Madhya Pradesh High Court
Bank Of Baroda vs District Magistrate Cum Collector on 14 February, 2025
Author: Vivek Agarwal
Bench: Vivek Agarwal
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IN THE HIGH COURT OF MADHYA
PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE SANJEEV SACHDEVA
HON'BLE SHRI JUSTICE VIVEK AGARWAL
&
HON'BLE SHRI JUSTICE VINAY SARAF
WRIT PETITION No. 11500 of 2020
BANK OF BARODA
Versus
DISTRICT MAGISTRATE CUM COLLECTOR AND OTHERS
Appearance
Shri Shreyas Dubey - Advocate for the petitioner.
Shri Bramhadatt Singh - Deputy Advocate General for the State.
Reserved on :- 09/09/2024
Pronounced on :- 14/02/2025
ORDER
Per: Vivek Agarwal, J :-
This matter is referred by the Division Bench of this High
Court which was hearing this writ petition with a request to Hon’ble
The Chief Justice to constitute a larger Bench to decide the
following questions :-
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(1). Whether remedy of appeal under Section 17(1) of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 is available to the
secured creditor against an order passed by the District Magistrate
under Section 14 of the said Act ?
(2). Whether in judgment/order passed in W.A. No.
489/2016 and W.P. No. 15608/2020, the Division Benches have
correctly interpreted Section 17(1) of the said Act and whether the
said judgments can be said to be good law ?
2. The factual matrix of the matter is that the Hon’ble Division
Bench while deciding W.A. No. 489/2016 (India Sem Asset
Reconstruction Co. Ltd. Vs. State of M.P. and others) decided on
21st day of December, 2017 were dealing with the order passed in
W.P. No. 6131/2016 by which the learned Writ Court relying on
the decision of the Supreme Court in KanhaiyaLal Lalchand
Sachdev and others Vs. State of Maharashtra and others (2011) 2
SCC 782 held that an action under Section 14 of the Securitisation
and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (In short ‘SARFAESI Act‘) constitutes
an action taken after the stage of Section 13 (4) and, therefore, the
same would fall within the ambit of Section 17(1) of the
SARFAESI Act and dismissed the writ petition as not maintainable
with liberty to the petitioner Financial institution to approach the
Debts Recovery Tribunal under Section 17 of the SARFAESI Act.
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3. While deciding the writ appeal and taking into consideration
the law laid down by the five Judges Bench of this High Court in
the case of Jabalpur Bus Operators Association and others Vs. State
of M.P. and another (2003) 1 MPLJ 513, so also taking into
consideration that the judgment of United Bank of India Vs.
Satyawati Tondon (2010) 8 SCC 110, Jagdish Singh Vs. Heeralal
and others (2014) 1 SCC 479 were not considered while upholding
the view taken in the matter of M/s Sri Ambika Solvex Ltd. Vs.
State Bank of India & others 2016 SCC Online MP 5772, held that
they would like to follow the earlier judgment of the Hon’ble
Supreme Court where the question of maintainability of the writ
petition was considered in great detail and held that appellant has an
effective alternate remedy to approach the Debt Recovery Tribunal
under Section 17 of the SARFAESI Act and accordingly held that
the writ appeal filed by the appellant/creditor India Sem Asset
Reconstruction Co. Ltd. has no merit and it accordingly dismissed
the writ appeal with liberty to the appellant to avail the remedy of
appeal under Section 17 of the SARFAESI Act in accordance with
law.
4. This judgment of the Division Bench of the High Court came
to be followed by another Division Bench of this High Court in
W.P. No. 15608/2020 decided on 21/10/2020 wherein it is held that
“IDBI infact has approached the District Magistrate and the order
has been passed by the District Magistrate on 29/09/2020. The
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petitioner is having the remedy to approach the Debt Recovery
Tribunal. Keeping in view the aforesaid, the admission is declined
and liberty is granted to the petitioner to approach the DRT for
redressal of his grievance.”
