Cholamandalam Investment And ... vs The State Of Madhya Pradesh
2023 Latest Caselaw 12741 MP

                                                     1
                           IN    THE    HIGH COURT OF MADHYA PRADESH
                                              AT INDORE
                                                  BEFORE
                           HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI
                                                     &
                                   HON'BLE SHRI JUSTICE PRANAY VERMA
                                            ON THE 8 th OF AUGUST, 2023
                                          WRIT PETITION No. 20762 of 2022

                          BETWEEN:-
                          CHOLAMANDALAM INVESTMENT AND FINANCE CO.
                          LTD. THROUGH ITS AUTHORIZED PERSON MR. ANAND
                          NAMDEO S/O VIJAY KUMAR NAMDEO AREA SALE
                          MANAGER, BRANCH OFFICE ASTHA MEDICAL WRIGHT
                          TOWN JABALPUR (MADHYA PRADESH)

                                                                             .....PETITIONER
                          (SHRI ROHIT SABOO, LEARNED COUNSEL FOR THE PETITIONER)

                          AND
                          1.    THE STATE OF MADHYA PRADESH THROUGH
                                ADDITIONAL DISTRICT MAGISTRATE RAJGARH
                                (MADHYA PRADESH)

                          2.    MR. VISHAL MAHESHWARI S/O SHRI JAGDISH
                                NARAYAN H.NO. 825, MAIN ROAD KURAWAR,
                                TEH. NARSINGHGARH (MADHYA PRADESH)

                          3.    SMT. PUSHPA MAHESHWARI D/O SHRI PREM
                                NARAYAN R/O H. NO. 825 MAIN ROAD KURAWAR
                                TEHSIL NARSINGHGARH DISTRICT RAJGARH
                                M.P. (MADHYA PRADESH)

                          4.    MR. PALASH MAHESHWARI S/O SHRI JAGDISH
                                MAHESHWARI R/O H. NO. 825 MAIN ROAD
                                KURAWAR TEHSIL NARSINGHGARH DISTRICT
                                RAJGARH M.P. (MADHYA PRADESH)

                                                                           .....RESPONDENTS

                          (SHRI BHUWAN GAUTAM, LEARNED GOVT. ADVOCATE FOR THE
                          RESPONDENT NO.1/STATE)
                          (SHRI PRANAY JOSHI, LEARNED COUNSEL FOR THE RESPONDENT
                          NO.3).
Signature Not Verified
Signed by: SEHAR HASEEN
Signing time: 8/9/2023
6:21:48 PM
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                                This petition coming on for order this day, JUSTICE SUSHRUT
                          ARVIND DHARMADHIKARI passed the following:
                                                              ORDER

Heard finally with the consent of both the parties. By way of the instant writ petition, the petitioner has assailed the order dated 30.05.2022 passed in Case No. 167/B-121/2021-22 by the respondent no.1 whereby the application u/S 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002(referred to as 'SARFAESI Act' hereinafter) filed by the petitioner has been dismissed.

2. Brief facts of the case are that the petitioner is a financial institution registered under the provisions of Companies Act, 1956. The petitioner is involved in the business of providing housing loan to its customers. The respondent no. 2 to 4 approached the petitioner company for availing the housing loan of Rs. 1,15,00,000/- and in lieu, they have furnished equitable mortgage of property bearing Plot No. 30, situated at Ward No. 5 Village Kurawar, Tehsil Narsingharh Distt. Rajgarh and Plot No. 825, Ward No. 5 Pargana Block Narsingharh Distt. Rajgarh(referred to as 'property in question') in favour of petitioner company as security interest. The account of the respondent no.2 to 4 was classified as Non Performing Asset(for short 'NPA'), due to irregular repayment of loan as per the terms and conditions. Notices u/S 13(2) of the SARFAESI Act were served upon all the respondents. Thereafter, the petitioner complied with all the provisions of Section 13(4) r/W Rule 8 & 9 of the Security Interest Rules of the SARFAESI Act. Petitioner filed application u/S 14 of the SARFAESI Act before the respondent no.1 i.e. Additional Signature Not Verified Signed by: SEHAR HASEEN Signing time: 8/9/2023 6:21:48 PM

District Magistrate. The respondent no.1 passed the impugned order dated 30.05.2022 dismissing the application filed by the petitioner u/S 14(f) of the SARFAESI Act without application of mind and also exceeded the jurisdiction as provided u/S 14 of the SARFAESI Act.

