Whether Magistrate must heard borrower before Allowing Possession Of Assets U/S 14 of SARFAESI Act?

The SARFAESI Act is intended to facilitate quick recovery of secured debts without extending any opportunity of hearing to a borrower and without judicial/quasi-judicial intervention till such time possession of the secured asset is taken by the secured creditor after serving the requisite notices and responding to the objection/representation that may be lodged/preferred by the borrower under section 13(3A). 

8. Pertinently, section 14 of the SARFAESI Act was amended twice, once in 2013 and then again in 2016. If it were the intention of the legislature to extend opportunity of hearing to a borrower before the District Magistrate/Chief Metropolitan Magistrate, as the case may be, it was free to do so. Advisedly, the legislature did not do so, for, it would have militated against the scheme of the SARFAESI Act and more particularly section 13 thereof. It is implicit in the scheme of the SARFAESI Act that natural justice, only to a limited extent, is available and not beyond what is expressly provided. There seems to be little merit in the argument advanced by Mr. Nedumpara and we hold that the language of section 14 is too clear and unambiguous, and does not admit of any requirement of complying with natural justice by putting the borrower on notice while an application thereunder is under consideration.

 IN THE HIGH COURT OF BOMBAY

Writ Petition (L) No. 8418 of 2022

Decided On: 23.03.2022

 C.A. Manisha Mehta and Ors. Vs. The Board of Directors and Ors.

Hon'ble Judges/Coram:

Dipankar Datta, C.J. and M.S. Karnik, J.

Citation:-MANU/MH/1377/2022

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Whether CMM or DM can adjudicate upon any objections raised by Borrower or anybody else while acting U/S 14 of SARFAESI Act?

 The jurisdiction of the CMM/DM under Section 14 of the

SARFAESI Act is purely ministerial and limited only to assisting

secured creditors in taking possession of secured assets and

nothing more. Section 14 of the SARFAESI Act does not

contemplate much less empower the DA to even consider much

less adjudicate upon any objections raised by Borrower or

anybody else. All that the DA 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 SARFAESI Act, and nothing else. Once the DA

is satisfied that the requirements of Section 13 and 14 have

been met and/or complied with, the DA has to proceed to take

possession of the secured asset. It is implicit on an examination

of Chapter III of the SARFAESI Act that the DA on finding that

the secured creditor has complied with Section 14 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 SARFAESI Act is to enable secured

creditors to enforce their security interest without the

intervention of the court or tribunal. We find that in several

cases, the DA dispose off Applications under Section 14 not only

without granting assistance to secure creditors in recovering

possession of their secured assets but in fact granting relief

(directly or indirectly) to Borrowers and/or Third Parties as has

been done in the present case. What is indeed shocking (as in

the present case) is that reliefs are granted to Borrowers/Third

Parties not only in the teeth of the provisions of Section 14 but

also despite the fact that these Borrowers/Third Parties have not

even contested the steps taken by the secured creditors under

Section 13 for enforcement of their securing interest by filing

any application before the DRT under Section 17 of the

SARFAESI Act. We find that the DA under Section 14 of the

SARFAESI Act claim powers which they do not have under

Section 14 and proceed to pass orders which are completely

contrary to the provisions of Section 14 and the very object and

purpose of Chapter III of the SARFAESI Act. We find that the

conclusion reached by Respondent No. 1 in the impugned order

is a prime example of this very worrying trend. {Para 16}

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION

WRIT PETITION NO.9749 OF 2021

 Phoenix ARC Private Limited  Vs. The State of Maharashtra

CORAM : K. R. SHRIRAM &

A. S. DOCTOR, JJ.

DATE : 03RD AUGUST, 2022

Coram:  A.S. DOCTOR, J.

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Whether DM or CMM can appoint an advocate to take possession of property as per the Sarfaesi Act?

