Bombay High Court
Kishan Lal Bishnoi And Shantidevi ... vs The Authorised Officer, Punjab ... on 28 October, 2015
Bench: S.C. Dharmadhikari
writ petitionL 2634.15.15.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 2634 OF 2015
Kishan Lal Bishnoi and Another ..Petitioners
Vs.
The Authorised Officer and Others ..Respondents
WITH
WRIT PETITION NO.640 OF 2015
Ganesh Bhimji Patel and Another ..Petitioners
Vs.
Bank of Baroda and Another ..Respondents
WITH
WRIT PETITION NO.398 OF 2015
Atharva Shelters Private Limited
and Others ..Petitioners
Vs.
Union Bank of India and Others ..Respondents
WITH
WRIT PETITION NO.1776 OF 2015
Home Agro Industries Limited
and Another ..Petitioners
Vs.
Allahabad bank and Others ..Respondents
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writ petitionL 2634.15.15.doc
Mr. Rohan Cama a/w Prathmesh Kamat, Ms Sapna Raichure, Mr
T. N. Tripathi i/b T. N. Tripathi and Co, for the Petitioners in all the
Writ Petitions.
Ms. Sandhya Nambidi i/b Law Focus, for Respondent Nos.1, 2 in
W.P. (L) No.2634/15.
Mr. A. R. Bamne i/b A. R. Bamne and Co, for Respondent No.1 in
W. P.No.640/15.
Mr V. N. Ajitkumar, for Respondent Nos.1 and 2 in W. P.
No.1776/15.
CORAM :- S. C. DHARMADHIKARI,J. &
B. P. COLABAWALLA, J.
Reserved On :- October 7, 2015.
Pronounced On:- October 28, 2015.
JUDGMENT :- [ Per B. P. Colabawalla, J ]
1. By these Petitions under Article 226 of the
Constitution of India, the Petitioners challenge the orders passed
by the In-charge Chief Metropolitan Magistrate, Mumbai, under
the provisions of section 14 of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (for short, the "SARFAESI Act").
2. In all these Petitions, the issue raised before us is that
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all these orders passed under section 14 by the In-charge Chief
Metropolitan Magistrate, are a nullity on the ground that he had
no authority and/or power to pass the impugned orders. In other
words, it is the contention of the Petitioners in all these Petitions,
that an Application under section 14 of the SARFAESI Act can be
made only to the Chief Metropolitan Magistrate, and therefore, the
orders passed by the In-charge Chief Metropolitan Magistrate are
bad in law and ought to be set aside by us, in our extraordinary,
equitable and discretionary jurisdiction under Article 226 of the
Constitution of India. Since this is the only point canvassed and
which requires our consideration, we are not setting out the facts
in each of the above Writ Petitions. For the sake of completeness
of this judgment, we will refer to the facts in Writ Petition (L)
No.2634 of 2015.
3. In this Writ Petition, it is the case of the Petitioners
that the Respondent Bank had sanctioned certain credit facilities
to Respondent No.4 (Sharavan Bishnoi, Proprietor of M/s Ganpat
Steel). In respect of the aforesaid facilities, the Respondent Bank
claims a mortgage over Flat No.15, 6th Floor, Building No.2,
Navjeevan Co-operative Housing Society, Dr. D. V. Marg,
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Lamington Road, Mumbai, 400 008 (hereinafter referred to as
"mortgage property"). Since Respondent No.4 defaulted in
repayment of the credit facilities granted to him, a Demand Notice
dated 20th February, 2013 was issued under section 13(2) of the
SARFAESI Act. After the issuance of the aforesaid Demand Notice
and since it was not complied with, the Respondent Bank took
possession of the mortgaged property under section 13(4) of the
SARFAESI Act.
4. To challenge the aforesaid action, on 20th September,
2013, the Petitioners filed Securatization Application No.62 of
2015, inter alia, challenging the 13(2) Notice as well as the
measures taken by the Respondent Bank under section 13(4) of
the SARFAESI Act. Since the Respondent Bank was unable to get
physical possession of the mortgaged property, it filed an
Application under section 14 of the SARFAESI Act in the Court of
the Chief Metropolitan Magistrate (being case No.192/SA/2013)
requesting him to take possession of the mortgaged property and
hand over the same to the Respondent Bank. This Application
under section 14 came to be allowed on 15th October, 2013 by the
In-charge Chief Metropolitan Magistrate.
