Andhra Pradesh High Court - Amravati
M/S. Sri Chakarapani Dall Mill, vs The Honble Chief Judicial Magistrate ... on 7 September, 2020
Author: J. Uma Devi
Bench: J. Uma Devi
HON'BLE SRI JUSTICE RAKESH KUMAR
AND
HON'BLE Ms. JUSTICE J.UMA DEVI
WRIT PETITION Nos.20778 & 21300 OF 2019
(Proceedings taken up through video conferencing)
COMMON ORDER:(Per Hon'ble Sri Justice Rakesh Kumar)
1. Since in both these Writ Petitions the parties, the dispute and questions raised, are almost one and the same, both these Writ Petitions, with the consent of both the parties, were heard together on 03.09.2020 and order was reserved, primarily, on the question of maintainability of these Writ Petitions, without asking the respondent-bank for filing counter- affidavit.
2. We have heard Sri T.Lakshminarayana, learned counsel for petitioners, and Sri K.Harinarayana, learned standing counsel for the respondent-Canara bank, in both the Writ Petitions. In both the Writ Petitions, the petitioners have prayed for issuance of a writ of prohibition prohibiting the 1st respondent/Chief Judicial Magistrate-cum-Principal Assistant Sessions Judge, Guntur (hereinafter referred to as the 'Chief Judicial Magistrate') from proceeding further in Crl.M.P. Nos.238 and 255 of 2019 respectively.
3. For better appreciation, it would be appropriate to refer certain facts of both the Writ Petitions, separately, which are as follows:
(a) Writ Petition No.20778 of 2019 was filed by the three petitioners; the 1st petitioner is M/s. Sri Chakrapani Dall Mill Contractors Sri Chakra Dall Producers, which is a partnership firm and 2nd and 3rd petitioners have claimed to be partners of the said partnership firm. The petitioners have prayed for issuance of writ in the nature of writ of prohibition prohibiting 1st respondent/Chief Judicial Magistrate to proceed RK, J & JUD, J 2 WP Nos.20778 & 21300/2019 further in Crl.M.P.No.238 of 2019 through 3rd respondent appointed as Advocate Commissioner for taking possession of property i.e., an extent of 258-81 Sq. yards or 216-14 Sq. meters of vacant house site, subsequently constructed RCC roof ground and first floor residential building thereon in Survey No.163, D.No.14-8-6 of 2nd Ward, 7th Block, Morrispet, Tenali Municipal Town area, Guntur district. From Annexure P-1 i.e., petition filed by the Canara Bank under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the SARFAESI Act') before the learned Chief Judicial Magistrate, Guntur i.e., Crl.M.P. No.238 of 2019, it is evident that, on 29.05.2014, the respondent-bank sanctioned a OCC-
General loan bearing Loan Account No.0774261011568 of Rs.3,50,00,000/- (Rupees three crores fifty lakhs); on 06.02.2019, the respondent-bank sanctioned Working Capital Term Loan bearing Loan Account No.0774746000001 of Rs.1,00,00,000/- (Rupees one crore) and another Funded Interest Term Loan bearing Loan Account No.0774747000001 of Rs.88,50,000/- (Rupees eighty eight lakhs fifty thousand) respectively on the same day to the petitioners' firm against the security of immovable property and mortgage of immovable property. The petitioners availed and utilized the said credit facility and executed the required loan documents in favour of the respondent-bank. The writ petitioners also created equitable mortgage of the schedule property situated in Morrispet, Tenali, Guntur district, creating security interest in favour of the respondent-bank. However, after availing the aforesaid facility, the petitioners avoided to regularize the accounts, even despite repeated remainders and notices issued by the respondent-bank. Subsequently, on 16.05.2019, the petitioners' accounts were classified as Non Performing Asset (NPA). Under different loan accounts an amount of RK, J & JUD, J 3 WP Nos.20778 & 21300/2019 Rs.3,59,82,028.24 paise (Rupees three crores fifty nine lakhs eighty two thousand twenty eight and twenty four paise) for OCC, Rs.1,02,48,537.59 (Rupees one crore two lakhs forty eight thousand five hundred thirty seven and fifty nine paise) for Working Capital Term Loan and Rs.90,69,955.77 (Rupees ninety lakhs sixty nine thousand nine hundred fifty five and seventy seven paise) for funded interest Term Loan with further interest at the rate of 11.75% as well as other charges were outstanding. However, as the petitioners, despite repeated remainders, had not taken steps for clearing the outstanding dues, notice under Section 13(2) of the SARFAESI Act was issued on 30.05.2019 calling upon the petitioners to liquidate the outstanding dues in the loan accounts within a period of 60 days, which too was not honoured. Thereafter, the respondent-bank initiated further action under Section 13(4) of the SARFAESI Act and symbolic possession was taken on 13.09.2019. The possession notice under Section 13(4) of the SARFAESI Act was published in leading newspapers. Only thereafter, with an object to take possession of secured asset under Section 14 of the SARFAESI Act, the learned Chief Judicial Magistrate, 1st respondent, was approached for rendering assistance; so that possession of secured asset may be taken and handed over to the respondent-bank. After filing of said petition, which was numbered as Crl.M.P.No.238 of 2019, the learned Chief Judicial Magistrate authorized and appointed Advocate Commissioner-3rd respondent for taking physical possession of the schedule property, so that it may be handed over to the respondent-bank. The said proceeding has been assailed in the present Writ Petition.
