Madhya Pradesh High Court
Bank Of Baroda vs District Magistrate Cum Collector on 14 February, 2025
Author: Vivek Agarwal
Bench: Vivek Agarwal
NEUTRAL CITATION NO. 2025:MPHC-JBP:10415
1 WP-11500-2020
IN THE HIGH COURT OF MADHYA
PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE SANJEEV SACHDEVA
HON'BLE SHRI JUSTICE VIVEK AGARWAL
&
HON'BLE SHRI JUSTICE VINAY SARAF
WRIT PETITION No. 11500 of 2020
BANK OF BARODA
Versus
DISTRICT MAGISTRATE CUM COLLECTOR AND OTHERS
Appearance
Shri Shreyas Dubey - Advocate for the petitioner.
Shri Bramhadatt Singh - Deputy Advocate General for the State.
Reserved on :- 09/09/2024
Pronounced on :- 14/02/2025
ORDER
Per: Vivek Agarwal, J :-
This matter is referred by the Division Bench of this High Court which was hearing this writ petition with a request to Hon'ble The Chief Justice to constitute a larger Bench to decide the following questions :-Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM
NEUTRAL CITATION NO. 2025:MPHC-JBP:10415
2 WP-11500-2020 (1). Whether remedy of appeal under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is available to the secured creditor against an order passed by the District Magistrate under Section 14 of the said Act ?
(2). Whether in judgment/order passed in W.A. No. 489/2016 and W.P. No. 15608/2020, the Division Benches have correctly interpreted Section 17(1) of the said Act and whether the said judgments can be said to be good law ?
2. The factual matrix of the matter is that the Hon'ble Division Bench while deciding W.A. No. 489/2016 (India Sem Asset Reconstruction Co. Ltd. Vs. State of M.P. and others) decided on 21st day of December, 2017 were dealing with the order passed in W.P. No. 6131/2016 by which the learned Writ Court relying on the decision of the Supreme Court in KanhaiyaLal Lalchand Sachdev and others Vs. State of Maharashtra and others (2011) 2 SCC 782 held that an action under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (In short 'SARFAESI Act') constitutes an action taken after the stage of Section 13 (4) and, therefore, the same would fall within the ambit of Section 17(1) of the SARFAESI Act and dismissed the writ petition as not maintainable with liberty to the petitioner Financial institution to approach the Debts Recovery Tribunal under Section 17 of the SARFAESI Act.
Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PMNEUTRAL CITATION NO. 2025:MPHC-JBP:10415 3 WP-11500-2020
3. While deciding the writ appeal and taking into consideration the law laid down by the five Judges Bench of this High Court in the case of Jabalpur Bus Operators Association and others Vs. State of M.P. and another (2003) 1 MPLJ 513, so also taking into consideration that the judgment of United Bank of India Vs. Satyawati Tondon (2010) 8 SCC 110, Jagdish Singh Vs. Heeralal and others (2014) 1 SCC 479 were not considered while upholding the view taken in the matter of M/s Sri Ambika Solvex Ltd. Vs. State Bank of India & others 2016 SCC Online MP 5772, held that they would like to follow the earlier judgment of the Hon'ble Supreme Court where the question of maintainability of the writ petition was considered in great detail and held that appellant has an effective alternate remedy to approach the Debt Recovery Tribunal under Section 17 of the SARFAESI Act and accordingly held that the writ appeal filed by the appellant/creditor India Sem Asset Reconstruction Co. Ltd. has no merit and it accordingly dismissed the writ appeal with liberty to the appellant to avail the remedy of appeal under Section 17 of the SARFAESI Act in accordance with law.
4. This judgment of the Division Bench of the High Court came to be followed by another Division Bench of this High Court in W.P. No. 15608/2020 decided on 21/10/2020 wherein it is held that "IDBI infact has approached the District Magistrate and the order has been passed by the District Magistrate on 29/09/2020. The Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 4 WP-11500-2020 petitioner is having the remedy to approach the Debt Recovery Tribunal. Keeping in view the aforesaid, the admission is declined and liberty is granted to the petitioner to approach the DRT for redressal of his grievance."
