Bank Of Baroda vs Collector And District ...
2021 Latest Caselaw 9611 Guj

       C/SCA/633/2021                                      ORDER DATED: 28/07/2021




                IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

               R/SPECIAL CIVIL APPLICATION NO. 633 of 2021

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                         BANK OF BARODA
                               Versus
             COLLECTOR AND DISTRICT MAGISTRATE, RAJKOT
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  Appearance:
  MR BHARAT T RAO(697) for the Petitioner(s) No. 1
  ADVANCE COPY SERVED TO GOVERNMENT PLEADER/PP(99) for
  the Respondent(s) No. 1
  NOTICE SERVED(4) for the Respondent(s) No. 1
  SHIVANI R MODI(9280) for the Respondent(s) No. 2
  ==========================================================

CORAM:HONOURABLE MR. JUSTICE NIKHIL S. KARIEL

                                 Date : 28/07/2021


                                  ORAL ORDER

Heard learned Advocate Shri Bharat Rao on behalf of the petitioner and learned Assistant Government Pleader Ishan Joshi on behalf of the District Magistrate, Rajkot and learned Advocate Shri Hemandra Baxi on behalf of the respondent No.2.

2. By way of this petition, the petitioner challenges order dated 24.11.2020 passed by the learned District Magistrate, Rajkot, rejecting the application preferred by the petitioner under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short " the SARFAESI Act").

3. Learned Advocate Shri Rao on behalf of the petitioner submits that the petitioner had as the secured creditor moved an application under Section 14 of the SARFAESI Act for taking possession of the

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secured assets of the borrowers and whereas the applicant had submitted an application as required under Section 14 along with the check list, as per the requirements of Section 14 and whereas the respondent District Magistrate has rejected the application interalia on the ground that the petitioner did not produce the necessary documents with regard to the ownership of the borrowers with regard to the secured assets as stated in the application. It is further noted that the petitioner-bank had not clarified that the property at serial no.1 in the application actually belonged to the borrower or not. Learned Advocate submits that the check list itself clearly shows that the documents with regard to the ownership of the property had been submitted before the District Magistrate and whereas the mortgage deed also had been placed on record before the Magistrate which clearly shows that the guarantors to the loan availed by the borrower had mortgaged the property in lieu of the loan in question. He further submits that since this aspect being clear upon a bare perusal of the mortgage deed itself, the learned Magistrate ought not to have rejected the application. Learned Advocate further submits that the copies of all documents had been placed before the Magistrate and whereas Section 14 does not envisage that the original document have to be placed before the Magistrate before passing of the order. Thus, it is submitted by the learned Advocate that the order passed by the learned Magistrate requires to be interfered by this Court and the application by the petitioner Bank may be considered afresh by the learned Magistrate in accordance with law in a stipulated time period.

4. Learned Advocate Shri Rao also relies upon the decision of the Division Bench of this Court in the case of IDBI Bank Ltd. Vs. District Magistrate, 2011 (2) GLH pg 12, and submits that the Division Bench of this Court has while deciding a similar petition has interalia observed that the District Magistrate is not empowered to

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question the genuinity or propriety of the documents including the document signed or agreed between the borrower and the secured creditor. Learned Advocate further submits that since the mortgage deed clearly set out the fact that the property had been mortgaged by the guarantor in lieu of the loan availed by the borrower, the District Magistrate ought not to have questioned the fact of the documents submitted by the petitioners substantially the application under Section 14 of the SARFAESI Act and, therefore, the said action of the District Magistrate is erroneous and the same requires interference.

5. As against the same learned Advocate Shri Hemandra Baxi on behalf of the respondent no.2 borrower has submitted that the guarantor, who is the owner of the property has not been joined in the present proceedings nor the guarantor has been joined in the proceedings before the learned Magistrate and, therefore, there was no infirmity in the order passed by learned Magistrate. Learned Advocate further submits that as per Section 59 of the Transfer of Property Act, where the principal money to be secured by a mortgage is more than Rs 100 then the same can be affected only by way of a registered instrument and whereas the same is not the case here and therefore, the applicant could not have moved an application for securing the possession of the assets in question. Learned Advocate further submits that in this view of the matter, there is no infirmity whatsover in the order of the learned Magistrate and, hence, this Court may not interfere with the same.

6. Learned Assistant Government Pleader Shri Ishan Joshi submits that since prim facie some infirmity was found in the documents, the decision impugned came to be passed by the District Magistrate and whereas learned Assistant Government Pleader further

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submits that as such no case has been made out for interference by this Court.

7. Having heard the learned Advocates for the parties, at the outset, this Court deems it expedient to refer to an observation of the Supreme Court in the case of Authorised Officer, Indian Bank Vs. D. Visalakshi and another (2019) 20 SC Cases 47 more particularly para 36, 39 and 41 thereof :

36. Suffice to observe that an inquiry conducted by the stated authority under Section 14 of the 2002 Act, is a sui generis inquiry. In that, majorly it is an administrative or executive function regarding verification of the affidavit and the relied upon documents filed by the parties. That inquiry is required to be concluded within the stipulated time frame. While undertaking such an inquiry, as is observed by this Court, the authority must display judicious approach, in considering the relevant factual position asserted by the parties. That presupposes that it is a quasijudicial inquiry though, a nonjudicial process. The inquiry does not result in adjudication of inter se rights of the parties in respect of the subject property or of the fact that the transaction is a fraudulent one or otherwise.

