Gujarat High Court
Kotak Mahindra Bank Ltd vs Distrct Magistrate & on 18 June, 2015
Author: R.M.Chhaya
Bench: R.M.Chhaya
C/SCA/7512/2014 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO.7512 of 2014
For Approval and Signature:
HONOURABLE MR.JUSTICE R.M.CHHAYA Sd/
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Whether Reporters of Local Papers may be
1 NO
allowed to see the judgment ?
2 To be referred to the Reporter or not ? NO
Whether their Lordships wish to see the
3 NO
fair copy of the judgment ?
Whether this case involves a substantial
question of law as to the interpretation
4 NO
of the constitution of India, 1950 or any
order made thereunder ?
Whether it is to be circulated to the
5 NO
civil judge ?
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KOTAK MAHINDRA BANK LTD....Petitioner(s)
Versus
DISTRCT MAGISTRATE & 1....Respondent(s)
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Appearance:
MS SANGEETA PAHWA for MR NAVIN K PAHWA, ADVOCATE for
Petitioner(s) No. 1
MR BHARAT VYAS, AGP for the Respondent(s) No. 1
RULE SERVED for the Respondent(s) No.2
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CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA
Date : 18/06/2015
ORAL JUDGMENT
(1) Heard Ms.Sangeeta Pahwa, learned advocate for the petitioner, and Mr.Bharat Vyas, learned Assistant Government Pleader for respondent No.1. Though served none appears for respondent No.2.
(2) It may be noted that by order dated 19.03.2015 this Court had asked learned Page 1 of 12 C/SCA/7512/2014 JUDGMENT advocate for the petitioner to inform respondent No.2 by Registered Post A.D. about the next date of hearing and the matter was specifically kept for hearing on 27.03.2015. Even though such attempt was made, respondent No.2 has chosen not to appear before this Court. Hence, the matter is heard today for final hearing.
(3) Following facts emerge from the record of the petition.
(4) Petitioner is a banking company constituted under the provisions of the Banking Regulations Act, 1949, and is incorporated under the provisions of the Companies Act, 1956. It is the case of the petitionerBank that respondent No.2 has taken some advance/ financial facilities from the State Bank of India (SBI) and the debts having been assigned in favour of the petitionerBank, as the account of respondent No.2 was classified as NPA in the books of SBI right from 23.06.1995 SBI had instituted suit for recovery of the outstanding dues before Debts Recovery Tribunal, Ahmedabad, being Original Application No.196/97. That the said O.A. came to be allowed by the DRT vide order dated 08.04.2005. That as per the said Page 2 of 12 C/SCA/7512/2014 JUDGMENT judgment respondent No.2 and his guarantors were directed to jointly and severally pay a sum of Rs.29,87,080.94 together with further simple interest @ 12% p.a. thereon from the date of the application until realization along with cost of the suit. That thereafter recovery certificate was issued in favour of the SBI, as averred in the petition SBI entered into a Deed of Assignment on 23.03.2006 with the petitionerBank and the petitionerBank was brought on record in the recovery proceedings in place of SBI.
(5) Record indicates that the petitionerBank, as an assignee of SBI, issued demand notice dated 23.05.2013, as provided under Section 13(2) the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (the Securitisation Act) calling upon respondent No.2 to repay the amount as mentioned in the said notice being Rs.86,89,194.08 together with further simple interest @ 12% p.a. from 23.05.2013 till the date of payment. It is a matter of record that in spite of such notice was served, respondent No.2 failed and neglected to pay the amount demanded within the prescribed period of 60 days and therefore the petitionerBank took symbolic Page 3 of 12 C/SCA/7512/2014 JUDGMENT possession of the secured assets, as provided under Section 13(4) of the Securitisation Act on 27.08.2013. That notice for possession under Section 13(4) of the Securitisation Act and the Rules, was thereafter published in two newspapers, both dated 31.08.2013. That the petitionerBank has specifically averred that even though such public notices were issued no one remained present and therefore the authorized officer of the petitioner could not take possession.
(6) It appears from the record that the petitionerBank thereafter preferred an application under Section 14 of the Securitisation Act before District Magistrate, Ahmedabad, who vide the impugned order dated 19.11.2013, without hearing the petitioner, dismissed the said application. Hence, the petitioner has preferred the present petition challenging the said order.
(7) This Court on 27.08.2014 passed the following order while admitting the matter:
"Heard Mr.Navin K.Pahwa, learned advocate for the petitioner and Mr.D.M.Devnani, learned Assistant Government Pleader for respondent No.1. Respondent No.2 has been served but has not put in an appearance before this Court.Page 4 of 12
C/SCA/7512/2014 JUDGMENT It is submitted by the learned advocate for the petitioner that the impugned order dated 19112013 passed by respondent No.1 is beyond the jurisdiction vested in him as per Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002. It is submitted that respondent No.1 has no power to hold that the recovery proceedings against respondent No.2, pending as on date before the Debts Recovery Tribunal, are beyond the period of limitation. It is further submitted that once the recovery certificate has been issued a fresh action arises and the calim cannot be said to be beyond limitation.