5. Shri Shreyas Dubey, learned counsel for the petitioner submits that Bank of Baroda had extended facility of credit in favour of M/S Life Guard Food and Drinks, a Proprietorship concern through its proprietor Ms. Pooja Sharma W/o Rajkumar Sharma of Shahjapur and on her inability to pay, the bank had issued a demand notice as per Section 13 (2) of the SARFAESI Act on 14/11/2017. Thereafter, when demand notice was not complied by the respondent within specified time of 60 days, the petitioner Bank was constrained to obtain possession of secured assets as per the provision of Section 13(4) of the Act of 2002. As the respondent did not made any effort to repay the total outstanding, therefore an application under Section 14 of the Act of 2002 was filed on 17/04/2018 before the respondent no. 2 Additional Collector and Additional District Magistrate, Shahjapur for obtaining the physical possession of secured assets.
6. It is submitted that contrary to the provisions of Section 14 of the Act of 2002, the Additional Collector instead of taking possession of the property issued a notice to the respondents seeking their explanation. On the directions of the Additional Collector, the respondent no. 5 was impleaded in the array of the Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 5 WP-11500-2020 respondents.
7. A reply was filed stating that the petitioner Bank has no right to sell the secured asset as the ownership was vested with respondent no. 5. Though, it was admitted that leasehold rights of the petitioner Bank is co-extensive to the lease hold right of lessee i.e. respondent no. 1. Respondent no. 2, on the basis of the reply filed by respondent nos. 3 and 5 dismissed the application, as a result of which a writ petition was filed before the High Court at Indore within whose territorial jurisdiction, Shahjapur is situated.
8. In the writ petition, several grounds were taken to submit that the judgment of the Division Bench of this Court in W.A. No. 784/2018 (Aditya Birla Finance Limited Versus Shri Carnet Elias Fernandes Vemalayam and others) has crystallized the ambit of Section 14 of the Act of 2002 and it is held that proceedings under Section 14 are not to adjudicate the rights of the parties and, therefore, no notice was required, yet Additional Collector has erroneously issued a notice in favour of the respondent Debtors.
9. When this petition was placed for hearing before the Division Bench, then the Division Bench was confronted with the orders/decisions of Single Bench in W.P. No. 6131/2016 (India SME asset Reconstruction Company Ltd. Throu. Pankan Agnihotri Vs. The State of Madhya Pradesh) and the order of the Division Bench in W.A. No. 489/2016 where the Division Bench rejected the contention of the appellant creditor and held that a remedy of Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 6 WP-11500-2020 appeal under Section 17 of the said Act is equally available to the Bank.
10. Thereafter, another Division Bench in W.P. No. 15608/2020 (Rajkumar Daima Vs. IDBI Bank Ltd.) took the same view and relegated the creditor to avail the remedy of appeal before the Debts Recovery Tribunal.
11. In the aforesaid backdrop, matter has come to this Full Bench in the form of reference to answer the aforesaid two questions.
12. Section 17 (1) of the Act of 2002 is as under :-
(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, [may make an application along with such fee, as may be prescribed,] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-
five days from the date on which such measure had been taken:
[Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.] [Explanation.--For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.] [(1-A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction--
(a) the cause of action, wholly or in part, arises;Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM
NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 7 WP-11500-2020
(b) where the secured asset is located; or
(c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being.
13. Thus language of Section 17(1) leaves no iota of doubt and further no scope for any other interpretation, then that remedy provided under Section 17 (1) is for any person including borrower who is aggrieved of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorized officer under this Chapter by way of making an application along with such fee as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter.
14. Section 13(4) of the Act of 2002 provides that "In case, the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely :-
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM
NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 8 WP-11500-2020 Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt;]
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.
15. Therefore, it is evident that the action can be taken by the secured creditor in terms of sub-section (4) of Section 13 against the borrower.
16. The Borrower is defined in Section 2(f) as under :-
"Borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a [asset reconstruction company] consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance [or who has raised funds through issue of debt securities]
17. Thus, it is evident that cause of action under Section 13 (4) is to the secured creditor on the failure of the borrower to discharge Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 9 WP-11500-2020 his liability in full within the period specified in sub-section (2) and upon such failure, Section 14 provides that the Chief Metropolitan Magistrate or the District Magistrate will assist the secured creditor in taking possession of secured asset.
18. Thus, if any steps are taken by the secured creditor under sub- section (4) of Section 13, then cause of action to file an application will be only in the hands of the borrower and the definition of borrower implies that any person ; will mean the person claiming through borrower like the Guarantor, surety etc. and not the secured creditor.
