Gujarat High Court
Gajanand Cottan Industries & 5 vs Authorized Officer & 3 on 3 November, 2015
Author: Abhilasha Kumari
Bench: Abhilasha Kumari
C/SCA/13648/2015 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 13648 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE SMT. JUSTICE ABHILASHA KUMARI
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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GAJANAND COTTAN INDUSTRIES & 5....Petitioner(s)
Versus
AUTHORIZED OFFICER & 3....Respondent(s)
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Appearance:
MR JR DAVE, ADVOCATE for the Petitioner(s) No. 1 - 6
MR.VISHAL J DAVE, ADVOCATE for the Petitioner(s) No. 1 - 6
MS. SHRUTI PATHAK, ASSISTANT GOVERNMENT PLEADER, for the
Respondent(s) No. 2
MR NAGESH C SOOD, ADVOCATE for the Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 2 - 4
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CORAM: HONOURABLE SMT. JUSTICE ABHILASHA
KUMARI
Date : 03/11/2015
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ORAL JUDGMENT
1 Rule. Ms. Shruti Pathak, learned Assistant Government Pleader, waives service of notice of Rule for respondents Nos.2 to 4. Mr. Nagesh C Sood, learned advocate for respondent No.1, waives service of notice of Rule for respondent No.1. On the facts and in the circumstances of the case, and with the consent of learned counsel for the respective parties, the petition is being heard and decided finally, at this stage.
2 By preferring the present petition under Article 226 of the Constitution of India, the petitioner has prayed for the issuance of a writ of mandamus, quashing and setting aside the order dated 21.07.2015, passed by respondent No.2, District Magistrate, Botad, under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI ACT). 3 Mr. Vishal J Dave, learned advocate for the petitioners has submitted that the impugned order under Section 14 of the SARFAESI ACT, has been passed Page 2 of 9 HC-NIC Page 2 of 9 Created On Thu Nov 05 02:20:27 IST 2015 C/SCA/13648/2015 JUDGMENT upon an application preferred by respondent No. 1 Bank, which has not been filed by the officer vested with the power to do so by the statute. Referring to the provisions of Section 14 of the SARFAESI Act, learned counsel for the petitioner has submitted that as per subsection 1 of Section 14, the Authorized Officer of the respondent Bank is entitled to file the application. It is submitted that "authorized officer"
has been defined in Rule 2(a) of the Security Interest (Enforcement) Rules, 2002,(The Rules) to mean an officer not less then the Chief Manager of a Public Sector Bank or equivalent. In the present case, the application has been filed by the Branch Manager, who cannot be said to be the Authorized Officer, within the meaning of the said definition.
4 It is further submitted that it is mandatory for the application under Section 14 to be accompanied by an affidavit, duly affirmed by the Authorized Officer of the secured creditor, as per the proviso of sub section 1 of Section 14. In the present case, no such affidavit has been filed. Hence, the proceedings under Section 14 of the SARFAESI Act are not in accordance Page 3 of 9 HC-NIC Page 3 of 9 Created On Thu Nov 05 02:20:27 IST 2015 C/SCA/13648/2015 JUDGMENT with law and deserve to be set aside in their entirety, including the impugned order passed thereupon.
5 Learned counsel for the petitioner further contends that no opportunity of hearing was granted to the petitioners by the District Magistrate, Botad, and a copy of the impugned order was not served upon the petitioners.
6 Mr. Nagesh C Sood, learned advocate for respondent No.1, has opposed the submissions advanced on behalf of the petitioners and has submitted that there is no legal infirmity in the impugned order passed by the District Magistrate, hence, it deserves no interference.
7 Ms. Shruti Pathak, learned Assistant Government Pleader for respondents Nos. 2 to 4, has opposed the prayers made by the petitioners by submitting that the impugned order does not suffer from any legal infirmity.
