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2023 DIGILAW 473 (UTT)

Bansal Agro Products v. District Magistrate, Udham Singh Nagar

2023-08-17

RAVINDRA MAITHANI

body2023
JUDGMENT : Ravindra Maithani, J. The challenge in this petition is made to an order dated 26.07.2023, passed under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“the SARFAESI Act”) by the respondent no.1, District Magistrate, Udham Singh Nagar with the related reliefs. 2. Heard learned counsel for the parties and perused the record. 3. It is the case of the petitioners that the petitioner no.1 the firm is a partnership firm and the petitioner no.2 is one of its partners. One of the partners of the petitioner no.1 the firm Mayank Agarwal has died on 10.08.2022. The firm had got sanctioned Cash Credit Limit facility with regard to the rice mill from the respondent no. 2, the Nainital Bank Ltd (“the Bank”). The petitioners were maintaining their accounts regularly, but the respondent no.2, the Bank in utter violation of the guidelines and directives of the Reserve Bank of India (“RBI”), regarding classification of Non Performing Assets (“NPA”) classified the loan account of the petitioners firm as NPA on 28.10.2022. The respondent no. 2 the Bank thereafter, proceeded under the provisions of the SARFAESI Act. It is the case of the petitioners that notice under Section 13 (2) of the Act has never been served upon them. Thereafter, on an application of the respondent no.2, the Bank, the respondent no.1, the District Magistrate, Udham Singh Nagar has passed the impugned order dated 26.07.2023 for taking possession of the assets. 4. Learned counsel for the petitioners would submit that entire action of the respondent no.2, the Bank is in utter violation of the RBI guidelines; the accounts of the petitioners could not have been classified as NPA. He would raise the following points in his submission:- (i) A writ petition assailing an order passed under Section 14 of the SARFAESI Act is maintainable, in view of the law, as laid down by the Hon’ble Supreme Court in the case of Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Limited and others, (2014) 6 SCC 1 . Under Section 13 (4) of the SARFAESI Act, an aggrieved person may ventilate his grievance under Section 17 of the SARFAESI Act, but action taken under Section 14 of the SARFAESI Act may not be challenged in any other court as per Section 14 (3) of the SARFAESI Act. Under Section 13 (4) of the SARFAESI Act, an aggrieved person may ventilate his grievance under Section 17 of the SARFAESI Act, but action taken under Section 14 of the SARFAESI Act may not be challenged in any other court as per Section 14 (3) of the SARFAESI Act. (ii) The action under Section 14 of the SARFAESI Act has not been as per law because an application that is required to be filed under Section 14 of the SARFAESI Act, requires to give all the details that are related to the matter. It is argued that the petitioners in response to the notice under Section 13 (2) of the SARFAESI Act have made a representation under Section 13 (3A) of the SARFAESI Act and this fact was necessarily required to be mentioned in the application under Section 14 of the SARFAESI Act, in view of clause (vii) of the first proviso to Section 14 (1), which reads as hereunder:- “14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.- (1) Where the possession of any secured asset is required to be taken by the secured creditor of 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- ............................................................................................................................................................................................................................................................................................... Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that- (i) ............................................................... (ii) ............................................................. (iii) ..................................................................................................................................................................................................... (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.” (iii) The District Magistrate may under Section 14 of the SARFAESI Act, authorise any officer subordinate to him to take possession. It is so required under Section 14 (1A) of the SARFAESI Act. It is so required under Section 14 (1A) of the SARFAESI Act. In the instant case, by the impugned order, the authorised officer of the Bank has been directed to take possession and the Senior Superintendent of Police, Udham Singh Nagar (“the SSP”) has been directed to deliver possession to the authorised officer of the Bank. It is argued that the SSP is not a subordinate officer to the District Magistrate. Such an order could not have been passed. 5. Learned counsel for the respondent no.2, the Bank would submit that after judgment passed in the case of Harshad (supra), Section 17 (4 A) of the SARFAESI Act has been incorporated and in view of the judgment in the case of C. Bright Vs. District Collector and others, (2021) 2 SCC 392 , now an order under Section 14 of the SARFAESI Act could be challenged under Section 17 of the SARFAESI Act. He would refer to para 19 of the judgment, which reads as hereunder:- “19. Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd., (2014) 6 SCC 1 : (2014) 3 SCC (Civ) 1 was a case where the person in possession claimed tenancy rights in the premises as well as a protected tenancy, being a tenant prior to creation of a mortgage. It was held that the remedy of an aggrieved person against a decision of Chief Metropolitan Magistrate or a District Magistrate lay only before the High Court. However, after the aforesaid judgment was rendered on 3-4-2014, the Act had been amended and sub-section (4-A) was inserted in Section 17 with effect from 1-9-2016. This provided a right to move an application to the Debts Recovery Tribunal by a person who claimed tenancy or leasehold rights.” 