(b) Writ Petition No.21300 of 2019 was filed by two petitioners; the 1st petitioner is M/s. Sri Chakrapani Dall Mill, which is a partnership firm, and 2nd petitioner has claimed to be partner of the said partnership RK, J & JUD, J 4 WP Nos.20778 & 21300/2019 firm. The petitioners have prayed for issuance of writ in the nature of writ of prohibition prohibiting 1st respondent/Chief Judicial Magistrate to proceed further in Crl.M.P.No.255 of 2019 through 3rd respondent appointed as Advocate Commissioner for taking possession of property i.e., an extent of 2178 Sq. yards with 1850 Sq. feet of RCC roof building and 2700 Sq. feet iron sheet roof shed therein etc., in Survey No.315/1, 315/2 near D.No.13/1, 13/1A of Pedaravuru gram panchayat area, Pedaravuru village, Tenali mandal, Guntur district. From Annexure P-1 i.e., petition filed by the Canara Bank under Section 14 of the SARFAESI Act before the learned Chief Judicial Magistrate, Guntur i.e., Crl.M.P. No.255 of 2019, it is evident that on 23.04.2015 the respondent-bank sanctioned a OCC-General loan bearing Loan Account No.0774261011578 of Rs.2,50,00,000/- (Rupees two crores fifty lakhs); on 02.12.2016, the respondent-bank sanctioned Term Loan bearing Loan Account No.0774773007115 of Rs.55,00,000/- (Rupees fifty five lakhs); on 06.02.2019, the respondent-bank sanctioned Working Capital Term Loan bearing Loan Account No.0774746000002 of Rs.50,00,000/- (Rupees fifty lakhs); and again on 06.02.2019 the respondent-bank sanctioned another Funded Interest Term Loan bearing Loan Account No.0774747000002 of Rs.24,50,000/- (Rupees twenty four lakhs fifty thousand) to the petitioners' firm against the security of immovable property and mortgage of immovable property. The petitioners availed and utilized the said credit facility and executed the required loan documents in favour of the respondent-bank. The writ petitioners also created equitable mortgage of the schedule property situated in Pedaravuru gram panchayat area, Tenali mandal, Guntur district creating security interest in favour of the respondent-bank. However, after availing the aforesaid facility, the petitioners avoided to regularize the accounts, even despite repeated RK, J & JUD, J 5 WP Nos.20778 & 21300/2019 remainders and notices issued by the respondent-bank. Subsequently, on 16.05.2019, the petitioners' accounts were classified as Non Performing Asset (NPA). Under different loan accounts an amount of Rs.2,58,06,489.00/- (Rupees two crores fifty eight lakhs six thousand four eighty nine) for OCC; Rs.45,67,562.12 (Rupees forty five lakhs sixty seven thousand five hundred sixty two and twelve paise) for Term Loan; Rs.51,27,193.56 (Rupees fifty one lakhs twenty seven thousand one hundred ninety three and fifty six paise) for Working Capital Term Loan; and Rs.25,12,324.84 (Rupees twenty five lakhs twelve thousand three hundred twenty four and eighty four paise) for funded interest Term Loan with further interest at the rate of 12% and 13.35% as well as other charges were outstanding. However, as the petitioners, despite repeated remainders, had not taken steps for clearing the outstanding dues, notice under Section 13(2) of the SARFAESI Act was issued on 30.05.2019 calling upon them to liquidate the outstanding dues in the loan accounts within a period of 60 days, which too was not honoured. Thereafter, the respondent-bank initiated further action under Section 13(4) of the SARFAESI Act and took symbolic possession of the property on 13.09.2019 and possession notice under Section 13(4) of the SARFAESI Act was published in leading newspapers. Only thereafter, with an object to take possession of secured asset under Section 14 of the SARFAESI Act, the learned Chief Judicial Magistrate, 1st respondent, was approached for rendering assistance; so that possession of secured asset may be taken and handed over to the respondent-bank. After filing of said petition it was numbered as Crl.M.P.No.255 of 2019, the learned Chief Judicial Magistrate authorized and appointed Advocate Commissioner-3rd respondent for taking physical possession of the schedule property, so RK, J & JUD, J 6 WP Nos.20778 & 21300/2019 that it may be handed over to the respondent-bank, which proceeding has been assailed in the present Writ Petition.
4. At the first instance, W.P. No.20778 of 2019 was filed on 19.12.2019; whereas W.P. No.21300 of 2019 was filed on 27.12.2019; W.P. No.20778 of 2019 was firstly listed and taken up on 19.12.2019; however, on the request of learned counsel for the petitioners, it was adjourned and directed to be listed on 21.12.2019; again it was listed on 23.12.2019, on which date, there was non appearance and it was deferred to next date i.e., 24.12.2019, on which date, learned counsel for the petitioners was asked to serve copy of the petition on learned counsel for the respondent-bank; thereafter, again, on one reason or the other, the Writ Petition was adjourned. On 29.01.2020, the matter was heard and directed to be listed on 03.02.2020 with an observation that on the next date, it would be considered whether counter-affidavit was required or not; however, on 03.02.2020, none appeared on behalf of the petitioners and case was adjourned. Again, on 27.02.2020, the Writ Petition was adjourned; on 03.03.2020, on the request of learned counsel for the petitioners, it was adjourned. After several months, the writ petition was listed on 02.09.2020 and it was directed to be listed on the next date i.e., on 03.09.2020, on which date, this writ petition along with Writ Petition No.21300 of 2019 was heard together.
