Bombay High Court
Bank Of Maharashtra Thr Its ... vs Additional District Magistrate ... on 17 June, 2016
Bench: V.A. Naik
wp.1122.16
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT NAGPUR, NAGPUR.
...
WRIT PETITION NO.1122/2016
Bank of Maharashtra
Through its Authorised Officer
Mahabank Building
Abhyankar Road, Sitabuldi
Nagpur-440 012. ..PETITIONER
v e r s u s
1)
Additional District Magistrate
Office of District Magistrate
at Nagpur.
2) M/s Narayana Farm Produce Private Limited
Company incorporated under the
Companies Act, 1956, and having its
registered office at Plot No.74,
Pioneer Residency Park, Somalwada
Wardha Road, Nagpur 440 025
and Factory Address: 57/1, Sukli Gharpure
Tahsil Hingna, Dist. Nagpur.
3) Sunil s/o Prabhakaran Menon
Plot No.03, Pioneer Residency Park
Somalwada Wardha Road
Nagpur- 440 025.
(Address corrected as per Court's order
dated 22.4.2016)
4) Smt. Jayashree w/o Suresh Nair
651, Shreyad Marartoli
Ramnagar, Nagpur- 440 010.
5) Shri Suresh s/o Narayan Nair
651, Shreyad Marartoli
Ramnagar, Nagpur- 440 010.
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6) Shri Shashi Nair
73, Pioneer Residency Park
Somalwada, Wardha Road
Nagpur- 440 025.
7) M/s Nair Coal Services Ltd.,
Company incorporated under the
Companies Act, 1956, and having its
registered office at 160,"Susheel"
Ramnagar, Nagpur-440 033.
8) M/s Narayana Processed Food Pvt. Ltd.
A company incorporated under the
Companies Act, 1956, and having
its registered office at Plot No.74
Pioneer Residency Park, Somalwada
Wardha Road, Nagpur- 440 025.
9) M/s Modern Food
A partnership firm carrying on business
Through its partners at
T.N. 74, Pioneer Residency Park
Somalwada, Wardha Road,
Nagpur-440025. .. ...RESPONDENTS
...........................................................................................................................
Mr. M.N. Phadke, Advocate for the petitioner
Mr. D.P. Thakre, Addl. Government Pleader for Respondent No.1
Respondent Nos. 2 to 9 served.
............................................................................................................................
CORAM: SMT. VASANTI A. NAIK &
MRS . SWAPNA JOSHI, JJ
.
DATED : 17th June, 2016
JUDGMENT: (PER MRS. SWAPNA JOSHI, J.)
Rule. Rule made returnable forthwith. The petition is heard
finally at the stage of admission, with the consent of the learned counsel for
the parties.
wp.1122.16
2. By this Writ Petition, the petitioner-Bank has impugned the order
dated 14th August, 2015 passed by the respondent no.1/ Additional District
Magistrate in Revenue Case No.113/2014, thereby declaring that the property
of which possession is to be taken, is an 'agricultural land' and rejecting the
claim of the petitioner-Bank to secure possession of the land mortgaged with
the petitioner-Bank and closing the case, in view of the provisions of Section
31(i) of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act,2002 (hereinafter referred to as the
'Securitisation Act' for the purpose of brevity).
