Bombay High Court
Kotak Mahindra Bank Ltd Thr Its ... vs The State Of Maharashtra Thr The ... on 30 August, 2023
Bench: G. S. Kulkarni, Rajesh S. Patil
2023:BHC-AS:24925-DB
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vai
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
Digitally signed by
VASANT VASANT
ANANDRAO ANANDRAO IDHOL WRIT PETITION NO.3351 OF 2023
IDHOL Date: 2023.08.31
10:25:40 +0530
Kotak Mahindra Bank Limited,
A Banking Company incorporation and
governed by the Companies Act, 1956 and
carrying on Banking Business under the
Banking Regulation Act, 1949 and having its
Registered & Corporate Office, at 27, BKC,
C/27, G Block, Bandra Kurla Complex,
Bandra (East), Mumbai - 400 051 and having
branch address at 5th floor, Adamas Plaza,
CST Road, Kalina, Santacruz East, Mumbai -
400 098. through its Authorized
Representative Mr.Shantanu Nayar. ...Petitioner
....Versus....
1. The State of Maharashtra,
Through the District Magistrate, Pune.
2. The Tahsildar / Office of Executive
Magistrate, Home Department, Pune,
"B" Wing, 4th Floor, New Collector Office
Building, Station Road, Opposite
Sasoon Hospital Pune - 411 001.
3. The Resident Nayab Tahsildar
Pune City, NH4, 76/10, Shukrawar Peth,
Mahatma Gandhi Road, Sukhrawar Peth, ...Respondents
Pune - 411 002.
Mr.Prathamesh Kamat with Mr.Apoorva Kulkarni i/b V. Deshpande &
Co. for the Petitioner.
Ms.Shruti D. Vyas, "B" Panel Counsel for the Respondent - State.
CORAM : G.S. KULKARNI &
RAJESH .S. PATIL, JJ.
RESERVED ON : 13TH JUNE, 2023
PRONOUNCED ON : 30TH AUGUST, 2023
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JUDGMENT : (Per Rajesh S. Patil, J.) :
1. Rule. Rule is made returnable forthwith. Heard finally by
consent of the learned counsel for the parties.
2. This Writ Petition filed under Article 226 of the
Constitution of India has prayed for the following reliefs :-
"(a) This Hon'ble Court be pleased to issue a Writ of
Mandamus or any other Writ of the like nature thereby
directing the Respondent No.2 and 3 to forthwith and or
within such time as this Court may deem fit and proper to
execute and implement order dated 12.01.2021 passed by
the Respondent No.1 under Section 14 of SARFAESI Act
in an Application being Application No. 978 of 2020.
(a1) This Hon'ble Court be pleased to issue a Writ of
Mandamus or any other Writ of the like nature thereby
quashing or setting aside the impugned
letter/communication dated 17.11.2022 directing that the
possession of the secured asset cannot be taken until
appropriate orders are passed in Civil Suit filed by
Petitioner in District Court Pune being Civil Suit No. 1436
of 2015.
(b) This Hon'ble Court be pleased to issue a Writ of
Certiorari or any other Writ of the like nature thereby
directing the Respondent No.2 and 3 to forthwith and or
within such time as this Court may deem fit and proper to
execute and implement order dated 12.01.2021 passed by
the Respondent No.1 under Section 14 of SARFAESI Act
and to take physical possession of the secured assets in
execution of the order dated 12.01.2021 and to handover
the same to the Authorized Officer of this Petitioner."
