Uttarakhand High Court

M/S Bansal Agro Products Others ... vs District Magistrate on 17 August, 2023

HIGH COURT OF UTTARAKHAND AT NAINITAL

            Writ Petition (M/S) No. 2284 of 2023


M/s Bansal Agro Products others                       ...Petitioners

                              Versus

District Magistrate, Udham Singh Nagar
And another                          ...Respondents


Present:-
              Mr. Atul Bansal, Advocate for the petitioners.
              Mr. H.M. Raturi, Deputy Advocate General for the
              State.
              Ms. Irum Zeba, Advocate, holding brief of Mr.
              Kartikey Hari Gupta, Advocate for the respondent
              no.2.

                             JUDGMENT

Hon'ble Ravindra Maithani, J. (Oral)

The challenge in this petition is made to an

order dated 26.07.2023, passed under Section 14 of the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 ("the

SARFAESI Act") by the respondent no.1, District

Magistrate, Udham Singh Nagar with the related reliefs.

2. Heard learned counsel for the parties and

perused the record.

3. It is the case of the petitioners that the

petitioner no.1 the firm is a partnership firm and the

petitioner no.2 is one of its partners. One of the

partners of the petitioner no.1 the firm Mayank Agarwal

has died on 10.08.2022. The firm had got sanctioned

Cash Credit Limit facility with regard to the rice mill

from the respondent no. 2, the Nainital Bank Ltd ("the

Bank"). The petitioners were maintaining their accounts

regularly, but the respondent no.2, the Bank in utter

violation of the guidelines and directives of the Reserve

Bank of India ("RBI"), regarding classification of Non

Performing Assets ("NPA") classified the loan account of

the petitioners firm as NPA on 28.10.2022. The

respondent no. 2 the Bank thereafter, proceeded under

the provisions of the SARFAESI Act. It is the case of the

petitioners that notice under Section 13 (2) of the Act

has never been served upon them. Thereafter, on an

application of the respondent no.2, the Bank, the

respondent no.1, the District Magistrate, Udham Singh

Nagar has passed the impugned order dated

26.07.2023 for taking possession of the assets.

4. Learned counsel for the petitioners would

submit that entire action of the respondent no.2, the

Bank is in utter violation of the RBI guidelines; the

accounts of the petitioners could not have been

classified as NPA. He would raise the following points in

his submission:-

(i) A writ petition assailing an order passed

under Section 14 of the SARFAESI Act

is maintainable, in view of the law, as

laid down by the Hon'ble Supreme

Court in the case of Harshad

Govardhan Sondagar Vs. International

Assets Reconstruction Company Limited

and others, (2014) 6 SCC 1. Under

Section 13 (4) of the SARFAESI Act, an

aggrieved person may ventilate his

grievance under Section 17 of the

SARFAESI Act, but action taken under

Section 14 of the SARFAESI Act may not

be challenged in any other court as per

Section 14 (3) of the SARFAESI Act.

(ii) The action under Section 14 of the

SARFAESI Act has not been as per law

because an application that is required

to be filed under Section 14 of the

SARFAESI Act, requires to give all the

details that are related to the matter. It

is argued that the petitioners in

response to the notice under Section 13

(2) of the SARFAESI Act have made a

representation under Section 13 (3A) of

the SARFAESI Act and this fact was

necessarily required to be mentioned in

the application under Section 14 of the

SARFAESI Act, in view of clause (vii) of

the first proviso to Section 14 (1), which

reads as hereunder:-

"14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.- (1) Where the possession of any secured asset is required to be taken by the secured creditor of if any of the secured asset 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 asset, 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-

................................................................................ ................................................................................

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) ...............................................................

(ii) .............................................................

(iii).............................................................. ................................................................... ....................................................................

(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."
(iii)   The    District          Magistrate                   may           under

        Section      14        of       the         SARFAESI                     Act,

authorise any officer subordinate to him

to take possession. It is so required

under Section 14 (1A) of the SARFAESI

Act. In the instant case, by the

impugned order, the authorised officer

of the Bank has been directed to take

possession and the Senior

Superintendent of Police, Udham Singh

Nagar ("the SSP") has been directed to

deliver possession to the authorised

officer of the Bank. It is argued that the

SSP is not a subordinate officer to the

District Magistrate. Such an order could

not have been passed.

