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2020 DIGILAW 48 (JK)

Rafiq Ahmad Wani v. Jammu And Kashmir Bank Ltd

2020-02-06

ALI MOHAMMAD MAGREY, DHIRAJ SINGH THAKUR

body2020
JUDGMENT Ali Mohammad Magrey, J. - By this petition, the petitioners have assailed the validity of order dated 16th of January, 2020 passed by the Court of learned Chief Judicial Magistrate, Srinagar, in an application under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the Act of 2002"). The petitioners are also aggrieved of order dated 16th of January, 2019 passed by the respondent Bank rejecting the application of the petitioners for 'One Time Settlement'. 2. The case of the petitioners is that the respondent No.1 preferred an application under Section 14 of the Act of 2002 before the Court of learned Chief Judicial Magistrate, Srinagar on 16th of January, 2020, for issuance of appropriate orders for taking possession of the properties of the petitioners as mentioned therein and cause the said properties to be delivered to the respondent No.1. The respondents claimed that an aggregate amount of Rs.222.50 lacs as loan facilities were granted by the respondent Bank to the petitioners and, in consideration thereof, the petitioners, as mortgagers charged their properties to the respondents. It was also alleged that the petitioner No.4 as well had charged his properties as mortgager to the bank. It was further alleged that the petitioners had failed to maintain the loan accounts as per the terms of the sanction, causing the same to be classified as 'NonPerforming Assets' on 31st of March, 2017. It was also alleged that despite service of notice dated 17th of April, 2017, under Section 13(2) of the Act of 2002, the petitioners had failed to liquidate the balance outstanding alongwith other charges and costs incurred by the bank from time to time, within the stipulated period of sixty days from the date of notice, necessitating the initiating of action under Section 14 of the Act of 2002 for taking possession of the mortgaged property/ secured asset in accordance with the provisions of Section 13(4) of the Act of 2002 read with Rule 8 of the Security Interest (Enforcement) Rules, 2002 (for short "the Rules of 2002"). It is pleaded that prior to the institution of the above proceedings under Section 14 of the Act of 2002, the respondent Bank, in purported compliance of the provisions of the Act of 2002, issued a notice dated 17th of April, 2017 to the petitioner Nos. It is pleaded that prior to the institution of the above proceedings under Section 14 of the Act of 2002, the respondent Bank, in purported compliance of the provisions of the Act of 2002, issued a notice dated 17th of April, 2017 to the petitioner Nos. 1 to 3 asserting that an aggregate amount of Rs. 222.50 lacs comprising of Rs. 145.00 lacs as working capital and Rs. 77.50 lacs as Term Loan had been sanctioned and granted to the petitioner Nos. 1 to 3 against the security of the properties mentioned therein. It was also alleged that the said account had been classified as Non- Performing Asset (NPA) as on 31st of March, 2017 and an amount of Rs.2,64,46,318.00 was recoverable from the petitioner Nos. 1 to 3 with further interest with effect from 1 st of April, 2017 and, accordingly, the petitioners were called upon to discharge the said liability within a period of sixty days. The petitioners contend that no notice under Section 13(2) of the Act of 2002 was issued by the respondents to the petitioner No.4 herein nor such notice was ever received by the said petitioner. The notice dated 17th of April, 2017 was duly replied by the petitioner Nos. 1 to 3 vide representation dated 20th of May, 2017, however, without deciding the said representation made by the petitioner Nos. 1 to 3, the respondents chose to invoke the powers provided under Section 13(4) of the Act of 2002 as also Rule 8 of the Security Interest (Enforcement) Rules, 2002, asserting of having taken symbolic possession of the mortgaged property mentioned therein. It is submitted that the said possession notice under Section 13(4) of the Act of 2002 had been issued by the respondents without deciding or communicating their decision on the representation of the petitioners dated 20th of May, 2017. The said notice, as per the petitioners, was issued by the respondents despite the successive representation of the petitioner Nos. 1 to 3 dated 29th of September, 2017 received by them vide receipt dated 4th of October, 2017, followed by further representations of the petitioner Nos. 1 to 3 dated 20th of November, 2017, 19th of April, 2018 and 3rd of July, 2018, in terms whereof the petitioners had proposed 'One Time Settlement' of the entire outstanding amount at a net amount of Rs. 1 to 3 dated 20th of November, 2017, 19th of April, 2018 and 3rd of July, 2018, in terms whereof the petitioners had proposed 'One Time Settlement' of the entire outstanding amount at a net amount of Rs. 185.00 lacs with substantial amount of Rs.50.00 to 60.00 lacs as first installment and the balance amount within a net period of eighteen months. It is submitted that pursuant to the said applications, the respondents even called the petitioners for negotiations at Zonal Office, Srinagar and, vide decision of the Committee of Officers headed by Mohd Younis Pattoo, vice President IAPM, Zonal Office, Srinagar, ordered the settlement at Rs.1.95 crores with a direction to the petitioners to deposit an amount of Rs. 2.00 lacs vide cheque dated 7th of April, 2018, in terms of his application dated 9th of April, 2018. Aggrieved by the issuance of possession notice, the petitioners preferred an appeal before the Court of learned Additional District Judge, Srinagar under Section 17-A of the Act of 2002, challenging the process initiated by the respondents, which appeal, in terms of final order dated 16th of April, 2019, came to be