It is next submitted that respondent No.1 could not have held that the petitioner has not submitted the licence of the RBI to carry on banking business whereas it is the case of the petitioner that such licence has been submitted.
In support of the above submissions regarding the role of the District Magistrate as per Section 14 of the Securitisation Act, reliance is placed upon following two judgments of the Division Bench of this Court:
(1) IDBI Bank Ltd. v. District Magistrate and another, reported in 2011(2)GLH 12 (2) Idbi Bank Ltd. v. Hytaisun Magnetics Ltd., reported in 2011(2) GLR 1438 Mr.D.M.Devnani, learned Assistant Government Pleader for respondent No.1 has supported the order passed by respondent No.1.
Issue Rule, returnable on 1592014.
In addition to the normal mode or service, direct service is also permitted.
The petitioner is permitted to serve respondent No.2 by Registered Post A.D. at its own cost.
Sd/ (SMT. ABHILASHA KUMARI, J.)"
(8) Even at the cost of repetition it is stated that even though rule is served respondent No.2 is not remained present.
(9) The impugned order clearly recites that the Page 5 of 12 C/SCA/7512/2014 JUDGMENT application under Section 14 of the Securitisation Act came to be rejected by District Magistrate, Ahmedabad, only on the ground that the same was filed after 18 years and on the other ground that the license under Reserve Bank of India (RBI) was not produced by the petitioner.
(10) Learned advocate for the petitioner has submitted at the outset that the impugned order is bad in the eyes of law in as much as that the District Magistrate has decided the said application without appreciating it's contents and has rejected the application on the ground which are not within the jurisdiction of the District Magistrate. Relying upon the Division Bench judgment in the case of IDBI Bank Ltd., Through Authorized Signatory, Vs. District Magistrate & Anr., 2011 (2) G.L.H. 12, it was contended that the District Magistrate has travelled beyond the jurisdiction. It was further submitted that in fact all documents were produced before District Magistrate, Ahmedabad, as can be seen from the record of this petition itself. It was therefore submitted that the petition deserves to be allowed and in fact the application filed by the petitioner under Page 6 of 12 C/SCA/7512/2014 JUDGMENT Section 14 of the Securitisation Act before the District Magistrate deserves to be allowed.
(11) Learned AGP for the respondent authority has not been able to deny the factum that the District Magistrate has travelled beyond the jurisdiction under Section 14 of Act.
No other or further submissions are made by learned counsel for the parties.
(12) Upon considering the submissions made as well as on verifying the record of the petition it clearly appears that the petitionerBank had filed an appropriate application under Section 14 of the Securitisation Act stating all facts. Reasons given by the District Magistrate are totally nongermane to the issue which was before the District Magistrate and it is rightly contended that the reasons given would amount to, travelling beyond the jurisdiction under Section 14 of the Securitisation Act. It is also noticed by this Court that in fact the petitioner had relied upon judgment of this Court and had also annexed copy of the same, which was totally discarded by the District Magistrate Page 7 of 12 C/SCA/7512/2014 JUDGMENT while passing the impugned order. In case if the District Magistrate has any doubt about the authority of the petitionerBank to file such an application under Section 14 of the Securitisation Act, it could have called upon the petitionerBank to furnish such details. Division Bench of this Court in the case of IDBI (supra) has categorically held that the District Magistrate has no power under Section 14(2) of the Securitisation Act to go into the merits of the case and at Paragraph Nos.610 it has been observed as under:
"6. The Authority who is called upon to act under Section 14 of the Securitisation Act can only assist, nay, is bound to assist the secured creditor in taking possession of the secured asset. As the Chief Metropolitan Magistrate and District Magistrate under Section 14 is not empowered to decide the question of legality and propriety of any of the actions taken by the secured creditor under Section 13(4), which may be assailed under Section 17 of the Act by the aggrieved person, under subsection (3) of Section 14 of the Securitisation Act, the act of the Chief Metropolitan Magistrate or District Magistrate done in pursuance of said Section cannot be called in question in any court or before any authority. It is evident from the provisions of law that the District Magistrate while bound to assist the secured creditor in taking possession of the secured assets and to take the possession of the documents relating thereto and forward such assets and documents to the secured creditor, he is not empowered to decide the question of genuinity or propriety of such documents, including the document signed or agreed between the borrower and the secured creditor.
7. Division Bench of this High Court has, in Special Civil Application No.15084/2010, in the matter between IDBI Bank Limited v/s. Hytaisun Magnetics Limited and others (unreported decision dated 9th February 2011) settled the entire position of law so far as the Page 8 of 12 C/SCA/7512/2014 JUDGMENT subject matter of the present petition is concerned.