Facts:
3. The Petitioner is a banking company carrying on banking
business under the Banking Regulation Act, 1949. In or about April,
2005, one Mr.Dipak Digambar Naik along with Mrs.Aruna Naik (for
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short referred as "the co-borrowers"), the Directors of M/s.Millennium
Motors Pvt. Ltd. had approached Citi Financial Consumer Finance
India Limited (for short "CCFIL") for grant of credit facilities. Based on
the request of the borrowers, CCFIL sanctioned housing loan for a
sum of Rs.30,41,069/- to the said borrowers. Such credit facility was
repayable in 96 Equated Monthly Installments (EMI) of Rs.47,040/-
with interest at the rate of 10% p.a. The borrowers created Equitable
Mortgage by deposit of title deeds of the land bearing Plot No.47,
admeasuring 3600 sq. ft. being part of the larger land bearing Survey
No.48/2 (City Survey No.410/519, Yerwada, Pune along with
constructed residential bungalow admeasuring 2600 sq.ft. built up
area (for short "the secured assets"), for loan amount of
Rs.30,41,069/- sanctioned under housing loan. Further in the month
of May, 2009, the borrowers again approached CCFIL for grant of
additional credit facilities. CCFIL granted a further loan of an amount
of Rs.81,00,000/-.
4. The said loan amount of Rs.81,00,000/- was repayable in
82 EMIs of Rs.1,36,139/-. As the title documents were already
deposited, the fresh loan amount was liquidated by deducting the
outstanding amount from the earlier loan amount and the remaining
amount was disbursed.
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5. As the loan being sanctioned and disbursed, various
security documents were executed in favour of CCFIL. The borrowers
assured to honour the repayment schedule for repaying back the
said financial facilities as per the agreed terms.
6. However, the borrowers failed to honour the commitment
and perform terms and conditions of the loan agreement. As the
account became highly irregular, the CCFIL classified the account of
the borrowers as Non-Performing Asset (for short "NPA") in
accordance with the RBI Guidelines.
7. By a Deed of Assignment dated 9 April 2013, CCFIL
assigned to the Petitioners herein, all its rights, title, interest, benefit
in and to the debts due and payable by the borrowers together with
any incidental rights thereto including assignment of and benefits
under the financial instruments along with the right to enforce its
interest in the underlying securities thereunder. Pursuant to the Deed
of Assignment, the Petitioner was entitled to demand and recover
repayment of the debt in question as assignee of CCFIL.
8. The Petitioner accordingly initiated recovery proceedings
under the provisions of Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (for
short "SARFAESI") by issuing a notice dated 31 March, 2014 under
Section 13(2) calling upon the borrowers to pay a sum of
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Rs.91,33,304/- due and payable as on 31 March, 2014 with further
interest at the contractual rate from 1 April, 2014 till payment and/or
realization.
9. There was no reply filed by the borrowers or by any other
parties to the said notice issued under Section 13(2) of the
SARFAESI Act. The Petitioner accordingly issued a notice dated 16
October 2014 under Section 13(4) of SARFAESI Act. The Petitioner
also took symbolic possession of the secured assets and also
published possession notice in newspaper in compliance with the
Securitization Rules.
10. Sometime in the year 2015 it came to the knowledge of
the Petitioner that one Mr.Jayraj Khanvilkar (for short "the third party")
informed he had filed Special Civil Suit No.676 of 2010 against the
borrowers in which a decree of cancellation of the Deed of
Assignment dated 17 May, 2005 was passed. The Petitioner/Bank
was not impleaded as a party to the said suit.
11. The Petitioner thereafter instituted a suit being Special
Civil Suit No.1436 of 2015 against the borrowers and said Mr.Jayraj
Khanvilkar, before Civil Judge (Senior Division), Pune for setting
aside the decree passed in Special Civil Suit No. 676/2010. In the
said Special Civil Suit an application below Exhibit '5' came to be filed
by the Petitioner on which an Order dated 25 November 2015 was
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passed granting temporary injunction in favour of the Petitioner
restraining Defendants from alienating the suit property.
12. Thereafter the Petitioner as per the provisions of Section
14 of the SARFAESI Act, filed Securitization Application No.978 of
2020 seeking necessary assistance for taking possession of the
secured assets. Respondent No.1 / District Magistrate, Pune by an
order dated 12 January 2021, allowed the said Securitization
Application and directed Respondent No.2 Tahsildar and Respondent
No.3 / Executive Magistrate, Pune to take possession of the secured
assets and to hand over the same to the authorized officer of the
Petitioner.
