Advocates can be told to control assets under Sarfaesi Act: SC

Brightening the lawyers’ image in society, the Supreme Court has ruled that advocates, as officers of the court, can be asked by district magistrate to take control of defaulting borrowers’ assets for handing over to secured creditors under Sarfaesi Act.

Under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002, on request of a secured creditor, the district magistrate (DM) or the chief metropolitan magistrate (CMM) would take possession of the secured assets of defaulted borrowers and hand them over to the secured creditor.

The Bombay HC had ruled that appointment of advocates by the DM or CMM for taking control of the secured assets for handing over to secured creditors was illegal as advocates are not subordinate to the court. But, the HCs of Madras, Delhi and Kerala had okayed decisions of DM/CMM to entrust the task to advocates under Sarfaesi Act.

Deciding a bunch of cross-appeals, a SC bench of Justices A M Khanwilkar and C T Ravikmar said the DM or CMM can appoint an advocate for taking possession of secured assets of borrowers for handing over to secured creditors as it would be impractical for the judicial officers to reach location of each and every secured assets in busy financial cities like Mumbai, Chennai, Kolkata or Delhi.

Justice Khanwilkar said it would be impractical, if not impossible, for a DM/CMM to personally take possession of each secured assets given the large volume of such cases in big cities and defeat the purpose of Sarfaesi Act, which mandates expeditious handing over of secured assets to secured creditors.