6. Referring to the judgment in the case of C. Bright (supra), learned counsel for the respondent no.2, the Bank would also submit that the court should be much slow in entertaining such petitions as the instant one. He would refer to the judgment in the case of Kotak Mahindra Bank Limited Vs. Girnar Corrugators Private Limited and others, (2023) 3 SCC 210 , to argue that the petitioners have alternate efficacious remedy by way of approaching the Debts Recovery Tribunal under Section 17 of the SARFAESI Act. In para 34 of the judgment, the Hon’ble Supreme Court observed as hereunder:- “34. Girnar Corrugators Private Limited and others, (2023) 3 SCC 210 , to argue that the petitioners have alternate efficacious remedy by way of approaching the Debts Recovery Tribunal under Section 17 of the SARFAESI Act. In para 34 of the judgment, the Hon’ble Supreme Court observed as hereunder:- “34. Under Section 14 of the SARFAESI Act, the District Magistrate or the Chief Metropolitan Magistrate as the case may be is required to assist the secured creditor in getting the possession of the secured assets. Under Section 14 of the SARFAESI Act, neither the District Magistrate nor the Metropolitan Magistrate would have any jurisdiction to adjudicate and/or decide the dispute even between the secured creditor and the debtor. If any person is aggrieved by the steps under Section 13(4)/order passed under Section 14, then the aggrieved person has to approach the Debts Recovery Tribunal by way of appeal/application under Section 17 of the SARFAESI Act.” 7. Learned counsel for the respondent no.2, the Bank would submit that, in fact, the notice was served on the petitioners, but the petitioners had refused to take it. It is also submitted that a notice under Rule 8 of the Security Interest (Enforcement) Rules, 2002 (“the Rules”), was also served on the petitioners by affixation of the notice. Learned counsel for the respondent no.2, the Bank would also raise the following points in his submission:- (i) The petitioners were given notice under Section 13 (2) of the SARFAESI Act to which they had replied under Section 13 (3 A) of the SARFAESI Act. Thereafter, the petitioners were given notice under Rule 8 of the Rules. (ii) The petitioners did not challenge any action that was taken under Section 13 (2) of the SARFAESI Act. The proceedings under Section 14 of the SARFAESI Act are in continuation to the proceedings that are undertaken under Section 13 (4) of the SARFAESI Act. Therefore, now the petitioners are not entitled to any relief. 8. In reply to it, learned counsel for the petitioners would submit that the notice that was issued under Rule 8 of the Rules is not on record. He would also submit that the principles of law, as laid down in the case of Kotak Mahindra (supra) were laid down on a different set of facts. 9. 8. In reply to it, learned counsel for the petitioners would submit that the notice that was issued under Rule 8 of the Rules is not on record. He would also submit that the principles of law, as laid down in the case of Kotak Mahindra (supra) were laid down on a different set of facts. 9. The SARFAESI Act has been enacted with a purpose to regulate securitisation and reconstruction of financial assets and enforcement of security interest etc. to provide for a Central database of security interest created on property rights, and for matters connected therewith or incidental thereto. It is a self contained Act. The Court leaves the question of jurisdiction open and does not propose to decide as to whether the instant writ petition is maintainable or not. The Court proceeds to decide the petition. 10. It is being argued that the impugned order is not as per law. The application was not supported with all the details, particularly the details, as required to be filled up under clause (vii) of the first proviso to Section 14 (1) and the decision thereof. In addition to it, what is being argued is that the District Magistrate, could not have directed the SSP to take possession because under Section 14 of the Act, the District Magistrate may only authorise the Officers subordinate to him, in view of Section 14 (1 A) of the Act. 11. It is not denied by the petitioners that they have taken a loan. They have also not denied their liability to repay the loan amount. It is also admitted that the petitioners were given notice under Section 13 (2) of the Act. It is admitted that the petitioners replied to it. The impugned order records that alongwith the application under Section 14 of the Act, the notice under Rule 8 (1) of the Rules were provided by the respondent no.2, the Bank. Rule 8 (1) reads as hereunder:- “8. Sale of immovable secured assets.- (1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property.” 12. The petitioners were aware that their representation under Section 13 (3A) of the SARFAESI Act has not been considered and the respondent no.2, Bank is proceeding further to take possession. The petitioners were issued notice under Rule 8 of the Rules. As stated, they have not challenged it. This Court is of the view that the grounds which are being taken to challenge the impugned order are not sustainable. 13. If the details of the representation that was made by the petitioners under Section 13 (3A) have not been included in the application made under Section 14 of the SARFAESI Act as filed by the Bank, in view of this Court, it does not vitiate the entire order under Section 14 of the SARFAESI Act. The District Magistrate has categorically allowed the application under Section 14 of the Act, filed by the respondent no.2, the Bank, and directed that the possession of the secured assets be provided to the authorised officer of the respondent no.2, the Bank. 14. The District Magistrate directed the SSP of the concerned District to get the possession delivered to the authorised officer of the respondent no.2 the Bank. This Court cannot accept the argument that the District Magistrate cannot direct the SSP. For the purposes of Section 14 (1A) of the SARFAESI Act, it cannot be said that the SSP is not subordinate to the District Magistrate. 15. In view of the aforesaid, this Court does not see any reason to entertain the petition. Accordingly, the petition deserves to be dismissed at the stage of admission itself. 16. The petition is dismissed in limine.