5. Shri Shreyas Dubey, learned counsel for the petitioner submits
that Bank of Baroda had extended facility of credit in favour of M/S
Life Guard Food and Drinks, a Proprietorship concern through its
proprietor Ms. Pooja Sharma W/o Rajkumar Sharma of Shahjapur
and on her inability to pay, the bank had issued a demand notice as
per Section 13 (2) of the SARFAESI Act on 14/11/2017.
Thereafter, when demand notice was not complied by the
respondent within specified time of 60 days, the petitioner Bank
was constrained to obtain possession of secured assets as per the
provision of Section 13(4) of the Act of 2002. As the respondent
did not made any effort to repay the total outstanding, therefore an
application under Section 14 of the Act of 2002 was filed on
17/04/2018 before the respondent no. 2 Additional Collector and
Additional District Magistrate, Shahjapur for obtaining the physical
possession of secured assets.
6. It is submitted that contrary to the provisions of Section 14 of
the Act of 2002, the Additional Collector instead of taking
possession of the property issued a notice to the respondents
seeking their explanation. On the directions of the Additional
Collector, the respondent no. 5 was impleaded in the array of the
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respondents.
7. A reply was filed stating that the petitioner Bank has no right to
sell the secured asset as the ownership was vested with respondent
no. 5. Though, it was admitted that leasehold rights of the
petitioner Bank is co-extensive to the lease hold right of lessee i.e.
respondent no. 1. Respondent no. 2, on the basis of the reply filed
by respondent nos. 3 and 5 dismissed the application, as a result of
which a writ petition was filed before the High Court at Indore
within whose territorial jurisdiction, Shahjapur is situated.
8. In the writ petition, several grounds were taken to submit that
the judgment of the Division Bench of this Court in W.A. No.
784/2018 (Aditya Birla Finance Limited Versus Shri Carnet Elias
Fernandes Vemalayam and others) has crystallized the ambit of
Section 14 of the Act of 2002 and it is held that proceedings under
Section 14 are not to adjudicate the rights of the parties and,
therefore, no notice was required, yet Additional Collector has
erroneously issued a notice in favour of the respondent Debtors.
9. When this petition was placed for hearing before the Division
Bench, then the Division Bench was confronted with the
orders/decisions of Single Bench in W.P. No. 6131/2016 (India
SME asset Reconstruction Company Ltd. Throu. Pankan Agnihotri
Vs. The State of Madhya Pradesh) and the order of the Division
Bench in W.A. No. 489/2016 where the Division Bench rejected
the contention of the appellant creditor and held that a remedy of
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appeal under Section 17 of the said Act is equally available to the
Bank.
10. Thereafter, another Division Bench in W.P. No. 15608/2020
(Rajkumar Daima Vs. IDBI Bank Ltd.) took the same view and
relegated the creditor to avail the remedy of appeal before the Debts
Recovery Tribunal.
11. In the aforesaid backdrop, matter has come to this Full Bench
in the form of reference to answer the aforesaid two questions.
12. Section 17 (1) of the Act of 2002 is as under :-
(1) Any person (including borrower), aggrieved by any of
the measures referred to in sub-section (4) of section 13
taken by the secured creditor or his authorised officer
under this Chapter, [may make an application along with
such fee, as may be prescribed,] to the Debts Recovery
Tribunal having jurisdiction in the matter within forty-
five days from the date on which such measure had been
taken:
[Provided that different fees may be prescribed for
making the application by the borrower and the person
other than the borrower.]
[Explanation.–For the removal of doubts, it is hereby
declared that the communication of the reasons to the
borrower by the secured creditor for not having accepted
his representation or objection or the likely action of the
secured creditor at the stage of communication of reasons
to the borrower shall not entitle the person (including
borrower) to make an application to the Debts Recovery
Tribunal under this sub-section.][(1-A) An application under sub-section (1) shall be filed
before the Debts Recovery Tribunal within the local
limits of whose jurisdiction–
(a) the cause of action, wholly or in part, arises;
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(b) where the secured asset is located; or
(c) the branch or any other office of a bank or financial
institution is maintaining an account in which debt
claimed is outstanding for the time being.