8. In paragraph 20 of the unreported judgment, the Hon'ble Division Bench held as under : "(i) Under Chapter III of the Securitization Act, a secured creditor has right to enforce security interest without the intervention of the Court or Tribunal in accordance with the provisions of the said Act. [Section 13(1)]
(ii) The borrower, who is under liability to the secured creditor under a secured agreement, is entitled to take a notice under Section 13(2) of the said Act.
(iii)The secured creditor who intends to enforce the secured asset is bound to give details of amount payable by the borrower and the secured assets intended to be enforced. [Section 13(3)]
(iv) Under Section 13(3A), the borrower has right to make representation or raise objection.
If any objection is there with regard to the secured asset, that can be raised only at the stage of Section 13(3A). Under the said provision, only the secured creditor will determine the objection and not any Court or Tribunal.
(v) No cause of action takes place even after the decision taken by the secured creditor under Section 13(3A) till the secured creditor takes recourse of one or more measures including the measure to take possession of the secured asset of the borrower under Section 13(4) of the Act.
(vi) The secured creditor is competent to take possession of all the secured assets of its own following the procedure laid down under Rule 8 of the Security Interest (Enforcement) Rules, 2002.
(vii)Only when the secured creditor finds difficulty to take possession of the secured asset, it may take assistance of the Chief Metropolitan Magistrate or the District Magistrate under Section 14 of the Act.
Page 9 of 12C/SCA/7512/2014 JUDGMENT
(viii)The measures taken under Section 14 amounts to measures taken under Section 13(4) of the Act.
(ix) As the measures taken under Section 14 amount to measures taken under Section 13(4) of the Act, under Section 14(3) such measures cannot be called in question before any Court or Tribunal.
(x) If such measures taken under Section 14 which amount to measures taken under Section 13(4) is not in accordance with the Securitization Act or the Rules framed thereunder, including the objection, if any, raised that the asset is not a secured asset to be taken under Section 13(4), the aggrieved person has a remedy under Section 17 before the Debts Recovery Tribunal to show that the measures taken are against the Act [Section 13(4)] or the Rules framed thereunder.
(xi) All such determination is to be made by the Debts Recovery Tribunal including the question whether the asset is a secured asset or not and the Chief Metropolitan Magistrate or the District Magistrate has not been empowered to adjudicate such dispute, but is directed only to assist the secured creditor in taking possession of the secured asset. If they are not empowered to adjudicate the dispute, they cannot also call for the secured creditor to produce any document to decide whether the asset is secured asset or not, which will be futile exercise in absence of power to adjudicate such issue.
Under Clauses (a) and (b) of Section 14(1), the Chief Metropolitan Magistrate or the District Magistrate and on request, are bound to take possession of the secured assets as also the documents relating thereto. If the documents are to be obtained by them, the question of asking the secured creditor to produce the document in all cases does not arise. Therefore, they do not have jurisdiction even to call for the documents."
9. In view of the settled position of law, under Section 14(2) of the Securitisation Act, for the purpose of securing compliance with the provisions of subsection (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken Page 10 of 12 C/SCA/7512/2014 JUDGMENT such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.
10. We are of the view that the District Magistrate has failed to discharge his statutory duties as he is obliged under Section 14(2) of the Securitisation Act and was not right in rejecting the application preferred by the petitioner Bank under Section 14 of the Securitisation Act.
11. For the reasons stated above, we quash and set aside the communication dated 22nd October 2010 (page 42 dated 9th June 2009) and we direct respondent no.1 to fully comply with the provisions of Section 14(2) of the Securitisation Act and to provide the necessary assistance and protection to the petitioner Bank for taking over possession of the secured assets of the principal borrower.
(13) In the the facts and circumstances of this case also, the District Magistrate ought not to have rejected the application on the ground that it is filed after a delay of 18 years and that license of RBI was not produced.
(14) In light of the aforesaid, the impugned order dated 19.11.2013 passed by District Magistrate, Ahmedabad, is hereby quashed and set aside and the proceedings of Misc. application No.DC/MAG/Securitisation Case No.79/C.43204/2013 is hereby restored to the file of the District Magistrate, who shall pass a fresh order, keeping in mind the ratio laid down by Division Bench of this Page 11 of 12 C/SCA/7512/2014 JUDGMENT Court in the case of IDBI (supra) as well as in the case of IDBI Bank Ltd. Vs. Hytaisun Magnetics Ltd., 2011(2) GLR 1438, de novo, after giving opportunity of being heard to the petitioner. The District Magistrate is hereby further directed to complete this exercise as directed this Court within a period of one month from the date of receipt of this order.
(15) With these observations and directions, the present petition is allowed to the aforesaid extent. Rule is made absolute. There shall be no order as to costs.
Sd/ [R.M.CHHAYA, J ] *** Bhavesh[pps]* Page 12 of 12