Supreme Court

C. Bright vs. The District Collector

MANU/SC/0845/2020

05.11.2020

Banking

When a public functionary is required to perform a public function within a time frame, the same will be held to be directory unless specified

The challenge in the present appeal is to an order passed by the High Court, whereby it was held that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) 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 argument of learned counsel for the Appellant, is that the proviso mandating the District Magistrate to record reasons, if the order is not passed within 30 days, in order to avail an extended period of a total 60 days, shows that the provision is mandatory. If the District Magistrate is not able to take decision within 60 days, the secured creditor has to find its remedy else- where and not in terms of Section 14 of the Act.

A well settled rule of interpretation of the statutes is that, the use of the word “shall” in a statute, does not necessarily mean that in every case, it is mandatory that, unless the words of the statute are literally followed, the proceeding or the outcome of the proceeding, would be invalid. The SARFAESI Act was enacted to provide a machinery for empowering banks and financial institutions, so that they may have the power to take possession of secured assets and to sell them. It is a well-settled principle that, if an act is required to be performed by a private person within a specified time, the same would ordinarily be mandatory but when a public functionary is required to perform a public function within a timeframe, the same will be held to be directory unless the consequences therefor are specified.

Present Court in Mardia Chemicals Ltd. and Ors. v. Union of India (UOI) and Ors. and Hindon Forge Pvt. Ltd. and Ors. v. The State of Uttar Pradesh and Ors. has held that, the purpose of the Act pertains to the speedy recovery of dues, by banks and financial institutions. The true intention of the Legislature is a determining factor herein. Keeping the objective of the Act in mind, the time limit to take action by the District Magistrate has been fixed to impress upon the authority to take possession of the secured assets. However, inability to take possession within time limit does not render the District Magistrate Functus Officio. The secured creditor has no control over the District Magistrate who is exercising jurisdiction under Section 14 of the Act for public good to facilitate recovery of public dues. The time limit is to instill a confidence in creditors that the District Magistrate will make an attempt to deliver possession as well as to impose a duty on the District Magistrate to make an earnest effort to comply with the man- date of the statute to deliver the possession within 30 days and for reasons to be recorded within 60 days. In this light, the remedy under Section 14 of the Act is not rendered redundant, if the District Magistrate is unable to handover the possession. The District Magistrate will still be enjoined upon, the duty to facilitate delivery of possession at the earliest.

In Hindon Forge Pvt. Ltd. and Ors. v. The State of Uttar Pradesh and Ors. it has been held that, the remedy of an aggrieved person by a secured creditor under the Act is by way of an application before the Debts Recovery Tribunal, however, borrowers and other aggrieved persons are invoking the jurisdiction of the High Court under Articles 226 or 227 of the Constitution of India without availing the alternative statutory remedy. The Hon’ble High Courts are well aware of the limitations in exercising their jurisdiction when affective alternative remedies are available, but a word of caution would be still necessary for the High Courts that interim orders should generally not be passed without hearing the secured creditor as interim orders defeat the very purpose of expeditious recovery of public money. There is no error in the order passed by the High Court. Appeal dismissed.

Relevant

Mardia Chemicals Ltd. and Ors. v. Union of India (UOI) and Ors. MANU/SC/0323/2004
and Hindon Forge Pvt. Ltd. and Ors. v. The State of Uttar Pradesh and Ors. MANU/SC/1250/2018

Tags : Secured Assets Possession Time limit

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