disposed of holding that the representation made by the petitioners under sub-Section 3-A of Section 3 of the Act of 2002 had not been responded to by the respondents within the statutory period of 15 days and that the possession notice under Section 13(4) of the Act of 2002 had not been published in accordance with the mandate of Rule 8(1) and 8(2) of the Rules of 2002. The learned Court held that the entire process had been initiated by the respondents without strictly following the procedure prescribed by law. In compliance of the directions passed by the learned District Judge, Srinagar, the petitioner Nos. 1 to 3 submitted a representation dated 30th of April, 2019 before the respondent No.1. The said representation, however, was again rejected by the respondent No.1 vide reply dated 6th of May, 2019. In compliance of the directions passed by the learned District Judge, Srinagar, the petitioner Nos. 1 to 3 submitted a representation dated 30th of April, 2019 before the respondent No.1. The said representation, however, was again rejected by the respondent No.1 vide reply dated 6th of May, 2019. It is pleaded by the petitioners that the inter se relation of the parties is controlled and governed by the judgment of the learned Additional District Judge, Srinagar, passed in exercise of powers vested in the said Court under Section 17-A of the Act of 2002 and the respondents were required to proceed ahead by following the mandate of law contained in Rule 8(2) of the Rules of 2002 and Section 3 of the Act of 2002, however, the respondents, instead of doing so, chose to directly approach the respondent No.3 with an application under Section 14 of the Act of 2002. In the said application, the respondent No.3 has passed the order dated 16th of January, 2020, which order is assailed by the petitioners herein this petition on the grounds detailed out in the petition. 3. Mr Haqani, the learned counsel for the petitioners, submits that the order impugned has been passed by the learned Magistrate without jurisdiction inasmuch as under Section 14 of the Act of 2002, the power contained therein in entitled to be exercised only by District Magistrate or Metropolitan Magistrate. It is submitted that the learned Magistrate has failed to record any satisfaction regarding compliance of the requirement of Section 14 of the Act of 2002 by the respondents and that no reasons supporting the conclusion arrived by the learned Magistrate have been reflected in the order. It is pleaded that the respondents having initiated the process under Section 13 of the Act of 2002 and issued the notice under Section 13(2) were required to act accordingly so as to follow the mandate of the Act of 2002 by taking resort to Rule 8 of the Rules of 2002 and other provisions of Section 13 of the Act of 2002. It is contended that the respondents having followed the course of operating the mechanism provided under Section 13 of the Act of 2002 were bound to act accordingly, instead of resorting to remedy under Section 14 of the Act of 2002 when no notice of the details of taking possession of the security interests was ever issued to the petitioners. The learned counsel has proceeded to state that the respondents have acted in disregard of the judgment of the Court of learned Additional District Judge, Srinagar and the course provided by law. It is also the case of the petitioners that the respondents have not at all issued the notices under Section 13(4) of the Act of 2002 or Rule 8 of the Rules of 2002 before invoking Section 14 of the Act of 2002. In order to support his arguments, the learned counsel for the petitioners has referred to and relied upon various judgments passed by Hon'ble the Supreme Court as well as different High Courts of the country. 4. Mr Shah, the learned Senior Counsel, who is on Caveat, representing the respondent Bank, while supporting the order passed by the learned Magistrate, submits that the order has been passed strictly in accordance with the procedure prescribed under law. It is pleaded that the petitioners have failed to maintain the loan accounts as per the sanction granted alongwith other agreed terms and conditions mentioned in the security documents executed by the petitioners in favour of the respondent Bank, resulting in classification of their loan accounts as Non-Performing Assets with effect from 31st of March, 2017. It is contended that the respondents issued notices under Section 13(2) of the Act of 2002 dated 17th of April, 2017 to the petitioners vide registered postal receipt dated 18th of April, 2017 and advised them to pay to the Bank all the amount outstanding against them in the books of accounts of the Bank within its Branch at Nowgam, Srinagar, together with interest thereon alongwith other charges and costs incurred by the Bank from time to time and thereby discharge, in full, all the liabilities to the Bank within a period of 60 days from the date of notice, failing which the Bank shall take the measures to recover its secured assets. It is argued that the petitioners, despite service of notice under Section 13 of the Act of 2002, did not pay any heed to the requests made by the respondent Bank to liquidate the balance outstanding, thereby giving cause to the respondent Bank to file the application under Section 14 of the Act of 2002 for taking possession of the above mentioned secured assets/ mortgaged property in accordance with the provisions of Section 13(4) of the said Act read with Rule 8 of the Rules of 2002. 5. Heard the learned counsel for the parties, perused the pleadings on record and considered the matter. 6. The seminal question involved in the instant petition is whether the Chief Judicial Magistrate is competent to process the request of the secured creditor to take possession of the secured asset under Section 14 of the Act of 2002. 