8 This Court has heard learned counsel for the
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respective parties, perused the averments made in the petition and the contents of the impugned order. 9 The SARFAESI Act is a special legislation that has far reaching effects upon the property of defaulting borrowers, if action is taken against such borrowers under its provisions. It, therefore, follows that the provisions of a statute that have wide ramifications and envisage the exercise of drastic power, ought to be read strictly. The intention of the legislature in enacting the statute is evident from the nature of its provisions. When the legislature has laid down that the application under Section 14 is to be filed by the Authorized Officer of the secured creditor, then the mandate of law is required to be followed. As per Rule 2(a) of the Rules, the "authorized officer" means an officer not less then the Chief Manager of a Public Sector Bank or his equivalent.
10 In order to ascertain whether there has been compliance with the provisions of Section 14 of the SARFAESI Act, this Court has called for the original record of the proceedings before the District Page 5 of 9 HC-NIC Page 5 of 9 Created On Thu Nov 05 02:20:27 IST 2015 C/SCA/13648/2015 JUDGMENT Magistrate. It has been made available by the learned Assistant Government Pleader and has been perused by the Court. Upon perusal of the record it is clear that the application under Section 14 of the SARFAESI Act has been preferred by the Branch Manager of respondent No.1 Bank and not by the Chief Manager, who is the Authorized Officer. It is not the case of respondent No.1 Bank that the Branch Manager is equivalent in rank to the Chief Manager, hence, there is a legal flaw in the application itself. The District Magistrate ought not to have entertained the application in the first place, leave alone passed an order upon it.
11 The record further reveals, that no affidavit has been preferred by respondent No.1 Bank along with the application under Section 14. The proviso of sub section 1 of Section 14 has been inserted by Act 1 of 2013, which has come into effect on 15.01.2013. Compliance with the proviso to subsection 1 of Section 14 is mandatory in nature, as are the Rules. The application is defective on this ground as well. The legislature has inserted the proviso to Section Page 6 of 9 HC-NIC Page 6 of 9 Created On Thu Nov 05 02:20:27 IST 2015 C/SCA/13648/2015 JUDGMENT 14(1) of the SARFAESI Act consciously, so that the relevant details, as required by clauses (i) to (ix) thereof, are stated in the application, before it is decided by the District Magistrate. Proper compliance with the above provisions is a mandatory requirement and failure to do so would render the application against the provisions of law. In fact, it would be no application in the eyes of law. An order passed on an application without the affidavit, as required under the proviso to Section 14 (1) of the SARFAESI Act, would be an order passed upon incomplete material, without application of mind to the relevant aspects of the matter. Such an order would be unsustainable in law.
12 Taking into consideration the fact that the proceedings before the District Magistrate were defective and not in accordance with law from the very initial stage, it follows that any order passed upon such proceedings would also suffer from the same infirmity. In view of the above, as the proceedings under Section 14 of the SARFAESI Act are not in accordance with law, it would be appropriate to set Page 7 of 9 HC-NIC Page 7 of 9 Created On Thu Nov 05 02:20:27 IST 2015 C/SCA/13648/2015 JUDGMENT them aside in their entirety, with liberty to respondent No.1 Bank to initiate fresh proceedings, in accordance with law.
13 Hence, the following order:
The entire proceedings under Section 14 of the SARFAESI Act, from the stage of the application, including the impugned order dated 21.07.2015, passed by the District Magistrate against the petitioner, are hereby quashed and set aside. It is open to respondent No.1 Bank to initiate fresh proceedings, in accordance with law. In the event that such proceedings are initiated, the District Magistrate, Botad, shall consider and decide them afresh, without being influenced by his earlier order, after granting an opportunity of hearing to the petitioner, as required by law. The decision shall be rendered by the District Magistrate, within the period of 6 weeks from the date of initiation.
14 The petition is allowed in the above terms. Rule is made absolute accordingly. There shall be no orders as to costs.
(SMT. ABHILASHA KUMARI, J.)
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Bimal
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