Andhra Pradesh High Court - Amravati
Hon'Ble Supreme Court Of India In ... vs Noble Kumar & Others1. Lastly He Lays ... on 21 July, 2023
1
HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
and
HON'BLE SRI JUSTICE DUPPALA VENKATA RAMANA
WRIT PETITION No.14983 of 2023
ORDER:(per D.V.S.S.Somayajulu, J) This Writ Petition is filed for the following relief:
"...to issue an appropriate Writ, order or direction more particularly one in the nature of
a) "Writ of Certiorari" calling for the entire records in Crl.M.P.No.122 / 2023, dated 07.06.2023 and the entire records of Cri.Misc.36/2021 relating to the orders passed by the Hon'ble CJM, Guntur, and related warrants issued to the advocate commissioners in respect of above 2 cases to take physical possession of the same schedule properties;
b) To pass necessary orders and set aside the orders passed by the Hon'ble CJM, Guntur in Crl.M.P.No.122/2023m dt.07.06.2023 and set aside 5 warrants issued to the 5 advocate commissioners without referring to the orders under which the warrants are issued on the same properties on which there is already an earlier order dated 20.03.2021 in Crl.Misc.No.36/2021.
c) To stay the operation of the illegal orders and 5 illegal warrants, dated 07.06.2023, issued to the 5 advocate commissioners, on the same 2 properties on which there is already an earlier order dated 20.03.2021 in crti.Misc.No.36/2021.
d) To pass necessary orders on the 7 issues raised in the above writ petition in para No.14, 18, 22, 25, 26, 27 & 32 and to pass such other order or orders as this Hon'ble Court may deem fit and proper in the circumstances of the case."
2) This Court has heard Sri Nazundappa, learned senior counsel, as instructed by Sri A.Venkata Durga Rao, learned counsel for the petitioners, and Sri S. Satyanarayana Moorthy learned counsel appearing for the respondent Bank.
3) This Writ Petition is filed raising number of issues which are briefly summaries as follows:
4) In grounds from 7 to 15 it is submitted that the Chief Judicial Magistrate has issued two sets of warrants under Section 14 of the SARFAESI Act in Crl.M.P.No.36 of 2021 and Crl.M.P.No.122 of 2023. In paragraph 18 it is stated that there is suppression of facts including the cases pending before the various Tribunals. In paragraph 19 it is stated that the affidavit which has been filed in the Court of the Chief Judicial Magistrate is accompanied by an affidavit, which does not fulfill the conditions laid down in Clauses 1 3 to 9 of Section 14(1) of the SARFAESI Act. From paragraph 19 these grounds are repeated till para 25, and then onwards the classification of the account has been challenged.
General grounds are raised thereafter.
5) Learned counsel for the petitioners argued the matter at length. It is his primary contention that two orders were passed by the Judicial Magistrate in Crl.M.P.No.36 of 2021 and in Crl.M.P.No.122 of 2023. He contends that there cannot be two orders to take up possession of the property. The 2nd major ground urged is that the affidavit filed in support of the application under Section 14 (1) is not in accordance with law and it does not contain the necessary disclosures. Learned counsel relied upon the judgments including W.P.No.4430 of 2020 and the judgment of the Hon'ble Supreme Court of India in Standard Chartered Bank v V. Noble Kumar & Others1. Lastly he lays heavy stress on the contents of the affidavit filed before the Magistrate and contends that the necessary ingredients set out in Clauses i to ix in Section 14, of the SARFAESI Act are not visible from the affidavit. He relies on the cases which 1 (2013) 9 SCC 620=2013 (2) DRTC 609 (SC) 4 are mentioned in the grounds of Appeal itself. He also raised the issue about the registration of the security interest created. Therefore, learned counsel argues that the writ of Certiorari should be issued and the entire records should be summoned and the warrants should be set aside.