13. Thus language of Section 17(1) leaves no iota of doubt and
further no scope for any other interpretation, then that remedy
provided under Section 17 (1) is for any person including borrower
who is aggrieved of the measures referred to in sub-section (4) of
Section 13 taken by the secured creditor or his authorized officer
under this Chapter by way of making an application along with
such fee as may be prescribed to the Debts Recovery Tribunal
having jurisdiction in the matter.
14. Section 13(4) of the Act of 2002 provides that “In case, the
borrower fails to discharge his liability in full within the period
specified in sub-section (2), the secured creditor may take recourse
to one or more of the following measures to recover his secured
debt, namely :-
(a) take possession of the secured assets of the borrower
including the right to transfer by way of lease,
assignment or sale for realising the secured asset;
(b) take over the management of the business of the
borrower including the right to transfer by way of lease,
assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease,
assignment or sale shall be exercised only where the
substantial part of the business of the borrower is held as
security for the debt:
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Provided further that where the management of whole of
the business or part of the business is severable, the
secured creditor shall take over the management of such
business of the borrower which is relatable to the security
for the debt;]
(c) appoint any person (hereafter referred to as the
manager), to manage the secured assets the possession of
which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person
who has acquired any of the secured assets from the
borrower and from whom any money is due or may
become due to the borrower, to pay the secured creditor,
so much of the money as is sufficient to pay the secured
debt.
15. Therefore, it is evident that the action can be taken by the
secured creditor in terms of sub-section (4) of Section 13 against
the borrower.
16. The Borrower is defined in Section 2(f) as under :-
“Borrower” means any person who has been granted
financial assistance by any bank or financial institution
or who has given any guarantee or created any mortgage
or pledge as security for the financial assistance granted
by any bank or financial institution and includes a person
who becomes borrower of a [asset reconstruction
company] consequent upon acquisition by it of any rights
or interest of any bank or financial institution in relation
to such financial assistance [or who has raised funds
through issue of debt securities]
17. Thus, it is evident that cause of action under Section 13 (4) is
to the secured creditor on the failure of the borrower to discharge
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his liability in full within the period specified in sub-section (2) and
upon such failure, Section 14 provides that the Chief Metropolitan
Magistrate or the District Magistrate will assist the secured creditor
in taking possession of secured asset.
18. Thus, if any steps are taken by the secured creditor under sub-
section (4) of Section 13, then cause of action to file an application
will be only in the hands of the borrower and the definition of
borrower implies that any person ; will mean the person claiming
through borrower like the Guarantor, surety etc. and not the secured
creditor.
19. In fact, plain reading of Section 13 (4) with Section 14 and
Section 17 leaves no iota of doubt that under Section 13(4), cause
of action will arise for the secured creditor if the borrower fails to
discharge his liability. Sub-section (2) of Section 13 provides that
“Where any borrower, who is under a liability to a secured creditor
under the security agreement, makes any default in repayment of
secured debt or any installment thereof, and his account in respect
of such debt is classified by the secured creditor as non-performing
asset, then notice is to be given for possession of the secured assets
under Section 13(4) and if the borrower fails to comply with the
said notice within a period of sixty days, then secured creditor can
take assistance of Chief Metropolitan Magistrate or District
Magistrate to assist it in taking possession of secured asset.
20. It is well settled by a Division Bench of this Court in Aditya
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Birla Finance Limited Versus Shri Carnet Elias Fernandes
Vemalayam and others while deciding W.A. No. 784/2018 that the
provisions of the Act of 2002 override all other provisions of law
which are inconsistent therewith. It is further held that once the
disclosure on nine different points contemplated under Section 17 is
made, then District Magistrate is duty bound to hand over physical
possession to the secured creditor.
21. It is further held that the proceedings under Section 14 of the
Act of 2002 are not the proceedings to adjudicate rights of the
parties, therefore no notice is contemplated to be served upon
debtor as such proceedings are taken only after serving notice under
Section 13 of the Act.
