Madhya Pradesh High Court
Poonawalla Housingh Finance Ltd. ... vs The State Of Madhya Pradesh on 23 November, 2023
Author: Sushrut Arvind Dharmadhikari
Bench: Sushrut Arvind Dharmadhikari, Pranay Verma
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 23 rd OF NOVEMBER, 2023
WRIT PETITION No. 26170 of 2023
BETWEEN:-
POONAWALLA HOUSINGH FINANCE LTD. (FORMERLY
KNOWN AS MAGMA HOUSING FINANCE LIMITED)
THROUGH ITS AUTHORIZED SIGNATORY MR.
DEVENDRA PAL S/O SHRI KAMASRAY PAL, AGED
ABOUT 40 YEARS, OCCUPATION: SERVICE
AUTHORIZED OFFICER REGD OFFICE 602 6TH FLOOR
ZERO ONE IT PARK SURVEY NO. 79/1 GHORPADI
MUNDHWA ROAD PUNE (M.H.) 411036 AND BRANCH
OFFICE 5TH FLOOR METRO B-2 PU 4 SCHEME NO. 54
VIJAY NAGAR INDORE 452010 (MADHYA PRADESH)
.....PETITIONER
(BY SHRI ROHIT SABOO, ADVOCATE FOR THE PETITIONER )
AND
THE STATE OF MADHYA PRADESH THROUGH
PRINCIPAL SECRETARY LAW AND LEGISLATURE
AFFAIRS VALLABH BHAWAN BHOPAL (MADHYA
PRADESH)
.....RESPONDENT
(BY SHRI BHUWAN GAUTAM, GOVT. ADVOCATE FOR THE
RESPONDENT/STATE )
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Reserved on : 12.10.2023
Pronounced on : 23.11.2023
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This petition coming on for admission this day, Justice Sushrut Arvind
Dharmadhikari passed the following:
ORDER
Heard on the question of admission and interim relief.
The instant writ petition under Article 226/227 of the Constitution of India
has been filed by the petitioner being aggrieved by the inaction of Chief Judicial
Magistrate, Khargone who is sitting tight over the application filed by the
petitioner u/S 14 of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002(referred to as"SARFAESI Act"
hereinafter) praying for the following relief:
"It is therefore prayed that the Learned Chief Judicial
Magistrate, Khargone be directed to dispose of the all pending
applications in respect to the petitioner in accordance with law
within a period as may be prescribed by this Hon'ble Court"
2. Brief facts of the case are that the petitioner is a non-banking finance
company involved in the business of advancing housing loans to its
customers.The petitioner had filed about 06 applications u/S 14 of the
SARFAESI Act before the Chief Judicial Magistrate, Khargone [referred to as
CJM, Khargone" hereinafter]. The learned CJM, Khargone has neither registered
the application nor taken any steps to proceed in the matter and in contravention
to the provisions of Section 14 of the SARFAESI Act, the CJM is listing the
matter for arguments on registration. Being aggrieved, the petitioner filed an
application under the Right to Information Act, 2005 seeking status of all similar
SARFAESI Act matters pending before the CJM, Khargone which was
forwarded by the State Public Information Officer, Distt. & Sessions Court,
Mandleshwar to the CJM who has issued the list of cases u/S 14 of
SARFAESI ACT pending before the CJM, Khargone annexed with the petition.
Now the present petition is preferred.
3. Learned counsel for the petitioner submitted that the CJM, Khargone
has failed to consider that the petitioner company is a secured creditor and the
property in question is secured by way of mortgage. The CJM exceeded its
jurisdiction by listing the cases u/S 14 of SARFAESI Act for the purpose of
arguments on registration. In fact, the CJM ought to have considered only two
aspects:
(i) Determine whether the secured assets fall within its territorial
jurisdiction?
(ii) Whether notice u/S 13(2) of the SARFAESI Act has been furnished
or not?
4. 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."
5. He further relied upon the order passed by the Division Bench of this
Court in the case of HDFC Bank Ltd. Vs. Additional District Magistrate,
Indore & Others in W.P. No. 14976/2022.
6. Learned counsel for the respondent/State submitted that petition may
be disposed of with directions to the CJM, Khargone to decide the applications
filed u/S 14 of the SARFAESI Act within a time bound period.
7. Heard, learned counsel for the parties and perused the record.
8. Before adverting to the relief sought in the petition, it is apt to go
through the provisions of Section 14 of the SARFAESI Act which are
reproduced below for convenience:
9. Section 14 of the SARFAESI Act:
"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 authorized 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 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.
10. In the present case, the petitioner has rightly approached the CJM
by filing an application u/S 14 of the SARFAESI Act in the light of the law laid
down by the Apex Court in the case of Authorized Officer, Indian Bank Vs.
