Authorized Officer, Bandhan Bank ... vs The District Magistrate Cum ...
2022 Latest Caselaw 7011 Chatt

                                        1
                                                                          NAFR
          HIGH COURT OF CHHATTISGARH, BILASPUR

                                 WPC No. 2020 of 2020

  1. Authorized Officer, Bandhan Bank Limited Gruh Centre, Through Ashish
     Sahu S/o Shri G.R. Sahu (Area In Charge), First Floor, Keshar Kunj, In
     Front Of Mohan Nagar Police Station, Station Road, Durg, Tahsil And
     District Durg Chhattisgarh., District : Durg, Chhattisgarh

                                                                   ---- Petitioner

                                     Versus

  1. The District Magistrate Cum District Collector Balod, District Balod
     Chhattisgarh., District : Balod, Chhattisgarh

  2. Shri Ramesh Chandak S/o Shri Purshottam Das Chandak R/o H. No. 31, In
     Front Of Ashirvad Bhawan, Jawahar Nagar, Durg, Tahsil And District Durg
     Chhattisgarh., District : Durg, Chhattisgarh

  3. Smt. Suraj Kiran Chandak W/o Shri Ramesh Chandak R/o H. No. 31, In
     Front Of Ashirvad Bhawan, Jawahar Nagar, Durg, Tahsil And District Durg
     Chhattisgarh., District : Durg, Chhattisgarh

  4. Shri Kamdev Sahu S/o Shri Tran Lal Sahu R/o H.No. 50, Village Pathariya,
     Tahsil Dhamdha, District Durg Chhattisgarh., District : Durg, Chhattisgarh

                                                            ---Respondents

For Petitioner                   :      Mr. Anish Tiwari, Advocate
For State                        :      Ms. Akanksha Jain, Dy. G.A.
For Respondents No. 2 to 4       :      Mr. Sunil Sahu, Advocate.




                   Hon'ble Shri Justice P. Sam Koshy
                              Order On Board
22.11.2022

1. Aggrieved by the order (Annexure P/1) dated 29.02.2020 passed by

the District Magistrate Balod, District Balod in the case No. 11/B-

121/2018-19, the present writ petition has been filed.

2. Vide the impugned order, the District Magistrate has rejected a claim

Application put forth by the Petitioner-Financial Institution under

Section 14 of the SARFAESI Act 2002. The rejection of the said

Application under Section 14 by the District Magistrate has been on

the ground that the calculation of interest made by the Petitioner-Bank

in the affidavit supported with the Application under Section 14 was in

correct. That because of the excessive interest charged, the

borrowers have been subjected to great mental agony and also their

reputation in the society has been tarnished. That in the given factual

backdrop, if the possession is ordered to be given to the Petitioner-

Bank, it would call substantial injustice to the borrowers and for all

these reasons the Section 14 Application was rejected by the District

Magistrate.

3. The facts of the case in brief are that the Respondents No. 2 to 4

have taken certain loan from the Petitioner-Bank. The loan was

sanctioned for an amount of Rs. 30 Lakh, out of 30 Lakh, the

Petitioner-Authority has already released an amount of Rs. 20 Lakh

on different dates. Meanwhile, however since there was a default on

the part the respondents No. 2 to 4, appropriate proceedings under

SARFAESI Act were initiated by the Petitioner-Bank. Subsequent to

exhausting of the rights under Section 13, the Petitioner-Bank moved

an Application under Section 14 of the SARFAESI Act before the

District Magistrate District Balod for an appropriate order for taking

over the possession of the mortgage property. The said Application

was filed as early as in the year 2018. Vide the impugned order

(Annexure P/1), the same has been rejected. The ground of rejection

is already mentioned in the preceding paragraphs.

4. The contention of the Learned Counsel for petitioner was that under

no circumstances could the District Magistrate have converted itself

into an Adjudicatory Agency and have adjudicated upon the

Application and the issues involved in the said Application between

the Petitioner-Bank and the Respondents No. 2 to 4 borrowers.

5. It was the further contention of the counsel for petitioner that the plain

reading of the impugned order itself would show that the District

Magistrate has decided the application in excess of his jurisdiction

while entertaining the Application under Section 14 of SARFAESI Act.

It is also the contention of the petitioner that, if at all, if there would

have been any lacuna and laches that the District Magistrate had

detected in the Application or in the supported affidavit, the District

Magistrate could have simply called upon the petitioner to improve

upon the same and to satisfy the District Magistrate in-respect-of

those lacuna and short-comings. Instead the District Magistrate has

proceeded to decide the matter and have entered into the disputed

questions of facts, which the District Magistrate otherwise under

Section 14 of the SARFAESI Act is not empowered to venture upon.