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5. This order dated 15th October, 2013 of the In-charge
Chief Metropolitan Magistrate, was sought to be challenged by the
Petitioners before the Debts Recovery Tribunal (DRT), by seeking
amendments to Securitization Application No.62 of 2014. In view
of the fact that the Applicants therein (Petitioners herein) were
ready and willing to pay the outstanding debts of the Respondent
bank and offered to deposit (i) a sum of Rs.50,00,000/- within one
week from the date of the said order; (ii) a further a sum of
Rs.50,00,000/- by the following week; and (iii) the balance
outstanding debt with interest, within six months from 28th July
2015, the DRT -II, Mumbai, directed the Petitioners to deposit the
aforesaid amounts as per the aforementioned time schedule,
failing which, the Securitization Application was to stand
dismissed.
6. It is the case of the Petitioners that due to financial
constraints as well as non co-operation of the borrower
(Respondent No.4 herein), the Petitioners could not comply with
the aforesaid order of deposit. In view thereof, Securitization
Application No.62 of 2014 was dismissed by the DRT - II, Mumbai,
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on 26th August, 2015. Being aggrieved thereby, the Petitioners
filed Appeal (L) No.302 of 2015 before the Debts Recovery
Appellate Tribunal (DRAT). Whilst this Appeal was pending, on
3rd September, 2015 the Petitioner received a Notice dated 7th
August, 2015 issued by the Assistant Registrar (attached to the
CMM), to take possession of the mortgaged property on 9th
September, 2015. In view thereof, on 4th September, 2015, the
Petitioner moved a praecipe before the DRAT and prayed for
urgent circulation for ad-interim relief, which circulation was
denied to the Petitioners. It is in these circumstances that the
Petitioners are before us.
7. In this background, Mr Cama, learned counsel
appearing on behalf of the Petitioners, contended that the orders
passed by the In-charge Chief Metropolitan Magistrate were
without jurisdiction and ultra-vires the provisions of the
SARFAESI Act. According to Mr Cama, as per section 14 of the
SARFAESI Act, only the Chief Metropolitan Magistrate (in
Metropolitan Cities) and the District Magistrate (outside the
Metropolitan Cities), alone have jurisdiction to entertain and pass
orders under section 14 of the SARFAESI Act. He submitted that
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in the present case, the orders under section 14 of the SARFAESI
Act had been passed by the In-charge Chief Metropolitan
Magistrate and absent a Notification authorizing him to entertain
and hear Applications under section 14, the In-charge Chief
Metropolitan Magistrate had no authority and/or jurisdiction to do
so. In support of the aforesaid argument, Mr Cama relied upon the
following three judgments:-
(i) Arjun Urban Co-operative Bank Ltd v/s Chief
Judicial Magistrate & Ors.1;
(ii) K. Arockiyaraj v/s the Chief Judicial Magistrate,
Srivilliputhur & Anr.2;
(iii) Manjudevi R. Somani v/s Union of India & Ors.3
Therefore, according to Mr. Cama, the orders passed
by the In-charge Chief Metropolitan Magistrate and which are
impugned in these Writ Petitions, ought to be quashed and set
aside by us, in our extraordinary, equitable and discretionary
jurisdiction under Article 226 of the Constitution of India.
8. On the other hand, the learned counsel appearing on
behalf of the Respondent Banks, supported the orders passed by
1 2009 (5) Mh. L. J. 380
2 AIR 2013 Madras 206
3 AIR 2013 Gujrat 242.
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the In-charge Chief Metropolitan Magistrate on all counts. It was
the submission of the Respondent Banks that in all these cases,
the Application under section 14 of the SARFAESI Act was
admittedly filed in the Court of the Chief Metropolitan Magistrate.