5. Almost in similar manner, W.P. No.21300 of 2019 was also deferred on several dates and finally it was heard together with W.P. No.20778 of 2019.
6. After hearing learned counsel for both the parties at length, primarily on the question of maintainability, order was reserved.
RK, J & JUD, J 7 WP Nos.20778 & 21300/2019
7. At the very outset, Sri K.Harinarayana, learned standing counsel for the respondent-bank, pointed out that in view of the changed circumstances, these writ petitions have become infructuous due to the reason that the 3rd respondent, who was appointed as Advocate Commissioner by 1st respondent i.e., Chief Judicial Magistrate, has finally taken physical possession over the schedule properties in question and handed over the same to respondent-bank. In W.P. Nos.20778 and 21300 of 2019, learned Advocate Commissioner had taken possession of the secured properties on 19.02.2020 and 28.02.2020 respectively and handed over the same to the respondent-bank.
8. Learned counsel for the respondent-bank has further raised a preliminary objection on the point of maintainability of the writ petitions on the ground that the petitioners, if, in any event, were aggrieved with the action of the respondent-bank, in taking possession of the secured properties, they are having a statutory remedy under Section 17 of the SARFAESI Act to approach the Debts Recovery Tribunal. According to learned counsel for the respondent-bank, in view of the availability of statutory remedy, the petitioners are not entitled to invoke the extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India, which is to be mainly invoked in a case where there is no statutory remedy.
9. Sri T.Lakshminarayana, learned counsel for the petitioners, has argued that against the action being taken by the learned Chief Judicial Magistrate, the petitioners were not having any statutory remedy under the SARFAESI Act and as such the petitioners are entitled to invoke the writ jurisdiction. Learned counsel emphatically referred to the provision contained in Sub-section 3 of Section 14 of the SARFAESI Act and RK, J & JUD, J 8 WP Nos.20778 & 21300/2019 submits that since action has been taken by the learned Chief Judicial Magistrate, illegally, the said action cannot be called upon in question in any Court or before any authority.
10. Learned counsel for the petitioners has further argued that under Section 14 of the SARFAESI Act, learned Chief Judicial Magistrate was not at all having authority to authorize or appoint an Advocate Commissioner for taking possession over the schedule property. He has referred to the provision contained under Section 14(1A) of the SARFAESI Act and submits that the District Magistrate or Chief Metropolitan Magistrate for such purposes was only to authorize an officer subordinate to him. According to learned counsel for the petitioners, the Advocate Commissioner is not subordinate to the District Magistrate and as such authorization given to 3rd respondent and his appointment as Advocate Commissioner was itself illegal. He had also tried to persuade the Court that, in view of Section 14 of the SARFAESI Act, learned Chief Judicial Magistrate was required to pass order within 30 days. However, this argument was not seriously substantiated by learned counsel for the petitioners. At the time of argument, learned counsel for the petitioners, by placing heavy reliance on a judgment of the Hon'ble Supreme Court reported in Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Limited and others1, submits that the action taken under Section 14 of the SARFAESI Act can only be assailed before the High Court while invoking writ jurisdiction and petitioners are not having a remedy to approach the Debts Recovery Tribunal against orders passed by the learned Chief Judicial Magistrate. Accordingly, it has been argued that in the absence of any statutory remedy available to the petitioners, they are entitled to invoke the writ jurisdiction of this Court, 1 2014 (6) SCC 1 RK, J & JUD, J 9 WP Nos.20778 & 21300/2019 particularly, in view of the illegality committed by the learned Chief Judicial Magistrate. Learned counsel for the petitioners has further argued that the property is situated in Tenali mandal, which is under the jurisdiction of District Magistrate/District Collector, Guntur and as such the learned Chief Judicial Magistrate was not having any jurisdiction to entertain the Criminal Miscellaneous Petitions filed by the respondent-bank.
11. Sri K.Harinarayana, learned counsel for the respondent-bank, besides raising preliminary objection on the point that in view of taking over possession of the secured asset by 3rd respondent/Advocate Commissioner and its handing over to the respondent-bank, these Writ Petitions have become infructuous, further submits that, even in a case of action being taken under Section 14 of the SARFAESI Act, the petitioners who are none else than the borrowers were having statutory remedy under Section 17 of the SARFAESI Act to approach the Debts Recovery Tribunal. Accordingly, the petitioners are not entitled, directly, to invoke the writ jurisdiction and maintain these Writ Petitions.