Some of the relevant facts for the purpose of deciding the instant
petition, are as under :-
3. On 4.10.2010, the respondent no.1-Company was granted the
term loan of Rs. 70 crores and cash credit limit of Rs. 5 crores for doing the
business of Dairy Farm. On 1.11.2010 the respondent no.2-Company, in
consideration of the said term loan and cash credit limit, executed various
documents. On 1.11.2010, the respondent nos. 3 to 6 in their individual
capacity, along with respondent nos. 7 to 9 executed separate guarantee deeds
and thereby agreed to guarantee the repayment of credit sum of Rs. 75 crores
to the petitioner-Bank. On 30.8.2011, the respondent nos.4 and 5 created
an equitable mortgage in respect of their seven immovable properties to secure
the repayment of the said loan facilities aggregating to Rs. 75 crores. The
respondent no.5 and one Shri Sushil Nair created an equitable mortgage in
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respect of their immovable property located at Kerala to secure the repayment
of the said loan facility aggregating to Rs. 75 crores. The respondent no.3 as
Director of the respondent no.8 created an equitable mortgage in respect of his
immovable property to secure the repayment of the said loan facilities
aggregating to Rs.75 crores. The respondent no.9 created an equitable
mortgage in respect of his immovable property to secure the repayment of the
said loan facility aggregating to Rs. 75 crores. On 17.7.2012 the respondent
nos. 2 to 9 gave a letter to the petitioner-Bank and thereby acknowledged their
liability to repay the amount due to the petitioner-Bank. On 2.5.2013 the
petitioner-Bank classified the account of respondent no.2-company as non-
performing asset as per the Reserve Bank of India Guidelines. On 20.8.2013,
the petitioner-Bank issued a demand notice under section 13 (2) of the
Securtisation Act, calling upon the respondent nos. 2 to 9 to pay the amount
of Rs. 70,85,86,832. 85 paise jointly and severally, to the petitioner-Bank. On
14.10.2013, the respondent nos. 2 to 9 raised the objection u/s 13(3) of the
Securitisation Act to the said demand notice. On 22.10.2013, the petitioner-
Bank filed the O.A. No.119/2013 against the recovery of Rs. 76,42,44,383.85
paise jointly and severally and for sale of the mortgage property. The
petitioner-Bank u/s 13(3A) of the Securitisation Act replied to the said
objection on 23.10.2013. The petitioner-Bank then issued a notice under sub-
section (4) of Section 13 of the Securitisation Act, in respect of seven
mortgaged properties, located in Nagpur and took a symbolic possession
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thereof by affixing the notice on the said seven properties, on 22.11.2013.
The petitioner-Bank then published the possession notice in the local
newspapers. The petitioner-Bank approached the District Magistrate at Nagpur
for seeking assistance u/s 14 of the Securitisation Act to take the physical
possession of the secured assets i.e. five mortgaged properties at Nagpur with
relevant information through an application and all the relevant documents in
support thereof, on 26.11.2014. On 5.1.2015 the respondent no.1/ Additional
District Magistrate issued notice to the respondent nos. 2 to 9 to file their
reply, in response to the application filed by the petitioner-Bank. On
11.6.2015 the respondent no.2 filed objections by way of reply to the said
application filed by the petitioner-Bank and that Shri Sadanand W. Laghate,
the alleged tenant also filed the objection by way of reply to the said
application filed by the petitioner-Bank. On 24/06/2015, the respondent no.1,
after hearing the petitioner-Bank the respondent nos. 2 to 9 and the alleged
objector/tenant, closed the case for order. On 14.8.2015 the respondent no.1/
Additional District Magistrate passed the impugned order and thereby closed
and filed the Revenue Case No.113/2014, in view of the provisions of Section
31 sub-clause (i) of the Securitisation Act. Thus, being greatly aggrieved by
the said impugned order dated 14.8.2015 passed by the respondent no.1/
Additional District Magistrate, Nagpur, the petitioner-Bank has filed the
present petition.
4. Shri M.N. Phadke, the learned counsel for the petitioner
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vehemently argued that the respondent no.1 had no jurisdiction to decide
whether the property was agricultural land or not. It is submitted that the
District Magistrate has no powers to adjudicate upon the questions in regard
to the nature of the property. According to the learned counsel for the
petitioner, neither the respondent nos. 2 to 9 nor the objector/tenant had, at
any point of time, raised the objection that the property of which the
possession was to be taken is an agricultural land. According to the learned
counsel for the petitioner, the respondent no.1 has no jurisdiction to go into
the merits of the case and pass an order u/s 14 of the Act, declaring that the
property of which possession is to be taken is an agricultural land. Learned
counsel for the petitioner placed reliance upon the judgment of the Bombay
High Court in the case of Union Bank of India vs. State of Maharashtra
and others, reported in AIR 2010 Bombay 150. He further placed reliance
upon the judgment of the Gujarat High Court in the case of Kotak Mahindra
Bank Limited vs. District Magistrate and one reported in 2015 LawSuit
(Guj) 1269.
5. Learned Additional Government Pleader, Shri D.P. Thakre,
appearing on behalf of the respondent no.1, fairly admitted that powers of the
District Magistrate are limited and he had no jurisdiction to decide whether
the property was agricultural property or not. The learned Additional
Government Pleader submitted that because the judgments were not cited
before him, there was some error in passing the impugned order. He stated
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that if the matter is remanded to the District Magistrate, he may pass an
appropriate order.