 Whereas, applying the "functional subordination" test, we are persuaded to take the view that Sub-section (1A) of Section 14 of the 2002 Act is no impediment for the CMM/DM to engage services of an advocate (an officer of the court) -- only for taking possession of secured assets and documents relating thereto and to forward the same to the secured creditor in furtherance of the orders passed by the CMM/DM Under Section 14(1) of the 2002 Act in that regard. It does not follow that the advocate so appointed needs to be on the rolls in the Office of the CMM/DM or in public service. There is intrinsic de jure functional subordinate relationship between the CMM/DM and the advocate being an officer of the court. The apprehension of the borrowers about improper execution of orders of the CMM/DM passed Under Section 14(1) of the 2002 Act by the Advocate Commissioner, is plainly misplaced. Further, being an officer of the court and appointed by the CMM/DM, the acts done by the Advocate Commissioner would receive immunity Under Section 14(3) of the 2002 Act -- as an officer authorised by the CMM/DM. There is no reason to assume that the advocate so appointed by the CMM/DM would misuse the task entrusted to him/her and that will not be carried out strictly as per law or it would be a case of abuse of power. Rather, going by the institutional faith or trust reposed on advocates being officers of the court, there must be a presumption that if an advocate is appointed as commissioner for execution of the orders passed by the CMM/DM Under Section 14(1) of the 2002 Act, that responsibility and duty will be discharged honestly and in accordance with Rules of law. {Para 42}

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 1637 of 2022 

Decided On: 25.02.2022

NKGSB Cooperative Bank Limited Vs. Subir Chakravarty and Ors.

Hon'ble Judges/Coram:

A.M. Khanwilkar and C.T. Ravikumar, JJ.

Author:A.M. Khanwilkar, J.

Citation: MANU/SC/0247/2022

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Whether Additional Chief Judicial Magistrate can pass order U/S 14 of SARFAESI Act?

We are in complete agreement with the view taken by the High Court that (i) the District Magistrate, Chief Metropolitan Magistrate is not a persona designata for the purposes of Section 14 of the SARFAESI Act; (ii) the expression “District Magistrate” and the “Chief Metropolitan Magistrate” as appearing in Section 14 of the SARFAESI Act shall deem to mean and include Additional District Magistrate and Additional Chief Metropolitan Magistrate for the purposes of Section 14 of the SARFAESI Act. {Para 12}

We hold that the powers under Section 14 of the SARFAESI Act can be exercised by the concerned Additional Chief Metropolitan Magistrates of the area having jurisdiction and also by the Additional District Magistrates, who otherwise are exercising the powers at par with the concerned District Magistrates either by delegation and/or special order. 

IN THE SUPREME COURT OF INDIA 

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 175 OF 2022;

M/s R.D. Jain and Co. Vs Capital First Ltd. & Ors.

Coram:  M.R. SHAH; J., B.V. NAGARATHNA; J. 

Author: M.R. SHAH, J.

Dated:  July 27, 2022 

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How to decide issue of limitation in SARFAESI Act proceeding?

I must now turn to the contentions of the learned Senior

Counsel for the petitioners on the issue of limitation. As already noted,


it is the stand of the petitioners that the application under Section 14

of the SARFAESI Act was filed before the Chief Judicial Magistrate

only on 11.09.2013 and therefore, beyond a period of 3 years from the

date on which the 2nd respondent was aware of the resistance offered

by the petitioners to an attempted dispossession. The petitioners point

to their submissions in the writ petition filed by the 1st respondent as

also the S.A. filed by them before the Debts Recovery Tribunal to

contend that the 2nd respondent was aware, as early as in 2009, of

their objections in the matter. It is argued, therefore, that by virtue of

Article 137 of the Limitation Act, the Section 14 application ought to

have been filed within three years from 2009 and, since it was not, the

said application of the 2nd respondent could not have been

entertained by the learned Magistrate. Persuasive though the

argument may seem at first blush, I'm afraid it cannot be accepted.