6. Learned Counsel for the Respondents No. 2 to 4 however opposing

the petition submits that, it is a case where the District Magistrate in-

fact has the power to be satisfied on the Application and the affidavit

filed under Section 14 and only thereafter could he have proceeded

further and on verification when the District Magistrate found that the

information provided in the affidavit was not satisfactory, he had no

other option but to reject the Application under Section 14. Therefore,

he has not committed any illegality or error in law.

7. The State Counsel on the other hand further justifying the action on

the part of the respondents, the District Magistrate submits that it is a

case where there were many deficiencies and irregularities detected

by the District Magistrate in the Application and the affidavit that the

Bank had furnished and the irregularities and deficiencies led to

dismissal of the Application and the same therefore does not warrant

any interference.

8. Counsel for the Private Respondents also further contends that the

details of the installments paid by the borrowers have not been

reflected in the affidavit of the Bank, which too was a serious

deficiency and if that has also been taken note of by the District

Magistrate, the order of rejection cannot be found fault with.

9. The Hon'ble Supreme Court recently on 26.09.2022 in the case of

Balkrishna Rama Tarle Dead Thr Lrs. & Anr. Vs. Phoenix ARC

Private Limited & Ors., in paragraph 5.2 to 7, has held as under:-

5.2 On a fair reading of Section 14 of the SARFAESI Act, it appears that for taking possession of the secured assets in terms of Section 14(1) of the SARFAESI Act, the secured creditor is obliged to approach the District Magistrate/Chief Metropolitan Magistrate by way of a written Application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action.

The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written Application under Section 14(1) of the SARFAESI Act from the secured creditor for that purpose. As soon as such an Application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the SARFAESI Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. As observed and held by this Court in the case of NKGSB Cooperative Bank Limited Vs. Subir Chakravarty & Ors. (Civil Appeal No. 1637/2022) decided on 25.02.2022, the aforesaid act is a ministerial act.

It cannot brook delay. Time is of the essence and this is the spirit of the special enactment. In the recent decision in the case of M/s R.D. Jain and Co. Vs. Capital First Ltd. & Ors. (Civil Appeal No. 175/2022) decided on 27.07.2022, this Court had an occasion to consider the powers exercisable by District Magistrate/Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act. After considering the object and purpose of Section 14 of the SARFAESI Act and the Scheme of the Act under Section 14, it is observed and held in paragraphs 7 to 9 as under:

"7. Now so far as the powers exercisable by DM and CMM under Section 14 of the SARFAESI Act are concerned, statement of objects and reasons for which SARFAESI Act has been enacted reads as under:-

"STATEMENT OF OBJECTS AND REASONS"

The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non- performing assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment 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. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise longterm assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce nonperforming assets by adopting measures for recovery or reconstruction."

Thus, the underlying purpose of the SARFAESI Act is to empower the financial institutions in India to have similar powers as enjoyed by their counterparts, namely, international banks in other countries. One such feature is to empower the financial institutions to take possession of

securities and sell them. The same has been translated into provisions falling under Chapter III of the SARFAESI Act. Section 13 deals with enforcement of security interest. Sub Section (4) thereof envisages that in the event a default is committed by the borrower in discharging his liability in full within the period specified in subsection (2), the secured creditor may take recourse to one or more of the measures provided in subsection (4). One of the measures is to 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. That, they could do through their "authorised officer" as defined in Rule 2(a) of the Security Interest (Enforcement) Rules, 2002.

7.1 After taking over possession of the secured assets, further steps to lease, assign or sale the same could also be taken by the secured creditor. However, Section 14 of the SARFAESI Act predicates that if the secured creditor intends to take possession of the secured assets, must approach the CMM/DM by way of an Application in writing, and on receipt of such request, the CMM/DM must move into action in right earnest. After passing an order thereon, he/she (CMM/DM) must proceed to take possession of the secured assets and documents relating thereto for being forwarded to the secured creditor in terms of Section 14(1) read with Section 14(2) of the SARFAESI Act. As noted earlier, Section 14(2) is an enabling provision and permits the CMM/DM to take such steps and use force, as may, in his opinion, be necessary.

7.2 At this stage, it is required to be noted that along with insertion of subsection (1A), a proviso has also been inserted in subsection (1) of Section 14 of the SARFAESI Act whereby the secured creditor is now required to comply certain conditions and to disclose that by way of an Application accompanied by affidavit duly affirmed by its authorised officer in that regard. SubSection (1A) is in the nature of an explanatory provision and it merely restates the implicit power of the CMM/DM in taking services of any officer subordinate to him. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the insertion of subsection (1A) is not to invest a new power for the first time in the CMM/DM as such.

8. Thus, considering the scheme of the SARFAESI Act, it is explicit and crystal clear that possession of the secured assets can be taken by the secured creditor before confirmation of sale of the secured assets as well as post confirmation of sale. For taking possession of the secured assets, it could be done by the "authorised officer" of the Bank as noted in Rule 8 of the Security Interest (Enforcement) Rules, 2002.