39. Now we may turn to the decision in Standard Chartered Bank (supra). The Court was called upon to consider the argument that secured creditor before invoking the remedy under Section 14 of the 2002 Act, must necessarily make an attempt to take possession of the secured assets and can take recourse thereto only if he fails in that effort and encounters resistance to such an attempt. While considering that argument, the Court analysed Sections 13, 14 and 15 of the 2002 Act and opined that Section 14 of the 2002 Act enables the secured creditor who desires to seek the assistance of "State's coercive power" for obtaining possession of the secured assets to make a request in writing to the authority designated therein, within whose jurisdiction the secured asset is located. It also noted that the authority after receiving such request under Section 14 of the 2002 Act, was not expected to do any further scrutiny of the matter except to verify from the secured creditor whether notice under Section 13(2) of the Act has already been given or not and whether the secured asset is located within his jurisdiction. There is no adjudication of any kind at this stage. The Court also noticed in paragraph 23 of the reported judgment that after amendment of Section 14 of the 2002 Act, by inserting first proviso therein, the designated authority has to satisfy itself only with regard to the matters mentioned in clauses (i) to (ix). In paragraph 25 of this decision, the Court noted as follows:

"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

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after recording of his satisfaction the Magistrate can pass appropriate orders regarding taking of possession of the secured asset."

41. Concededly, the Court was not called upon to consider the specific issue that arises for our consideration, in this batch of cases. To wit, whether the CJM is competent to deal with the request made by the secured creditor under Section 14 of the 2002 Act in the same manner as can be done by the CMM in metropolitan areas and DM in non- metropolitan areas.

Nevertheless, what is significant to note is that this decision clearly delineates the nature of inquiry required to be conducted by the authority referred to in the Section 14 of the 2002 Act. By its very nature the inquiry, is an administrative or executive measure and to borrow the phrase used in the said judgment, "State's coercive power" for obtaining possession of the secured assets. It is possible to suggest that as the authority is required to make inquiry and pass an order, it would partake the colour of being a quasijudicial inquiry. In any case, the stated authority is not empowered to adjudicate on any issue(s) that may be raised regarding the rights of the concerned parties.

7.1 From the observations of the Supreme Court referred to hereinabove, it becomes clear that the Executive Magistrate is required to verify the compliances referred to in the first proviso of Section 14 and whereas the same has to be concluded in the stipulated time frame. Further more while the authority is required to display judicious approach but there cannot be any adjudication on any issues. In so far as the present case is concerned, the District Magistrate, Rajkot was required to verify whether in the property of which possession was sought for, the borrower had created a security interest or not. The Act does not require that the owner of the secured asset (if he is not the borrower) is required to be joined. Further in contradistinction the Act also does not contemplate that possession can be sought for of secured assets of the borrower only.

8 As far as the contention of learned Advocate for the respondent borrower, that the mortgage deed is not registered, learned Advocate Shri Rao has drawn attention of this Court to the mortgage deed which clearly shows that the deed in question had been registered with the Sub Registrar, Gondal on 31.12.2013. Thus, when it is

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descernible that the property in question more particularly at serial no. 1 of the application, was an asset mortgaged by the guarantor in lieu of the loan availed by the borrower, there was no requirement of joining the guarantor as such and since the mortgaged deed clearly reflects the position as hereinabove, the District Magistrate ought not to have rejected the application preferred by the petitioner herein on the said sole ground only. As such it was not the case of the Bank that the owner of the said property was a borrower from the Bank rather as emphasised hereinabove, the owner of the property in question was a guarantor and it was to take the possession of such asset that the application had been interalia preferred. As per Section 24 of the SARFAESI Act read with the judgment of the Supreme Court in the case of D. Visalakshi (supra) the District Magistrate was required to verify whether the borrower has created security interest over the property. The act does not envisage joining the owner of the property in which security interest is created nor does it envisage that application for possession under Section 14 could be made only of secured asset of the ownership of the borrower. Thus the submission on behalf of respondent no.2 being against the factual and legal position cannot be countenanced.

9. This Court is also bound by the view taken by the Division Bench of this Court, where the Division Bench has in case of IDBI Bank (supra) at paragraph 6 stated as thus :

" 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

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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 Securitistion 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 relating thereto and forward such assets and documents to the 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.

10. In this view of the matter, this Court is of the considered opinion that the District Magistrate ought not to have rejected the application on the ground that the applicant has not clarified in the application as to whether the property in question the possession of which was to be taken over belonged to the borrower or not more particularly since it becomes clear from the document annexed with the application that it was never the case of the petitioner that the property belonged to the borrower the property as such belonged to the guarantor who had mortgaged the property to the Bank in lieu of the loan taken by the borrower. In this view of the fact, this Court is of the considered opinion that the order impugned, deserves to be interfered with.

11. The District Magistrate, Rajkot is directed to consider the application of the petitioner under Section 14 of the SARFAESI Act dated 19.02.2020, afresh if required by giving the same a new number, in accordance with law, as explained herein above, within the time limit as stipulated in the Act.

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12. With the above observations and directions the present petition is disposed of as allowed.

(NIKHIL S. KARIEL,J) MARY VADAKKAN