D. Visalakshi and Another reported in (2019) 20 SCC 47.
Recently, this Court in W.P. No. 3024/2023 has dealt with two core legal
questions which are as follows:
(i) Whether the CJM can exercise powers u/S 14 of the
SARFAESI Act?
(ii) Whether the borrower can and /or "any other person" is
required to be given an opportunity of hearing before passing the
order u/S 14 of the SARFAESI Act?
11. The questions so framed are answered as mentioned below:
So far as the answer to the first question is concerned, this question
came up for consideration before The Hon'ble Apex Court in the case of
Authorized Officer, Indian Bank (supra) was tasked to deal with the
contrary views being taken from various High Courts in the country. The High
Court of Bombay, Calcutta, Madras, Madhya Pradesh and Uttarakhand
interpreted the said provision to mean that only the CMM in metropolitan areas
and the DM in non-metropolitan areas were competent to deal with the
applications u/S 14 of the SARFAESI Act whereas on the other hand High
Courts of Kerela, Allahabad, Andhra Pradesh and Karnataka took a contrary
view and concluded that the provision does not debar or preclude the CJM to
exercise the powers u/S 14 of the Act. The Apex Court in the case of
Authorized Officer, Indian Bank(supra) has held thus:
"34. Notably, the powers and functions of the CMM and the
CJM are equivalent and similar, in relation to matters specified in
the Cr.P.C.. These expressions (CMM and CJM) are
interchangeable and synonymous to each other. Moreover, Section
14 of the 2002 Act does not explicitly exclude the CJM from
dealing with the request of the secured creditor made thereunder.
The power to be exercised under Section 14 of the 2002 Act by the
concerned authority is, by its very nature, nonjudicial or State's
coercive power. Furthermore, the borrower or the persons claiming
through borrower or for that matter likely to be affected by the
proposed action being in possession of the subject property, have
statutory remedy under Section 17 of the 2002 Act and/or judicial
review under Article 226 of the Constitution of India. In that sense,
no prejudice is likely to be caused to the borrower/lessee; nor is it
possible to suggest that they are rendered remediless in law. At the
same time, the secured creditor who invokes the process
under Section 14 of the 2002 Act does not get any advantage
muchless added advantage. Taking totality of all these aspects,
there is nothing wrong in giving expansive meaning to the
expression "CMM", as inclusive of CJM concerning non‐
metropolitan area, who is otherwise competent to discharge
administrative as well as judicial functions as delineated in
the Cr.P.C. on the same terms as CMM. That interpretation would
make the provision more meaningful. Such interpretation does not
militate against the legislative intent nor it would be a case of
allowing an unworthy person or authority to undertake inquiry
which is limited to matters specified in Section 14 of the 2002 Act.
44. Suffice it to observe that keeping in mind the subject and
object of the 2002 Act and the legislative intent and purpose
underlying Section 14 of the 2002 Act, contextual and purposive
construction of the said provision would further the legislative
intent. In that, the power conferred on the authorised officer
in Section 14 of the 2002 Act is circumscribed and is only in the
nature of exercise of State's coercive power to facilitate taking over
possession of the secured assets.
54. To sum up, we hold that the CJM is equally competent to
deal with the application moved by the secured creditor
under Section 14 of the 2002 Act. We accordingly, uphold and
approve the view taken by the High Courts of Kerala, Karnataka,
Allahabad and Andhra Pradesh and reverse the decisions of the
High Courts of Bombay, Calcutta, Madras, Madhya Pradesh and
Uttarakhand in that regard. Resultantly, it is unnecessary to dilate
on the argument of prospective overruling pressed into service by
the secured creditors (Banks)."
12. So far as the answer to Question No.2 is concerned, the maiden
attempt to decide the said question was made by the Apex Court in the case of
Standard Chartered Vs. Noble Kumar & Others reported in (2013) 9 SCC
620 wherein the Apex Court has observed thus:
"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 the
possession of the secured asset."
13. The Apex Court in the case of Authorized Officer, (supra) went
to throw light on the operation and application of Section 14 of the SARFAESI
Act. Relevant extracts of the judgment are as follows:
".......Concededly, the nature of inquiry to be conducted by the designated
authorities under the 2002 Act, is spelt out in Section 14 of the 2002 Act. The
same is circumscribed and is limited to matters specified in Clauses (i) to (ix) of
the first proviso in subsection (1) of Section 14 of the 2002 Act, inserted in
2013. Prior to the insertion of that proviso, it was always understood that in
such inquiry, it is not open to adjudicate upon contentious pleas regarding the
rights of the parties in any manner. The stated authorities could only do
verification of the genuineness of the plea and upon being satisfied that it is
genuine, the adjudication thereof could then be left to the Court of competent
jurisdiction.