In these Applications, orders were passed by the In-charge Chief
Metropolitan Magistrate only because the Chief Metropolitan
Magistrate was absent. It is in these circumstances, that the In-
charge Chief Metropolitan Magistrate was acting as the Chief
Metropolitan Magistrate, and therefore, there was nothing
incorrect and/or illegal about the orders passed by the In-charge
Chief Metropolitan Magistrate under section 14 of the SARFAESI
Act. The learned counsel appearing for the respective Respondent
Banks also contended that even assuming that the In-charge Chief
Metropolitan Magistrate had no authority to pass the orders
impugned in these Writ Petitions, the "de-facto doctrine" would
apply and on this count also the orders passed by the In-charge
Chief Metropolitan Magistrate cannot be termed as illegal
requiring any interference under Article 226 of the Constitution of
India. In support of the aforesaid proposition, the Respondent
Banks relied upon a decision of the Supreme Court in the case of
Gokaraju Rangaraju v/s the State of Andhra Pradesh.4
4 (1981) 3 SCC 132
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9. With the help of the learned counsel, we have perused
the papers and proceedings in the above mentioned Writ Petitions,
along with the orders passed by the In-charge Chief Metropolitan
Magistrate and which have been impugned herein. Before we deal
with the present controversy, we must mention here that though
several other grounds have been raised in these Writ Petitions,
none have been argued before us. The only point canvassed in
these Writ Petitions was that the orders passed by the In-charge
Chief Metropolitan Magistrate under section 14 of the SARFAESI
Act, are a nullity as he is not the authority who can entertain and
decide an Application under the provisions of section 14. In this
view of the matter, we have not dealt with any other
argument/ground that has been set out in the above Writ
Petitions.
10. Having said this, we shall now deal with the rival
contentions. To understand the above controversy, we would have
to refer to certain provisions of the SARFAESI Act as well as the
Code of Criminal Procedure, 1973 (for short, "the CrPC, 1973").
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11. The SARFAESI Act was brought into force to regulate
the securitization and reconstruction of financial assets and
enforcement of security interest and for matters connected
therewith or incidental thereto. The statements of object and
reasons indicate that the financial sector, being one of the key
drivers in India's efforts to achieve success in rapidly developing
its economy, did not have a level playing field as compared to
other participants in the financial markets in the World. There
was no legal provision for facilitating securitisation of financial
assets of banks and financial institutions, and unlike international
banks, the banks and financial institutions in India did not have
the power to take possession of securities and sell them. The
Legislature felt that our existing legal framework had not kept
pace with the changing commercial practices and financial sector
reforms, which resulted in delays in recovery of defaulting loans.
This in turn had the effect of mounting levels of non-performing
assets of banks and financial institutions. In order to bring the
Indian Banking Sector on par with the International Standards,
the Government set up two Narasimhan Committees and the
Andhyarujina Committee for the purposes of examining banking
sector reforms. These Committees inter alia suggested enactment
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of a new legislation for securitisation and empowering banks and
financial institutions to take possession of the securities and to
sell them without the intervention of the Court. Accepting these
recommendations, the SARFAESI Act was brought into force with
w.r.e.f. 21-06-2002. This is really the genesis of the SARFAESI
Act.
12. Chapter III of the SARFAESI Act deals with the
enforcement of security interest and consists of sections 13 to 19
respectively. Section 13(1) stipulates that notwithstanding
anything contained in section 69 or section 69A of the Transfer of
Property Act, 1882 any security interest created in favour of any
secured creditor may be enforced, without the intervention of the
Court or Tribunal, by such secured creditor in accordance with the
provisions of this Act. Section 13(2) contemplates that where the
borrower, who is under a liability to a secured creditor under a
security agreement, makes any default in repayment of the
secured debt or any installment thereof, and his account in
respect of such debt is classified as non-performing asset (NPA),
then, the secured creditor may require the borrower by notice in
writing to discharge in full his liabilities to the secured creditor
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within sixty days from the date of the notice, failing which the
secured creditor shall be entitled to exercise all or any of the
measures under section 13(4) thereof. Section 13(3) and 13(3A)
deal with the contents of the 13(2) notice as well as the procedure
to be followed before any measures are taken under section 13(4).
Thereafter, section 13(4) inter alia provides that in case the
borrower fails to discharge his liability in full within the period
specified in the 13(2) notice, the secured creditor may take
recourse to one or more measures [as set out in section 13(4)] to
recover his secured debt. Section 13(4) of the SARFAESI Act
reads as under:-
"(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
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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."
