Kerala High Court
The Federal Bank Limited, Kallai Branch vs Cjm, Kozhikode on 11 March, 2025
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WP(C) NO. 3317 OF 2025 1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE GOPINATH P.
TUESDAY, THE 11TH DAY OF MARCH 2025 / 20TH PHALGUNA, 1946
WP(C) NO. 3317 OF 2025
PETITIONER/S:
THE FEDERAL BANK LIMITED, KALLAI BRANCH,
REPRESENTED BY ITS AUTHORIZED OFFICER, SHIBJU R.,
ASSISTANT VICE PRESIDENT AND DIVISION HEAD,
LCRD/KOZHIKODE DIVISION, 1 ST FLOOR, FEDERAL TOWERS,
MAVOOR ROAD, ARAYADATHUPALAM, KOZHIKODE, PIN - 673016
BY ADVS.
MOHAN JACOB GEORGE
P.V.PARVATHY (P-41)
REENA THOMAS
NIGI GEORGE
ANANTHU V.LAL
SHERIN VARGHESE
BRAHMA R.K.
RESPONDENT/S:
1 CHIEF JUDICIAL MAGISTRATE, KOZHIKODE,
ERANHIPAALAM, ERANHIPPALAM, KOZHIKODE, PIN - 673006
2 ANARATH AMMED @ ANARATH AMMED HAJI,
S/O. ANARATH MOIDU HAJI, ANARATH HOUSE,
VILLIYAPPALLY P.O., BADAGARA VIA,
KOZHIKODE, PIN - 673542
3 FAYIZ AHMED ANARATH,
S/O. ANARATH AMMED, ANARATH HOUSE,
VILLIYAPPALLY P.O., BADAGARAVIA,
KOZHIKODE, PIN - 673542
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WP(C) NO. 3317 OF 2025 2
4 SOUMYHA AMMED ANARATH,
W/O. ANARATH AMMED, ANARATH HOUSE, VILLIYAPPALLY P.O.,
BADAGARA VIA, KOZHIKODE, PIN - 673542
5 ADV. SEEMA N.G.,
32/2140 JAYTHRA VILLA, P.O. KOTTAPARAMBA,
KOZHIKODE, PIN - 673008
BY ADVS.
GAYATHRI MURALEEDHARAN
BIJU ABRAHAM (KAIPPANPLACKAL)(K/966/2000)
ARCHANA B.(K/3068/2022)
ANTIJA JAMES(K/1549/2024)
NAEEM(K/002664/2024)
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
11.03.2025, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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WP(C) NO. 3317 OF 2025 3
'C.R'
JUDGMENT
This Writ Petition has been filed inter-alia seeking a
declaration that Ext.P3 petition filed by the 2nd respondent
before the Chief Judicial Magistrate Court, Kozhikode
(hereinafter referred to as 'the CJM') is not maintainable and the
issues raised in the petition cannot be adjudicated by the Chief
Judicial Magistrate .
The brief facts:-
2. The petitioner, a banking company, initiated
proceedings under the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(hereinafter referred to as 'the SARFAESI Act') to recover
amounts due under a loan availed by respondent Nos.2, 3 and 4
from it. The 2nd respondent challenged the proceedings by filing
an application under Section 17 of the SARFAESI Act before the
Debts Recovery Tribunal-I, Ernakulam (hereinafter referred to
as 'the Tribunal'). The application was numbered as S.A. No.432
of 2024 before the Tribunal. The Tribunal, on 12.08.2024,
issued a conditional interim order on I.A. No.2861 of 2024 in
S.A. No.432 of 2024. The interim order of the Tribunal in I.A.
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No.2861 of 2024 in S.A. No.432 of 2024 was challenged before
this Court by the 2nd respondent by filing OP(DRT) No.264 of
2024. This Court, on 22.08.2024, directed that the 2 nd
respondent shall not be ousted from the secured asset subject to
the condition that he pays a sum of Rs.1,00,00,000/- (Rupees one
Crore only) towards the loan liability on or before 30.09.2024.
