Poonawalla Fincorp Limited ... vs The State Of Madhya Pradesh
2023 Latest Caselaw 14549 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 5 th OF SEPTEMBER, 2023
                                            WRIT PETITION No. 13462 of 2023

                         BETWEEN:-
                         POONAWALLA FINCORP LIMITED (FORMERLY KNOWN
                         AS    MAGMA FINCORP LTD.)        THROUGH     ITS
                         AUTHORIZED SIGNATORY MR. MOHOMMAD ZISHAN
                         KHAN S/O DR. HAMID KHAN, AGED ABOUT 35 YEARS,
                         OCCUPATION:     LEGAL MANAGER      (AUTHORIZED
                         OFFICER), REGD OFFICE 601, 6TH FLOOR 01 IT PARK
                         SURVEY No. 79/1 GHORPADI, MUNDHWA ROAD PUNE
                         (M.H.) 411036 AND BRANCH OFFICE AT 5TH FLOOR
                         METRO TOWER B-2, PU-4 SCHEME NO. 54, NEAR VIJAY
                         NAGAR, A.B. ROAD INDORE (MADHYA PRADESH)

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

                         AND
                         1.    THE STATE OF MADHYA PRADESH, DISTRICT
                               MAGISTRATE,   COLLECTORATE,  DISTRICT
                               KHARGONE (MADHYA PRADESH)

                         2.    ADDITIONAL    DISTRICT                MAGISTRATE,
                               COLLECTORATE,    DISTRICT              KHARGONE
                               (MADHYA PRADESH)

                                                                                     .....RESPONDENTS
                         (SHRI GAURAV SINGH CHOUHAN, DY. GOVERNMENT ADVOCATE FOR
                         THE STATE).

                               This petition coming on for admission this day, Justice Sushrut Arvind
                         Dharmadhikari passed the following:
                                                             ORDER

Heard finally with the consent of both the parties. Signature Not Verified Signed by: SREEVIDYA Signing time: 9/8/2023 6:24:11 PM

By way of the instant writ petition, petitioner has assailed the order dated 11.10.2022 (Annexure P/3) passed in Case No. 0036/B-108(3)/2022-2023 by Additional District Magistrate/respondent no.2 whereby the application under Section 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 loan to its customers. One Mr. Devendra Singh (hereinafter referred to as the 'borrower') approached the petitioner

company for availing loan of Rs. 25,00,000/- and in lieu thereof, they have furnished equitable mortgage of property bearing Survey No. 68/1, Patwari Halka Plot No.08, Gram-Ghaghla, Tehsil Badwah & District Khargone (MP) admeasuring 12,055.58 sq. ft. (referred to as 'property in question') in favour of petitioner company as security interest. Due to non-payment of certain installments, as per the terms and conditions, the account of the borrower was classified as Non Performing Asset (for short 'NPA') on 01.12.2020. Notice under Section 13(2) of the SARFAESI Act was served upon the borrower. Thereafter, when the borrower did not choose to pay, the petitioner filed application under Section 14 of the SARFAESI Act before the respondent no.2 i.e. Additional District Magistrate. Respondent no.2 passed the impugned order dated 11.10.2022 dismissing the application filed by the petitioner under Section 14 of the SARFAESI Act without application of mind and also exceeded the jurisdiction as provided under Section 14 of the SARFAESI Act.

3. Section 14 of the SARFAESI Act is reproduced below for

Signature Not Verified convenience and ready reference:

Signed by: SREEVIDYA Signing time: 9/8/2023 6:24:11 PM

"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 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 [within a period of thirty days from the date Signature Not Verified Signed by: SREEVIDYA Signing time: 9/8/2023 6:24:11 PM

of application:] [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.] [(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 [ a n y 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.2 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.2 exceeded its jurisdiction in deciding the rights of the parties while deciding application under Section 14 of the SARFAESI Act. In fact, in case respondent no .2 was to determine whether the secured asset falls within the scope of Section 31(i) or not, he ought to have considered the following aspects:

(i) What is the nature of the land upon which security interest is created?

(ii) If the nature of the land is agriculture, is there any actual agricultural activity going on over that land?

(iii) Whether notice under Section 13(2) of the SARFAESI Act has been furnished 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 Signature Not Verified Signed by: SREEVIDYA Signing time: 9/8/2023 6:24:11 PM

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. In the considered opinion of this Court, respondent no.2 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 11.10.2022 (Annexure P/3) is quashed and respondent no.2 is directed to pass the order afresh 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 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)
Signature Not Verified
Signed by: SREEVIDYA
Signing time: 9/8/2023
6:24:11 PM

                                 JUDGE       JUDGE
                         vidya




Signature Not Verified
Signed by: SREEVIDYA
Signing time: 9/8/2023
6:24:11 PM