SHIMLA: In a significant judgment, the Division Bench of Justice Tarlok Singh Chauhan and Justice Bipin Chand Negi of the High Court of Himachal Pradesh addressed a common legal issue arising in multiple writ petitions in State Bank of India vs HP government and others case.
The central question revolved around the powers of District Magistrates when dealing with applications filed by banks or financial institutions under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
The cases involved borrowers who had defaulted on loans, leading to their accounts being classified as non-performing assets (NPAs).
The petitioner bank sought assistance under Section 14 of the Act to take possession of the secured assets. However, borrowers preemptively filed caveat petitions before the District Magistrate.
The District Magistrate, in response, directed the bank to provide documents, citing objections by borrowers regarding the classification of their accounts as NPAs.
The key legal issue was whether the District Magistrate had the authority to adjudicate on such matters.
Justice Chauhan clarified that the District Magistrate's role under Section 14 is ministerial and limited to assisting secured creditors in taking possession of assets.
The court emphasized that the District Magistrate does not possess adjudicatory powers and should only ensure compliance with statutory requirements.
Citing recent Supreme Court judgments, the High Court reaffirmed that the District Magistrate's function is to act promptly to facilitate the recovery of secured assets, without engaging in quasi-judicial processes.
The judgment also expressed concern over instances where District Magistrates had allegedly exceeded their authority, granting relief to borrowers in violation of the law.
The court urged District Magistrates to adhere to the legal framework and circulated the order to the Chief Secretary for distribution among all District Magistrates and relevant authorities.
The court allowed the writ petitions and directed the respondent to decide the bank's applications under Section 14 within the legal parameters outlined by the Supreme Court, ensuring timely and lawful proceedings.