22. In view of such facts, plain language of Section 17(1) and the
law laid down by the Supreme Court in Standard Chartered Bank
Vs. V. Noble Kumar and others (2013) 9 SCC 620 has held as under
:-
It can be noticed from the language of the proviso to
Section 13 (3-A) and the language of Section 17 that an
‘appeal’ under Section 17 is available to the borrower
only after losing possession of the secured asset.
23. This view finds support from the judgment of a Division
Bench of Punjab and Haryana High Court in Kotak Mahindra Bank
Ltd. Vs. District Magistrate and another 2021 SCC Online P & H
763 wherein it is held as under :-
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“24. A perusal of the above would show that any
person which includes a borrower, who is aggrieved by
any of the measures taken by the secured creditor or his
authorized officer referred to in sub-section 4 of Section
13 of the SARFAESI Act under the Chapter, can make
an application under Section 17 of the SARFAESI Act.
The language itself makes in amply clear that the remedy
is available to a person aggrieved by any of the measures
referred in sub-section 4 of Section 13 of the SARFAESI
Act, which are taken by the secured creditor or his
authorized officer. The remedy, therefore, under Section
17 of the SARFAESI Act, would not be available to the
secured creditor or his authorized officer for rejection of
an application preferred by the said secured creditor or
his authorized person under the SARFAESI Act.
25. In the light of the above, the order which has been
passed by the District Magistrate under Section 14 of the
SARFAESI Act is final qua the petitioner and under
these circumstances, the remedy available to the
petitioner is only under Article 226/227 of the
Constitution of India, which remedy the petitioner has
rightly availed of. Reliance on the judgment of the
Hon’ble Supreme Court in Kaniyalal Lalchand Sachdev’
case (supra) by the counsel for respondent No. 2 is totally
misplaced, where the Hon’ble Supreme Court was
considering Section 17 of the SARFAESI Act when the
person aggrieved was neither the secured creditor nor the
authorized officer but any other person. The ratio of said
judgment, therefore, would not be attracted to the present
case.”
24. The law laid down by the Supreme Court in Kanaiyalal
Lalchand Sachdev and others Vs. State of Maharashtra and others
(2011) 2 SCC 782 is wrongly interpreted by the Division Bench in
India Sem Asset Reconstruction Co. Ltd. (supra), in as much as the
appellant before the Supreme Court was a borrower and in that
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context, it is held that appellant is amenable to jurisdiction of Debts
Recovery Tribunal under Section 17 of SARFAESI Act. Infact, the
Supreme Court in Kanaiyalal Lalchand Sachdev (supra) noted as
under :-
21. In Indian Overseas Bank v. Ashok Saw Mill [(2009) 8
SCC 366] the main question which fell for determination was
whether the DRT would have jurisdiction to consider and
adjudicate post Section 13(4) events or whether its scope in terms
of Section 17 of the Act will be confined to the stage contemplated
under Section 13(4) of the Act? On an examination of the
provisions contained in Chapter III of the Act, in particular Sections
13 and 17, this Court held as under: (SCC pp. 375-76, paras 35-36
& 39)
“35. In order to prevent misuse of such wide powers and
to prevent prejudice being caused to a borrower on
account of an error on the part of the banks or financial
institutions, certain checks and balances have been
introduced in Section 17 which allow any person,
including the borrower, aggrieved by any of the measures
referred to in sub-section (4) of Section 13 taken by the
secured creditor, to make an application to the DRT
having jurisdiction in the matter within 45 days from the
date of such measures having taken for the reliefs
indicated in sub-section (3) thereof.
36. The intention of the legislature is, therefore, clear that
while the banks and financial institutions have been
vested with stringent powers for recovery of their dues,
safeguards have also been provided for rectifying any
error or wrongful use of such powers by vesting the DRT
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with authority after conducting an adjudication into the
matter to declare any such action invalid and also to
restore possession even though possession may have
been made over to the transferee.