12. On the point of jurisdiction of learned Chief Judicial Magistrate to proceed on the basis of Criminal Miscellaneous Petitions filed by the respondent-bank, for rendering assistance to take possession of the secured assets which were lying within the Tenali mandal, Guntur district, he submits that the learned Chief Judicial Magistrate, who is also the Principal Assistant Sessions Judge, Guntur is having jurisdiction over entire district of Guntur and as such the objection raised by the learned counsel for the petitioners regarding non-availability of jurisdiction of learned Chief Judicial Magistrate in the matter is not sustainable in the eye of law.
RK, J & JUD, J 10 WP Nos.20778 & 21300/2019
13. On the point of alternative remedy and the judgment relied upon by learned counsel for the petitioners in Harshad Govardhan Sondagar1, Sri K.Harinarayana, learned counsel for the respondent-bank, has argued that actually in those cases so called tenants of the secured property had raised grievance without availing remedy under Section 17 of the SARFAESI Act. However in Harshad Govardhan Sondagar1, the Hon'ble Supreme Court had allowed the parties to avail remedy under Section 17 of the SARFAESI Act. According to learned counsel for the respondent- bank, in both these writ petitions, huge public fund is involved and petitioners after availing loan facility had miserably failed to discharge their obligation in clearing the outstanding dues to the respondent-bank. It is a case in which the petitioners have availed the loan facility from the respondent-bank for several crores of rupees and did not take any step to regularize their accounts. Since the loan accounts were not regularized, their accounts were declared as NPAs and subsequently, under the SARFAESI Act, steps have been taken to realise the loan amount i.e., public fund. Accordingly, it has been argued that the Writ Petitions are fit to be rejected on the ground of preliminary objection itself.
14. Learned counsel for the respondent-bank has also placed reliance on the judgments of the Hon'ble Supreme Court reported in Authorized Officer, State Bank of Travancore and another v. Mathew K.C2 and Bajarang Shyamsunder Agarwal Vs. Central Bank of India and another3 and submits that, time without number, the Hon'ble Supreme Court has deprecated the approach of High Courts in interfering in the matters relating to SARFAESI Act without permitting the aggrieved parties to avail statutory remedies under the SARFAESI Act. 2 2018 (3) SCC 85 3 2019 (9) SCC 94 RK, J & JUD, J 11 WP Nos.20778 & 21300/2019
15. Besides hearing learned counsel for the parties, we have minutely examined the entire material available on record. It is not in dispute that, from the facts enumerated herein above, the petitioners in both the writ petitions had availed loan facility for several crores of rupees. It is also specific that their accounts were declared NPAs; thereafter, notices under Section 13(2) of the SARFAESI Act were issued asking the petitioners to clear the outstanding dues within a specific period but they were not complied with and thereafter notional possession was also taken by the respondent-bank in respect of the secured properties, under Section 13(4) of the SARFAESI Act, by following all the procedure prescribed under the Act.
16. Subsequently, for taking actual physical possession of the schedule property, the respondent-bank rightly approached the learned Chief Judicial Magistrate, under Section 14 of the SARFAESI Act, and as such proceedings were initiated vide Crl.M.P.Nos.238 and 255 of 2019 respectively. In the said proceedings, since physical possession was to be taken on arrival at the site, learned Chief Judicial Magistrate rightly appointed 3rd respondent as Advocate Commissioner with an object to regulate the proceedings. It is not in dispute that exercise of power by the learned Chief Judicial Magistrate under Section 14 of the SARFAESI Act is not adjudicatory, rather it is regulatory and such power is termed as administrative power. Accordingly, while discharging administrative function, the learned Chief Judicial Magistrate rightly authorized an Advocate Commissioner for taking physical possession of the schedule property and hand over the same to the respondent-bank. Appointment of Advocate Commissioner by the learned Chief Judicial Magistrate, under Section 14 of the SARFAESI Act, is a recognized act, which has also been dealt with by the Kerala High Court in a case reported in Canara Bank RK, J & JUD, J 12 WP Nos.20778 & 21300/2019 Limited Vs. Stepehen John and others4. Section 14 of the SARFAESI Act was subsequently amended and sub-section (1A) was added. Even before amendment, the said provision was incorporated in the SARFAESI Act only with a view to endeavour the secured creditor to avail assistance of the State to take possession of secured asset. The reason for enacting such provision was taken keeping in mind that if any obstruction is raised by the borrower, it would be difficult for the respondent-bank to take possession and as such the secured creditor, under Section 14 of the SARFAESI Act, has been given liberty to take assistance of learned Chief Judicial Magistrate for taking physical possession over the secured asset. Whether a step taken by learned Chief Judicial Magistrate, under Section 14 of the SARFAESI Act, was adjudicatory or administrative, the Kerala High Court in Canara Bank Limited4, has considered the matter in Paragraph Nos.7 and 8 and observed as follows:
"7. Interpreting the unamended provision, in Ayishumma v. Hassan [2009 (3) KLT 399] and South Indian Bank Limited v. Union of India [2010 (4) KLT 657], this court held further that the only aspect to be seen by the Chief Judicial Magistrate, while exercising power under section 14 of the Act, is whether the property in respect of which assistance is sought is a secured asset. It is thereafter, the provision has been amended and the provisos to sub-section (1) and sub-section (1A) were introduced. The amendments have not made any change to the scheme of the provision. On the other hand, it is seen that the amendments were intended to remove the ambiguity in the unamended provision as regards the jurisdiction of the competent authority exercising power under Section 14 of the Act. In the light of the amendments, before rendering assistance to the secured creditor, 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 4 2018 (3) KHC 670 RK, J & JUD, J 13 WP Nos.20778 & 21300/2019 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 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 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."