19. In fact, plain reading of Section 13 (4) with Section 14 and Section 17 leaves no iota of doubt that under Section 13(4), cause of action will arise for the secured creditor if the borrower fails to discharge his liability. Sub-section (2) of Section 13 provides that "Where any borrower, who is under a liability to a secured creditor under the security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then notice is to be given for possession of the secured assets under Section 13(4) and if the borrower fails to comply with the said notice within a period of sixty days, then secured creditor can take assistance of Chief Metropolitan Magistrate or District Magistrate to assist it in taking possession of secured asset.
20. It is well settled by a Division Bench of this Court in Aditya Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 10 WP-11500-2020 Birla Finance Limited Versus Shri Carnet Elias Fernandes Vemalayam and others while deciding W.A. No. 784/2018 that the provisions of the Act of 2002 override all other provisions of law which are inconsistent therewith. It is further held that once the disclosure on nine different points contemplated under Section 17 is made, then District Magistrate is duty bound to hand over physical possession to the secured creditor.
21. It is further held that the proceedings under Section 14 of the Act of 2002 are not the proceedings to adjudicate rights of the parties, therefore no notice is contemplated to be served upon debtor as such proceedings are taken only after serving notice under Section 13 of the Act.
22. In view of such facts, plain language of Section 17(1) and the law laid down by the Supreme Court in Standard Chartered Bank Vs. V. Noble Kumar and others (2013) 9 SCC 620 has held as under
:-
It can be noticed from the language of the proviso to Section 13 (3-A) and the language of Section 17 that an 'appeal' under Section 17 is available to the borrower only after losing possession of the secured asset.
23. This view finds support from the judgment of a Division Bench of Punjab and Haryana High Court in Kotak Mahindra Bank Ltd. Vs. District Magistrate and another 2021 SCC Online P & H 763 wherein it is held as under :-
Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PMNEUTRAL CITATION NO. 2025:MPHC-JBP:10415 11 WP-11500-2020 "24. A perusal of the above would show that any person which includes a borrower, who is aggrieved by any of the measures taken by the secured creditor or his authorized officer referred to in sub-section 4 of Section 13 of the SARFAESI Act under the Chapter, can make an application under Section 17 of the SARFAESI Act.
The language itself makes in amply clear that the remedy is available to a person aggrieved by any of the measures referred in sub-section 4 of Section 13 of the SARFAESI Act, which are taken by the secured creditor or his authorized officer. The remedy, therefore, under Section 17 of the SARFAESI Act, would not be available to the secured creditor or his authorized officer for rejection of an application preferred by the said secured creditor or his authorized person under the SARFAESI Act.
25. In the light of the above, the order which has been passed by the District Magistrate under Section 14 of the SARFAESI Act is final qua the petitioner and under these circumstances, the remedy available to the petitioner is only under Article 226/227 of the Constitution of India, which remedy the petitioner has rightly availed of. Reliance on the judgment of the Hon'ble Supreme Court in Kaniyalal Lalchand Sachdev' case (supra) by the counsel for respondent No. 2 is totally misplaced, where the Hon'ble Supreme Court was considering Section 17 of the SARFAESI Act when the person aggrieved was neither the secured creditor nor the authorized officer but any other person. The ratio of said judgment, therefore, would not be attracted to the present case."
24. The law laid down by the Supreme Court in Kanaiyalal Lalchand Sachdev and others Vs. State of Maharashtra and others (2011) 2 SCC 782 is wrongly interpreted by the Division Bench in India Sem Asset Reconstruction Co. Ltd. (supra), in as much as the appellant before the Supreme Court was a borrower and in that Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 12 WP-11500-2020 context, it is held that appellant is amenable to jurisdiction of Debts Recovery Tribunal under Section 17 of SARFAESI Act. Infact, the Supreme Court in Kanaiyalal Lalchand Sachdev (supra) noted as under :-
21. In Indian Overseas Bank v. Ashok Saw Mill [(2009) 8 SCC 366] the main question which fell for determination was whether the DRT would have jurisdiction to consider and adjudicate post Section 13(4) events or whether its scope in terms of Section 17 of the Act will be confined to the stage contemplated under Section 13(4) of the Act? On an examination of the provisions contained in Chapter III of the Act, in particular Sections
13 and 17, this Court held as under: (SCC pp. 375-76, paras 35-36 & 39) "35. In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in sub-section (3) thereof.
36. The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 13 WP-11500-2020 with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.
