on the public exchequer, and District Magistrates cannot unnecessarily delay passing orders under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

The Court was considering a Writ Petition filed by Petitioner-Bank aggrieved by non-execution of the order passed by the Chief Judicial Magistrate under the provisions of Section 14 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

The Division Bench of Chief Justice Sheel Nagu and Justice Ramesh Kumari observed, "Non-Performing Assets (NPAs) are a huge burden on the public exchequer, banking and financial system, and, thus, prompt enforcement of recovery mechanism under the SARFAESI Act is paramount for liquidity in the system."

The Petitioner was represented by Advocate Deepika Mittal, while the Respondent was represented by Additional Advocate General Vipin Pal Yadav.

The Court was surprised that the Tehsildar-cum-Duty Magistrate failed to discharge their statutory duty of assisting and handing over physical possession of the secured asset to the Petitioner-Bank. 

It thus directed the concerned authority to execute the order passed under Section 14 of the SARFAESI Act by handing over physical possession of the secured asset to the Petitioner-Bank as expeditiously as possible, preferably, within a period of 30 days. It stressed that the guidelines laid down by a coordinate bench in Bank of Maharashtra Vs. District Magistrate, Hisar And Others be adhered to by the concerned authorities.

The Court expressed its surprise to note that time and again it is coming across cause of actions raised by the Banks aggrieved by the fact that an order passed under Section 14 of the SARFAESI Act is not executed.

"The scheme of the SARFAESI Act enjoins the District Magistrate to pass an order under Section 14 of the SARFAESI Act within the extended period of 60 days, and thereafter, the Tehsildar or the concerned Revenue Authority to execute such order without any unnecessary delay. Merely because, time frame is not prescribed for execution of an order passed under Section 14 of the SARFAESI Act does not mean that the District Magistrate and the concerned Revenue Authority sits over the file, thereby frustrating the object of SARFAESI Act, which is inter alia to expeditiously recover the mounting bad debts in shape of NPA which are a huge burden on the public exchequer", the Court observed.

It referred to Supreme Court's decision in R.D. Jain & Co. Versus Capital First Limited & Ors. (2023) and noted that the functionaries of the State have either not been made known of the order passed by the Court or they are intentionally not complying with the same.

"In view of the above, this Court is compelled to direct the Chandigarh Judicial Academy to hold an Orientation Course for all District Magistrates and Tehsildars of all the districts in the States of Punjab, Haryana and U.T., Chandigarh, as early as possible", the Court held.

It added that any failure on the part of the District Magistrate/ Deputy Commissioner in performing the statutory duty of passing or executing an order under Section 14 of the SARFAESI Act would amount to contempt of the orders.

The Petition was accordingly disposed of.

Cause Title: AU Small Finance Bank vs. State of Punjab And Others

Appearances:

Petitioner- Advocate Deepika Mittal, Advocate Bharat Mani Goyal

Respondent- Additional Advocate General Vipin Pal Yadav

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