13. Respondent No.3 thereafter issued a notice dated 1
February, 2021, fixing 26 February, 2021 as the day for taking
possession of the secured assets and called upon the borrowers to
hand over physical possession of the secured assets to Respondent
No.3 so as to enable him to hand over to the authorized officer of the
Petitioner, thereby executing the order dated 12 January, 2021. The
Police Authorities were also requested to render necessary protection
for taking physical possession.
14. On 26 February 2021 as the possession could not be
taken, Respondent No.3 once again issued a notice dated 26th
February, 2021 thereby fixing 30 March 2021 as the date for taking
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physical possession, and to in turn, hand it over to the authorized
officer of the Petitioner.
15. However, on 18 March 2021, one person by name
Mr.Jayraj Khanvilkar (for short 'the third party') objected to handing
over possession of the secured assets.
16. The Petitioner by its letter dated 14 July, 2021 informed
Respondent No.1 / District Magistrate about the said factual events
and further informed that the objection raised by a third party cannot
be considered and the same are required to be rejected.
17. The third party by his letter dated 30 August 2021 once
again raised an objection to the measures taken by the Petitioner and
requested that the measures be stopped. On such letter of the third
party, Respondent No.1 / District Magistrate by his letter dated 2
September 2021 issued to Petitioner's Authorized Officer, directed to
give explanation and clarification to the objection raised by the third
party.
18. The Petitioner thereafter by its letter dated 26 November
2021 requested Respondent No. 3 Nayab Tahsildar that since there
was no stay to the order dated 12 January 2021, passed by the
Respondent No.1 / District Magistrate, Pune, despite the date of
possession being fixed, the order was not being executed. The
Petitioner therefore requested to take necessary direction for
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possession of the secured asset to be taken over.
19. Thereafter, the date of taking over of possession was
fixed on various occassions, that is, on 20 January 2022, 15 February
2022, 5 April 2022, however, the physical possession of the secured
asset was not taken over. Respondent No.1 / District Magistrate,
Pune however by his letter dated 17 November 2022 addresssed to
the Petitioner informed that the possession of the secured assets
cannot be taken until appropriate orders are passed in the Special
Civil Suit No. 1436 of 2015 filed by the Petitioner before the Civil
Court, at Pune.
20. The Petitioner on the above backdrop has filed the
present Writ Petition challenging the delay in the execution and
implementation of order dated 12 January, 2022 passed by
Respondent No.1/ District Magistrate Pune and the legality of the
Communication dated 17 November 2022 addressed by Respondent
No.1 by which the Respondent No.1/ District Magistrate, Pune took
a position that the possession of the secured assets cannot be taken
until appropriate orders are passed in Special Suit No. 1436 of 2015
by the District Court, Pune.
21. The Petitioner has raised various contentions in the
present Writ Petition which are as under:-
(A) Respondent Nos.2 and 3 have grossly acted in
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breach of the settled position in law and the order passed by this
Hon'ble Court from time to time, to execute the order passed by
Respondent No.1 and in fact the same amounts to contempt of
the order passed by this Hon'ble Court.
(B) The Respondent Nos.2 and 3 have erred in not executing
and implementing the order passed by the Respondent
No.1,dated 12 January 2022 within a reasonable period of time.
(C) Respondent No.2 and 3 have failed to appreciate
that the very purpose of the SARFAESI Act is defeated if the
order passed on an application filed under Section 14 is not
implemented in reasonable time.
(D) Respondent Nos. 2 and 3 have failed to appreciate that
if the order passed on an application under Section 14 is not
promptly executed, there is every likelihood that the defaulting
Borrower having notice of the measures taken by the Petitioner
would deal with the secured assets and transfer them, which
would be difficult to retrieve.
(E) Respondent Nos. 2 and 3 ought to have followed
the guideline issued by the Hon'ble Court in the matter of
Tradewell Vs. Indian Bank and in the matter of PIL filed by
I.A.R.C. against Union of India.
