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Balkrishna Rama Tarle (Dead) Thr. LRs & Anr. vs Phoenix ARC Private Limited & Ors.

Special Leave Petition (Civil) · 2022 INSC 1022Decided 26 Sept 2022
Special Leave Petition (Civil) No. 16013 of 2022
M.R. Shah · Krishna Murari

Background

A borrower had mortgaged property to Religare Finvest, which later assigned the loan to Phoenix ARC as the secured creditor. After the loan turned into a Non-Performing Asset, Phoenix ARC invoked the SARFAESI Act to take possession of the mortgaged property. The petitioner, claiming to be a tenant of part of the property, tried to intervene in the possession proceedings before the District Magistrate, who kept the application pending instead of deciding it. The Bombay High Court set aside that inaction and directed the District Magistrate to dispose of the possession application, prompting the tenant's legal heirs to approach the Supreme Court.

Decision Breakdown

The Supreme Court held that under Section 14 of the SARFAESI Act, the District Magistrate/Chief Metropolitan Magistrate performs only a ministerial function in assisting a secured creditor to take possession. It is not an adjudicatory process, and the magistrate cannot decide disputes between the secured creditor and third parties like alleged tenants. Such disputes belong before the Debt Recovery Tribunal under Section 17 of the Act instead. Since the borrower/petitioner never approached the DRT to challenge the underlying Section 13 SARFAESI proceedings, the magistrate had no authority to keep the possession application pending on account of the tenancy claim. The Court agreed with the High Court and dismissed the petition.

Lesson Learnt

A person claiming rights (such as tenancy) over property that a bank is repossessing under the SARFAESI Act cannot block that possession process before the District Magistrate: the correct forum to raise and contest such rights is the Debt Recovery Tribunal.

Official source (sci.gov.in)View Judgment (PDF)

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