5. Learned counsel for the respondent no.2, the

Bank would submit that after judgment passed in the

case of Harshad (supra), Section 17 (4 A) of the

SARFAESI Act has been incorporated and in view of the

judgment in the case of C. Bright Vs. District Collector

and others, (2021) 2 SCC 392, now an order under

Section 14 of the SARFAESI Act could be challenged

under Section 17 of the SARFAESI Act. He would refer

to para 19 of the judgment, which reads as hereunder:-

"19. Harshad Govardhan Sondagar Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd., (2014) 6 SCC 1 : (2014) 3 SCC (Civ) 1 was a case where the person in possession claimed tenancy rights in the premises as well as a protected tenancy, being a tenant prior to creation of a mortgage. It was held that the remedy of an aggrieved person against a decision of Chief Metropolitan Magistrate or a District Magistrate lay only before the High Court. However, after the aforesaid judgment was rendered on 3-4- 2014, the Act had been amended and sub- section (4-A) was inserted in Section 17 with effect from 1-9-2016. This provided a right to move an application to the Debts Recovery Tribunal by a person who claimed tenancy or leasehold rights."

6. Referring to the judgment in the case of C.

Bright (supra), learned counsel for the respondent no.2,

the Bank would also submit that the court should be

much slow in entertaining such petitions as the instant

one. He would refer to the judgment in the case of

Kotak Mahindra Bank Limited Vs. Girnar Corrugators

Private Limited and others, (2023) 3 SCC 210, to argue

that the petitioners have alternate efficacious remedy by

way of approaching the Debts Recovery Tribunal under

Section 17 of the SARFAESI Act. In para 34 of the

judgment, the Hon'ble Supreme Court observed as

hereunder:-

"34. Under Section 14 of

the SARFAESI Act, the District Magistrate or

the Chief Metropolitan Magistrate as the case

may be is required to assist the secured

creditor in getting the possession of the

secured assets. Under Section 14 of

the SARFAESI Act, neither the District

Magistrate nor the Metropolitan Magistrate

would have any jurisdiction to adjudicate

and/or decide the dispute even between the

secured creditor and the debtor. If any

person is aggrieved by the steps under

Section 13(4)/order passed under Section 14,

then the aggrieved person has to approach

the Debts Recovery Tribunal by way of

appeal/application under Section 17 of

the SARFAESI Act."

7. Learned counsel for the respondent no.2, the

Bank would submit that, in fact, the notice was served on

the petitioners, but the petitioners had refused to take it.

It is also submitted that a notice under Rule 8 of the

Security Interest (Enforcement) Rules, 2002 ("the Rules"),

was also served on the petitioners by affixation of the

notice. Learned counsel for the respondent no.2, the Bank

would also raise the following points in his submission:-

(i) The petitioners were given notice under

Section 13 (2) of the SARFAESI Act to

which they had replied under Section

13 (3 A) of the SARFAESI Act.

Thereafter, the petitioners were given

notice under Rule 8 of the Rules.

(ii) The petitioners did not challenge any

action that was taken under Section 13

(2) of the SARFAESI Act. The

proceedings under Section 14 of the

SARFAESI Act are in continuation to the

proceedings that are undertaken under

Section 13 (4) of the SARFAESI Act.

Therefore, now the petitioners are not

entitled to any relief.

8. In reply to it, learned counsel for the

petitioners would submit that the notice that was

issued under Rule 8 of the Rules is not on record. He

would also submit that the principles of law, as laid

down in the case of Kotak Mahindra (supra) were laid

down on a different set of facts.

9. The SARFAESI Act has been enacted with a

purpose to regulate securitisation and reconstruction of

financial assets and enforcement of security interest

etc. to provide for a Central database of security interest

created on property rights, and for matters connected

therewith or incidental thereto. It is a self contained

Act. The Court leaves the question of jurisdiction open

and does not propose to decide as to whether the

instant writ petition is maintainable or not. The Court

proceeds to decide the petition.

10. It is being argued that the impugned order is

not as per law. The application was not supported with

all the details, particularly the details, as required to be

filled up under clause (vii) of the first proviso to Section

14 (1) and the decision thereof. In addition to it, what is

being argued is that the District Magistrate, could not

have directed the SSP to take possession because

under Section 14 of the Act, the District Magistrate may

only authorise the Officers subordinate to him, in view

of Section 14 (1 A) of the Act.

11. It is not denied by the petitioners that they

have taken a loan. They have also not denied their

liability to repay the loan amount. It is also admitted

that the petitioners were given notice under Section 13

(2) of the Act. It is admitted that the petitioners replied

to it. The impugned order records that alongwith the

application under Section 14 of the Act, the notice

under Rule 8 (1) of the Rules were provided by the

respondent no.2, the Bank. Rule 8 (1) reads as

hereunder:-

"8. Sale of immovable secured assets.- (1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property."

12. The petitioners were aware that their

representation under Section 13 (3A) of the SARFAESI

Act has not been considered and the respondent no.2,

Bank is proceeding further to take possession. The

petitioners were issued notice under Rule 8 of the

Rules. As stated, they have not challenged it. This Court

is of the view that the grounds which are being taken to

challenge the impugned order are not sustainable.

13. If the details of the representation that was

made by the petitioners under Section 13 (3A) have not

been included in the application made under Section 14

of the SARFAESI Act as filed by the Bank, in view of this