Authorized Officer, I.D.B.I Bank Ltd. v. The State of Maharashtra

6 Mr. Rohit Gupta, the learned counsel appearing on behalf of Petitioners, submitted that the impugned order was perverse and beyond the scope of the jurisdiction vested in the Additional District Magistrate Nashik under Section 14 of the SARFAESI Act. Mr. Gupta submitted that the Additional District Magistrate Nashik had not only travelled beyond the jurisdiction vested in him by virtue of Section 14 of the SARFAESI Act, 2002 but had infact acted contrary to it. Mr. Gupta invited our attention to Section 14 of the SARFAESI Act, 2002 which provides as follows, viz. “14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking lgc 8/16 possession of secured asset— (1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him— (a) take possession of such asset and documents relating thereto; and (b) forward such assets and documents to the secured creditor. Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorized officer of the secured creditor, declaring that--

(i) the aggregate amount of financial assistance granted and the total claim of the bank as on the date of filing the application;

(ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or the Financial is within the limitation period;

(iii) the borrower has created security interest over various properties giving the details of properties referred to in sub-clause (ii) above; lgc 9/16

(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount;

(v) Consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non performing asset;

(vi) affirming that the period of sixty days' notice as required by the provisions of sub-section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower;

(vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for non-acceptance of such objection or representation had been communicated to the borrower;

(viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of section 13 read with section 14 of the principal Act;

(ix) That the provisions of this Act and the rules made there under had been complied with: Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured asset within a period of thirty days from the date of application. Provided also that if no order is passed by the Chief Metropolitan lgc 10/16 Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days. Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act. (1A) The District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him,---

(i) to take possession of such assets and

(ii) to forward such assets and documents to the secured creditor.

(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate of the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate (any officer authorised by the Chief Metropolitan or District Magistrate) done in pursuance of this section shall be called in question in any court or before any authority” Mr. Gupta submitted that (a) the jurisdiction vested in the relevant Authority under Section 14 of the SARFAESI Act, was limited only to the relevant Authority aiding and assisting the secured creditor in lgc 11/16 recovering possession of the secured asset(s) from a defaulting borrower and nothing more; (b) Section 14 does not provide for the borrower to file a Reply, despite which Respondent No.2 had not only filed a Reply but the contents of the same had even been considered by the Additional District Magistrate in the Impugned Order; (c) in paragraphs 3(ii) to (iv) of the impugned order the Additional District Magistrate had gone into and dealt with the contentions raised by Respondent No.2 in the said Reply, which was ex facie beyond the jurisdiction vested in him under Section 14 of the SARFAESI Act. In support of his submission that the Additional District Magistrate had travelled beyond his jurisdiction, Mr. Gupta placed reliance on a judgment of a Division Bench of this Hon’ble Court in Kotak Mahindra Bank Ltd. and Ors. vs. The State of Maharashtra and Ors,[1] which held as follows,:-

19. We are therefore of the view that the Magistrate is required to ascertain whether the statements are made by the bank under the nine clauses below Section 14(1) and once he is satisfied that the statements as required in those nine clauses have been made by the bank in its affidavit, the Magistrate/DM would proceed to grant the application under Section 14(3).

20. Considering the law laid down by the Hon’ble Apex Court and which was relied upon by the three benches of this Court, we find that the Magistrate has travelled beyond its jurisdiction in this case in going 1 MANU/MH/0877/2018 = (2018 4 ALLMR 37 lgc 12/16 into the limitation aspects under Sections 14(1) and 14(3). Once a recovery certificate was issued, the bank would derive its authority to recover the said amount within 12 years. The Magistrate, while exercising jurisdiction under Section 14(1), was only required to verify whether there was a mortgage keeping in view the second proviso below Section 14(1) by which the CMM/DM has to satisfy itself as regards the contents of the affidavit being in tune with the declarations required to be made by the bank in the nine clauses below the first proviso and whether the secured assets are located within his jurisdiction (See. Trade Well v. Indian Bank (supra).

21. In the light of the above, we find that the CMM was not required to go into whether the claim of the bank was barred by limitation or not since the first as well as the second proviso and the nine clauses introduced by the amendment dated 15.01.2013 to Section 14(1), did not invest this jurisdiction with the said authority. The impugned order dated 10.04.2017 is therefore unsustainable.” Based upon the above, Mr. Gupta submitted that the order of the Additional District Magistrate was bad in law and in excess of the jurisdiction vested in the Additional District Magistrate under Section 14 of the SARFAESI Act.

7 Respondent No.1 has not filed any Affidavit in Reply opposing the Writ Petition. Ms. Vyas, the learned counsel appearing on behalf of Respondent No.1, while supporting the impugned order fairly did not dispute that insofar as the findings contained in paragraphs 3 (ii) to (iv) lgc 13/16 thereof, the same were beyond the scope of Section 14 of the SARFAESI Act.

8 Having heard the learned counsel for the Parties and having perused the pleadings and the provisions of the SARFAESI Act, as well as considering the law laid down by this High Court in the case of Kotak Mahindra Bank Ltd. (supra) we find that the Additional District Magistrate, Nashik has not only transgressed the jurisdiction vested in him under Section 14 of the SARFAESI Act but has infact acted contrary to it. The jurisdiction vested under Section 14 of the SARFAESI Act is limited only to assisting a secured creditor in taking possession of the secured assets and nothing more. Section 14 does not contemplate, much less provide for the defaulting borrower to raise any objections and/or reasons to resist the taking of possession of the secured asset(s) by the Authorities so mentioned in Section 14. The defaulting Borrower under Section 14 does not have any vested right of hearing and/or of filing a reply. Section 14 comes into play when secured creditor has failed to discharge in full its liabilities within sixty days from receipt of a demand notice issued under Section 13(2) of the SARFAESI Act. Section 14 is merely an enabling provision under Chapter III of the SARFAESI Act to enable a secured creditor to recover possession of the secured assets from a defaulting and non-cooperative borrower, thats all. The function of the relevant Authority under Section 14 of the SARFAESI Act is purely ministerial and restricted to ensuring that the lgc 14/16 secured creditor has complied with the requirements [as set out in Section 14 (1) (i) to (ix)]. Once the Authority is satisfied that the requirements of Section 14 have been met and/or complied with, the Authority has to proceed to take possession of the secured asset. The wordings of Section 14 leave no manner of doubt in this regard, viz. (1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him— (a) take possession of such asset and (b) forward such assets and documents to the secured creditor.

9 It is also essential to note that Chapter III of the SARFAESI Act is for “Enforcement of Security Interest” and Section 13 specifically provides for a secured creditor to enforce the security interest created in its favour without the intervention of the court or tribunal. The secured creditor under Section 13 (3A) has a right to make any representation or raise any objection on receipt of a demand notice. Section 14 is only an enabling provision which comes into play only after the defaulting borrower has lgc 15/16 failed and/or neglected to discharge in full its liability to the secured creditor and is limited to providing assistance to the secured creditor to recover possession of secured asset against non-co-operative borrowers that all.

10 Thus in light of the above observations, we find that the Additional District Magistrate, Nashik has transgressed the jurisdiction vested in him under Section 14 of the SARFAESI Act. We accordingly set aside the Impugned Order and remand the matter with direction that the same be heard and disposed within a period of six weeks from today in accordance with the provisions of Section 14 of the SARFAESI Act.