39. We are unable to agree with or accept the submissions made on behalf of the appellants that the DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated under Section 13(4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in terms of Section 13(4) is open to scrutiny and cannot only be set aside but even the status quo ante can be restored by the DRT."
(emphasis supplied by us)
25. We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT
26. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 14 WP-11500-2020 available if an efficacious alternative remedy is available to any aggrieved person. (See Sadhana Lodh v. National Insurance Co. Ltd. [(2003) 3 SCC 524 : 2003 SCC (Cri) 762] , Surya Dev Rai v. Ram Chander Rai [(2003) 6 SCC 675] and SBI v. Allied Chemical Laboratories [(2006) 9 SCC 252]
27. Thus, we observe that the Division Bench deciding India Sem Asset Reconstruction Co. Ltd. (supra), read the Supreme Court judgment, totally out of context.
28. Therefore, the reference is answered as under :-
(1). Remedy of appeal under Section 17(1) of the Act of 2002 is not available to the secured creditor against an order passed by the District Magistrate under Section 14 of the said Act but is available only to a person, be it a borrower or any person under the facts and circumstances delineated in the judgment of the Supreme Court in Standard Chartered Bank (supra).
(2). The judgment passed in W.A. No. 489/2016 by the Division Bench has erred in not correctly interpreting Section 17 of the Act, therefore said judgment cannot be said to be good law.
29. It is also to be noted that the order passed by the Division Bench in W.P. No. 15608/2020 appears to have been inappropriately put up in reference.
30. In this writ petition, the borrower was the person aggrieved of Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 15 WP-11500-2020 the action initiated by the secured creditor and, therefore, the Division Bench had granted liberty to the petitioner to approach the Debts Recovery Tribunal.
Per : Sanjeev Sachdeva, J :-
I have had the privilege of reading the Judgment authored by my learned brother Justice Vivek Agarwal. I am in complete agreement by the view taken by him and the conclusion arrived at, however I would like to supplement the reasons.
31. The questions that have been referred to the larger bench for consideration are:
1. Whether remedy of appeal under section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is available to the secured creditor against an order passed by the District Magistrate under section 14 of the said Act?
2. Whether in judgment/order passed in W.A. No. 489/2016 and W.P. No. 15608/2020, the Division Benches have correctly interpreted Section 17(1) of the said Act and whether the said judgments can be said to be good law?
32. To answer the first question we may refer to the power exercised by the Chief Metropolitan Magistrate or District Magistrate, under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the Act), which reads as under:Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM
NEUTRAL CITATION NO. 2025:MPHC-JBP:10415
16 WP-11500-2020 "14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.
(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him--
(a) take possession of such asset and documents relating thereto; and
(b) forward such asset and documents to the secured creditor:
Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that--
(i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application;
(ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period;
(iii) the borrower has created security interest over various properties giving the details of Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 17 WP-11500-2020 properties referred to in sub-clause (ii)above;
(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount;
(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount.
(v) consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non-
performing asset;
(vi) affirming that the period of sixty days notice as required by the provisions of sub- section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower;
(vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for non-acceptance of such objection or representation had been communicated to the borrower;
(viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub- section (4) of section 13 read with section 14 of the principal Act;
(ix) that the provisions of this Act and the rules made thereunder had been complied with:
Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 18 WP-11500-2020 satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets within a period of thirty days from the date of application:
Provided also that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days.
Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act.
(1A) The District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him,
--
(i) to take possession of such assets and documents relating thereto; and
(ii) to forward such assets and documents to the secured creditor.
(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.
(3) No act of the Chief Metropolitan Magistrate or the District Magistrate any officer authorised by the Chief Metropolitan Magistrate or District Magistrate done in pursuance of this section shall be called in question in any court or before any authority."Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM
NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 19 WP-11500-2020
33. Section 14 of the Act contemplates that where possession of any secured asset is required to be taken by the secured creditor or if any secured asset is required to be sold or transferred by the secured creditor under the provisions of the Act, the secured creditor may for the purposes of taking over possession of control of the asset request the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction such asset is situated, then Chief Metropolitan Magistrate or the District Magistrate, as the case may be, 'shall' on such a request being made take possession of such asset and forward such asset to the secured creditor.
