Introduction
The Madras High Court has recently mandated that applications submitted by banks and financial institutions under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) must be registered promptly and resolved within the statutory deadlines. The directive aims to streamline the process and reduce unnecessary litigation.
Key Directives from the Court
The ruling, delivered by Chief Justice Sushrut Arvind Dharmadhikari and Justice G Arul Murugan, insists that any delays in the adjudication process must be justified in writing and are permissible only under exceptional circumstances. The court has set a strict timeline, requiring these applications to be resolved within 60 days of filing, even in such exceptional cases.
The court emphasized that authorities processing Section 14 applications perform a ministerial role and are not to engage in adjudicative processes. Specifically, Section 14 empowers secured creditors to enlist the assistance of chief metropolitan magistrates or district magistrates to take possession of properties from defaulting borrowers. The court clarified that these authorities should not entertain disputes between creditors and borrowers, as such issues should be addressed by the Debts Recovery Tribunal under Section 17 of the SARFAESI Act.
Case Background
This ruling came in response to a petition filed by Vijayanand Srinivasan, who had purchased assets auctioned by Punjab National Bank under the SARFAESI Act. Despite paying the full sale price and receiving a sale certificate by June 3, 2025, possession of the property had not been transferred to him. The bank revealed that it had submitted a Section 14 application to the Chief Judicial Magistrate in Chengalpattu back in August 2025, but the application remained unnumbered and pending due to a backlog of approximately 200 cases.
Addressing Systemic Backlogs
The court noted that Tamil Nadu has faced numerous writ petitions due to delays and jurisdictional overreach by authorities tasked with executing possession orders under Section 14. Such litigation not only clogs the judicial system but also undermines the objectives of the SARFAESI Act.
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To mitigate these issues, the court ordered immediate registration of all Section 14 applications, eliminating the need for pre-registration hearings. It instructed that checks be limited to ensuring territorial jurisdiction, confirmation of notice under Section 13(2) of the SARFAESI Act, submission of the requisite affidavit, and whether the case falls under exceptions specified in Section 31 of the Act.
Moreover, the court ruled that borrowers, mortgagors, guarantors, or third parties need not be notified prior to orders under Section 14, except in cases involving legitimate claims of prior tenancy or lease.
Implementation and Compliance
In this specific case, the court directed the Chief Judicial Magistrate in Chengalpattu to resolve the pending application within 30 days, allowing adjournments only if absolutely necessary. The court also ordered the circulation of this judgment to all Principal District and Sessions Judges in Tamil Nadu, as well as the Chief Secretary for further distribution among District and Additional District Magistrates.
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Advocate ML Ramesh represented the petitioner, while Standing Counsel ML Ganesh appeared for Punjab National Bank.
For more details, refer to the full judgment.