RK, J & JUD, J 14 WP Nos.20778 & 21300/2019
17. Since the jurisdiction of learned Chief Judicial Magistrate, under Section 14 of the SARFAESI Act, is administrative in nature, for taking physical possession of secured property, there is no difficulty to authorize an Advocate Commissioner to take possession. A Division Bench of Madras High Court in a case reported in S.Lalitha Vs. District Collector5 was pleased to consider this issue. The case in hand before the Madras High Court was almost on similar footing. In the said case, the borrower was given liberty right from the date he received the notice under Section 13(2) of the SARFAESI Act for making the payment. In the present case also as facts have been discussed herein above it is evident that since petitioners failed to regularize their accounts, their accounts were declared NPAs and thereafter notice under Section 13(2) of the SARFAESI Act was given for clearing outstanding dues within a specified period. The petitioners did not pay any heed to the notice and subsequently notional possession under Section 13(4) of the SARFAESI Act was taken over the secured properties. Even thereafter, it is not case of petitioners that they tried to liquidate the outstanding dues of the respondent-bank. The respondent-bank left with no option was constrained to file petitions under Section 14 of the SARFAESI Act and thereafter cases vide Crl.M.P. Nos.238 and 255 of 2019 respectively were registered in both the cases and subsequently the learned Chief Judicial Magistrate appointed Advocate Commissioner for taking physical possession. In S.Lalitha5, the Division Bench of Madras High Court observed as follows in Paragraph 7:
"7. We have considered the pleadings and entire facts of the case. In the case on hand, the petitioner was given opportunity right from the day she received the notice under Section 13(2) of the Act 2002, for making the payment. The petitioner was thereafter, further granted an opportunity for settlement of the loan 5 MANU/TN/0037/2015 RK, J & JUD, J 15 WP Nos.20778 & 21300/2019 by communication dated 28-04-2011, and the petitioner had full information with regard to the auction of the property and also about taking cognizance of the matter by the District Magistrate on an application made by the secured creditor. The petitioner has not taken any steps even to satisfy by depositing at least a part of the payment. The contention that the direction to the Deputy Collector to take over possession of the property in question is contrary to the provisions of law, is necessarily to be rejected as the process of securing possession of the property in question, has to be done either by an authority or Advocate Commissioner and as such, there is no illegality."
18. In view of the proposition laid down by the Division Bench of Madras High Court in S.Lalitha5, the contention raised by learned counsel for the petitioners that the learned Chief Judicial Magistrate was not having any authority to authorize an Advocate Commissioner for taking possession has got no relevance and such contention is fit to be rejected.
19. Fact remains that the petitioners had taken huge amount of loan from the respondent-bank and more than crores of rupees was outstanding. Accordingly, the respondent-bank had proceeded in accordance with the provisions contained under the SARFAESI Act. It goes without saying that the SARFAESI Act is a self contained Act which provides statutory remedies to the aggrieved party. Time without number interference by the High Courts, without asking the party to avail statutory remedy, has been deprecated by the Hon'ble Supreme Court. The Hon'ble Supreme Court in a case reported in United Bank of India v. Satyawati Tondon and others6 has elaborately dealt with the issue. We may not do better than to reproduce the relevant paragraphs of the judgment as follows:
"[2]. With a view to give impetus to the industrial development of the country, the Central and State Governments encouraged 6 2010 (8) SCC 110 RK, J & JUD, J 16 WP Nos.20778 & 21300/2019 the banks and other financial institutions to formulate liberal policies for grant of loans and other financial facilities to those who wanted to set up new industrial units or expand the existing units. Many hundred thousand took advantage of easy financing by the banks and other financial institutions but a large number of them did not repay the amount of loan, etc. Not only this, they instituted frivolous cases and succeeded in persuading the Civil Courts to pass orders of injunction against the steps taken by banks and financial institutions to recover their dues. Due to lack of adequate infrastructure and non-availability of manpower, the regular Courts could not accomplish the task of expeditiously adjudicating the cases instituted by banks and other financial institutions for recovery of their dues. As a result, several hundred crores of public money got blocked in unproductive ventures. In order to redeem the situation, the Government of India constituted a committee under the chairmanship of Shri T.Tiwari to examine the legal and other difficulties faced by banks and financial institutions in the recovery of their dues and suggest remedial measures. The Tiwari Committee noted that the existing procedure for recovery was very cumbersome and suggested that special tribunals be set up for recovery of the dues of banks and financial institutions by following a summary procedure. The Tiwari Committee also prepared a draft of the proposed legislation which contained a provision for disposal of cases in three months and conferment of power upon the Recovery Officer for expeditious execution of orders made by adjudicating bodies. The issue was further examined by the Committee on the Financial System headed by Shri M.Narasimham. In its First Report, the Narasimham Committee also suggested setting up of special tribunals with special powers for adjudication of cases involving the dues of banks and financial institutions.