6. After hearing both sides and perusal of the documents placed on
record, it is necessary to go through the provisions of Section 14 of the
Securitisation Act:-
"14. Chief Metropolitan Magistrate or District Magistrate to assist
secured creditor in taking possession of secured asset:
Where the possession of any secured asset 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 asset, request,
in writing,the Chief Metropolitan Magistrate or the District
Magistrate within whose jurisdiction any such secured asset or
other documents relating thereto may be situated or found, to take
possession thereof, and the Chief Metropolitan Magistrate or, as the
case may be, the District Magistrate shall, on such request being
made to him :
(a) take possession of such asset and documents relating
thereto; and
(b) forward such asset and documents to the secured
creditor,
1.(a) 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 of financial Institution
is holding a valid and subsisting security interest over such
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properties and the claim of the bank or Financial Institution
is within the limitation period;
(iii) the borrower has created security interest over
various properties giving the details of properties referred
to in sub-clause (ii) above;
(iv) the borrower has committed default in repayment of
the financial assistance granted aggregating the specified
amount;
(v) consequent upon such default in repayment of the
financial assistance the account of the borrower has been
classified as a non-performing asset;
(vi) affirming that the period of sixty days notice as
required by the provisions of sub-section (2)of Section 13,
demanding payment of the defaulted financial assistance
has been served on the borrower;
(vii) the objection or representation in reply to the notice
received from the borrower has been considered by the
secured creditor and reasons for non-acceptance of such
objection or representation had been communicated to the
borrower;
(viii) the borrower has not made any repayment of the
financial assistance in spite of the above notice and the
Authorised officer is, therefore, entitled to take possession of
the secured assets under the provisions of sub-section (4) of
Section 13 read with section 14 of the principal Act;
(ix) that the provisions of this Act and the rules made
thereunder has 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
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case may be, on the date of commencement of this Act."
(b) after sub-section (1), the following sub-section shall be
inserted, namely:
"(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."
(c)
in sub-section (3), after the words "the District Magistrate",
the words " any officer authorised by the Chief Metropolitan
magistrate or District Magistrate " shall be inserted. "
The provisions quoted herein-above clearly indicate that the
District Magistrate has to simply verify that the contents in the affidavit
tendered by the petitioner-Bank, are in accordance with the provisions of
Section 14(1)(a) of the Act. A bare perusal of the order passed by the
respondent no.1 would reveal that the observation of the Additional District
Magistrate that the property of which possession is taken appears to be
'agricultural land' and no evidence is filed on record that the property is non-
agricultural land and that as per the provisions of Sec. 31 sub-clause (1) of
Secrutisation Act does not apply to the agricultural land, appears to be without
jurisdiction. Significantly, neither the respondent nos.2 to 9 nor the objector/
tenant raised such an objection. The District Magistrate has no power under
section 14 of the Act to go into the merits of the case. In Kotak Mahindra Bank
wp.1122.16
Vs District Magistrate (supra) the Division Bench of Gujarat High Court,
relying upon the judgment in the case of IDBI Bank Limited through
Authorised signatory vs. District Magistrate and another; reported in 2011 (2)
GLH 12, in paragraph no.6 observed as under :
"6. The Authority who is called upon to act under
Section 14 of the Securitisation Act can only assist, nay, is
bound to assist the secured creditor in taking possession of
the secured asset. As the Chief Metropolitan Magistrate and
District Magistrate under section 14 is not empowered to
decide the question of legality and propriety of any of the
actions taken by the secured creditor under Section 13 (4),
which may be assailed under section 17 of the Act by the
aggrieved person, under sub-section (3) of Section 14 of the
Securitisation Act, the act of the Chief Metropolitan
Magistrate or District Magistrate done in pursuance of said
Section cannot be called in question in any court or before
any authority. It is evident from the provisions of law that
the District Magistrate while bound to assist the secured
creditor in taking possession of the secured assets and to
take the possession of the documents to be secured creditor,
he is not empowered to decide the question of genuinity or
propriety of such documents, including the document signed
or agreed between the borrower and the secured creditor. "
It is further held that:
"If such measures taken u/s 14 which amount to measures
taken u/s 13 (4) is not in accordance with Securitisation
Act or the Rules framed thereunder, including the objection,
if any, raised that the asset is not a secured asset to be
taken under Section 13 (4), the aggrieved person has a
remedy u/s 17 before the Debts Recovery Tribunal to show
that the measures taken are against the Act. Such a
determination is to be made by the D.R.T. including the
question whether the assets is a secured asset or not and the
Chief Metropolitan Magistrate or the District Magistrate has
not been empowered to adjudicate such a dispute, but is
directed only to secure asset in taking possession of the
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secured assets".