6) In reply, learned standing counsel for the respondent Sri Satyanarayana Moorthy argues in line with what is stated in the counter affidavit. It is his contention that as earlier warrant could not be executed within the time stipulated by the Act, fresh warrants had to be obtained by the Bank for the sake of taking possession of the property. He also relies upon the judgment of the Hon'ble Supreme Court of India in the Standard Chartered Bank (1 supra) to argue that the affidavit in question has more than complied with Section 14 and that all the details are furnished. He points out that substantial compliance has been held to be enough by Division Bench of this Court in W.P.No.4430 of 2020. He also points out that as far as the issue of NPA is concerned the matter was already raised before the coordinate Bench of this Court which directed that 5 the issue should be raised before the DRT since there are complicated questions of fact. He refers to the Order passed in W.P.Nos.9080 and 9081 of 2019, and it is also stated that against the said order the SLP filed was also rejected. It is also pointed out that in the order filed by the writ petitioners themselves it is clearly mentioned that the issue of NPA would be urged before the DRT. He also submits that the DRT had also decided the point that the classification of NPA will have to be decided before the DRT Hyderabad and that this order was passed in the presence of the counsels. Even with regard to the non-registration of the charge, the DRT had already rendered a finding and it is, therefore, said that this issue cannot be raised once again before this Court. Lastly, he submits that the writ petition is not a proper remedy and that more than once this Writ Petitioner was told to approach the DRT for his grievance. He submits that huge outstanding is due to the bank and on one ground or the other cases are being raised before this Court to delay the recovery.
6COURT:
7) It is important to note that no rejoinder has been filed to counter affidavit.
8) After hearing both the counsel, this Court notices that there is a serious issue raised by the writ petitioner with heavy emphasis on the contents of the affidavits which are filed before the CJM under Section 14 of the SARFAESI Act.
This very same section and the contents of the affidavit etc., were also discussed threadbare by the Hon'ble Supreme Court of India in the case of Standard Chartered Bank case ( 1supra). Both the counsel relied upon the same. The following are the findings of the Hon'ble Supreme Court of India in paras 23 to 25 of this judgment:
"23. We must make it clear that these provisions were not in existence on the date of the order impugned [V. Noble Kumar v. Standard Chartered Bank, (2010) 8 MLJ 282 :
(2011) 1 CTC 513] in the instant proceedings. These amendments are made to provide safeguards to the interest of the borrower. These provisions stipulate that a secured creditor who is seeking the intervention of the Magistrate under Section 14 is required to file an affidavit furnishing the information contemplated under various sub-clauses (i) to (ix) of the proviso and obligates the Magistrate to pass suitable orders regarding taking of the 7 possession of the secured assets only after being satisfied with the contents of the affidavits.
24. An analysis of the nine sub-clauses of the proviso which deal with the information that is required to be furnished in the affidavit filed by the secured creditor indicates in substance that:
24.1. (i) there was a loan transaction under which a borrower is liable to repay the loan amount with interest, 24.2. (ii) there is a security interest created in a secured asset belonging to the borrower, 24.3. (iii) that the borrower committed default in the repayment, 24.4. (iv) that a notice contemplated under Section 13(2) was in fact issued, 24.5. (v) in spite of such a notice, the borrower did not make the repayment, 24.6. (vi) the objections of the borrower had in fact been considered and rejected, 24.7. (vii) the reasons for such rejection had been communicated to the borrower, etc.
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."
9) A coordinate Bench of this Court in W.P.No.4430 of 2020 also had an occasion to consider the very same issue. Paragraph 5 of this Judgment makes it very clear that 8 the core issue before the Court was about the contents of the affidavit to be filed.
10) The judgment of the Hon'ble Supreme Court of India referred to above was not cited but before the Division Bench the other judgments were cited. In paragraph 11 of the said judgment the Division Bench relied upon the Kerala High Court judgment in Canara bank Limited v Stephen John and Others2 and approved the findings of the judgment of the Kerala High Court. The following passages of the Division Bench, wherein Kerala High Court's order was approved, are relevant for this case:
".....it is obligatory for the Chief Judicial Magistrate exercising power under section 14 of the Act to satisfy that the secured creditor has made a declaration in the form of an affidavit as regards matters specifically mentioned in the first proviso to sub-section (1) of Section 14. In other words, after the amendments, if the secured creditor does not file an affidavit declaring all the facts required to be declared in terms of the first proviso, the Chief Judicial Magistrate is not obliged to render assistance to them. The correctness or otherwise of the declaration, going by the scheme of the provision, is not a matter at all for the Chief Judicial Magistrate to adjudicate. As taking possession of the secured asset 2 2018 (3) KHC 670 9 through the process under section 14 of the Act is also one of the measures contemplated under sub- section (4) of section 13 of the Act, the correctness, if any, of the declaration made by the secured creditor for the purpose of availing assistance under Section 14 of the Act is a matter for the Debts Recovery Tribunal exercising power under Section 17 of the Act to adjudicate upon, if raised.
