Calcutta HC rules secured creditors can seek possession of property under SARFAESI Act even after sale to purchaser.
Calcutta High Court Upholds Lender’s Right to Possession Under SARFAESI
In a significant ruling on creditor rights under the SARFAESI Act, the Calcutta High Court has held that a secured creditor can seek physical possession of an immovable property under Section 14 even after the property has been sold to a purchaser.
The decision came from a division bench comprising Justices Debangsu Basak and Md. Shabbar Rashidi, which overturned a Single Judge’s order that had refused State Bank of India (SBI) the right to physical possession of the property.
Background of the Case
The matter arose when SBI, acting as a secured creditor, filed a writ petition seeking physical possession of an immovable property that had already been sold to a purchaser following default by the borrower. The Single Judge had earlier denied this request, prompting SBI to file an appeal before the division bench.
Legal Standpoint: Section 14 of SARFAESI Act
The bench clarified that Section 14 of the SARFAESI Act, 2002 empowers a secured creditor to approach the District Magistrate or Chief Metropolitan Magistrate for assistance in taking possession of secured assets. This authority, the Court ruled, remains available even after the asset has been sold, provided the sale has occurred under lawful proceedings.
“The objective of Section 14 is to aid the enforcement of possession, and this function is not extinguished upon sale,” the bench observed.
Implications of the Verdict
This ruling is likely to bolster the enforcement rights of banks and financial institutions dealing with non-performing assets (NPAs). Legal experts suggest it may prevent delays in recovery by streamlining the possession process, even post-sale.
Furthermore, it provides legal clarity in cases where purchasers face resistance from borrowers or encroachers, helping ensure that possession aligns with the lawful sale of secured assets.
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