34. The wording of Section 14 of the Act is very clear. The Chief Metropolitan Magistrate or the District Magistrate, as the case may be, on receipt of such a request is obliged to take over possession of the secured asset and forward the asset to the secured creditor. There is no discretion given to the same authority. Said authority is obliged to take possession and handover to the secured creditor. We may note that first proviso to Section 14 of the Act provides that the application of the secured creditor shall be accompanied by an affidavit duly affirmed by an authorised officer declaring to certain conditions as contained in first proviso to Section 14 of the Act. Once such a declaration is filed, the District Magistrate or Chief Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 20 WP-11500-2020 Metropolitan Magistrate has to merely satisfy himself with the contents of the Affidavits and then pass suitable orders for the purposes of taking possession of the secured asset within a period of 30 days. The District Magistrate or Chief Metropolitan Magistrate has been given powers only to ascertain as to whether the Affidavit filed by the authorised officer satisfies the requirement of the first proviso to Section 14 of the Act. Once the Affidavit satisfies the requirement of Section 14 of the Act, the District Magistrate has no discretion thereafter.
35. Reference may be had to the judgment of the Supreme Court in R.D. Jain & Company vs. Capital First Limited and others, (2023) 1 SCC 675, Kotak Mahindra Bank Ltd. vs. Girnar Corrugators Pvt. and others, (2023) 3 SCC 210 and Balkrishna Rama Tarle vs. Phoenix Arc Pvt. Ltd. and others, (2023) 1 SCC 662 wherein the Supreme Court has held that the steps taken by the Chief Metropolitan Magistrate or the District Magistrate are ministerial in nature and does not involve any adjudicatory process.
36. In R.D. Jain & Company (supra), the Supreme Court has held as under:
"25. As observed and held by this Court in NKGSB Coop. Bank [NKGSB Coop. Bank Ltd. v. Subir Chakravarty, (2022) 10 SCC 286 : (2023) 1 SCC (Cri) 157] , the step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself/herself or through any officer subordinate to him/her, including the Advocate Commissioner who is considered as an officer of his/her Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 21 WP-11500-2020 court. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. Thus, we reiterate that the step to be taken by the CMM/DM under Section 14 of the Sarfaesi Act, is a ministerial step. While disposing of the application under Section 14 of the Sarfaesi Act, no element of quasi-judicial function or application of mind would require. The Magistrate has to adjudicate and decide the correctness of the information given in the application and nothing more. Therefore, Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets."
The Supreme Court in Girnar Corrugators Pvt. (supra) has held as under:
"34. Under Section 14 of the Sarfaesi Act, the District Magistrate or the Chief Metropolitan Magistrate as the case may be is required to assist the secured creditor in getting the possession of the secured assets. Under Section 14 of the Sarfaesi Act, neither the District Magistrate nor the Metropolitan Magistrate would have any jurisdiction to adjudicate and/or decide the dispute even between the secured creditor and the debtor. If any person is aggrieved by the steps under Section 13(4)/order passed under Section 14, then the aggrieved person has to approach the Debts Recovery Tribunal by way of appeal/application under Section 17 of the Sarfaesi Act."
36. Similarly, the Supreme Court in Balkrishna Rama Tarle (supra) has held as under:
"18. Thus, the powers exercisable by CMM/DM under Section 14 of the Sarfaesi Act are ministerial steps and Section 14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets. In that view of the matter once all the requirements under Section 14 of the Sarfaesi Act are complied with/satisfied by the secured creditor, it is the duty cast upon the Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 22 WP-11500-2020 CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner. At that stage, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings under Section 17 of the Sarfaesi Act, before the Debts Recovery Tribunal."
37. Thus, subject to the secured creditor satisfying the requirement of first proviso to Section 14(1) of the Act, the District Magistrate or Chief Metropolitan Magistrate, as the case may be, have no further discretion and have to merely perform the ministerial power of taking over possession of the secured asset and handing over the same to the secured creditor.
38. Therefore, it is clear that the action taken under section 14 of the Act by the District Magistrate or Chief Metropolitan Magistrate is not adjudicatory but merely ministerial, consequent to the action taken by the secured creditor requiring the District Magistrate or Chief Metropolitan Magistrate to assist the secured creditor to take possession of the secured asset and their action would in effect be deemed to be an action for an on behalf of the secured creditor.
39. Reference may be had to Section 17 of the Act which reads as under:
"17. Application against measures to recover secured Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 23 WP-11500-2020 debts.--(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty five days from the date on which such measure had been taken:
Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
Explanation.--For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.
1A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction--
(a) the cause of action, wholly or in part, arises;
(b) where the secured asset is located; or
(c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being.
