Uttarakhand High Court Orders Authorities to Help Lender Take Possession of Mortgaged Property

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Case Name

M/S CSL Finance Limited vs. The District Magistrate, Haridwar and Others (High Court of Uttarakhand)

Writ Petition (M/S) No. 3710 of 2024

Date: 9th January 2025

Key Takeaways

• The court reinforced that once a District Magistrate allows a lender to take possession of a mortgaged property under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), local authorities must assist in executing that order.
• The case highlights the importance of timely action by government authorities in enforcing financial recovery laws.
• The borrower’s attempts to challenge the possession order in both the Debt Recovery Tribunal and the High Court were unsuccessful; both challenges were dismissed.
• The court’s order ensures that lenders are not left helpless after obtaining legal orders for possession.

Issue

Should the local authorities be directed to assist the lender in taking physical possession of the mortgaged property, as previously ordered by the District Magistrate under the SARFAESI Act, 2002?

Facts

• Parties:
• Petitioner: M/S CSL Finance Limited (a public limited company and NBFC registered with RBI)
• Respondents: District Magistrate, Haridwar; Tehsildar, Roorkee; Senior Superintendent of Police, Haridwar; and the defaulting borrower (Respondent No. 4)
• Timeline:
• CSL Finance gave a loan of ₹8,45,303 to Respondent No. 4.
• The borrower defaulted, and the loan was classified as a Non-Performing Asset (NPA) on 31.03.2021.
• A demand notice was issued on 16.11.2023 under Section 13(2) of the SARFAESI Act, 2002, read with Rules 3 and 4 of the Security Interest (Enforcement) Rules.
• The borrower did not pay, so CSL Finance applied under Section 14 of the SARFAESI Act for help from the District Magistrate.
• The District Magistrate allowed the application on 11.03.2024, authorizing the lender to take possession and directing local authorities to assist.
• CSL Finance paid a police protection fee, and the police were directed to help.
• The borrower challenged the order in the Debt Recovery Tribunal (SA No. 175 of 2024) and in the High Court (Writ Petition Misc. Single No. 3256 of 2024), but both challenges were dismissed.
• Despite all this, the local authorities had not yet helped the lender take possession, leading to this writ petition.

Arguments

Petitioner (CSL Finance Limited)

• The company is entitled to take possession of the mortgaged property under the SARFAESI Act, 2002.
• The District Magistrate has already allowed their application and directed authorities to assist.
• Despite paying the required police protection fee and repeated requests, the authorities have not provided the necessary assistance.

Respondents (Authorities)

• The judgment does not detail their arguments, but it is implied that there was a delay or inaction in providing the required assistance, which the court found unjustified.

Key Legal Precedents & Provisions

• Section 13(2) of the SARFAESI Act, 2002: Allows a secured creditor to issue a demand notice to a defaulting borrower.
• Section 14 of the SARFAESI Act, 2002: Allows the secured creditor to approach the District Magistrate for assistance in taking possession of the secured asset.
• Rules 3 and 4 of the Security Interest (Enforcement) Rules: Lay down the procedure for enforcement of security interest.
• The judgment does not cite specific case law names, but it strictly references the above statutory provisions and rules.

Judgement

• The High Court, with the consent of both parties, directed the Senior Superintendent of Police, Haridwar (Respondent No. 3) and the Tehsildar, Roorkee (Respondent No. 2) to ensure compliance with the District Magistrate’s order dated 11.03.2024.
• The authorities must assist the lender in taking possession of the mortgaged property as per the law.
• The writ petition was disposed of with these directions.

FAQs

Q1: What is the SARFAESI Act, 2002?

A: It’s a law that allows banks and financial institutions to recover their dues by taking possession of secured assets (like mortgaged property) without court intervention, under certain conditions.

Q2: Why did the lender need help from the authorities?

A: Even after getting a legal order to take possession, the lender needed police and administrative support to physically take over the property, which the local authorities had not provided.

Q3: Did the borrower try to stop the possession?

A: Yes, the borrower challenged the order in both the Debt Recovery Tribunal and the High Court, but both challenges were dismissed.

Q4: What did the High Court decide?

A: The court ordered the local authorities to comply with the District Magistrate’s order and help the lender take possession of the property.

Q5: What does this mean for other lenders?

A: It reinforces that once all legal steps are followed, authorities must assist lenders in enforcing their rights under the SARFAESI Act.