33. 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 pre‐
supposes 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. "
14. In the present petition, as per the information gathered by the
petitioner by way of filing an application through the Right to Information Act,
(Annexure P-5) at least around 17 cases are pending before the Chief Judicial
Magistrate Distt. Khargone which are of similar nature and are pending for
arguments on registration of application u/S 14 of the SARFAESI Act which is
reproduced below for ready reference:
Annexure P-5
न्यायालय - ीमित पदमा राजौरे ितवारी मुख्य न्याियक म जस्टे ट
प.िन. खरगोन
इस न्यायालय म लं िबत सफसी अ धिनयम के करणो क जानकारी िनयमानुसार है :-
अ नु मांक प कार का नाम म पे श ी िदना
01 उज्जीवन स्माल फायनस िव संजय पंजीयन पर तक हेतु 27.09.2023
02 ए यू स्मॉल फायनस िव लक्क सोहनी पंजीयन पर तक हेतु 29.09.2023
03 इ वटाटॉस स्मॉल फायनस िव वीण इत्यादी पंजीयन पर तक हेतु 04.10.2023
04 ए यू स्मॉल फायनस िव िचंताराम इत्यादी पंजीयन पर तक हेतु 04.10.2023
05 ए यू स्मॉल फायनस िव स्वतं◌ ं इत्यााादी पंजीयन पर तक हेतु 05.10.2023
06 पूनावाला हाउ संग फायनस िव महेश पंजीयन पर तक हेतु 16.10.2023
अ नु मांक ए यू स्मॉल फायनस िव का
प कार राधेनाम
श्याम इत्यादी पंजीयन पर तक हेतमु 16.10.2023
पे श ी िदना
08 पूनावाला हाउ संग फायनस िव भीम संग पंजीयन पर तक हेतु 30.10.2023
09 पूनावाला हाउ संग फायनस िव िवरेन् पंजीयन पर तक हेतु 31.10.2023
10 पूनावाला हाउ संग फायनस िव सुरन
े ् पंजीयन पर तक हेतु 04.11.2023
11 इ वटॉस स्मॉल फायनस िव बद ददीन पंजीयन पर तक हेतु 04.11.2023
12 पूनावाला हाउ संग फायनस िव िदनेश पंजीयन पर तक हेतु 06.11.2023
13 ए यू स्मॉल फायनस िव शब्बीर इत्यादी पंजीयन पर तक हेतु 07.11.2023
14 ए यू स्मॉल फायनस िव मंजीत पंजीयन पर तक हेतु 17.11.2023
15 पूनावाला हाउ संग फायनस िव कमले श पंजीयन पर तक हेतु 20.11.2023
16 ए यू स्मॉल फायनस िव मुकेश पंजीयन पर तक हेतु 24.11.2023
17 पूनावाला हाउ संग फायनस िव सुिनल इत्यादी पंजीयन पर तक हेतु 30.11.2023
15. As has been already held by this Court as well as by the Apex
Court on number of occasions, the Chief Judicial Magistrate has to consider
two aspects before passing an order u/S 14 of the SARFAESI Act:
(i) to determine whether secured assets fall within their territorial
jurisdiction?
(ii) whether notice u/S 13(2) of the SARFAESI Act has been furnished.
Therefore the action of the Chief Judicial Magistrate, Khargone is
absolutely illegal and is not the requirement of law.
16. The scope and extent of jurisdiction vested in the DM/ADM/CJM as
provided u/S 14 of the SARFAESI Act is clear from a bare reading of Section
14 as well as from the catena of judgments passed by the Apex Court[See :
R.D. Jain & Company Vs. Capital First Limited & Others, (2023) 1 SCC
675 and Kotak Mahindra Bank Limited Vs. Girnar Corrugators Pvt. &
Ors. (2023) 3 SCC 210]. 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 DM/ADM/CJM by way of a written application. The
statutory obligation upon the DM/ADM/CJM is to immediately move into action
by passing 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. As per Section 14 of the SARFAESI Act, the DM/ADM/CJM 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 further extended for such further period but
not exceeding to 60 days. The possession of the secured assets could be
taken by the DM/ADM/CJM himself/herself or through any officer sub-ordinate
to him/her. Thus, from the above, it is apparent that nature of power u/S 14 of
SARFAESI Act vested in the DM/ADM/CJM is executory and ministerial and
not adjudicatory.