39. We are unable to agree with or accept the
submissions made on behalf of the appellants that the
DRT had no jurisdiction to interfere with the action taken
by the secured creditor after the stage contemplated
under Section 13(4) of the Act. On the other hand, the
law is otherwise and it contemplates that the action taken
by a secured creditor in terms of Section 13(4) is open to
scrutiny and cannot only be set aside but even the status
quo ante can be restored by the DRT.”
(emphasis supplied by us)
25. We are in respectful agreement with the above
enunciation of law on the point. It is manifest that an
action under Section 14 of the Act constitutes an action
taken after the stage of Section 13(4), and therefore, the
same would fall within the ambit of Section 17(1) of the
Act. Thus, the Act itself contemplates an efficacious
remedy for the borrower or any person affected by an
action under Section 13(4) of the Act, by providing for
an appeal before the DRT
26. In our opinion, therefore, the High Court rightly
dismissed the petition on the ground that an efficacious
remedy was available to the appellants under Section 17
of the Act. It is well settled that ordinarily relief under
Articles 226/227 of the Constitution of India is not
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available if an efficacious alternative remedy is available
to any aggrieved person. (See Sadhana Lodh v. National
Insurance Co. Ltd. [(2003) 3 SCC 524 : 2003 SCC (Cri)
762] , Surya Dev Rai v. Ram Chander Rai [(2003) 6 SCC
675] and SBI v. Allied Chemical Laboratories [(2006) 9
SCC 252]
27. Thus, we observe that the Division Bench deciding
India Sem Asset Reconstruction Co. Ltd. (supra), read
the Supreme Court judgment, totally out of context.
28. Therefore, the reference is answered as under :-
(1). Remedy of appeal under Section 17(1) of the Act of
2002 is not available to the secured creditor against an order passed
by the District Magistrate under Section 14 of the said Act but is
available only to a person, be it a borrower or any person under the
facts and circumstances delineated in the judgment of the Supreme
Court in Standard Chartered Bank (supra).
(2). The judgment passed in W.A. No. 489/2016 by the
Division Bench has erred in not correctly interpreting Section 17 of
the Act, therefore said judgment cannot be said to be good law.
29. It is also to be noted that the order passed by the Division
Bench in W.P. No. 15608/2020 appears to have been
inappropriately put up in reference.
30. In this writ petition, the borrower was the person aggrieved of
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the action initiated by the secured creditor and, therefore, the
Division Bench had granted liberty to the petitioner to approach the
Debts Recovery Tribunal.
Per : Sanjeev Sachdeva, J :-
I have had the privilege of reading the Judgment authored by
my learned brother Justice Vivek Agarwal. I am in complete
agreement by the view taken by him and the conclusion arrived at,
however I would like to supplement the reasons.
31. The questions that have been referred to the larger bench for
consideration are:
1. Whether remedy of appeal under section 17(1) of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 is available to
the secured creditor against an order passed by the
District Magistrate under section 14 of the said Act?
2. Whether in judgment/order passed in W.A. No.
489/2016 and W.P. No. 15608/2020, the Division
Benches have correctly interpreted Section 17(1) of the
said Act and whether the said judgments can be said to
be good law?
32. To answer the first question we may refer to the
power exercised by the Chief Metropolitan Magistrate or
District Magistrate, under Section 14 of the Securitisation
and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (hereinafter referred to as
the Act), which reads as under:
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“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 ofSignature Not Verified
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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;
(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
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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.”
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33. Section 14 of the Act contemplates that where possession of
any secured asset is required to be taken by the secured creditor or
if any secured asset is required to be sold or transferred by the
secured creditor under the provisions of the Act, the secured
creditor may for the purposes of taking over possession of control
of the asset request the Chief Metropolitan Magistrate or the
District Magistrate within whose jurisdiction such asset is situated,
then Chief Metropolitan Magistrate or the District Magistrate, as
the case may be, ‘shall’ on such a request being made take
possession of such asset and forward such asset to the secured
creditor.
34. The wording of Section 14 of the Act is very clear. The Chief
Metropolitan Magistrate or the District Magistrate, as the case may
be, on receipt of such a request is obliged to take over possession of
the secured asset and forward the asset to the secured creditor.