After considering the reports of the two Committees and taking cognizance of the fact that as on 30-9-1990 more than 15 lakh cases filed by public sector banks and 304 cases filed by financial institutions were pending in various Courts for recovery of debts, etc. amounting to Rs. 6000 crores, the Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, 'the DRT Act'). The new legislation facilitated creation of specialised forums i.e., the Debts Recovery Tribunals and the Debts Recovery Appellate Tribunals RK, J & JUD, J 17 WP Nos.20778 & 21300/2019 for expeditious adjudication of disputes relating to recovery of the debts due to banks and financial institutions. Simultaneously, the jurisdiction of the Civil Courts was barred and all pending matters were transferred to the Tribunals from the date of their establishment.
An analysis of the provisions of the DRT Act shows that primary object of that Act was to facilitate creation of special machinery for speedy recovery of the dues of banks and financial institutions. This is the reason why the DRT Act not only provides for establishment of the Tribunals and the Appellate Tribunals with the jurisdiction, powers and authority to make summary adjudication of applications made by banks or financial institutions and specifies the modes of recovery of the amount determined by the Tribunal or the Appellate Tribunal but also bars the jurisdiction of all courts except the Supreme Court and the High Courts in relation to the matters specified in Section 17. The Tribunals and the Appellate Tribunals have also been freed from the shackles of procedure contained in the Code of Civil Procedure. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of the dues of banks and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of Civil Courts for frustrating the proceedings initiated by the banks and other financial institutions.
For few years, the new dispensation worked well and the officers appointed to man the Tribunals worked with great zeal for ensuring that cases involving recovery of the dues of banks and financial institutions are decided expeditiously. However, with the passage of time, the proceedings before the Tribunals became synonymous with those of the regular Courts and the lawyers representing the borrowers and defaulters used every possible mechanism and dilatory tactics to impede the expeditious adjudication of such cases. The flawed appointment procedure adopted by the Government greatly contributed to the malaise of delay in disposal of the cases instituted before the Tribunals.
The survey conducted by the Ministry of Finance, Government of India revealed that as in 2001, a sum of RK, J & JUD, J 18 WP Nos.20778 & 21300/2019 more than Rs.1,20,000/- crores was due to the banks and financial institutions and this was adversely affecting the economy of the country. Therefore, the Government of India asked the Narasimham Committee to suggest measures for expediting the recovery of debts due to banks and financial institutions. In its Second Report, the Narasimham Committee noted that the non-performing assets of most of the public sector banks were abnormally high and the existing mechanism for recovery of the same was wholly insufficient. In Chapter VIII of the Report, the Committee noted that the evaluation of legal framework has not kept pace with the changing commercial practice and financial sector reforms and as a result of that the economy could not reap full benefits of the reform process. The Committee made various suggestions for bringing about radical changes in the existing adjudicatory mechanism. By way of illustration, the Committee referred to the scheme of mortgage under the Transfer of Property Act and suggested that the existing laws should be changed not only for facilitating speedy recovery of the dues of banks, etc. but also for quick resolution of disputes arising out of the action taken for recovery of such dues. The Andhyarujina Committee constituted by the Central Government for examining banking sector reforms also considered the need for changes in the legal system. Both, the Narasimham and Andhyarujina Committees suggested enactment of new legislation for securitisation and empowering the banks and financial institutions to take possession of the securities and sell them without intervention of the court. The Government of India accepted the recommendations of the two committees and that led to enactment of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act'), which can be termed as one of the most radical legislative measures taken by the Parliament for ensuring that dues of secured creditors including banks, financial institutions are recovered from the defaulting borrowers without any obstruction. For the first time, the secured creditors have been empowered to take steps for recovery of their dues without intervention of the Courts or Tribunals.
RK, J & JUD, J 19 WP Nos.20778 & 21300/2019 [3] Section 13 of the SARFAESI Act contains detailed mechanism for enforcement of security interest. Sub-section (1) thereof lays down that notwithstanding anything contained in Sections 69 or 69A of the Transfer of Property Act, any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. Sub-section (2) of Section 13 enumerates first of many steps needed to be taken by the secured creditor for enforcement of security interest.
