Designated Authorities Under SARFAESI Cannot Decide Borrower Disputes, Rules Madras High Court

The Madras High Court has issued significant directions aimed at ensuring the speedy disposal of applications filed under Section 14 of the SARFAESI Act, 2002. The Court clarified that Chief Metropolitan Magistrates, Chief Judicial Magistrates, and District Magistrates exercising powers under Section 14 perform only ministerial functions and cannot adjudicate disputes involving borrowers, guarantors, tenants, third parties, or secured creditors.

The ruling came in a petition filed by an auction purchaser who had acquired a secured asset through proceedings initiated by Punjab National Bank but had not received physical possession despite the issuance of a sale certificate. The bank informed the Court that its Section 14 application seeking assistance for taking possession had remained pending before the Chief Judicial Magistrate, Chengalpattu.

A Division Bench comprising Sushrut Arvind Dharmadhikari and G. Arul Murugan reiterated that disputes relating to tenancy rights, borrower objections, or competing claims over secured assets fall exclusively within the jurisdiction of the Debts Recovery Tribunal under Section 17 of the Act.

The Court directed that Section 14 applications must be registered immediately upon filing and ordinarily decided within 30 days, extendable to 60 days only for recorded reasons. It further ordered State-wide circulation of the judgment to ensure uniform compliance and reduce delays that frustrate the objective of expeditious recovery under the SARFAESI framework.