There is no discretion given to the same authority. Said authority is
obliged to take possession and handover to the secured creditor. We
may note that first proviso to Section 14 of the Act provides that the
application of the secured creditor shall be accompanied by an
affidavit duly affirmed by an authorised officer declaring to certain
conditions as contained in first proviso to Section 14 of the Act.
Once such a declaration is filed, the District Magistrate or Chief
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Metropolitan Magistrate has to merely satisfy himself with the
contents of the Affidavits and then pass suitable orders for the
purposes of taking possession of the secured asset within a period
of 30 days. The District Magistrate or Chief Metropolitan
Magistrate has been given powers only to ascertain as to whether
the Affidavit filed by the authorised officer satisfies the requirement
of the first proviso to Section 14 of the Act. Once the Affidavit
satisfies the requirement of Section 14 of the Act, the District
Magistrate has no discretion thereafter.
35. Reference may be had to the judgment of the Supreme Court
in R.D. Jain & Company vs. Capital First Limited and others,
(2023) 1 SCC 675, Kotak Mahindra Bank Ltd. vs. Girnar
Corrugators Pvt. and others, (2023) 3 SCC 210 and Balkrishna
Rama Tarle vs. Phoenix Arc Pvt. Ltd. and others, (2023) 1 SCC 662
wherein the Supreme Court has held that the steps taken by the
Chief Metropolitan Magistrate or the District Magistrate are
ministerial in nature and does not involve any adjudicatory process.
36. In R.D. Jain & Company (supra), the Supreme Court has held
as under:
“25. As observed and held by this Court in NKGSB
Coop. Bank [NKGSB Coop. Bank Ltd. v. Subir
Chakravarty, (2022) 10 SCC 286 : (2023) 1 SCC (Cri)
157] , 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
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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.”
The Supreme Court in Girnar Corrugators Pvt. (supra)
has held as under:
“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.”
36. Similarly, the Supreme Court in Balkrishna Rama
Tarle (supra) has held as under:
“18. Thus, the powers exercisable by CMM/DM under
Section 14 of the Sarfaesi Act are ministerial steps and
Section 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
Section 14 of the Sarfaesi Act are complied with/satisfied
by the secured creditor, it is the duty cast upon theSignature Not Verified
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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 Section 17 of the Sarfaesi Act, before the Debts
Recovery Tribunal.”
37. Thus, subject to the secured creditor satisfying the
requirement of first proviso to Section 14(1) of the Act, the District
Magistrate or Chief Metropolitan Magistrate, as the case may be,
have no further discretion and have to merely perform the
ministerial power of taking over possession of the secured asset and
handing over the same to the secured creditor.
38. Therefore, it is clear that the action taken under section 14 of
the Act by the District Magistrate or Chief Metropolitan Magistrate
is not adjudicatory but merely ministerial, consequent to the action
taken by the secured creditor requiring the District Magistrate or
Chief Metropolitan Magistrate to assist the secured creditor to take
possession of the secured asset and their action would in effect be
deemed to be an action for an on behalf of the secured creditor.
39. Reference may be had to Section 17 of the Act which reads as
under:
“17. Application against measures to recover secured
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debts.–(1) Any person (including borrower), aggrieved
by any of the measures referred to in sub-section (4) of
section 13 taken by the secured creditor or his authorised
officer under this Chapter, may make an application
along with such fee, as may be prescribed, to the Debts
Recovery Tribunal having jurisdiction in the matter
within forty five days from the date on which such
measure had been taken:
Provided that different fees may be prescribed for
making the application by the borrower and the person
other than the borrower.
Explanation.–For the removal of doubts, it is hereby
declared that the communication of the reasons to the
borrower by the secured creditor for not having accepted
his representation or objection or the likely action of the
secured creditor at the stage of communication of reasons
to the borrower shall not entitle the person (including
borrower) to make an application to the Debts Recovery
Tribunal under this sub-section.