(F) Respondent Nos. 2 and 3 have failed to appreciate that
while application under Section 14E allowed, the order passed
thereon is also former in nature and not to be implemented
without verifying any further document. The Respondent Nos.1
and 2 are not required to adjudicate any issue at the stage of
execution.
(G)Respondent Nos.2 and 3 ought to have considered the
apprehension of the Petitioner that the borrowers would attempt
to dispose of the secured asset and if they succeed in the ulterior
motives, grave harm and prejudice would be caused to the
Petitioner.
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Submissions of the Parties:
22. Mr.Prathamesh Kamat, counsel for the Petitioner/Bank
has submitted that a third party would have no right, to stall the
execution in SARFAESI proceedings merely by filing a letter or by
filing a civil suit against the borrower. The only remedy such party
could have, was to invoke the provisions of Section 17 of the
SARFAESI Act. It is submitted that the third party has admittedly not
filed any proceedings under Section 17 of the SARFAESI Act. It is
next submitted that the third party infact had filed a collusive suit and
obtained a decree against the borrowers. It is submitted that the said
decree would not affect the measures being taken by the Petitioner
under the SARFAESI Act. It is submitted that there was no dispute
that the borrower had created an equitable mortgage of the secured
assets with the petitioners, and there was no stay granted by any
Court to prevent the enforcement of the measures / steps being taken
by the petitioner under the SARFAESI Act. Thus, there being no
prohibitory orders against Respondent Nos.2 and 3 from executing
the Orders, these Respondents need to immediately act on the order
passed by Respondent No.1 / District Magistrate, Pune.
23. Ms. Shruti Vyas, Counsel for the State opposed the
petition and stated that there is a decree passed by the Civil Court,
in favour of the third party and unless and until the decree is set
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aside, the SARFAESI proceeding cannot move ahead. She would
submit that for such reasons directions not to assist the Petitioners to
take over the possession of the mortgaged assets were issued by
Respondent no.1, to Respondent Nos.2 and 3. Ms. Shruti Vyas would
hence submit that the petition be dismissed with costs.
ANALYSIS AND CONCLUSION:
24. We have heard counsel for both the sides. We have also
gone through the record, and authorities cited by both the sides.
25. It is an admitted fact that the borrowers had availed of a
housing loan and other credit facilities from the Petitioner. It is also an
admitted fact that in relation to the said loan as and by way of
security, a Deed of Mortgage was entered into in the month of May
2005 in so as to mortgage the property in favour of the CCFIL. After
the loan account of the borrowers was declared as an NPA, a notice
under Section 13(2) of the SARFAESI Act was issued on 31 March,
2014, to which no reply was filed by the borrowers. The Petitioner
hence invoked the provisions of Section 13(4) of the SARFAESI Act
by issuance of a Notice dated 16 October, 2014 and took symbolic
possession of the secured assets. As the possession was not handed
over even after issuance of the notice under Section 13(4) of the
SARFAESI Act, the Petitioner moved an application before the
District Magistrate, Pune / Respondent No.1 by filing Securitization
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Application No.978 of 2020 so as to obtain physical possession. On
such application of the Petitioner an Order was passed on 12
January 2021, by the District Magistrate, Pune / Respondent No.1
allowing the application, and directed Respondent Nos.2 and 3 to
hand over possession of the secured assets to the Petitioner.
26. Only after the District Magistrate, Pune started taking
measures for obtaining possession of the secured assets, third party
addressed a letter dated 18 March, 2021 objecting to the Petitioner
taking over the possession of the secured assets on the ground that
he had obtained a decree of cancellation of Deed of Assignment, and
on the ground that the suit filed by Petitioner Bank challenging the
decree is pending for adjudication.