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 24 WP-11500-2020 facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,--
(a) declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured creditor as invalid; and
(b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under sub-section (1), as the case may be; and
(c) pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt.
(4A) Where--
(i) any person, in an application under sub-
Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PMNEUTRAL CITATION NO. 2025:MPHC-JBP:10415 25 WP-11500-2020 section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,--
(a) has expired or stood determined; or
(b) is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or
(c) is contrary to terms of mortgage; or
(d) is created after the issuance of notice of default and demand by the Bank under subsection (2) of section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause
(d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.
(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415
26 WP-11500-2020 Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder."
40. Section 17(1), (2) and (3) of the Act use the expression "measures taken by the Secured Creditor" and Section 17(4) of the Act uses the expression "recourse taken by a secured creditor". Section 17 of the Act stipulates that any person including a borrower aggrieved by any measure referred to in sub-section (4) of Section 13 of the Act taken by the secured creditor, may make an application to Debt Recovery Tribunal having jurisdiction against such measure.
41. Section 13(4) of the Act reads as under :
"13. Enforcement of security interest.Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM
NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 27 WP-11500-2020 (1) ******* (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt;
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM
NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 28 WP-11500-2020
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt."
42. Section 17 of the Act provides for a remedy against an action taken by the Secured Creditor but does not provide for a remedy against an action or an inaction of the part of the District Magistrate or the Chief Metropolitan Magistrate.
43. Section 17 of the Act provides for remedy of approaching the Debt Recovery Tribunal to any person including a borrower who is aggrieved by measure taken by the secured creditor. By no stretch of imagination, can this provision be read to include or make it obligatory on part of the secured creditor to approach the Debt Recovery Tribunal under Section 17 of the Act against measures taken by its own self. Only a party, who is aggrieved by a measure taken by the secured creditor or its authorised officer, has to approach the Debt Recovery Tribunal. A secured creditor cannot be said to be aggrieved by its own action. Bare reading of Section 17 of the Act contemplates persons including the borrowers but excluding the secured creditor, who are obliged to approach the Debt Recovery Tribunal against the measure taken under Section 17 of the Act.
Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PMNEUTRAL CITATION NO. 2025:MPHC-JBP:10415 29 WP-11500-2020
44. Accordingly, the reference is answered as under:
1. Remedy of appeal under section 17(1) of the Act is not available to the secured creditor against an order passed by the District Magistrate under section 14 of the said Act but is available to any person aggrieved including the borrower but excluding the secured creditor.
2. However, the order passed by the Division Bench in W.P. No. 15608/2020 appears to have been incorrectly incorporated in the terms of reference for the reason that the said order was passed in a Writ Petition filed by a petitioner against the action initiated by the secured creditor and the Division Bench, while declining to entertain the petition, granted liberty to the petitioner to approach the Debts Recovery Tribunal. Said order neither considers nor holds that the secured creditor has to approach the Debts Recovery Tribunal against an action taken by the District Magistrate under section 14 of the act.
For the purposes of completeness, order dated 21.10.2020 in W.P. No. 15608/2020 is extracted hereunder:
"The High Court Of Madhya Pradesh WP-15608-2020 (RAJ KUMAR DAYMA AND OTHERS Vs IDBI Signature Not Verified Signed by: VAIBHAV YEOLEKAR Signing time: 3/5/2025 3:02:41 PM NEUTRAL CITATION NO. 2025:MPHC-JBP:10415 30 WP-11500-2020 BANK LIMITED AND OTHERS) Indore, Dated : 21-10-2020 Heard through Video Conferencing.
Parties through their counsel.
The petitioner before this court has filed this present petition being aggrieved by the action initiated by the bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act), 2002.
The IDBI Bank has approached the District Magistrate and order has been passed by the District Magistrate on 29.9.2020. The petitioner is having a remedy to approach the DRT. Keeping in view the aforesaid, the admission is declined with liberty to the petitioner to approach the DRT for redressal of his grievance."
45. Accordingly, the Reference is answered in the above terms.
46. The matter is remitted to the Division Bench for a decision on merits in accordance with the findings hereinabove.
(SANJEEV SACHDEVA) (VIVEK AGARWAL) (VINAY SARAF)
JUDGE JUDGE JUDGE
vy
Signature Not Verified
Signed by: VAIBHAV
YEOLEKAR
Signing time: 3/5/2025
3:02:41 PM