Synergy Insolvency

C. Bright Vs District Collector & Ors. (Supreme Court)

SARFAESI

Whether the time limit of 30 days which is further extendable by a further period 30 days for a District Collector to secure the possession of a secured asset is mandatory or directory?

The challenge in the present appeal is to an order passed by the Division Bench of the Kerala High Court of 19.7.2019, whereby it was held that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)  mandating the District Magistrate to deliver possession of a secured asset within 30 days, extendable to an aggregate of 60 days upon reasons recorded in writing, is a directory provision. The High Court held as under:

“18. The primary question in these Writ Petitions, namely, whether the time limits in section 14 of the SARFAESI Act are mandatory or directory should be answered in light of the principles enumerated above. As stated above, the object and purpose of the said time limit is to ensure that such applications are decided expeditiously so as to enable secured creditors to take physical possession quickly and realise their dues. Moreover, as stated earlier, the consequences of non-compliance with the time limit are not specified and the sequitur thereof would be that the district collector/district magistrate concerned would not be divested of jurisdiction upon expiry of the time limit.

In this connection, it is also pertinent to bear in mind that if the “consequences of non-compliance” test is applied, the borrower, guarantor or lessee, as the case may be, is not adversely affected or prejudiced, in any manner, whether such applications are decided in 60, 70 or 80 days. On the other hand, the secured creditor is adversely affected if the provision is construed as mandatory and not directory in as much as it would delay the process of taking physical possession of assets instead of expediting such process by entailing the filing of another application for such purpose. For all these reasons, the time limit stipulation in the amended Section 14 of the SARFAESI Act is directory and not mandatory.”

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