This Sub-section provides that if a borrower, who is under a liability to a secured creditor, makes any default in repayment of secured debt and his account in respect of such debt is classified as non- performing asset, then the secured creditor may require the borrower by notice in writing to discharge his liabilities within sixty days from the date of the notice with an indication that if he fails to do so, the secured creditor shall be entitled to exercise all or any of its rights in terms of Section 13(4). Sub-section (3) of Section 13 lays down that notice issued under Section 13(2) shall contain details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the bank or financial institution. Sub-section (3-A) of Section 13 lays down that the borrower may make a representation in response to the notice issued under Section 13(2) and challenge the classification of his account as non-performing asset as also the quantum of amount specified in the notice. If the bank or financial institution comes to the conclusion that the representation/objection of the borrower is not acceptable, then reasons for non- acceptance are required to be communicated within one week. Sub-section (4) of Section 13 specifies various modes which can be adopted by the secured creditor for recovery of secured debt. The secured creditor can take possession of the secured assets of the borrower and transfer the same by way of lease, assignment or sale for realising the secured assets. This is subject to the condition that the right to transfer by way of lease, etc. shall be exercised only where substantial part of the business of the borrower is held as secured debt. If the management of whole or part of the business is severable, then the secured creditor can take over management only of such business of the borrower which is relatable to security. The secured creditor can appoint any person to manage the secured asset, the possession of which has been taken over. The secured creditor can also, by notice in RK, J & JUD, J 20 WP Nos.20778 & 21300/2019 writing, call upon a person who has acquired any of the secured assets from the borrower to pay the money, which may be sufficient to discharge the liability of the borrower. Sub-section (7) of Section 13 lays down that where any action has been taken against a borrower under Sub-section (4), all costs, charges and expenses properly incurred by the secured creditor or any expenses incidental thereto can be recovered from the borrower. The money which is received by the secured creditor is required to be held by him in trust and applied, in the first instance, for such costs, charges and expenses and then in discharge of dues of the secured creditor. Residue of the money is payable to the person entitled thereto according to his rights and interest. Sub-section (8) of Section 13 imposes a restriction on the sale or transfer of the secured asset if the amount due to the secured creditor together with costs, charges and expenses incurred by him are tendered at any time before the time fixed for such sale or transfer. Sub-section (9) of Section 13 deals with the situation in which more than one secured creditor has stakes in the secured assets and lays down that in the case of financing a financial asset by more than one secured creditor or joint financing of a financial asset by secured creditors, no individual secured creditor shall be entitled to exercise any or all of the rights under Sub- section (4) unless all of them agree for such a course. There are five unnumbered provisos to Section 13(9) which deal with pari passu charge of the workers of a company in liquidation. The first of these provisos lays down that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of Section 529A of the Companies Act, 1956. The second proviso deals with the case of a company being wound up on or after the commencement of this Act. If the secured creditor of such company opts to realise its security instead of relinquishing the same and proving its debt under Section 529(1) of the Companies Act, then it can retain sale proceeds after depositing the workmen's dues with the liquidator in accordance with Section 529A. The third proviso requires the liquidator to inform the secured creditor about the dues payable to the workmen in terms of Section 529A. If the amount payable to the workmen is not certain, then the liquidator has to intimate the estimated amount to the secured creditor. The fourth proviso lays down that in case the secured creditor deposits the estimated amount of the workmen's RK, J & JUD, J 21 WP Nos.20778 & 21300/2019 dues, then such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited with the liquidator. In terms of the fifth proviso, the secured creditor is required to give an undertaking to the liquidator to pay the balance of the workmen's dues, if any. Sub-section (10) of Section 13 lays down that where dues of the secured creditor are not fully satisfied by the sale proceeds of the secured assets, the secured creditor may file an application before the Tribunal under Section 17 for recovery of balance amount from the borrower. Sub-section (11) states that without prejudice to the rights conferred on the secured creditor under or by this section, it shall be entitled to proceed against the guarantors or sell the pledged assets without resorting to the measures specified in Clauses (a) to (d) of Sub-section (4) in relation to the secured assets. Sub-section (12) of Section 13 lays down that rights available to the secured creditor under the Act may be exercised by one or more of its officers authorised in this behalf. Sub-section (13) lays down that after receipt of notice under Sub-section (2), the borrower shall not transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice without prior written consent of the secured creditor. In terms of Section 14, the secured creditor can file an application before the Chief Metropolitan Magistrate or the District Magistrate, within whose jurisdiction the secured asset or other documents relating thereto are found for taking possession thereof. If any such request is made, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, is obliged to take possession of such asset or document and forward the same to the secured creditor. [4] Section 17 speaks of the remedies available to any person including borrower who may have grievance against the action taken by the secured creditor under Sub-section (4) of Section 13. Such an aggrieved person can make an application to the Tribunal within 45 days from the date on which action is taken under that Sub-section. By way of abundant caution, an Explanation has been added to Section 17(1) and it has been clarified that the communication of reasons to the borrower in terms of Section 13(3A) shall not constitute a ground for filing application under Section 17(1). Sub-section (2) of Section 17 casts a duty on the Tribunal to consider whether the measures taken by the secured RK, J & JUD, J 22 WP Nos.20778 & 21300/2019 creditor for enforcement of security interest are in accordance with the provisions of the Act and the Rules made thereunder. If the Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that the measures taken by the secured creditor are not in consonance with Sub-section (4) of Section 13, then it can direct the secured creditor to restore management of the business or possession of the secured assets to the borrower. On the other hand, if the Tribunal finds that the recourse taken by the secured creditor under Sub-section (4) of Section 13 is in accordance with the provisions of the Act and the Rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor can take recourse to one or more of the measures specified in Section 13(4) for recovery of its secured debt. Sub-section (5) of Section 17 prescribes the time- limit of sixty days within which an application made under Section 17 is required to be disposed of. The proviso to this Sub-section envisages extension of time, but the outer limit for adjudication of an application is four months. If the Tribunal fails to decide the application within a maximum period of four months, then either party can move the Appellate Tribunal for issue of a direction to the Tribunal to dispose of the application expeditiously. Section 18 provides for an appeal to the Appellate Tribunal.