There are several other sub-sections to section 13 but
they are not really germane to the controversy in the present
case.
13. Thereafter, comes section 14 which stipulates that a
secured creditor, in order to take possession of the secured assets,
may take assistance of the Chief Metropolitan Magistrate or the
District Magistrate, as the case may be. Section 14 of the
SARFAESI Act (after its amendment w.e.f. 15-01-2013), reads
thus:-
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 asset is
required to be sold or transferred by the secured creditor under
the provisions of this Act, the secured creditor may, for the
purpose of taking possession or control of any such secured
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
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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
ig 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;
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(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:
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.
(1-A) 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."
(emphasis supplied)
14. Thereafter, section 17 of the SARFAESI Act inter alia
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provides that 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 authorized officer under Chapter-III,
may make an Application along with such fee as may be
prescribed to the DRT having jurisdiction in the matter, within 45
days from the date on which such measures had been taken. How
the said Application has to be dealt with is also set out in the said
section.
15. As can be seen from the aforesaid provisions, wide
powers have been given to banks and financial institutions to
recover their secured debts by enforcing their security without
the intervention of the Court. In order to gain possession of the
secured assets, banks and financial institutions are also
empowered to approach the Chief Metropolitan Magistrate or the
District Magistrate, to take their assistance in that regard. All
these provisions have been enacted keeping in mind the object and
purpose of quick and efficacious recovery of secured debts due to
banks and financial institutions who play a very vital role in our
country's economic growth.
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16. Having noted the provisions of the SARFAESI Act and
the purpose sought to be achieved thereby, we shall now make a
brief reference to the provisions of the CrPC, 1973. The CrPC,
1973 is an Act to consolidate and amend the law relating to
criminal procedure. Section 6 of the CrPC, 1973 deal with the
classes of Criminal Courts and stipulates that besides the High
Courts and the Courts constituted under any law, other than this
Code, there shall be, in every State, the following classes of
Criminal Courts, namely, (i) Courts of Session; (ii) Judicial
Magistrates of the first class and, in any metropolitan area, the
Metropolitan Magistrate; (iii) Judicial Magistrates of the second
class; and (iv) Executive Magistrates. Thereafter, section 8 talks
about metropolitan areas and stipulates that the State
Government may, by notification, declare that as from such date
as may be specified in the notification, any area in the State
comprising a city or town whose population exceeds one million,
shall be a metropolitan area for the purposes of the CrPC, 1973.
Section 16 deals with the Courts of Metropolitan Magistrates and
stipulates that in every metropolitan area, there shall be
established as many Courts of Metropolitan Magistrates, and at
such places, as the State Government may, after consultation with
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the High Court, by notification, specify. Section 16 further
provides that the Presiding Officers of such Courts shall be
appointed by the High Court and the jurisdiction and powers of
every Metropolitan Magistrate shall extend throughout the
metropolitan area. Thereafter, section 17 deals with the
appointment of the Chief Metropolitan Magistrate and the
Additional Chief Metropolitan Magistrate. It reads thus:-
"17. Chief Metropolitan Magistrate and Additional Chief
Metropolitan Magistrate.-- (1) The High Court shall, in relation
to every metropolitan area within its local jurisdiction, appoint a
Metropolitan Magistrate to be the Chief Metropolitan Magistrate
for such metropolitan area.
(2) The High Court may appoint any Metropolitan Magistrate to
be an Additional Chief Metropolitan Magistrate, and such
Magistrate shall have all or any of the powers of a Chief
Metropolitan Magistrate under this Code or under any other law
for the time being in force as the High Court may direct."
(emphasis supplied)
17. Section 17 therefore empowers the High Court to
appointment the Chief Metropolitan Magistrate for every
metropolitan area within its jurisdiction. Additionally, in relation
to every metropolitan area within its local jurisdiction, the High
Court is empowered to appoint any Metropolitan Magistrate to be
an Additional Chief Metropolitan Magistrate and such Magistrate
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would have all or any of the powers of a Chief Metropolitan
Magistrate under the CrPC, 1973 or under any other law for time
being in force, as the High Court may direct.