27. In the above context as to whether the District Magistrate
would be correct and legal in his approach to act upon such letter of
the third party and not proceed to take an action to take over the
possession in Section 13(4) of the SARFAESI would mandate, it
would be necessary to extract Section 13(4), 17 and 34 of the
SARFAESI Act. Section 13(4), 17 and 34 of the SARFAESI Act
reads as under:-
Section 13. Enforcement of Security Interest
Section 13 (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
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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;
(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.
Section 17. Application against measures to recover
secured 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.]
[(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;
(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 facts
and circumstances of the case and evidence produced by
the parties, comes to the conclusion that any of the
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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.
[(4-A) Where--
(i) any person, in an application under sub-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 65-A 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 sub-section (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 pendency of the
application with the Debts Recovery 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
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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.]
Section 34. Civil Court not to have jurisdiction.
No Civil Court shall have jurisdiction to entertain any suit or
proceeding in respect of any matter which a Debts Recovery
Tribunal or an Appellate Tribunal is empowered by or under
this Act to determine and no injunction shall be granted by
any Court or other authority in respect of any action taken or
to be taken in pursuance of any power conferred by or under
this Act or under the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (51 of 1993).
28. From a reading of the aforesaid provisions, it is clear that
these provisions are a code by itself when it comes to an action being
taken under the SARFAESI Act is concerned. As per Section 34
there is a clear bar to the filing of a civil suit in respect of any action
which the DRT or the Appellate Tribunal is empowered under the
SARFAESI Act to determine as also no injunction shall be granted by
any court or other authority in respect of any action being taken
interalia under the SARFAESI Act or the RDB Act 1993.
29. In such context, a Division bench of this court in Nasik
Merchant Co-op. Bank Vs. The District Collector Jalna in Writ
Petition No.10069 of 2022, has held that there is no prohibition under
the scheme of the SARFAESI Act that comes in the way of district
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magistrate to re-exercise the powers to execute the orders passed
under section 14. Paragraph no. 20 of the said judgment reads as
under:
20. The uncontroverted factual aspects in present matter
depict that the respondent Nos. 5 and 6 have devised novel,
unimaginable and unsustainable modus operandi to defeat ends
of justice and fair play. It is not only the matter of physical
altercation, but would tantamount to assault on the law and
statute. They have the audacity to overrule the law. The growing
tendency of overpowering the law cannot be tolerated. In
peculiar facts and circumstances of this case, we are inclined to
exercise powers under Article 226 of the Constitution of India to
protect the rule of law and deprecate rising tendency of using
criminal force against recovery proceeding undertaken by the
financial institutions in terms of SARFAESI Act. We do not find
any prohibition under the scheme of the SARFAESI Act that
comes in the way of District Magistrate or his delegate to re-
exercise the powers to execute the orders passed under section
[emphasis supplied ]
30. A Co-ordinate Bench of this Court in Kotak Mahindra
Bank ltd. Vs. State of Maharashtra in Writ Petition No.6805 of 2023
where one of us (Shri Justice Rajesh S. Patil) was a member of the
bench, held that after passing of order under section 14 for
dispossession of the borrower, the same cannot be allowed to be
intermeddled with by any person, the same would result in a mockery
of the rule of law. Para no. 13 reads as under :
13. Considering the law laid down by the Division Bench of
this Court and referred to by us above, we are unable to agree
with the submission made by the learned AGP that the District
Magistrate does not have the power to re-execute his own
order or that he has become functus officio. If we were to take
the view as propounded by the learned AGP it would lead to a
complete chaos. We have no hesitation in stating that the
borrowers have devised a novel, unimaginable and
unsustainable modus operandi to defeat the ends of justice. It
is not only the matter of physical altercation by assaulting the
security guard appointed by the Petitioner Bank and breaking
open the lock and seal affixed on the secured asset which is
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wholly illegal, but the same would also tantamount to an assault
on the law and the statute itself. If, after orders are passed
under section 14 for dispossession of the borrower,and the
same are inter-meddled with by any person including the
borrower, the same would result in a mockery of the rule of law.