[5] Section 34 lays down that no Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Tribunal or Appellate Tribunal is empowered to determine. It further lays down that no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken under the SARFAESI Act or the DRT Act. Section 35 of the SARFAESI Act is substantially similar to Section 34(1) of the DRT Act. It declares that the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
[6] However, effective implementation of the SARFAESI Act was delayed by more than two years because several writ petitions were filed in the High Courts and this Court questioning its vires. The matter was finally decided by this Court in Mardia Chemicals v. Union of India [(2004) 4 SCC 311 and the validity of the SARFAESI Act was upheld except the condition of deposit of RK, J & JUD, J 23 WP Nos.20778 & 21300/2019 75% amount enshrined in Section 17(2). The Court referred to the recommendations of the Narasimham and Andhyarujina Committees on the issue of constitution of special tribunals to deal with cases relating to recovery of the dues of banks etc. and observed:
"One of the measures recommended in the circumstances was to vest the financial institutions through special statutes, the power of sale of the assets without intervention of the court and for reconstruction of assets. It is thus to be seen that the question of non- recoverable or delayed recovery of debts advanced by the banks or financial institutions has been attracting attention and the matter was considered in depth by the Committees specially constituted consisting of the experts in the field. In the prevalent situation where the amounts of dues are huge and hope of early recovery is less, it cannot be said that a more effective legislation for the purpose was uncalled for or that it could not be resorted to. It is again to be noted that after the Report of the Narasimham Committee, yet another Committee was constituted headed by Mr. Andhyarujina for bringing about the needed steps within the legal framework. We are, therefore, unable to find much substance in the submission made on behalf of the petitioners that while the Recovery of Debts Due to Banks and Financial Institutions Act was in operation it was uncalled for to have yet another legislation for the recovery of the mounting dues. Considering the totality of circumstances and the financial climate world over, if it was thought as a matter of policy to have yet speedier legal method to recover the dues, such a policy decision cannot be faulted with nor is it a matter to be gone into by the courts to test the legitimacy of such a measure relating to financial policy."
This Court then held that the borrower can challenge the action taken under Section 13(4) by filing an application under Section 17 of the SARFAESI Act and a civil suit can be filed within the narrow scope and on the limited grounds on which they are permissible in the matters relating to an English mortgage enforceable without intervention of the Court. In paragraph 31 of the judgment, the Court observed as under:
RK, J & JUD, J 24 WP Nos.20778 & 21300/2019 "In view of the discussion held in the judgment and the findings and directions contained in the preceding paragraphs, we hold that the borrowers would get a reasonably fair deal and opportunity to get the matter adjudicated upon before the Debts Recovery Tribunal. The effect of some of the provisions may be a bit harsh for some of the borrowers but on that ground the impugned provisions of the Act cannot be said to be unconstitutional in view of the fact that the object of the Act is to achieve speedier recovery of the dues declared as NPAs and better availability of capital liquidity and resources to help in growth of the economy of the country and welfare of the people in general which would sub serve the public interest."
20. Again in the year 2018, in Authorized Officer, State Bank of Travancore2, the Hon'ble Supreme Court reiterated the settled principle and deprecated interference by the High Courts in exercising jurisdiction under Article 226 of the Constitution of India in a case arising out of SARFAESI Act. This Court is reminded by the observation made in Paragraph 27 of the Hon'ble Supreme Court in Satyawati Tondon6, which is as follows:
"27. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
21. In the present case also the petitioners were having a statutory remedy under Section 17 of the SARFAESI Act against issuance of notice under Section 13(4) of the SARFAESI Act but, instead of approaching the Debts Recovery Tribunal, the petitioners without assailing the action of the respondent-bank regarding notional physical possession under Section RK, J & JUD, J 25 WP Nos.20778 & 21300/2019 13(4) of the Act has invoked the writ jurisdiction taking an unfounded plea that the learned Chief Judicial Magistrate was not competent to appoint an Advocate Commissioner for taking possession of the secured properties. The stand taken by the learned counsel for the petitioners that the schedule property is not within the jurisdiction of the Chief Judicial Magistrate, Guntur, also appears to be a ground which is to be noticed only for its rejection. It is not in dispute that the secured property (property in question) is lying within the district of Guntur and as such learned Chief Judicial Magistrate, Guntur is having full jurisdiction to deal with the matter.
22. In view of the facts and circumstances, particularly the fact that there was remedy available to the petitioners under the SARFAESI Act itself, there is no reason to entertain these Writ Petitions. Moreover, if submission of learned standing counsel for the respondent-bank is accepted that, in the proceedings initiated by the learned Chief Judicial Magistrate physical possession of the secured assets were already taken and handed over to the respondent-bank in the month of February, 2020 itself, it would be a futile exercise to deal with these matters and on this ground also the Writ Petitions are liable to be rejected.
23. Accordingly, we do not find any ground to interfere with the matter. Both Writ Petitions stand dismissed. No order as to costs.
24. As a sequel, miscellaneous petitions pending, if any, in these Writ Petitions shall stand closed.
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RAKESH KUMAR, J
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J.UMA DEVI, J
Date: -09-2020.
Dsh