18. Section 19 deals with subordination of Metropolitan
Magistrates and reads thus:-
"19. Subordination of Metropolitan Magistrates.-- (1) The
Chief Metropolitan Magistrate and every Additional Chief
Metropolitan Magistrate shall be subordinate to the Sessions
Judge; and every other Metropolitan Magistrate shall, subject to
the general control of the Sessions Judge, be subordinate to the
Chief Metropolitan Magistrate.
(2) The High Court may, for the purposes of this Code, define the
extent of the subordination, if any, of the Additional Chief
Metropolitan Magistrates to the Chief Metropolitan Magistrate.
(3) The Chief Metropolitan Magistrate may, from time to time,
make rules or give special orders, consistent with this Code, as to
the distribution of business among the Metropolitan Magistrates
and as to the allocation of business to an Additional Chief
Metropolitan Magistrate."
19. Section 19(1) stipulates that the Chief Metropolitan
Magistrate and every Additional Chief Metropolitan Magistrate
shall be subordinate to the Sessions Judge and every other
Metropolitan Magistrate shall, subject to the general control of the
Sessions Judge, be subordinate to the Chief Metropolitan
Magistrate. Section 19(2) provides that the High Court may, for
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the purposes of this Code, define the extent of the subordination, if
any, of the Additional Chief Metropolitan Magistrates to the Chief
Metropolitan Magistrate. Section 19(3) provides that the Chief
Metropolitan Magistrate may from time to time make rules or give
special orders, consistent with this Code, as to the distribution of
business among the Metropolitan Magistrates and as to the
allocation of business to an Additional Chief Metropolitan
Magistrate.
20. What can be discerned from the aforesaid provisions is
that the Court of the Chief Metropolitan Magistrate as well as that
of the Additional Chief Metropolitan Magistrate are courts
constituted under the CrPC, 1973 and exercise powers as
stipulated therein. Section 14 of the SARFAESI Act stipulates that
where the bank or financial institution seeks to take possession of
the secured assets, it may approach the Chief Metropolitan
Magistrate or the District Magistrate, as the case may be, for his
assistance. Therefore, under section 14 of the SARFAESI Act, the
bank / financial institution is to approach a pre-existing court
already constituted under the provisions of the CrPC, 1973. It is
well settled that the Chief Metropolitan Magistrate or the District
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Magistrate, as the case may be, whilst deciding an Application
under section 14 of the SARFAESI Act, acts in a very limited
jurisdiction and does not adjudicate any lis between the bank and
the borrower. His jurisdiction is invoked only for the limited
purpose of seeking his assistance in taking the possession of the
secured assets. This assistance would be rendered to the
banks/financial institutions subject to them complying with the
conditions and stipulations set out in section 14.
21. In the facts before us all the Applications filed by the
Respondent Banks were instituted in the Court of the Chief
Metropolitan Magistrate. Since the Chief Metropolitan Magistrate
was absent, the In-charge Chief Metropolitan Magistrate
entertained the aforesaid Applications and passed orders under
section 14 of the SARFAESI Act. It is to be noted that in all these
cases, the Application under section 14 was filed before the Court
of the Chief Metropolitan Magistrate and not before any other
authority, and therefore, the Respondent Banks had approached
the correct forum as stipulated in section 14 of the SARFAESI Act.
The Respondent Banks, having filed their Applications under
section 14 before the correct forum / authority, were entitled to
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presume that the In-charge Chief Metropolitan Magistrate had the
power and/or authority to hear and decide their Applications. It is
not as if the Respondent Banks were aware of the
authority/power, or the lack thereof, of the In-charge Chief
Metropolitan Magistrate who disposed of their Applications under
section 14 of the SARFAESI Act. Furthermore, it is not as if the In-
charge Chief Metropolitan Magistrate was a usurper and/or an
intruder who had assumed jurisdiction of an office / title he was
not entitled to in law. The law does not contemplate that when a
judicial officer is absent, a vacuum is created in the process. In
these circumstances we do not think that the Petitioners can
today question the authority of the said In-charge Chief
Metropolitan Magistrate to pass the orders impugned herein and
thereby thwart the securitization proceedings initiated by the
Respondent Banks. We, therefore, find that the argument
canvassed on behalf of the Petitioners that the In-charge Chief
Metropolitan Magistrate had no jurisdiction to entertain the
Applications filed by the Respondent Banks under section 14, is
wholly without merit.