3. Section 14 of the SARFAESI Act is reproduced below for convenience and ready reference:

"14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.-

(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or as the case may be, the District Magistrate shall, on such request being made to him-

(a) take possession of such asset and documents relating thereto; and

(b) forward such asset and documents to the secured creditor: [Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that---

(i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application;

(ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period;

(iii) the borrower has created security interest over various properties giving the details of properties referred to in sub-clause (ii)above;

(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount;

(v) consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non-performing asset;

(vi) affirming that the period of sixty days notice as required by the provisions of sub-section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower;

(vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for non-

acceptance of such objection or representation had been communicated to the Signature Not Verified Signed by: SEHAR HASEEN Signing time: 8/9/2023 6:21:48 PM

borrower;

(viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of section 13 read with section 14 of the principal Act;

(ix) that the provisions of this Act and the rules made thereunder had been complied with:

Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets 2 [within a period of thirty days from the date of application:] 2 [Provided also that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days.] Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act.] 3 [(1A) The District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him,--

(i) to take possession of such assets and documents relating thereto; and

(ii) to forward such assets and documents to the secured creditor.] (2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate 1 [any officer authorised by the Chief Metropolitan Magistrate or District Magistrate] done in pursuance of this section shall be called in question in any court or before any authority.

4. Learned counsel for the petitioner submitted that respondent no.1 failed to consider that the petitioner company is a secured creditor and the property in question is secured by way of mortgage. The respondent no.1 exceeded its jurisdiction in deciding the rights of the parties while deciding application u/S 14 of the SARFAESI Act. In fact, the respondent no.1 ought to have considered only two aspects:

(i) Determine whether the secured assets fall within its territorial jurisdiction?

Signature Not Verified

(ii) Whether notice u/S 13(2) of the SARFAESI Act has been furnished Signed by: SEHAR HASEEN Signing time: 8/9/2023 6:21:48 PM

or not?

5. In support of his contention, learned counsel for the petitioner relied on the judgment passed by Single Bench of this Court in the case of Cholamandalam Investments and Finance Ltd. Vs. Additional District Magistrate and Others [2018(3) MPLJ 123] wherein , in para 20 it is held that :

20. "It has been held that the District Magistrate has to consider only two aspects. He has to first determine whether the secured asset falls within his territorial jurisdiction and secondly whether the notice under Section 13(2) has been furnished or not and no adjudication has been contemplated at that stage."

6. On the other hand, learned counsel for the respondents submitted that the order need no interference as the same has been passed in accordance with law and prayed for dismissal of the writ petition.

7. Heard, learned counsel for the parties and perused the record.

8. It is not disputed that the private respondents no.2 to 4 have already preferred an application u/S 17(1) of the SARFAESI Act bearing S.A. No. 193/2022 which is pending before the Debt Recovery Tribunal. In the considered opinion of this Court, respondent no.1 has transgressed its jurisdiction by deciding the matter on merits and traveling beyond the scope of Section 14 of the SARFAESI Act, therefore, the impugned order deserves to be quashed.

9. In view of the aforesaid, the present petition is allowed. The order dated 30.05.2022(Annexure P-1) is quashed and respondent no.1 is directed to pass the order afresh in accordance with law keeping in view the statutory Signature Not Verified Signed by: SEHAR HASEEN Signing time: 8/9/2023 6:21:48 PM

provisions as contained in Section 14 of the SARFAESI Act as well as in the light of the judgment passed in the case of Cholamandlam Investment and Finance Ltd. (supra).

10. Petition stands disposed of. No order as to cost.

                               (S. A. DHARMADHIKARI)                                 (PRANAY VERMA)
                                        JUDGE                                            JUDGE
                          sh




Signature Not Verified
Signed by: SEHAR HASEEN
Signing time: 8/9/2023
6:21:48 PM