When OP(DRT) No.264 of 2024 came up for consideration on
30.09.2024, this Court was informed that no amount had been
paid by the 2nd respondent and therefore, this Court, by Exhibit
P5(a) judgment dated 30.09.2024 dismissed O.P(DRT) No.264 of
2024. It appears that after the dismissal of OP(DRT) No.264 of
2024, Exhibit P3 petition was filed by the 2 nd respondent before
the Chief Judicial Magistrate Court, Kozhikode (in the
proceedings initiated by the petitioner- bank under Section 14 of
the SARFAESI Act before that Court) seeking the following
reliefs:-
"a) An order may be issued to recall the Advocate
Commissioner appointed in CMP 747/2024;
b) An order and direction may be issued to furnish a
fresh affidavit to the petitioner in CMP 747/2024;
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c) To pass an order for the dismissal of CMP 747/2024
on the ground that the averments in the affidavit are not
satisfactory to this Hon'ble court;
d) To pass an interim order directing the Advocate
Commissioner to abstain from executing the order until
the disposal of this CMP;
e) For such other relief as this Hon'ble Court may deem
fit and proper in the circumstance of this case.''
The petitioner bank filed an Exhibit P4 counter statement, also
arguing that Exhibit P3 petition was not maintainable. The
petitioner is before this Court aggrieved by the fact that the CJM
has not disposed of the Exhibit P3 petition despite it being
brought to the court's notice that the petition is not
maintainable.
3. Sri. Mohan Jacob George, the learned counsel
appearing for the petitioner, submits that the power of the
Magistrate under Section 14 of the SARFAESI Act has been
considered by the Supreme Court in Balkrishna Rama Tarle v.
Phoenix ARC (P) Ltd.; (2023) 1 SCC 662 . It is submitted that
this Court also considered the powers exercised by the
Magistrate under Section 14 of the SARFAESI Act in State
Bank of India, TVM and Another v. Chief Judicial
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Magistrate, Kollam and Others; 2021 (6) KHC 83. It is
submitted that, on the application of the law laid down by the
Supreme Court in Balkrishna Rama Tarle (supra) and this
Court in State Bank of India, Tvm (supra), it is clear that no
application will lie at the instance of the borrower before the
CJM as the CJM does not exercise any adjudicatory power while
deciding applications under Section 14 of the SARFAESI Act.
4. Smt. Gayathri Muraleedharan, the learned counsel
appearing for the 2nd respondent submits that rather than
merely assisting secured creditors mechanically in taking
possession of the secured asset, the learned CJM must exercise
the statutory power envisaged under Section 14 of the
SARFAESI Act by verifying the correctness of the contents in the
affidavit filed by the Authorised Officer of the Bank. The learned
counsel further refers to the Statement of Objects and Reasons
of the SARFAESI Act to contend that the scheme of the
SARFAESI Act makes it clear that the Magistrate has the power
to adjudicate and decide the correctness of the information in
the application. Therefore, it is her submission that while the
CJM performs a ministerial act in matters filed under Section 14
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of the SARFAESI Act, the CJM must verify the correctness of the
details stated in the application filed. It is submitted that on
21.02.2021, the petitioner Bank and the co-borrowers entered
into a restructuring agreement to which the 2nd respondent was
not a party. It is stated that the 2nd respondent did not sign or
authorize anyone to sign the agreement on his behalf. It is also
submitted that the 2nd respondent is the owner of the mortgaged
property. However, since the 2nd respondent has never signed
any subsequent restructuring agreement no valid security
interest has been created. She further submitted that the
account in question was classified as a Non-Performing Asset on
03.06.2023. It is submitted that although the CJM has sufficient
power to verify the correctness of the affidavit/application filed
by the petitioner, the CJM failed to exercise his statutory powers
and thereby erred in passing Ext.P2 order. She further submits
that, for these reasons, the 2 nd respondent has filed Ext. P3
petition to recall Ext. P2 order. It is submitted that the CJM has
the authority to recall Ext. P2 order and is competent to verify
the correctness of the affidavit filed by the petitioner in Ext. P1
petition. Thus the writ petition is liable to be dismissed, is the
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submission.
5. Having heard the learned counsel as above, I am
certain that the petitioner is entitled to succeed. The power
exercised by a Magistrate under Section 14 of the SARFAESI
Act has been the subject matter of many decisions of the
Supreme Court. In Indian Bank v. D. Visalakshi; (2019) 20
SCC 47 it was held:-
"36. Suffice it 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 quasi-judicial inquiry though, a non-judicial 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."