Section 36 of the SARFAESI Act that deals with limitation reads as

follows:


           "36. Limitation.-No secured creditor shall be entitled to
           take all or any of the measures under sub-section (4) of
           section 13, unless his claim in respect of the financial
           asset is made within the period of limitation prescribed
           under the Limitation Act, 1963 (36 of 1963).





      20. It will be apparent from a reading of the above provision

that once a claim in respect of a financial asset is made within the

period of limitation prescribed under the Limitation Act, 1963, then

the measure adopted by the secured creditor under Section 13 (4) is

also deemed to be within limitation. This view has been endorsed by a

Division Bench of this Court in the judgment dated 22.08.2012 in

W.A.No.899 of 2011 [E.P.Sreedharan v. Manager, Indian Bank

and Ors.].     A Special Leave Petition preferred against the said

judgment was dismissed by the Supreme Court on 17.02.2014

[S.L.P.Nos.10904-10905/2013]. Further, the decision of this Court in

Sami v. Bank of India - [2011 (3) KLT 554] is authority for the

proposition that the action of a financial institution in approaching the

Magistrate under Section 14 of the SARFAESI Act would itself

constitute a measure under Section 13 (4) of the Act. On the facts of

the instant cases, therefore, since it is not in dispute that the notice

under Section 13 (2) was issued within the period of limitation under

the Limitation Act, 1963, the subsequent measures taken by the 2nd

respondent, including approaching the Magistrate under Section 14 of

the SARFAESI Act, have to be seen as within the period of limitation


prescribed under the SARFAESI Act.
 IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                            PRESENT:

               THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR

               TUESDAY, THE 19TH DAY OF JANUARY 2016
                                   WP(C).No. 30016 of 2015 (B)
                                    
         P.M. KELUKUTTY,
           Vs
         YOUNG MEN'S CHRISTIAN ASSOCIATION,
             A.K.JAYASANKARAN NAMBIAR, J.
                       -------------------------------
                  
              Dated this the 19th day of January, 2016
Citation:AIR 2016 kerala 135
                   

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Whether Chief Judicial Magistrate in non-metropolitan area can entertain an application U/S 14 of SARFAESI Act 2002?

 According to us, there is no casus omissus. We are not reading something into the provision which the Legislature never intended to nor are we trying to interpret the provision so as to defeat the intention of the Legislature. We are only resorting to a purposive interpretation to arrive at the intention of the Legislature depending on the objects for which the enactment was made. As stated earlier, the intention of the Legislature was to achieve speedier recovery of the dues without the intervention of Tribunals or the Courts and for quick resolution of disputes arising out of the action taken for recovery of such dues. Ergo, by conferring jurisdiction on an authority to exercise the power of assistance, which, his counterpart in a Metropolitan area, is exercising, the Court is not interpreting the provision in a different manner so as to negate the intent of the Legislature. Giving jurisdiction to Chief Judicial Magistrates in non-metropolitan area, who are exercising the same functions as that of Chief Metropolitan Magistrates in metropolitan areas, would not in anyway abrogate or contradict the words used in Section 14 of the SARFAESI Act, thereby causing prejudice to any of the parties. On the other hand, it would hasten the process of rendering assistance to the secured creditors to recover possession of their assets thereby achieving the object for which the SARFAESI Act has been introduced.

39. For the aforesaid reasons, we answer the reference holding that the nomenclature Chief Metropolitan Magistrate referred to in Section 14 is inclusive of Chief Judicial Magistrate in non-metropolitan area and as such the Chief Judicial Magistrate in a non-metropolitan area gets jurisdiction to entertain an application under Section 14 of the SARFAESI Act, 2002.

IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH

Writ Petition Nos. 17589 and 17625 of 2014

Decided On: 27.11.2015

Appellants: T.R. Jewellery and Ors. 
Vs.
Respondent: State Bank of India and Ors.

Hon'ble Judges/Coram:D.B. Bhosale, Actg. C.J., C. Praveen Kumar and M.S.K. Jaiswal, JJ.

Citation:AIR 2016 Hyd125

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