7. Section 14 (1) of the Act of 2002 not only gives powers to the District Magistrate, but also to the Chief Metropolitan Magistrate to assist the secured creditor in taking possession of the secured asset. Section 1 (a) provides that the District Magistrate or the Chief Metropolitan Magistrate/ for the purpose of Chief Judicial Magistrate, may authorize any officer subordinate to him to take possession of such assets relating thereto and forward the said assets to the secured creditor. The learned Magistrate, in his order, impugned in the instant petition, has held that the nomenclature; Chief Metropolitan Magistrate used in Section 14 of the Act of 2002, is inclusive of Chief Judicial Magistrate functioning in non-metropolitan areas and that the Chief Judicial Magistrate shall have jurisdiction to entertain an application made by a secured creditor under Section 14 of the Act of 2002. In order to support this view, the learned Magistrate, has placed reliance on the law laid down by Hon'ble the Supreme Court in case titled 'The Authorized Officer, Indian Bank v. D. Visalakshi & Anr.' rendered in 'Civil Appeal No.6295/2015'. We have gone through the judgment aforesaid passed by the Hon'ble Apex Court and find that the Chief Judicial Magistrate has been declared as equally competent to deal with an application moved by the secured creditor under Section 14 of the Act of 2002 in non-metropolitan areas. We have gone through the judgment aforesaid passed by the Hon'ble Apex Court and find that the Chief Judicial Magistrate has been declared as equally competent to deal with an application moved by the secured creditor under Section 14 of the Act of 2002 in non-metropolitan areas. That being so, we are of the view that the submission of the learned counsel for the petitioners that the Chief Judicial Magistrate could not proceed ahead in the application filed by the respondent Bank for taking possession of such secured assets to the secured creditor is not tenable and, as such, shall stand rejected. 8. The next contention raised by the learned counsel for the petitioners that the information, in tune with Section 14 of the Act of 2002, has not been accompanied by the Affidavit of the authorized officer of the Bank which has a direct bearing on the decision of the learned Magistrate and, thus, renders the same bad in law is also unsustainable. This is so because in terms of Section 14 of the Act of 2002, the Magistrate is required to satisfy itself as regards the contents of the Affidavit and pass suitable orders for the purpose of taking possession of the secured assets. The said satisfaction of the Magistrate, contemplated under the second proviso to Section 14(1) of the Act of 2002, does not require the Magistrate to examine the legal niceties of the transaction. In the case on hand, the learned Chief Judicial Magistrate has examined this issue in detail and has recorded satisfaction qua the contents of the Affidavit strictly in tune with Section 14 of the Act of 2002 and, thus, we do not find any illegality or perversity in the order impugned passed by the learned Magistrate in this regard. 9. It was also the case of the learned counsel for the petitioners before us that no opportunity of being heard was provided to the petitioners by the Chief Judicial Magistrate before passing the order impugned. The law is that there is no requirement of providing any opportunity of being heard to the borrower before passing any order on the application filed by the secured creditor before the Magistrate under Section 14 of the Act of 2002. The law is that there is no requirement of providing any opportunity of being heard to the borrower before passing any order on the application filed by the secured creditor before the Magistrate under Section 14 of the Act of 2002. The Magistrate, after satisfying itself in tune with the mandate of Section 14 of the Act of 2002, is empowered to proceed ahead with the said application moved by the secured creditor and pass appropriate orders thereon. It is apposite to mention here that the Bank has the option either to take possession of the secured asset(s) by having recourse to Rule 8(1) of the Rules of 2002 or then may approach the Chief Metropolitan Magistrate/ District Magistrate/ Chief Judicial Magistrate, as the case may be, for seeking such possession. Admittedly, all the safeguards and the procedures provided in Section 13 of the Act of 2002 have been complied with by the secured creditor before initiating proceedings in terms of Section 14(1) of the Act of 2002. This submission, thus, being without any merit, is also not accepted by us. 10. Learned counsel for the petitioners also pleaded before us that the respondent Bank did not follow the procedure prescribed in Section 13(4) of the Act of 2002 in the matter, after the Appellate Court had set aside the process initiated by the respondent Bank in the appeal filed by the petitioners inasmuch as the respondent Bank did not initiate the entire process afresh right from stage one, i.e., Section 13(2) of the Act of 2002. We have gone through the judgment passed by the Appellate Court in the appeal filed by the petitioners and find that the Appellate Court had asked the respondent Bank to consider the representation/ objections filed by the petitioners, which direction, upon perusal of the pleadings on record, seems to have been complied with by the respondent Bank/ secured creditor in letter and spirit, resulting in issuance of certain communications addressed to the petitioners by the respondent Bank. 11. In view of the preceding analysis, we do not find any illegality or perversity in the order passed by the learned Magistrate under Section 14 of the Act of 2002 and, thus, the petition of the petitioners, being devoid of any merit, shall stand dismissed, alongwith the connected CM. This shall also discharge the Caveat No.151/2020 lodged by the respondent Bank.