Tamil Nadu Mercantile Bank Ltd. v. District Collector, Sivagangai
2016-01-21
SANJAY KISHAN KAUL, V.RAMASUBRAMANIAN
body2016
DigiLaw.ai
JUDGMENT : V. RAMASUBRAMANIAN, J. 1. Aggrieved by an order passed by the District Collector cum District Magistrate, under Section 14 of the SARFAESI Act, 2002, directing the bank not to take over physical possession of the hypothecated and mortgaged properties, but only to take over the management of the Mill, the bank has come up with the above writ petition. 2. We have heard Mr. A.R.M. Ramesh, learned counsel for the petitioner, Mr. M. Alagathevan, learned Special Government Pleader for the first respondent and Mr. G. Prabhu Rajadurai, learned counsel for the second respondent. 3. Upon the second respondent committing default in making repayment of its dues to the petitioner bank and the account consequently becoming non-performing asset, the petitioner bank issued a notice under Section 13(2) of SARFAESI Act, followed by possession notice under Section 13(4). 4. Thereafter, the petitioner bank filed an application on 19.12.2005 before the District Collector cum District Magistrate, Sivagangai, under Section 14 of the SARFAESI Act, to render assistance to take possession of the secured assets. The District Collector passed an order on 23.02.2007, nominating the Revenue Divisional Officer, Sivagangai, to take possession of the properties with police protection and to hand over the same to the petitioner bank. 5. But, since nothing happened, the bank again petitioned the District Collector on 19.04.2007. Thereafter, the Revenue Divisional Officer cum Sub-Divisional Magistrate, issued proceedings dated 07.09.2007, fixing 25.09.2007 as the date on which he would be present along with revenue officials and police to hand over possession. 6. But, by a communication dated 12.10.2007, the Revenue Divisional Officer informed the District Collector that as per the Report of the Superintendent of Police, there was a likelihood of a law and order problem in the area. Not stopping with that, the Revenue Divisional Officer very curiously took note of an Appeal filed by the management of the second respondent Mill before the Debts Recovery Tribunal, Madurai, in S.A. No. 81 of 2007. But, the Revenue Divisional Officer also indicated that after Maruthu Pandiyar and Pasumpon Thevar Celebrations were over on 30.10.2007, he would again take initiatives in the first or second week of November, 2007, to take physical possession. 7. Thereafter, the local Member of the Legislative Assembly by name Mr.
But, the Revenue Divisional Officer also indicated that after Maruthu Pandiyar and Pasumpon Thevar Celebrations were over on 30.10.2007, he would again take initiatives in the first or second week of November, 2007, to take physical possession. 7. Thereafter, the local Member of the Legislative Assembly by name Mr. S. Gunasekaran appears to have given a representation to the District Collector cum District Magistrate, purportedly on behalf of the workers of the Mill, to review the earlier order of the Collector dated 23.02.2007. On his representation, which is not even maintainable, the District Collector passed an order on 26.10.2007, directing the Bank to take over the management of the Mill rather than taking over the physical possession of the secured assets. Aggrieved by the said order, the Bank has come up with the above writ petition. 8. At the outset, we are surprised at the manner in which the District Collector has exercised jurisdiction under Section 14 of the SARFAESI Act. The jurisdiction of the District Magistrate under Section 14 is limited only to the extent of satisfying himself about the contents of the affidavit filed in terms of the first proviso. The first respondent District Collector in this case was already satisfied by the contents of the affidavit so filed by the bank and had passed an order on 23.02.2007. Thereafter, nothing remains for the District Collector to do. 9. The District Collector cannot take the role of the Debts Recovery Tribunal and examine as to which of the measures prescribed under Section 13(4) should have been resorted to by the bank. The bank has several options under Section 13(4) of the SARFAESI Act and it is left absolutely to their discretion to exercise one or more options available under the provisions. The District Collector does not have the jurisdiction and power to determine the manner in which the secured creditor should exercise their statutory rights. 10. Moreover, an appeal under Section 17 of the SARFAESI Act filed by the borrower is already pending before the Debts Recovery Tribunal. When the validity of the measure taken by the secured creditor under Section 13(4) is in question before the Debts Recovery Tribunal, it is preposterous on the part of the District Collector to decide the manner in which the power should have been exercised by the secured creditor. 11.
When the validity of the measure taken by the secured creditor under Section 13(4) is in question before the Debts Recovery Tribunal, it is preposterous on the part of the District Collector to decide the manner in which the power should have been exercised by the secured creditor. 11. In any event, Section 14 of the SARFAESI Act does not confer the power of review upon the District Collector. What the District Collector has done by the impugned order is to review his earlier order dated 23.02.2007, which is wholly unwarranted. What is shocking is that the District Collector has reviewed his earlier order at the instance of the local Member of the Legislative Assembly. Therefore, the impugned order is wholly illegal and liable to be set aside. 12. However, relying upon the decision of the Supreme Court in Harshad Goverdhan Sondagar v. International Assets Reconstruction Co. Ltd. (2014) 5 MLJ 613 (SC), it is contended by the learned counsel for the second respondent that the District Collector is empowered to examine the request of the secured creditor, with reference to certain parameters. But, the said decision of the Supreme Court related to the rights of the lessees, that too created before a notice under Section 13(2) was issued. The judgment deals with third party right created even before a demand notice is issued under Section 13(2). The decision does not confer any power upon the District Collector to exercise supervisory jurisdiction over the manner in which the secured creditor would exercise his rights. 13. The next decision relied upon by the learned counsel for the second respondent in Hotel Amuthas v. District Collector, (2015) 5 MLJ 213 , is also misplaced. The said decision arose out of a question whether the particulars contained in the affidavit filed in terms of the first proviso to Section 14 are correct or not. That is not the situation here. Therefore, the said decision has no application to the facts of the case. 14. If the stand now taken by the Management and approved tacitly by the District Collector is accepted, the only option available to a secured creditor in respect of defaulting industries is to take over the management, if the industry happens to be a running industry.
Therefore, the said decision has no application to the facts of the case. 14. If the stand now taken by the Management and approved tacitly by the District Collector is accepted, the only option available to a secured creditor in respect of defaulting industries is to take over the management, if the industry happens to be a running industry. Therefore, we find the order of the District Collector wholly illegal and the conduct of the management of the second respondent in setting up the local Member of the Legislative Assembly, purportedly representing the workers, to annul the statutory rights is highly condemnable. 15. Therefore, the writ petition is allowed. The impugned order is set aside and the District Collector is directed to give effect to the original order dated 23.02.2007. No order as to costs.