Delay in disposal of SARFAESI Act applications impacts financial health of country: Bombay High Court

The Bombay High Court recently observed that delay in disposal of applications filed by secured creditors under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act impacts the financial health of the country. [L&T Finance Limited v. State of Maharashtra & Ors].Section 14 of the SARFAESI Act places an obligation on the chief metropolitan magistrate or district magistrate to assist secured creditors in taking possession of the secured asset.Once such application is filed, the magistrate forwards it to the secured creditor for further action..A Division Bench of Justices Nitin Jamdar and Abhay Ahuja emphasized that the powers of the magistrate under Section 14 were merely administrative. It added that the magistrate was not even required to adjudicate any dispute between the borrower, third parties and the secured creditor concerning the secured assets. "Any delay in that was unacceptable given the emphasis of this enactment on expediency. Such enormous backlog of applications under Section 14 in Maharashtra is inconsistent with the objectives of the Act and defeats the legislative intent emphasized by the Supreme Court,” the order stated..Stressing on the importance of expeditious disposal of such applications for recovery of bad loans, the Court said,“It is needless to stress the importance of expeditious disposal of the applications under section 14 of the SARFAESI Act, as the pendency of a large number of applications hinders the recovery of bad loans, which has a significant impact on the financial health of the country.”.The Bench disposed of a clutch of petitions raising grievance that Section 14 applications had remained pending before the magistrate for an unduly long period. The petitioners highlighted the lethargy of the authorities, their reluctance to proceed under Section 14 and borrowers causing the delay. The High Court clubbed all such petitions and sought assistance from the State government and High Court administration to find a solution. .The Court was informed that on April 10, 2023, the State government issued a circular to all magistrates with following directions: all pending applications filed before March 31, 2023 should be disposed off by April 30, 2023. all applications filed after March 31, 2023 should be disposed of within thirty days. orders passed under Section 14 must be implemented within four weeks.if existing officers are overburdened, an advocate can be appointed to implement the order as per law. a report must be submitted on applications and orders not disposed of within thirty days, and parties can make representations if an application is not disposed of or an order is not implemented within sixty days. an online platform will be implemented to record all information and statistics..The Court said that these guidelines could also reduce the inflow of petitions by secured creditors before the High Court.It also noted that implementation of an e-system would improve transparency and efficiency, and keep all parties informed about pending applications. To reinforce the guidelines and effectuate the intent of the SARFAESI Act, the Bench reiterated them as directions in its order. It directed that the e-system be implemented within 16 weeks. .Advocates SS Panchpor, SS Agave appeared for TJSB Sahakari Bank.Advocate Asha Bhuta from Bhuta & Associates appeared for The National Co-operative BankSaraf with government pleaders PP Kakade, Shruti Vyas and Himanshu Takke appeared for State.Advocate SR Nargolkar appeared for Magistrate and High Court administration..[Read order]