37-38......
39. Now we may turn to the decision in Standard
Chartered Bank. The Court was called upon to consider
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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 para 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 para 25
of this decision, the Court noted as follows :
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"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."
xxx xxx xxx"
In R.D. Jain & Co. v. Capital First Ltd.; (2023) 1 SCC 675
the Supreme Court held:-
"25. As observed and held by this Court in NKGSB Coop.
Bank, 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 quasi-judicial function or application of mind
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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."
In Balkrishna Rama Tarle (supra) it was held:-
"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."
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In Sama Rubbers v. South Indian Bank Ltd.; 2023 KLT
OnLine 1955 this Court held:-
"23. The inquiry conducted by the Chief Judicial
Magistrate under Section 14 of the SARFAESI Act does
not result in an adjudication of the parties' inter se rights
regarding the subject matter. It is an administrative or
executive function regarding the verification of the
affidavit and documents relied on by the parties. The
authority must display a judicial approach in considering
the relevant facts asserted by the parties. It is a quasi-
judicial inquiry through a non-judicial process."
Paragraph 16 of the judgment of this Court in State Bank of
India, TVM (supra) reads:
"16. The authorised Magistrate will have to act strictly in
conformity with the statutory conferment of powers under
section 14 and there is no scope for any application by the
borrower for any purpose whatsoever. The borrower
cannot maintain any application under section 14 of the
SARFAESI Act nor can the borrower invoke the
jurisdiction of the authorised Magistrate under section 14
of the Act. Further, the statute does not contemplate an
adjudicatory order to be passed by the Magistrate or to
consider the application as in a judicial process. The
procedure prescribed under section 14 of the SARFAESI
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Act is part of a non-judicial process. The said power is no
doubt peculiar to the special statute.'' (Emphasis is
supplied)
In the facts of this case, after failing to comply with the
conditional order in I.A. No.2861 of 2024 in S.A. No.432 of 2024
and after OP(DRT) No.264 of 2024 was dismissed by this Court,
the 2nd respondent sought the adjudication of various issues by
the CJM. This was clearly not maintainable, in the light of the
decisions referred to above.
Therefore, this Writ Petition is allowed. It is declared that
the Chief Judicial Magistrate, Kozhikode has no jurisdiction to
adjudicate on the issues set out in Exhibit P3 petition. The
proceedings taken on Exhibit P3 petition by the Chief Judicial
Magistrate, Kozhikode will stand set aside and consequently
Exhibit P3 petition will stand dismissed.
Sd/-
GOPINATH P.,
JUDGE
ajt
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APPENDIX OF WP(C) 3317/2025
PETITIONER EXHIBITS
Exhibit P1 COPY OF THE ABOVE SAID CMP NO.747/2024 FILED
BY THE PETITIONER BEFORE THE 1 ST RESPONDENT
Exhibit P2 COPY OF THE ORDER DATED 16.03.2024 OF THE 1
ST RESPONDENT IN CMP NO.747/2024
Exhibit P3 COPY OF THE CMP NO.2801/ 2024 IN CMP
NO.747/2024 DATED 24.10.2024
Exhibit P4 COPY OF THE COUNTER DATED 06.11.2024 FILED
BY THE PETITIONER AGAINST THE EXT-P3
PETITION THROUGH ITS COUNSEL
Exhibit P5 COPY OF INTERIM ORDER DATED 22.08.2024 IN
Exhibit P5(a) COPY OF THE JUDGMENT DATED 30.09.2024 IN O.P
(DRT) NO.264/2024 OF THIS HON'BLE COURT
Exhibit P6 COPY OF THE PROCEEDINGS OF THE HON'BLE CJM
Exhibit P7 COPY OF JUDGMENT IN BALAKRISHNA RAMA TARLE
DEAD THR. L.RS. AND OTHERS VS. PHOENIX ARC
PRIVATE LIMITED AND ORS.REPORTED IN
MANU/SC/1244/2022
RESPONDENT EXHIBITS
Exhibit R2(a) The true copy of the agreement 21.01.2021