In such a situation the court cannot and should not remain a
mute spectator and allow the illegality to continue. The
tendency of trying to overreach the law as well as the orders
passed by Judicial Authorities has to be nipped in the bud right
away, lest the rule of law shall suffer.
[emphasis supplied]
31. In Balkrishna Rama Tarle V. Phoenix ARC (P) Ltd.
reported in (2023) 1 SCC 662 it was held that after initiation of
proceedings and taking steps under Sections 13(2) and 13(4) of the
SARFAESI Act by a secured creditor, the District Magistrate should
assist secured creditor in obtaining possession of secured assets.
District Magistrate, erred in passing order that only after termination
of tenancy rights of petitioner by finance company (secured creditor)
by following due procedure of law, further orders regarding
possession of mortgage property shall be passed, and thereafter the
said application shall be decided. Para no.4, 18 to 21 read as under:
4. That thereafter, the secured creditor filed an application
under Section 14 of the SARFAESI Act seeking assistance of
designated authority - Respondent 3 herein - District
Magistrate, Nashik, for taking physical possession of the
secured assets. The petitioner herein - original Respondent 2
claiming to be a tenant in respect of the ground floor plus first
floor showroom along with service station on a part of the
secured assets bearing Nos. 465 and 463 sought to intervene
in the said proceedings filed under Section 14 of the
SARFAESI Act. The petitioner placed reliance upon an order
dated 20-4-2018 passed in Regular Civil Suit No. 58 of 2018
filed by him against one of the borrowers, whereby one of the
borrowers was restrained from dispossessing him from the said
premises. At this stage, it is required to be noted that neither
the borrowers) nor the petitioners) instituted any proceedings
before the Debts Recovery Tribunal ("DRT) under Section 17 of
the SARFAESI Act against the steps taken under Section 13 of
the SARFAESI Act.
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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 the CMM/DM to assist the secured creditor in
obtaining the possession as well as the documents related to
the secured assets even with the help of any officer
subordinate to him and/or with the help of an advocate
appointed as Advocate Commissioner. At that stage, the CMM/
DM is not required to adjudicate the dispute between the
borrower and the secured creditor and/or between any other
third party and the secured creditor with respect to the secured
assets and the aggrieved party to be relegated to raise
objections in the proceedings under Section 17 of the
SARFAESI Act, before the Debts Recovery Tribunal.
19. Under the circumstances in the present case, no error has
been committed by the High Court in setting aside the order
dated 27-8-2021 passed by the designated authority keeping
the application pending till the secured creditor initiates the
legal proceedings for eviction of the tenant cannot get the
possession in an application under Section 14 of the
SARFAESI Act. The High Court has rightly directed the
designated authority to proceed further with the application
under Section 14 of the SARFAESI Act, and to dispose of the
same in accordance with the provisions of Section 14 of the
SARFAESI Act.
20. Now so far as the reliance placed upon the decision of this
Court in Harshad Govardhan Sondagar by the learned counsel
appearing on behalf of the petitioner is concerned, the same
shall not be applicable to the facts of the case on hand, what is
observed by this Court in the aforesaid case is the DM/CMM
has to give a notice and opportunity of hearing to the person in
possession of the secured assets claiming to be a "Class (1) or
(2)' lessee of mortgagor/borrower, as well as to secured
creditor, consistent with the principles of natural justice, and
then take a decision. In the said decision, it is not observed that
the DM/MM has to adjudicate the rights between the parties.
21. Now so far as the reliance placed upon the decision of this
Court in the case of Vishal N. Kalsaria by the learned counsel
appearing on behalf of the petitioner is concerned, the said
decision shall also not be applicable to the facts of the case on
hand. In the said decision, the question before this Court was of
conflict of claim under the Maharashtra Rent Control Act, 1999
and the provisions of the SARFAESI Act, and which law will
prevail. The scope and ambit of the powers to be exercised
under Section 14 of the SARFAESI Act were not directly in
question before this Court. Even as observed and held by this
Court in the aforesaid decision, a judgment cannot be
interpreted and applied to fact situations by reading it as a
statute. One cannot pick up a word or sentence from a
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judgment to construe that it is the ratio decided on the relevant
aspects of the case (para 33).