1A) An application under sub-section (1) shall be filed
before the Debts Recovery Tribunal within the local
limits of whose jurisdiction–
(a) the cause of action, wholly or in part,
arises;
(b) where the secured asset is located; or
(c) the branch or any other office of a bank or
financial institution is maintaining an account
in which debt claimed is outstanding for the
time being.
(2) The Debts Recovery Tribunal shall consider whether
any of the measures referred to in sub-section (4) of
section 13 taken by the secured creditor for enforcement
of security are in accordance with the provisions of this
Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the
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facts and circumstances of the case and evidence
produced by the parties, comes to the conclusion that any
of the measures referred to in sub-section (4) of section
13, taken by the secured creditor are not in accordance
with the provisions of this Act and the rules made
thereunder, and require restoration of the management or
restoration of possession, of the secured assets to the
borrower or other aggrieved person, it may, by order,–
(a) declare the recourse to any one or more
measures referred to in sub-section (4) of
section 13 taken by the secured creditor as
invalid; and
(b) restore the possession of secured assets or
management of secured assets to the borrower
or such other aggrieved person, who has made
an application under sub-section (1), as the
case may be; and
(c) pass such other direction as it may consider
appropriate and necessary in relation to any of
the recourse taken by the secured creditor
under sub-section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse
taken by a secured creditor under sub-section (4) of
section 13, is in accordance with the provisions of this
Act and the rules made thereunder, then, notwithstanding
anything contained in any other law for the time being in
force, the secured creditor shall be entitled to take
recourse to one or more of the measures specified under
sub-section (4) of section 13 to recover his secured debt.
(4A) Where–
(i) any person, in an application under sub-
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section (1), claims any tenancy or leasehold
rights upon the secured asset, the Debt
Recovery Tribunal, after examining the facts
of the case and evidence produced by the
parties in relation to such claims shall, for the
purposes of enforcement of security interest,
have the jurisdiction to examine whether lease
or tenancy,–
(a) has expired or stood determined; or
(b) is contrary to section 65A of the Transfer
of Property Act, 1882 (4 of 1882); or
(c) is contrary to terms of mortgage; or
(d) is created after the issuance of notice of
default and demand by the Bank under
subsection (2) of section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that
tenancy right or leasehold rights claimed in
secured asset falls under the sub-clause (a) or
sub-clause (b) or sub-clause (c) or sub-clause
(d) of clause (i), then notwithstanding anything
to the contrary contained in any other law for
the time being in force, the Debt Recovery
Tribunal may pass such order as it deems fit in
accordance with the provisions of this Act.
(5) Any application made under sub-section (1) shall be
dealt with by the Debts Recovery Tribunal as
expeditiously as possible and disposed of within sixty
days from the date of such application:
Provided that the Debts Recovery Tribunal may, from
time to time, extend the said period for reasons to be
recorded in writing, so, however, that the total period of
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Tribunal, shall not exceed four months from the date of
making of such application made under sub-section (1).
(6) If the application is not disposed of by the Debts
Recovery Tribunal within the period of four months as
specified in sub-section (5), any part to the application
may make an application, in such form as may be
prescribed, to the Appellate Tribunal for directing the
Debts Recovery Tribunal for expeditious disposal of the
application pending before the Debts Recovery Tribunal
and the Appellate Tribunal may, on such application,
make an order for expeditious disposal of the pending
application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts
Recovery Tribunal shall, as far as may be, dispose of the
application in accordance with the provisions of the
Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 (51 of 1993) and the rules made
thereunder.”
40. Section 17(1), (2) and (3) of the Act use the expression
“measures taken by the Secured Creditor” and Section 17(4) of the
Act uses the expression “recourse taken by a secured creditor”.
Section 17 of the Act stipulates that any person including a
borrower aggrieved by any measure referred to in sub-section (4) of
Section 13 of the Act taken by the secured creditor, may make an
application to Debt Recovery Tribunal having jurisdiction against
such measure.
41. Section 13(4) of the Act reads as under :
“13. Enforcement of security interest.