22. Equally without merit, we find the argument
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canvassed by Mr. Cama that absent a Notification authorizing the
In-charge Chief Metropolitan Magistrate to entertain and hear
Applications under section 14, he had no authority and/or
jurisdiction to do so. We find that in the present case the principles
of the "de-facto" doctrine would apply, and therefore, the orders
passed by the In-charge Chief Metropolitan Magistrate cannot be
assailed by the Petitioners. This doctrine, which is now well
established, propounds that the acts of officers "de-facto"
performed by them within the scope of their assumed official
authority, in the interest of public or third persons and not for
their own benefit, are generally as valid and binding, as if they
were the acts of officers "de-jure". This doctrine is founded on
good sense, sound policy and practical expedience. It is aimed at
the prevention of public and private mischief and the protection of
public and private interest. It avoids unnecessary confusion and
needless chaos. Even though an illegal appointment may be set
aside and a proper appointment may be made, but the acts of
those who hold office "de-facto" are not so easily undone and may
have lasting repercussions and confusing sequels, if attempted to
be undone.
23. It is keeping this larger public interest in mind that
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this "de-facto" doctrine has been evolved. Though this doctrine is
well settled, it would be apposite to refer to the decision of the
Supreme Court in the case of Gokaraju Rangaraju4 in this regard.
After reviewing the law on the subject, including American Law
and English Law, the Supreme Court at paragraph 17 held as
under:-
"17. A judge, de facto, therefore, is one who is not a mere
intruder or usurper but one who holds office, under colour of
lawful authority, though his appointment is defective and may
later be found to be defective. Whatever be the defect of his title
to the office, judgments pronounced by him and acts done by him
when he was clothed with the powers and functions of the office,
albeit unlawfully, have the same efficacy as judgments
pronounced and acts done by a judge de jure. Such is the de facto
doctrine, born of necessity and public policy to prevent needless
confusion and endless mischief. There is yet another rule also
based on public policy. The defective appointment of a de facto
judge may be questioned directly in a proceeding to which he be
a party but it cannot be permitted to be questioned in a litigation
between two private litigants, a litigation which is of no concern
or consequence to the judge except as a judge. Two litigants
litigating their private titles cannot be permitted to bring in issue
and litigate upon the title of a judge to his office. Otherwise so
soon as a judge pronounces a judgment a litigation may be
commenced for a declaration that the judgment is void because
the judge is no judge. A judge's title to his office cannot be
brought into jeopardy in that fashion. Hence the rule against
collateral attack on validity of judicial appointments. To question
a judge's appointment in an appeal against his judgment is, of
course, such a collateral attack."
(emphasis supplied)
24. We find that in the facts of the present case, this
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judgment will apply with full force. It is not as if the In-charge
Chief Metropolitan Magistrate is an intruder or usurper as set out
in the aforesaid Supreme Court decision, but is one who holds the
office under the color of lawful authority. Even if this doctrine is
not strictly applied in the facts of this case, the impugned orders
cannot be assailed. To assume that the Presiding Officer entered
upon or took office unlawfully or illegally is not correct. It is
pertinent to note that the Presiding Officer passing the impugned
order was presiding over the Court of the Chief Metropolitan
Magistrate. He was the chosen one being next in seniority to the
Chief Metropolitan Magistrate demitting office or on leave
temporarily. Thus, an officer duly appointed as an Additional
Chief Metropolitan Magistrate and functioning as such took
charge as a Chief Metropolitan Magistrate on the orders and
directions of his superiors and in terms of a settled official
practice. Thus, a Judge of an existing Court presided over his
immediate senior's Court in the absence of such senior. None can
question this process much less a litigant like the Petitioners for
they suffer no prejudice. As far as the Banks are concerned, they
proceeded with the matters bonafide and have no control over
such affairs. In any event, the judgments pronounced by him and
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the acts done by him when he was clothed with the powers and
functions of office, have the same efficacy as a judgment
pronounced, and acts done by him de-jure. It is important to note
that the Supreme Court has categorically stated that though a
defective appointment of a "de-facto" Judge may be questioned
directly in a proceeding to which he is a party, it cannot be
permitted to be questioned in a litigation between two private
litigants, a litigation which is of no concern or consequence to the
Judge except as a Judge. The two litigants litigating their private
disputes cannot be permitted to bring in issue and litigate upon
the authority and/or title of the Judge to his office. Otherwise, as
soon as the Judge pronounces a judgment, a litigation may be
commenced for a declaration that the judgment is void because
the Judge is not a Judge. This is exactly the case before us. Hence,
the rule against collateral attack on the validity of judicial
appointments cannot be permitted in such a fashion. We,
therefore, find that even assuming that the In-charge Chief
Metropolitan Magistrate did not have the actual authority, or was
not clothed with the powers to entertain an Application under
section 14 of the SARFAESI Act, by applying the "de-facto"
doctrine, it would make no difference in the present case.