8. It is seen that confusion arose as regards the jurisdiction under Section 14 on account of the fact that the Chief Judicial Magistrate entrusted with judicial functions is exercising that jurisdiction. Merely for the reason that the power under Section 14 is exercised by the Chief Judicial Magistrate, it cannot be argued that the power is judicial as it is now settled that the fact that the power is entrusted or wielded by a person who functions as a court is not decisive of the question whether the act or decision is administrative or judicial. An administrative order would be one which is directed to the regulation or supervision of matters as distinguished from an order, which decides the rights of parties or confers or refuses to confer rights to property, which are the subjects of adjudication by the court. One of the surest tests would be whether a matter which involves the exercise of discretion is left for the decision of the authority, particularly if that authority were a court [see Shankarlal Aggarwala v. Shankarlal Poddar (AIR 1965 SC
507)]. In the instant case, there is no discretion whatsoever for the Chief Judicial Magistrate exercising power under Section 14 and the power is conferred only for the regulation of matter as distinguished from a power to decide the rights of parties. If the scope of the jurisdiction of the Chief Judicial Magistrate under 10 Section 14 is understood in this fashion, there is no difficulty in arriving at the conclusion that the power is only administrative and not judicial."
11) Later a coordinate Bench also referred to the judgment in Tulsi Rocks Pvt. Ltd., v Bank of India3 and held as follows:
"16) In Tulsi Rocks Pvt. Ltd. v. Bank of India delivered by a Division bench of the combined High Court for the States of Telangana and Andhra Pradesh, in Writ Petition No.5018 of 2019, dealt with the issue as to what amounts to compliance of Section 14 of the SARFAESI Act. In the said case, the Court, after considering the affidavit filed and the documents filed along with the M.P., held that if the parameters indicated in clauses (i) to (ix) of the first proviso to Section 14(1) are broadly complied with, the court is bound to invoke the doctrine of 'substantial compliance'. The Court further held that clauses (i) to (ix) of the first proviso to Section 14(1) of the Act merely provide the form in which the essential averments for an application under Section 14 of the Act are to be made. Therefore, what is important is the substance and not the form. It will be useful to extract the relevant paragraphs of the judgments, which is as under:
16. While reiterating our finding that all the ingredients of Clauses (i) to (ix) of the first proviso to Section 14(1) of the Act find a place in the affidavit of the authorized officer filed in support of the application under Section 14 of the Act, we would 3 2019 (3) ALD 254 11 also add that in cases of this nature, la substantial compliance would be sufficient. As pointed out by the Supreme Court in Commissioner of Central Excise v. Mrs. Harichand Shri Gopal, the Courts have always invoked the doctrine of 'substantial compliance', to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the essence or the substance of the requirements. The Supreme Court pointed out in the said case that the court should determine whether the Statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance."
12) Even if the leading judgment of the Hon'ble Supreme Court of India in paragraph 24 of the Standard Chartered Bank judgment (1 supra) is examined, which is cited by the Supreme Court of India, the following details must be mentioned in the affidavit as per Para 26:
(i) there was a loan transaction under which a borrower is liable to repay the loan amount with interest,
(ii) there is a security interest created in a secured asset belonging to the borrower,
(iii) that the borrower committed default in the repayment,
(iv) that a notice contemplated under Section 13(2) was in fact issued, 12
(v) in spite of such a notice, the borrower did not make the repayment,
(vi) the objections of the borrower had in fact been considered and rejected,
(vii) the reasons for such rejection had been communicated to the borrower, etc.
13) It is also clarified in the subsequent paragraphs that the Magistrate is not under an obligation to examine the factual correctness made in the affidavit but not the legal niceties of the transaction. It is also apparent that while dealing with the application under Section 14, the Magistrate is not required to decide the "rights" of the parties. An issue about the rights of the parties is not capable of being decided by the learned Magistrate in the course of an order under Section 14. As pointed out by the Hon'ble Supreme Court of India in order to ensure that certain procedural safeguards which may benefit the borrower are followed, an amendment was brought to Section 14 of the Act.
14) This Court holds that what is necessary is the substantial compliance of the various issues mentioned in Section 14 of the SARFAESI Act and not the compliance 13 beyond reasonable doubt as urged by the learned counsel for the petitioner.
15) If the affidavit which is filed in the present case is examined against the backdrop of the cases mentioned above it is clear that the affidavit contain the following details:
a) Amount borrowed (Rs.8,00,00,000/-), principle and interest outstanding (Rs.8,11,19,173/-);
b) Execution of the loan documents including the deposit of title deeds as security and execution of necessary security documents; execution of confirmation letter etc., (09.01.2018 / 27.04.2018)
c) Details of the payment of loan and classification as NPA on 30.04.2019;
d) Issuance of a demand notice in May, 2019 and receipt of the same by the respondents on 16.05.2019; the failure of borrowers to repay etc.