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(1) *******(4) In case the borrower fails to discharge his liability in
full within the period specified in sub-section (2), the
secured creditor may take recourse to one or more of the
following measures to recover his secured debt, namely:-
(a) take possession of the secured assets of the
borrower including the right to transfer by way
of lease, assignment or sale for realising the
secured asset;
(b) take over the management of the business
of the borrower including the right to transfer
by way of lease, assignment or sale for
realising the secured asset:
Provided that the right to transfer by way of
lease, assignment or sale shall be exercised
only where the substantial part of the business
of the borrower is held as security for the
debt:
Provided further that where the management
of whole of the business or part of the business
is severable, the secured creditor shall take
over the management of such business of the
borrower which is relatable to the security for
the debt;
(c) appoint any person (hereafter referred to as
the manager), to manage the secured assets the
possession of which has been taken over by
the secured creditor;
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(d) require at any time by notice in writing, any
person who has acquired any of the secured
assets from the borrower and from whom any
money is due or may become due to the
borrower, to pay the secured creditor, so much
of the money as is sufficient to pay the secured
debt.”
42. Section 17 of the Act provides for a remedy against an action
taken by the Secured Creditor but does not provide for a remedy
against an action or an inaction of the part of the District Magistrate
or the Chief Metropolitan Magistrate.
43. Section 17 of the Act provides for remedy of approaching the
Debt Recovery Tribunal to any person including a borrower who is
aggrieved by measure taken by the secured creditor. By no stretch
of imagination, can this provision be read to include or make it
obligatory on part of the secured creditor to approach the Debt
Recovery Tribunal under Section 17 of the Act against measures
taken by its own self. Only a party, who is aggrieved by a measure
taken by the secured creditor or its authorised officer, has to
approach the Debt Recovery Tribunal. A secured creditor cannot be
said to be aggrieved by its own action. Bare reading of Section 17
of the Act contemplates persons including the borrowers but
excluding the secured creditor, who are obliged to approach the
Debt Recovery Tribunal against the measure taken under Section
17 of the Act.
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44. Accordingly, the reference is answered as under:
1. Remedy of appeal under section 17(1) of the Act is not
available to the secured creditor against an order passed by the
District Magistrate under section 14 of the said Act but is available
to any person aggrieved including the borrower but excluding the
secured creditor.
2. However, the order passed by the Division Bench in
W.P. No. 15608/2020 appears to have been incorrectly
incorporated in the terms of reference for the reason that the said
order was passed in a Writ Petition filed by a petitioner against the
action initiated by the secured creditor and the Division Bench,
while declining to entertain the petition, granted liberty to the
petitioner to approach the Debts Recovery Tribunal. Said order
neither considers nor holds that the secured creditor has to approach
the Debts Recovery Tribunal against an action taken by the District
Magistrate under section 14 of the act.
For the purposes of completeness, order dated 21.10.2020 in
W.P. No. 15608/2020 is extracted hereunder:
“The High Court Of Madhya Pradesh
WP-15608-2020
(RAJ KUMAR DAYMA AND OTHERS Vs IDBI
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NEUTRAL CITATION NO. 2025:MPHC-JBP:1041530 WP-11500-2020
BANK LIMITED AND OTHERS)Indore, Dated : 21-10-2020
Heard through Video Conferencing.
Parties through their counsel.
The petitioner before this court has filed this present
petition being aggrieved by the action initiated by the
bank under the Securitisation and Reconstruction of
Financial Assets and Enforcement of Securities Interest
Act, 2002 (SARFAESI Act), 2002.
The IDBI Bank has approached the District Magistrate
and order has been passed by the District Magistrate on
29.9.2020. The petitioner is having a remedy to approach
the DRT. Keeping in view the aforesaid, the admission is
declined with liberty to the petitioner to approach the
DRT for redressal of his grievance.”
45. Accordingly, the Reference is answered in the above terms.
46. The matter is remitted to the Division Bench for a decision on
merits in accordance with the findings hereinabove.
(SANJEEV SACHDEVA) (VIVEK AGARWAL) (VINAY SARAF)
JUDGE JUDGE JUDGE
vy
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