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2023 DIGILAW 558 (HP)

State Bank of India v. State of Himachal Pradesh

2023-12-18

BIPIN CHANDER NEGI, TARLOK SINGH CHAUHAN

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JUDGMENT : Tarlok Singh Chauhan, J. Since common question of law arises for consideration in all these writ petitions, therefore, the same are taken up together for hearing and are being disposed of by common reasoning. 2. The moot question that arises for consideration, in all these petitions, is the nature of power exercisable by the District Magistrate in application(s) filed by the Bank or Financial Institutions under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 2002 (for short, the Act). 3. The undisputed facts are that the borrowers availed of various financial assistance from the petitioner-Bank by mortgaging their immovable properties. However, the borrowers failed to repay the loan amount, as a result whereof, their loan accounts were classified as non performing assets (NPA). The petitioner-Bank thereafter issued notices under Section 13(2) and 13(4) of the Act to the borrowers, but to no avail, constraining the petitioner-Bank to file application(s) under Section 14 of the Act seeking assistance in taking over possession of the secured assets. However, prior to the aforesaid application(s), the borrowers being aware of the proceedings filed caveat petition(s) before the District Magistrate in respect of order of delivery of possession and the District Magistrate started hearing the borrowers and directed the petitioner-bank to supply documents to borrowers. Hence, the instant petitions. 4. The respondent-District Magistrate has contested the petitions by filing replies, wherein common defence has been taken to the effect that on examination of the case files, it was noticed that the borrowers in their respective representations filed under Section 13(3A) of the Act had raised objections that classification of their accounts as NPAs was not in accordance with statutory guidelines of the Reserve Bank of India (RBI) and that the petitioner-Bank had wrongly clubbed the liability of other independent and distinct entities, as a result of which their accounts turned NPAs. In view of this, in order to satisfy the contents of the affidavit(s), the authorized officer of the petitioner-Bank was directed to submit the relevant record in this regard. Direction given to the authorized officer was purely an administrative direction with a view to assess the record so that the contents of the affidavit(s) could be satisfied. It is in this background that the question, as formulated above, arises for consideration. 5. Direction given to the authorized officer was purely an administrative direction with a view to assess the record so that the contents of the affidavit(s) could be satisfied. It is in this background that the question, as formulated above, arises for consideration. 5. However, in order to determine the question, it shall be apt firstly to reproduce section 14 of the Act, which reads as under:- Section 14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset. It is in this background that the question, as formulated above, arises for consideration. 5. However, in order to determine the question, it shall be apt firstly to reproduce section 14 of the Act, which reads as under:- Section 14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset. (1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets 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 assets, 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 asset and documents to the secured creditor: 1[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) 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 Financial Institution 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; (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 thereunder 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 assets [within a period of thirty days from the date of application:] [Provided also that if no order is passed by the Chief Metropolitan 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 documents relating thereto; 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 or 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 1[any officer authorised by the Chief Metropolitan Magistrate or District Magistrate] done in pursuance of this section shall be called in question in any court or before any authority. 6. The nature, scope, sweep and extent of the jurisdiction vested in the District Magistrate under Section 14 of the Act is not only evident from the unambiguous language of Section 14, but also from the law laid down by the Hon’ble Supreme Court from time to time. 7. A bare perusal of Section 14 of the Act would go to indicate that the jurisdiction of the Chief Metropolitan Magistrate/District Magistrate under Section 14 of the Act is purely ministerial and limited only to assisting secured creditors in taking possession of secured assets and nothing more. 8. Section 14 of the Act does not contemplate much less empowers the District Magistrate to even consider much less adjudicate upon any objections raised by borrower or anybody else. All that the District Magistrate is required to do when considering an application under Section 14 is – (a) to ascertain that the secured asset falls within his jurisdiction and (b) that the secured creditor has complied with the requirements of Section 13 and 14 of the Act and nothing else. 9. Once the District Magistrate is satisfied that the requirements of Sections 13 and 14 of the Act have been met or complied with, the District Magistrate has to proceed to take possession of the secured asset. 10. It is implicit on an examination of Chapter III of the Act that the District Magistrate on finding that the secured creditor has complied with Section 14 of the Act must act promptly and with due dispatch in ensuring that possession of the secured asset is recovered as quickly as possible. The very objective of Chapter III of the Act is to enable secured creditors to enforce their security interest without the intervention of the court or tribunal. 11. In taking the aforesaid view, we are duly supported and fortified by two recent judgments of the Hon’ble Supreme Court. 12. The very objective of Chapter III of the Act is to enable secured creditors to enforce their security interest without the intervention of the court or tribunal. 11. In taking the aforesaid view, we are duly supported and fortified by two recent judgments of the Hon’ble Supreme Court. 12. In R.D. Jain and Company vs. Capital First Limited and others, (2023) 1 SCC 675 , while dealing with scope, sweep and extent of the jurisdiction vested in the District Magistrate under Section 14 of the Act, the Hon’ble Supreme Court has held as under:- 21. At this stage, it is required to be noted that along with insertion of subsection (1A), a proviso has also been inserted in sub-section (1) of Section 14 of the SARFAESI Act whereby the secured creditor is now required to comply certain conditions and to disclose that by way of an application accompanied by affidavit duly affirmed by its authorised officer in that regard. Sub Section (1A) is in the nature of an explanatory provision and it merely restates the implicit power of the CMM/DM in taking services of any officer subordinate to him. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the insertion of subsection (1A) is not to invest a new power for the first time in the CMM/DM as such. 22. Thus, considering the scheme of the SARFAESI Act, it is explicit and crystal clear that possession of the secured assets can be taken by the secured creditor before confirmation of sale of the secured assets as well as post confirmation of sale. For taking possession of the secured assets, it could be done by the “authorised officer” of the Bank as noted in Rule 8 of the Security Interest (Enforcement) Rules, 2002. 23. However, for taking physical possession of the secured assets in terms of Section 14(1) of the SARFAESI Act, the secured creditor is obliged to approach the CMM/DM by way of a written application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action. The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the SARFAESI Act from the secured creditor for that purpose. The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the SARFAESI Act from the secured creditor for that purpose. As soon as such an application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the SARFAESI Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. 24. As mandated by Section 14 of the SARFAESI Act, the CMM/DM has to act within the stipulated time limit and pass a suitable order for the purpose of taking possession of the secured assets within a period of 30 days from the date of application which can be extended for such further period but not exceeding in the aggregate, sixty days. Thus, the powers exercised by the CMM/DM is a ministerial act. He cannot brook delay. Time is of the essence. This is the spirit of the special enactment. 25. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself/herself or through any officer subordinate to him/her, including the advocate commissioner who is considered as an officer of his/her court. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. Thus, we reiterate that the step to be taken by the CMM/DM under Section 14 of the SARFAESI Act, is a ministerial step. While disposing of the application under Section 14 of the SARFAESI Act, no element of quasi-judicial function or application of mind would require. The Magistrate has to adjudicate and decide the correctness of the information given in the application and nothing more. Therefore, Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets. 26. The Magistrate has to adjudicate and decide the correctness of the information given in the application and nothing more. Therefore, Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets. 26. Thus, in view of the scheme of the SARFAESI Act, more particularly, Section 14 of the SARFAESI Act and the nature of the powers to be exercised by learned Chief Metropolitan Magistrate/learned District Magistrate, the High Court in the impugned judgment and order has rightly observed and held that the power vested in the learned Chief Metropolitan Magistrate/learned District Magistrate is not by way of persona designata. 13. Thereafter, when similar issue came up before the Hon’ble Supreme Court in Kotak Mahindra Bank Limited vs. Girnar Corrugators Private Limited and Ors., (2023) 3 SCC 210 , it was observed as under:- 33. Even otherwise the Naib Tehsildar was not at all justified in not taking possession of the secured assets/ properties as per order dated 24.09.2014 passed by the District Magistrate under Section 14 of the SARFAESI Act. The order passed by the Naib Tehsildar refusing to take possession of the secured assets/properties despite the order passed under Section 14 of the SARFAESI Act on the ground that recovery certificates issued by respondent No.1 for recovery of the orders passed by the Facilitation Council are pending, is wholly without jurisdiction. While exercising power under Section 14 of the SARFAESI Act, even the District Magistrate has no jurisdiction and/or District Magistrate and/or even the Chief Metropolitan Magistrate has no jurisdiction to adjudicate the dispute between secured creditor and debtor. 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 District Magistrate nor 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. 35. 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. 35. Therefore, the order passed by the Naib Tehsildar refusing to take the possession pursuant to the order passed by the District Magistrate under Section 14 of the SARFAESI Act was wholly without jurisdiction and therefore also the same was liable to be set aside. 14. Thus, it is clearly evident from the aforesaid exposition of law that the nature of power under Section 14 of the Act is executory and ministerial in nature and not adjudicatory. The question of law is answered accordingly. 15. However, the matter cannot be left to rest here, for our experience has been otherwise as we find that in several cases, that have come before the Court, the District Magistrates are disposing of applications under Section 14 of the Act without granting assistance to secure creditors in recovering possession of their secured assets and what is still worse is that the District Magistrates are granting relief (s) directly or indirectly to borrowers or third parties in flagrant and blatant violation of law, more particularly, when the borrowers or third parties have not even contested the steps taken by the secured creditors under Section 13 of the Act for enforcement of their securing interest by filing any application before the concerned Debt Recovery Tribunal (DRT) under Section 17 of the Act. 16. We find that the District Magistrates under Section 14 of the Act claim powers, which they do not possess or enjoin under Section 14 and proceed to pass orders, which are not only contrary to provisions of Section 14, but void ab initio and against the very object and purpose of Chapter III of the Act. 17. It is high time that the District Magistrates put their respective houses in order and for this purpose, let a copy of this order be sent to the Chief Secretary to the Government of Himachal Pradesh for onward circulation to all the District Magistrates and the concerned authorities. 18. 17. It is high time that the District Magistrates put their respective houses in order and for this purpose, let a copy of this order be sent to the Chief Secretary to the Government of Himachal Pradesh for onward circulation to all the District Magistrates and the concerned authorities. 18. As regards these writ petitions, we deem it appropriate to allow the same and direct the respondent to decide the applications filed by the petitioner-Bank under Section 14 of the Act within parameters of the law as explained by the Hon’ble Supreme Court in the aforesaid decisions and pass appropriate orders within an outer limit of 30 days extendable upto 60 days, but only after recording reasons for delay. Ordered accordingly. 19. The instant petitions are allowed in the aforesaid terms. Pending application(s), if any, also stands disposed of.