It is evident from the above discussion that the Additional District
Magistrate has no powers to adjudicate the dispute, but has to verify whether
the declarations are made in the affidavit tendered by the petitioner as per
Section 14(1)(a) and then pass an order for taking actual possession of the
secured assets.
In AIR 2010 BOM 150 (supra), in paragraph 23, the Division
"23.
Bench of this Court, has observed thus :-
Similarly, in the case of Bank of India (AIR 2007
Guj 201) (cited supra), the learned Judge in paragraph 8 has
observed thus:
8. Hence the authority who is called upon to act
under S. 14 of the Securitisation Act can only assist, nay,
bound to assist the secured creditor in taking possession of the
secured asset. Any dispute between the parties regarding the
secured asset raised before the authority cannot be gone into by
authority, the authority has to relegate aggrieved person to
seek statutory remedy under the Securitisation Act after taking
possession and handing over the secured creditor. The authority
cannot be permitted to read anything beyond this is S.14 of
the Securitisation Act.
It is further held that:
It is evident that Section 14 of the SARFAESI Act
is an enabling section which empowers Magistrate only to
assist secured creditor in taking possession of the secured assets
and, therefore, the power vested in the District Magistrate is
limited and specific. Plain reading of Section 14 of the
SARFAESI Act demonstrates that it does not clothe the District
magistrate with power to undertake any adjudication in
respect of any dispute between the parties regarding the
secured assets. Hence, any dispute raised regarding the secured
assets of any kind, cannot be gone into by the District
Magistrate while exercising power under Section 14 and the
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aggrieved person is required to approach the competent forum
for redressal of his grievance in respect of the secured assets."
In that case, this Court held that the District Magistrate cannot
adjudicate any dispute between the parties regarding the secured assets. It is
held that the District Magistrate cannot decide about the nature of the secured
asset and hence he cannot hold that a particular secured asset is an
agricultural land.
Likewise, in the case in hand, the learned District Magistrate has
exceeded his limits and has passed the impugned order without jurisdiction
and contrary to the provisions of Section 14.
In the case of Standard Chartered Bank vs. Noble Kumar and
others, reported in (2013) 9 SCC 620, the Hon'ble Apex Court has observed
in paragraph 25, as under :
"25. The satisfaction of the Magistrate contemplated
under the second proviso to Section 14(1) necessarily
requires the Magistrate to examine the factual correctness of
the assertions made in such an affidavit but not the legal
niceties of the transaction. It is only after recording of his
satisfaction the Magistrate can pass appropriate orders
regarding taking of possession of the secured asset."
7. Thus, the respondent no.1/Addl. District Magistrate has erred in
passing the impugned order in as much as, he was only required to examine
whether assertions were made in the affidavit by the petitioner-Bank as per
Section 14(1)(a) and only after recording of the satisfaction, he should have
passed appropriate order regarding taking of possession of the secured assets.
wp.1122.16
The Addl. District Magistrate has thus passed an illegal order, without
jurisdiction and therefore it is liable to be quashed. The respondent no.1 erred
in observing that the property of which possession was to be taken is an
agricultural land when neither the respondent no.2 to 9 nor the objector/
tenant raised the objection about the same and when he had no jurisdiction to
embark upon the said question. Thus, the order passed by the Addl. District
Magistrate is unsustainable in law, being illegal and without jurisdiction.
Hence the following order: ig ORDER:
i) Writ Petition is allowed.
ii) The impugned order dated 14.08.2015 passed by respondent no.1/
Addl. District Magistrate, Nagpur, is hereby quashed and set aside.
iii) The matter is remanded to the District Magistrate, Nagpur for fresh
decision by affording an opportunity of being heard, to the parties, in
accordance with law, within a period of one month from the date of receipt of
copy of this order.
Rule is made absolute in the aforesaid terms, with no order as to
costs.
JUDGE JUDGE
sahare