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25. Even otherwise, we find that in pursuance of section
17(2) of the CrPC, 1973, by a Notification No.A-3902 / 2015 dated
21st October, 2015 the High Court has empowered the Additional
Chief Metropolitan Magistrate who holds charge of the Chief
Metropolitan Magistrate in the latter's absence, to entertain and
decide Applications filed under Section 14 of the SARFAESI Act.
The said Notification reads as under:-
"In pursuance of Sub Section (2) of Section 17 of the Code of
Criminal Procedure the High Court empowers the Additional
Chief Metropolitan Magistrate who hold the charge of the Chief
Metropolitan Magistrate in latter's absence, to entertain and
decide the applications filed under Section 14 of the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002."
26. In this view of the matter and considering the fact that
a specific Notification has now been issued, it would be an exercise
in futility to accept the submissions made on behalf of the
Petitioners and set aside the impugned orders and remand the
matter back to the Court of the Chief Metropolitan Magistrate for
fresh consideration.
27. In all these Petitions, the Petitioners are borrowers as
understood under the provisions of the SARFAESI Act and owe
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huge amounts to the Respondent Banks. We do not think that
justice lies on the side of the Petitioners for us to exercise our
extraordinary, equitable and discretionary jurisdiction under
Article 226 of the Constitution of India and allow the Petitioners to
set up such a collateral attack on the powers and jurisdiction of
the In-charge Chief Metropolitan Magistrate to somehow delay
and thwart the securitization proceedings initiated against them.
On this aspect of the matter, it would be apposite to refer to the
observations of a Division Bench [M. C. Chagla, C.J. and S T Desai
J] of this Court in the case of the State of Bombay Vs. Morarji
Cooverji.5 which [at Pg 332] reads as under:-
"But it is not sufficient that a party should come to this Court and
make out a case that a particular requisition order is not valid.
In order to get that relief from the Court on a writ petition, not
only must he come with clean hands, not only must he not
suppress any material facts, not only must he show the utmost
good faith, but he must also satisfy the Court that the making of
the order will do justice and that justice lies on his side."
(emphasis supplied)
28. Having held so, we shall now deal with the judgments
relied upon by Mr Cama, learned counsel appearing on behalf of
the Petitioners. The first judgment relied upon by Mr Cama is a
5 (1958) LXI BLR 318
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judgment of this Court in the case of Arjun Urban Co-operative
Bank Ltd.1 The facts of this case reveal that one Hindmata Cloth
Emporium (borrower), had availed of cash credit facilities from
the Petitioner and offered security by mortgaging a flat. Since the
said borrower had failed and neglected to repay the debts due to
the Petitioner, it initiated action under the SARFAESI Act and
after following the necessary procedure approached the Chief
Judicial Magistrate, Solapur, under section 14 of the SARFAESI
Act for securing his assistance in taking possession of the secured
assets. It is in these facts that the Division Bench held that section
14 of the SARFAESI Act was clearly worded and that the secured
creditor, for taking possession of the secured assets, has to
approach the Chief Metropolitan Magistrate or the District
Magistrate. Since the Petitioner had chosen a wrong forum and
had approached the Chief Judicial Magistrate, the Chief Judicial
Magistrate could not have entertained the Application filed under
section 14. Clearly, this judgment has no application to the facts
of the present case. In the case of Arjun Urban Co-Operative
Bank Ltd.1, the Petitioner had approached the wrong authority
which was not at all empowered to entertain and decide
Applications filed under section 14 of the SARFAESI Act. It is in
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these circumstances that the findings given in the aforesaid
judgment have to be considered and read. In the facts before us
such is not the case. In the present case, admittedly, the
Applications (under section 14 of the SARFAESI Act) were filed in
the Court of the Chief Metropolitan Magistrate which is admittedly
the authority named in section 14 of the SARFESI Act. Since the
Chief Metropolitan Magistrate was absent that the orders came to
be passed by the In-charge Chief Metropolitan Magistrate under
section 14 of the Act. We, therefore, find that this judgment has
absolutely no application to the facts of the present case and would
not carry the case of the Petitioners any further.
