Bombay High Court

Kotak Mahindra Bank Ltd vs The State Of Maharashtra Through ... on 10 January, 2024

Author: B.P. Colabawalla

Bench: B.P. Colabawalla

2024:BHC-OS:717-DB

                                                                                       14-WPL-32478-2023.doc




                        IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                            ORDINARY ORIGINAL CIVIL JURISDICTION

                           WRIT PETITION (LODGING) NO. 32478 OF 2023

             Kotak Mahindra Bank Ltd., a Company incorporated
             under the provisions of Companies Act, 1956 and
             carrying on its banking business under the Banking
             Regulation Act, 1949, having its branch office
             amongst others at 4th Floor, Adamas Plaza, 166/16,
             Kolivery Village, Kunchi Kurve Nagar, Behind Hare
             Krishan Hotel, CST Road, Kalina, Santacruz (E),
             Mumbai-400 098 through its Associate Vice .. Petitioner
             President, Ms. Shweta Kamath
                           Versus
             The State of Maharashtra, through Government
             Pleader (O.S.), High Court, Bombay           ...Respondent




             Mr.Alok D. Mishra, Advocate for Petitioner.

             Mr.Mohit Jadhav, Addl.G.P. for Respondent-State.


                               CORAM :          B.P. COLABAWALLA &
                                                SOMASEKHAR SUNDARESAN, JJ.

                              DATE        :     JANUARY 10, 2024.


             PC:

1. The learned Advocate appearing on behalf of the Petitioner sought

leave to delete Respondent Nos.2 to 6 as they are not really concerned

with the above Writ Petition.

January 10, 2024 Shraddha Talekar, PS

14-WPL-32478-2023.doc

2. In these circumstances, the Petitioner is permitted to delete

Respondent Nos.2 to 6. The amendment shall be carried out forthwith in

front of the Associate of this Court. Re-verification is dispensed with.

3. Rule. Respondent No.1 (now the Sole Respondent) waives service.

With the consent of the Petitioner and now the sole Respondent, rule is

made returnable forthwith and heard finally.

4. The above Writ Petition is filed challenging the order dated 10 th

October 2023 passed by the learned Additional Chief Magistrate, Mumbai

under Section 14 of the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002 (for short,

'SARFAESI Act, 2002') in Case No.402/SA/2021.

5. By the impugned order, the application of the Petitioner under

Section 14 of the SARFAESI Act, 2002 was rejected only on the ground

that the Petitioner-Bank had not taken the measures under Section 13(4)

of the SARFAESI Act, 2002 read with Rule 8(2) of the Security Interest

(Enforcement) Rules, 2002 (Enforcement Rules).

6. According to the learned Additional Chief Metropolitan Magistrate,

it was mandatory for the Petitioner-Bank to first take possession as per

January 10, 2024 Shraddha Talekar, PS

14-WPL-32478-2023.doc

the Enforcement Rules and only then approach the Additional Chief

Metropolitan Magistrate under Section 14 of the SARFAESI Act, 2002.

This is the only ground on which the application of the Petitioner-Bank

was rejected.

7. After going through the impugned order, we are unable to agree

with the view of the learned Additional Chief Metropolitan Magistrate,

Mumbai because the entitlement of the secured creditor to choose how to

enforce his security interest is converted into an obligation to adopt one

measure before the other. Section 14 is an independent avenue for

enforcement of the security interest that is available to a secured creditor.

It is not correct to suggest that unless and until measures under Section

13(4) are adopted by taking possession under Rule 8 of the Enforcement

Rules, the assistance of the Magistrate under Section 14 would become

unavailable.

8. It is noteworthy that the position adopted in the impugned order of

the Additional Chief Metropolitan Magistrate is contrary to the judgment

of the Hon'ble Supreme Court in Standard Chartered Bank Vs. V. Noble

Kumar & Ors. [(2013) 10 S.C.R. 762] ("Standard Chartered"). In this

decision, the Apex Court explicitly declared that the scheme of Section 13

and Section 14 of the SARFAESI Act, 2002, do not warrant a conclusion

January 10, 2024 Shraddha Talekar, PS

14-WPL-32478-2023.doc

that an unsuccessful attempt to first take possession of the secured asset

under Section 13(4) is a pre-requisite to approaching the Magistrate

under Section 14. In the words of the Hon'ble Supreme Court, such a

construction is rooted in a misconception of the scope of Section 17,

which enables an appeal regardless of whether Section 13(4) or Section 14

is invoked.

9. The Hon'ble Supreme Court has, in fact, declared in Standard

Chartered (supra) that 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

the affidavit filed before him, but that the Magistrate must refrain from

interpreting the legal niceties of the transactions. The relevant portion of

the Hon'ble Supreme Court's decision in Standard Chartered (supra) is

reproduced hereunder :-

"29. It is in the above-mentioned background of the legal frame of Sections 13 and 14, we are required to examine the correctness of the conclusions recorded by the High Court. Having regard to the scheme of Sections 13 and 14 and the object of the enactment, we do not see any warrant to record the conclusion that it is only after making an unsuccessful attempt to take possession of the secured asset, a secured creditor can approach the Magistrate. No doubt that a secured creditor may initially resort to the procedure under Section 13(4) and on facing resistance, he may still approach the Magistrate under Section 14. But, it is not mandatory for the secured creditor to make attempt to obtain possession on his own before approaching the Magistrate under Section 14. ....

....

January 10, 2024 Shraddha Talekar, PS

14-WPL-32478-2023.doc

37. Thus, there will be three methods for the secured creditor to take possession of the secured assets:-

(i) The first method would be where the secured creditor gives the requisite notice under Rule 8(1) and where he does not meet with any resistance. In that case, the authorised officer will proceed to take steps as stipulated under Rule 8(2) onwards to take possession and thereafter for sale of the secured assets to realise the amounts that are claimed by the secured creditor.

(ii) The second situation will arise where the secured creditor meets with resistance from the borrower after the notice under Rule 8(1) is given. In that case he will take recourse to the mechanism provided under Section 14 of the Act viz. making application to the Magistrate. The Magistrate will scrutinise the application as provided in Section 14, and then if satisfied, appoint an officer subordinate to him as provided under section 14(1-A) to take possession of the assets and documents. For that purpose the Magistrate may authorise the officer concerned to use such force as may be necessary. After the possession is taken the assets and documents will be forwarded to the secured creditor.

(iii) The third situation will be one where the secured creditor approaches the Magistrate concerned directly under Section 14 of the Act. The Magistrate will thereafter scrutinise the application as provided in Section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forwards them to the secured creditor as under clause (ii) above."

[Emphasis Supplied]

10. In fact, a similar matter had come up before this Court in the case

of Kotak Mahindra Bank Limited & Anr. Vs. The State of Maharashtra &

Ors. [Writ Petition (L.) No.31964 of 2023, decided on 7 th December

2023]. In that matter also, this Court, after relying upon the judgment of

the Hon'ble Supreme Court in the case of Standard Chartered (Supra),

quashed the impugned order and directed the Magistrate to decide the

application filed by the Petitioner afresh and in accordance with law.

January 10, 2024 Shraddha Talekar, PS

14-WPL-32478-2023.doc

11. We find that the facts of the present case are almost identical to the

ones in Writ Petition (L.) No.31964 of 2023. Once this is the case, we