16) Thus, it is clear that points 1 to 5 of paragraph 24 of the Standard Chartered Bank judgment (1 supra) are complied with in letter and spirit. It is also clear that the borrowers - writ petitioners did not issue any representation 14 or objection to the Section 13 (2) Notice. In addition, another coordinate Division Bench of this Court in W.P.No.3950 of 2022 clearly held that the mere non-mentioning of total outstanding amount as on the date of filing of the application is not a ground to hold that the Bank followed the statutory provisions of sub-section 1 of Section 14 of the SARFAESI Act. This judgment was passed by coordinate Bench after considering the Standard Chartered Bank judgment (1 supra) and also other judgments on the subject including the C.Bright, Managing Trustee v District Collector4.
17) This Court, therefore, concludes on this issue that what is necessary is that the basic ingredients must have been mentioned in the affidavit like the borrowing, the failure to repay, security interest created, the outstanding, a notice demanding the outstanding and the failure to pay. Substantial compliance is enough. It is also evident that an objection has been given to the borrower to make a representation / raise an objection at that stage itself after receipt of a notice under Section 13 (2).
4 2020 Lawsuit SC 692 15
18) This Court on examining the entire issue in this case is of the opinion that there is more than substantial compliance with the law in the affidavit filed before the learned Magistrate and the facts mentioned are crystal clear.
19) Lot of argument was also advanced by the learned counsel for the writ petitioner on the classification of the account as an NPA. Learned counsel also refers to the prudential norms etc., for schedule classification and tried to convince this Court that the classification of NPA itself is contrary to law. A closer reading of the facts and the counter affidavits filed show that in W.P.Nos.9080 of 2019 and 9081 of 2019 this issue was raised by the present writ petitioner. The classification of the account as an NPA and the issuance of notice on 08.05.2019 are the subject matters of the decision. The Division Bench clearly held in paragraph 17 of the order dated 13.03.2020 in W.P.Nos.9080 and 9081 of 2019 that this classification of act as an NPA is a seriously disputed fact and that the same cannot be decided under Article 226 of the Constitution of India. Against this order an SLP was filed bearing Diary No.11071 16 of 2020, which was rejected by the Hon'ble Supreme Court of India by orders dated 06.10.2020.
20) Thereafter, in a related W.P.No.24409 of 2020 a direction was given based on the consent of the learned counsel for the parties that the writ petition should be disposed of with a direction to the 1st respondent-DRT Visakhapatnam, to dispose of S.A.No.193 of 2021 and S.A.No.194 of 2021 within three months. This order was passed on 26.10.2021. Thereafter, the DRT, Visakhapatnam by its order dated 27.06.2022 disposed of S.A.No.193 of 2021 and S.A.No.194 of 2021. In the said order it was clearly mentioned that the issue of NPA will be decided by the DRT, Hyderabad, in S.A.No.131 of 2020. This was visible from the conclusion by paragraph 5 of the said order.
21) It is noticed that despite the same, vehement arguments were advanced on the classification of account as a NPA. This Court is of the opinion that in view of the authoritative pronouncements of the coordinate Bench, against which an SLP was also rejected, the same cannot be 17 agitated once again before this Court nor can findings be invited from this Court.
22) As far as non-registration of the security with the central registry again arguments were advanced but the same is not pleaded. Nevertheless it is noticed that the DRT, Visakhapatnam in the course of its order in S.A.No.193 and 194 of 2021 has already dealt these issues and held that the non-registration of the mortgage is not fatal to the case.
23) After considering all the submissions of the learned counsel, this Court is of the opinion that the petitioner has not made out any case whatsoever for issuance of an order as prayed for. A writ of certiorari is to be issued when the Tribunal or a Court, before whom the matter is pending, has failed to exercise its jurisdiction or exercised its jurisdiction totally in arbitrary manner etc. This Court on the basis of the material fact is of the opinion that there is absolutely no ground to issue a certiorari. Time and again the Hon'ble Supreme Court of India has cautioned the High Court against exercising jurisdiction in such SARFAESI matters and held that the High Court should be 18 extremely careful and circumvent in interfering in such matters.
24) With these observations, the Writ Petition is dismissed. There shall be no order as to costs.
25) Consequently, Miscellaneous Applications pending, if any, shall also stand dismissed.
__________________________ D.V.S.S.SOMAYAJULU, J _________________________________ DUPPALA VENKATA RAMANA, J Date:21.07.2023.
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