29. The next judgment relied upon by Mr Cama is the
judgment of the Madras High Court in the case of K. Arockiyaraj.2
Here also we find that the Application under section 14 of the
SARFAESI Act was made to the Chief Judicial Magistrate as was
done in the case of Arjun Urban Co-operative Bank Ltd.1 We,
therefore, find that for the same reason this decision also would
have no application to the facts of the present case.
30. The last judgment relied upon by Mr Cama was the
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judgment of the Gujarat High Court in the case of Manjudevi R.
Somani.3 We have carefully gone through the aforesaid decision.
We find that in this case the Petitioner, who was a debtor of Union
Bank of India, called into question the legality, validity and
propriety of the order dated 17th July, 2012 passed by the
Additional Chief Metropolitan Magistrate in exercise of powers
under section 14 of the SARFAESI Act. The Petitioner also called
into question the legality, validity and propriety of the office order
issued by the Chief Metropolitan Magistrate dated 4th February,
2012 in exercise of his powers under section 19(3) of the CrPC,
1973 by which Applications under the provisions of the SARFAESI
Act, arising within the limits of the Ahmedabad Municipal
Corporation were ordered to be filed in the Court of the Additional
Chief Metropolitan Magistrate, Ahmedabad. The Gujarat High
Court after analyzing the provisions of the CrPC, 1973 as well as
the SARFAESI Act, came to the conclusion that the allocation of
the business to the Additional Chief Metropolitan Magistrate as
contemplated under section 19(3) of the Code of Criminal
Procedure must be consistent with the jurisdiction conferred upon
him by the High Court in exercise of powers under section 17(2)
thereof. In this view of the matter, the Gujarat High Court set
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aside the office order issued by the Chief Metropolitan Magistrate
dated 4th February, 2012 and consequently the order passed by
the Additional Chief Metropolitan Magistrate dated 17th July,
2012 on the ground that the same was without jurisdiction, and
therefore, void ab-initio. With great respect to the Gujarat High
Court, we are unable to agree with the aforesaid decision. We find
that the Gujarat High Court has come to this conclusion without
taking into consideration the "de-facto doctrine" that has been
well settled and very succinctly set out in the decision of the
Supreme Court in the case of GokaRaju RangaRaju.4 According to
us, even if the Chief Metropolitan Magistrate's order of 4th
February, 2012 was held to be in excess of exercise of its powers,
the orders passed pursuant thereto by the Additional Chief
Metropolitan Magistrate ought not to have been set aside in view
of the "de-facto" doctrine that has now been well settled and
evolved in larger public interest. We, therefore, with great
humility, find ourselves unable to agree with the decision of the
Gujarat High Court in the case of Manjudevi R Somani.3
31. In view of our discussion earlier in this judgment, we
find no merit in these Writ Petitions. They are accordingly
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dismissed. All interim orders passed therein, if any, stand vacated
forth with. However, in the facts and circumstances of this case,
we leave the parties to bear their own costs.
(B. P. COLABAWALLA, J.) (S. C. DHARMADHIKARI, J.)
At this stage, Mr. Kamat prays for continuation of the
ad-interim order for a period of four weeks to enable the
Petitioners to challenge this judgment in a higher court. This
request is opposed by the advocates appearing for the banks in all
the Writ Petitions. Some of the Petitioners were required to
deposit certain amounts to show their bonafides. Even this
condition in the ad-interim order has not been complied with. In
such circumstances, the request is refused.
(B. P. COLABAWALLA, J.) (S. C. DHARMADHIKARI, J.)
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