8.1 However, for taking physical possession of the secured assets in terms of Section 14(1) of the SARFAESI Act, the secured creditor is obliged to approach the CMM/DM by way of a written Application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action. The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written Application under Section 14(1) of the SARFAESI

Act from the secured creditor for that purpose. As soon as such an Application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the SARFAESI Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. As mandated by Section 14 of the SARFAESI Act, the CMM/DM has to act within the stipulated time limit and pass a suitable order for the purpose of taking possession of the secured assets within a period of 30 days from the date of Application which can be extended for such further period but not exceeding in the aggregate, sixty days. Thus, the powers exercised by the CMM/DM is a ministerial act. He cannot brook delay. Time is of the essence. This is the spirit of the special enactment. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself/herself or through any officer subordinate to him/her, including the advocate commissioner who is considered as an officer of his/her court. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. Thus, we reiterate that the step to be taken by the CMM/DM under Section 14 of the SARFAESI Act, is a ministerial step. While disposing of the Application under Section 14 of the SARFAESI Act, no element of quasijudicial function or Application of mind would require. The Magistrate has to adjudicate and decide the correctness of the information given in the Application and nothing more.

Therefore, Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets.

Thus, the powers exercisable by CMM/DM under Section 14 of the SARFAESI Act are ministerial step 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 Debts Recovery Tribunal. Under the circumstances in the present case no error has been committed by the High Court in setting aside the order dated 27.08.2021 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.

6. Now so far as the reliance placed upon the decision of this Court in the case of Harshad Govardhan Sondagar (supra) 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 principles of natural justice, and then take a decision. In the said decision, it is not observed that the DM/CMM has to adjudicate the rights between the parties.

7. Now so far as the reliance placed upon the decision of this Court in the case of Vishal N. Kalsaria (supra) 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 judgment to construe that it is the ratio decidendi on the relevant aspects of the case (para 33)

10. All said and done, the undisputed facts in the instant case is that the

Respondents No. 2 to 4 are the borrowers of the Petitioner-Bank. The

loan amount sanctioned was Rs. 30 Lakh. The Petitioner-Bank had

released Rs. 20 Lakh to the Respondents No. 2 to 4. There was a

default on the part of the Respondents No. 2 to 4 in repaying loan

amount. The Petitioner-Bank initiated SARFAESI proceedings and

after Section 13 proceedings, Section 14 proceedings were drawn by

moving an appropriate Application before the District Magistrate. True

it is that in the Section 14 Application, certain information are required

to be furnished by the Petitioner-Bank with their affidavit but what is

required to be appreciated is the fact that, as has been discussed by

the Hon'ble Supreme Court in Judgment referred in the preceding

paragraph, the nature of work to be exercised by the District

Magistrate is purely Ministerial. There was no adjudicatory process

which was supposed to be drawn by the District Magistrate while

exercising or entertaining an Application under Section 14 of the

SARFAESI Act. If at all, if the informations available in the affidavit

along with Section 14 the Application, were not sufficient enough, the

District Magistrate could have very well ordered to Bank to furnish all

these informations to his satisfaction before an order under Section-14

could have been passed. Thereafter, if the Bank would have failed in

discharge of their duties, the District Magistrate could have proceeded

further, which in the instant case does not seem to have happened.

11. The Application under Section 14 supported with an affidavit itself has

been converted into a litigation or a dispute which the District

Magistrate proceeded further to adjudicate upon and has finally

passed the impugned order of rejection.

12. That, in the light of the judgment of the Hon'ble Supreme Court

referred to in the preceding paragraph and also a catena of decisions

rendered by this Court as also by the Hon'ble Supreme Court that

Section 14 Application is not an adjudicatory provision and the District

Magistrate only has to be satisfied in-respect-of the details that are

furnished in the Application and the affidavit under Section 14. If

certain information are sought or are deficient, the District Magistrate

could have asked the Petitioner-Bank to make available these

informations and thereafter could have proceeded further.

13.The impugned order to the aforesaid extent is not sustainable and the

same deserves to be, and is accordingly set aside /quashed. The

matter stands remitted back to the District Magistrate Balod for

reconsidering the Application under Section 14 filed by the Petitioner-

Bank. The District Magistrate, if, is of the opinion that certain

information are further required to his satisfaction in-respect-of the

loan made available by the petitioner to the Respondents No. 2 to 4

and the extent of default on the part of the respondents No. 2 to 4, the

District Magistrate may call upon the Bank who may in-turn furnish

these informations and thereafter the District Magistrate may proceed

further and pass an appropriate order at the earliest preferably within

a further period of 60 days starting from the date of receipt of copy of

this order. It shall be the responsibility of the petitioner to apprise the

District Magistrate so far as the order passed by this Court is

concerned.

14.Accordingly, the present writ petition stands disposed of.

Sd/-

(P. Sam Koshy) JUDGE

Jyoti