17. This Court while dealing with the SARFAESI matters has also
come across certain cases wherein the secured assets have been given on lease
or tenancy by the borrower prior to mortgage and the tenants/lessee on an
apprehension of dispossession from the mortgaged property approach this
Court. Under such circumstances, the DM/ADM/CJM before deciding
application under Section 14 of the SARFAESI Act shall follow the mandate as
held in the cases of Harshad Govardhan Sondagar vs. International
Assets Reconstruction Co. Ltd., (2014) 6 SCC 1 and Vishal N.Kalsaria
vs. Bank of India & Ors., (2016) 3 SCC 762.
18. This Court every other day is dealing with number of cases
where District Magistrate/Additional District Magistrate/Chief Judicial Magistrate
instead of complying with the provisions of Section 14 of the SARFAESI Act
either exceed their jurisdiction by adjudicating the case or sitting tight over the
matter, as in the case in hand. In the considered opinion of this Court, Chief
Judicial Magistrate, Khargone has travelled beyond the scope of Section 14 of
the SARFAESI Act, in as much as, that in place of deciding the application
within the stipulated time which was filed in July 2023, the application is kept
pending for months together for arguments on registration of the case which is
not warranted as per the provisions of Section 14 of the SARFAESI Act. The
Chief Judicial Magistrate attained the role of adjudicatory authority/ functus
officio. This Court as well as the Apex Court time and again reiterated that the
role of DM/ADM/CJM is ministerial in nature so far as Section 14 of the
SARFAESI Act is concerned and not that of adjudication. In number of cases,
it is seen that the orders are being passed as per convenience of the Officer
concerned without following the mandate of this Court as well as the Apex
Court.
1 9 . In view of the above discussion, it is clear as day light that
DM/ADM/CJM have to strictly follow the provisions of Section 14 of
SARFAESI Act as well as law laid down by the Apex Court in the case
o f R.D. Jain & Company(supra) and Kotak Mahindra Bank
Limited(supra) in deciding the applications filed by the secured creditors
keeping in the mind the interest of lessee/tenant of borrowers also as held in the
cases of Harshad Govardhan Sondagar & Vishal N.Kalsaria (supra).
20. Accordingly, the present petition is allowed with the following
directions:
A. The Chief Judicial Magistrate, Khargone is directed to decide all
pending applications of the petitioner as well as other pending applications in
accordance with law keeping in view the statutory provisions as contained in
Section 14 of the SARFAESI Act as well as in the light of the judgments
mentioned above, within a period of 30 days from the date of receipt of
certified copy of the order passed today.
B. Looking to the fact that being aggrieved by the inaction of the
DM/ADM/CJM in deciding the applications filed under Section 14 of
SARFAESI Act, the secured creditors rushed to this Court leading to opening
of a flood gate of writ petitions , in the considered opinion of this Court, it
would be apposite to issue guidelines/directions to be followed by these
DM/ADM/CJM while passing orders for deciding applications u/S 14 of
the SARFAESI Act which are as follows :
(i) DM/ADM/CJM have to determine whether secured assets fall within
their territorial jurisdiction.
(ii) whether notice u/S 13(2) of the SARFAESI Act has been furnished
by the secured creditor and also whether the case of secured creditor falls
under the any of the exceptions provided under Section 31 of the SARFAESI
Act?
(iii) DM/ADM/CJM is not at all required to hear the application u/S 14 of
the SARFAESI Act for the purpose of registration of the case.
(iv) DM/ADM/CJM acting under Section 14 of the SARFAESI Act is not
required to give notice either to the borrower or to the 3rd party.
(v) The DM/ADM/CJM shall ensure that the secured creditor should file
an affidavit declaring that the terms and conditions prescribed u/S 14(1) of the
SARFAESI Act are satisfied.
(vi) DM/ADM/CJM should ensure that application filed u/S 14 of the
SARFAESI Act shall be decided as expeditiously as possible, preferably within
45 days from the date of filing of such an application.
21. Petition stands disposed off.
Let a copy of this order be sent to the Registrar General, High Court of
M.P, Jabalpur.
The Registrar General, High Court of M.P., Jabalpur is directed to
circulate the copy of this order to all the Principal District Judges in the State of
M.P. with a direction to circulate this order amongst Chief Judicial Magistrate
who are exercising powers under the SARFAESI Act in their respective
districts. The Registrar General is also directed to send a copy of this order to
the Principal Secretary, Revenue Department, Bhopal with a request to circulate
this order amongst all DM/ADM in the State of Madhya Pradesh only for the
purpose of avoiding unnecessary delays and unwanted procedures giving rise to
flooding of High Court with unwanted litigation.
(S. A. DHARMADHIKARI) (PRANAY VERMA)
JUDGE JUDGE
sh