[emphasis supplied]
32. A Division Bench of this Court in Punjab National Bank vs.
State of Maharashtra & Ors., Writ Petition (Stamp) No.26048 2019
held that the possession of the secured assets can't be held up and
Tahsildar should take immediate steps to hand over possession.
Paragraph 4 of the said order reads as under :-
"4. From the facts noted herein-above highlighting that the order
dated 21.01.2019 passed in Suit No.12 of 2019 has not been issued
against the Bank or the Tahsildar, we dispose of the Petition directing
the Tahsildar, Thane who has been appointed by the District
Magistrate, Thane vide Exh.A to take possession of the secured
asset. We direct the Tahsildar not to delegate said function to the
Circle Officer because in law he himself is a delegatee and cannot
further delegate the authorisation. The Tahsildar, District Thane is
directed to comply with the direction issued by us today within two
weeks of receipt of an authenticated copy of the present order."
33. After going through the record, it is clearly seen that the
third party had given a No Objection and had consented for the
mortgage of secured asset and had received a sum of
Rs.30,41,069/- of the Loan amount from the erstwhile lender CCFIL
by four cheques. It is a matter of record that after the loan account of
borrower turned into NPA, a notice under section 13(2) followed by
notice under section 13(4) of the SARFAESI were issued by the
Petitioner/ Bank, to the borrower. The borrower had deposited the
Original Title Deed of the suit property with CCFIL which were in turn
deposited with Petitioner/ Bank. In the suit filed by the third party, a
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decree was passed after the borrower had appeared in the suit
without any summons and had not contested the suit and the decree
was passed since it appeared that the dispute was settled amicably.
The Petitioner/ Bank was not a party to said proceedings.
34. Apart from merely addressing a letter to the Petitioner and
to Respondents, no proceedings were filed by the third party under
Section 17 of the SARFAESI Act. In such a situation, taking into
consideration the settled position in law as discussed above, we are
of the clear opinion that the Respondents in absence of any stay,
much less an order which could be passed in the proceedings which
the third party could initiate only under Section 17 of the SARFAESI
Act before the DRT. We are of the clear view that the Respondents
were totally illegal in their approach in addressing the impugned
communication dated 17 November 2022 as also stalling the
recovery proceedings as initiated by the Petitioner.
35. In the light of the above discussion, the Petition
deserves to be allowed. It is accordingly allowed in terms of the
prayer clauses (a), (a1) and (b), which read as under:
"(a) This Hon'ble Court be pleased to issue a Writ of
Mandamus or any other Writ of the like nature thereby directing
the Respondent No.2 and 3 to forthwith and or within such time
as this Court may deem fit and proper to execute and implement
order dated 12.01.2021 passed by the Respondent No.1 under
Section 14 of SARFAESI Act in an Application being Application
No. 978 of 2020.
a1) This Hon'ble Court be pleased to issue a Writ of
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Mandamus or any other Writ of the like nature thereby quashing
or setting aside the impugned letter/communication dated
17.11.2022 directing that the possession of the secured asset
cannot be taken until appropriate orders are passed in Civil Suit
filed by Petitioner in District Court Pune being Civil Suit No.
1436 of 2015.
(b) This Hon'ble Court be pleased to issue a Writ of
Certiorari or any other Writ of the like nature thereby directing
the Respondent No.2 and 3 to forthwith and or within such time
as this Court may deem fit and proper to execute and implement
order dated 12.01.2021 passed by the Respondent No.1 under
Section 14 of SARFAESI Act and to take physical possession of
the secured assets in execution of the order dated 12.01.2021
and to handover the same to the Authorized Officer of this
Petitioner."
36. Disposed of as allowed. No costs.
(RAJESH S. PATIL, J.) (G.S. KULKARNI, J.)
