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Judgment
C.S.Dias,J.
The 1st petitioner is an entrepreneur who had availed three loan facilities from the 2nd respondent-Bank in 2019, with the 2nd petitioner standing as guarantor. The 1st petitioner initially serviced the loan instalments regularly. However, due to the adverse impact of the COVID-19 pandemic on his business, he defaulted on repayment of the monthly instalments. The respondents thereafter classified the loan account as a non-performing asset and initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('Act', for brevity). Subsequently, for the purpose of taking possession of the secured asset, covered by Annexure-A notice, the respondents filed M.C.No.484 of 2023 before the Court of the Additional Chief Judicial Magistrate, Ernakulam ('the learned Magistrate', for short), which resulted in the appointment of an Advocate Commissioner as per Annexure-C order. Aggrieved by the aforesaid action, the petitioners instituted S.A.No.679 of 2024 before the Debt Recovery Tribunal-I, Ernakulam. According to the petitioners, the demand notice issued by the respondents is not a valid notice under Section 13(2) of the Act, as the particulars of the claim and the secured assets are conspicuously absent. They further contend that, for the same reason, the possession notice issued by the respondents is also invalid. The Advocate Commissioner thereafter issued a dispossession notice dated 27.08.2024. Along with the securitisation application, the petitioners filed an application seeking an interim order of status quo, which the Tribunal allowed, subject to the petitioners depositing Rs.78/- lakh. The petitioners, however, could deposit only Rs.15 lakh, resulting in the interim order being vacated. Faced with the imminent threat of dispossession, the petitioners approached this Court by filing O.P.(DRT) No.310 of 2024. They also filed W.P.(C) No.42666 of 2024 before this Court for permission to discharge the liability in instalments. By Annexure-D judgment, this Court disposed of the writ petition as prayed for. However, owing to the petitioners' financial constraints, they were unable to make the payment as directed in Annexure-D judgment. During the interregnum, the respondents offered to settle the liability in respect of the first loan account for Rs.83/- lakh, against an outstanding amount of nearly Rs.1.40/- crore. The petitioners deposited Rs.70/- lakh. Thereafter, when they approached the respondents, to remit the balance amount, the respondents refused to return the title deeds of the mortgaged properties until the entire balance amount was paid. Subsequently, the 2nd respondent filed M.C.No.738 of 2026 before the learned Magistrate to appoint an Advocate Commissioner to take physical possession of the secured asset. By the impugned Annexure-H order, the learned Magistrate has appointed an Advocate Commissioner as prayed in the application. The impugned order is per se illegal and wrong. Hence, this petition.
The respondents have filed a counter-affidavit, inter alia, contending that the present petition is not maintainable in law. It is submitted that, while exercising jurisdiction under Section 14 of the Act, the learned Magistrate performs only a ministerial function and does not act as a criminal court. According to the respondents, the legal position is well settled by a catena of decisions of this Court. It is further contended that the petitioners have approached this Court with any bona fides. Although a conditional order of status quo was passed in their favour, they failed to comply with the conditions. Likewise, despite being granted an opportunity to discharge the defaulted amount in instalments, they failed to pay the ordered amount. The respondents therefore contend that the petitioners have approached this Court with unclean hands. Hence, this petition may be dismissed.
I have heard Adv. Aleena Anabelly A, the learned Counsel for the petitioners, and Adv. Paulochan Antony P, the learned Counsel for the respondents.
The principal grievance of the petitioners is that the learned Magistrate, before appointing an Advocate Commissioner to take possession of the secured assets, failed to apply her mind to the facts and circumstances of the case. According to the petitioners, in view of the settlement arrived at between the parties and the learned Magistrate dismissing M.C.No.484 of 2023, the respondents were estopped from filing a fresh application for an identical relief. It is further contended that the demand notice and the dispossession notice are invalid. The petitioners also assert that the properties taken possession by the respondents are more than sufficient to discharge the outstanding liability. Furthermore, the respondents having accepted Rs.70/- lakh towards the proposed settlement, it is inequitable for the respondents to refuse to conclude the settlement on the agreed terms. On these grounds, the petitioners seek quashing of the impugned order.
In the above background, it is relevant to refer to Section 14 of the Act, which reads as follows:
“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:
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 subclause (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 S.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 S.13 read with S.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 (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.”
A plain reading of the above provision makes it evident that, when possession of a secured asset is sought to be taken under Section 14(1) of the Act, the secured creditor is required to approach the District Magistrate or the Chief Metropolitan Magistrate by way of a written application accompanied by the requisite affidavit and documents. If the Magistrate is satisfied that the statutory requirements specified in the provisos to Section 14(1) have been complied with, the Magistrate shall pass appropriate orders for taking possession of the secured assets and the documents relating thereto and for forwarding them to the secured creditor. The nature and scope of this jurisdiction are thus circumscribed by the statutory scheme and do not extend to adjudication of the substantive disputes between the borrower and the secured creditor.
In NKGSB Cooperative Bank Limited v. Subir Chakravarty and Others (Civil Appeal No.1637/2022), the Hon’ble Supreme Court has held that the function performed under Section 14 of the Act is ministerial in nature and that the learned Magistrate cannot brook delay in discharging the statutory obligation. The decision emphasises that time is of the essence and that such expeditious action is consistent with the object and scheme of the special enactment.
In Balkrishna Rama Tarle Dead Thr LRS and Another v. Phoenix ARC Private Limited and Others [2022 KHC 7020], the Hon’ble Supreme Court has held as follows:
“9.Thus, in view of the scheme of the SARFAESI Act, more particularly, S.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.” Thus, the powers exercisable by CMM / DM under S.14 of the SARFAESI Act are ministerial step and S.14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets. In that view of the matter once all the requirements under S.14 of the SARFAESI Act are complied with / satisfied by the secured creditor, it is the duty cast upon the CMM / DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and / or with the help of an advocate appointed as Advocate Commissioner. At that stage, the CMM / DM is not required to adjudicate the dispute between the borrower and the secured creditor and / or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings under S.17 of the SARFAESI Act, before Debts Recovery Tribunal……….”
(underline supplied)
In the light of the principles laid down in Balkrishna Rama Tarle’s case (supra), the grievances raised by the petitioners concerning the validity of the demand and possession notices, the alleged settlement between the parties, the payments made by them, and the respondents' entitlement to proceed against the secured assets are matters which do not fall within the adjudicatory jurisdiction of the learned Magistrate while exercising powers under Section 14 of the Act. Such disputes are matters to be raised before the Debts Recovery Tribunal in appropriate proceedings under Section 17 of the Act. The learned Magistrate, while exercising jurisdiction under Section 14, is not required to adjudicate upon the inter se rights and liabilities of the borrower and the secured creditor.
In view of the above exposition of law and the efficacious and alternative statutory remedy available to the petitioners under Section 17 of the Act, I am not inclined to entertain this petition filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023. Consequently, this petition is dismissed, leaving open the petitioners' right to work out their remedies in accordance with law.