Allahabad High Court
M/S Lakshya Concosts Pvt. Ltd. And ... vs Bank Of Baroda And 2 Others on 8 February, 2017
Equivalent citations: AIR 2017 ALLAHABAD 172, (2017) 4 ALL WC 3528, (2017) 5 ADJ 122 (ALL), (2017) 2 BANKCAS 608, 2018 (129) ALR SOC 569 (ALL)
Author: Krishna Murari
Bench: Krishna Murari, Prashant Kumar
HIGH COURT OF JUDICATURE AT ALLAHABAD A.F.R. Reserved Civil Misc. Writ Petition No. 15167 of 2016 M/s. Lakshya Concosts Private Limited & Anr. ------- Petitioners Versus Bank of Baroda & Ors. ------- Respondents Hon'ble Krishna Murari, J.
Hon'ble Prashant Kumar, J.
(Delivered by Krishna Murari, J.) Heard Shri Sudhanshu Pandey, learned counsel for the petitioners, Shri Sandeep Singh for respondent-Bank and learned Standing Counsel for the State respondents.
Facts relevant for the purpose of the case as unfolded in the pleadings are as under.
Petitioner-company obtained various credit facilities from the respondent-Bank and petitioner no. 2 is the guarantor. There was some default in repayment of the loan, on account of which, respondent-Bank issued notice dated 04.10.2014 under Section 13 (2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the 'Act') demanding a sum of Rs.5,64,94,962.17/- along with other charges. Thereafter, respondent-Bank initiated proceedings under Section 13 (4) of the Act for taking over possession of the secured assets by issuing notice dated 30.12.2014. Petitioner-company challenged the same by filing SARFAESI application before the Debt Recovery Tribunal, which was registered as Case No. 221 of 2015. Thereafter, petitioner also filed writ petition before the Lucknow Bench of this Court being Misc. Single No. 3510 of 2015 seeking a mandamus directing the Debt Recovery Tribunal, Lucknow to dispose of the interim application of the petitioner filed in S.A. No. 221 of 2015. A further relief was also claimed to command the Collector/Additional District Magistrate (Finance), Aligarh and respondent-Bank not to take proceeding in Misc. Case No. 182 of 2015 filed under Section 14 of the Act. The said writ petition was disposed of by making following observation.
"This writ petition has been for a mandamus, directing the Debt Recovery Tribunal, Lucknow (respondent-1) to dispose of the interim relief application of the petitioners filed in S.A. No. 221 of 2015 and further relief has been sought for issue of mandamus directing the Collector/Additional District Magistrate (Finance), Aligarh and Bank of Baroda, Branch Office Sashni Gate, District Aligarh, not to take proceeding in Misc. Case No. 182 of 2015, filed u/s 14 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the "Act").
It is alleged that the petitioner has taken loan from Bank of Baroda and due to committing default in payment of interest on the above loan for the quarter ended 30.6.2014 and 30.9.2014 and also default in payment of installment due on 30.6.2014, the bank has initiated proceeding u/s 13 of the Act. Notice u/s 13(2) of the Act was given to the petitioners on 4.10.2014 and thereafter, the order u/s 13(4) has been passed for taking possession on 13.12.2014, but the petitioner has not handed over possession, as such, proceeding has been initiated before the District Magistrate for providing police help for taking possession over the secured assets u/s 14 of the Act. The petitioner has challenged the notice issued u/s 13(4) of the Act before the Debt Recovery Tribunal, Lucknow and the matter is pending before it, in which the petitioner has also filed an application for interim relief (annexed as annexure 4 to the writ petition) and it is stated that 14.7.2015 is the date fixed before the Debt Recovery Tribunal, Lucknow. However, before the Collector/Additional District Magistrate (Finance), Aligarh, the proceeding initiated for providing police help is going on and the matter is fixed today, i.e. 26.6.2015.
At the very outset of the arguments, the counsel for the petitioner expressed his willingness to deposit Rs. 50 lakhs within a week. Since the matter is pending before the Debt Recovery Tribunal, Lucknow, which is a statutory authority and seasoned with the case, as such, it will be appropriate that all the controversies raised before this Court, may be raised before the Debt Recovery Tribunal, Lucknow, who shall decide it, considering entire facts on record.
However, as 14.7.2015 is the date fixed and the petitioner is willing to deposit a substantial amount, as such, upto 14.7.2015, Bank of Baroda (respondent-3) shall not take forceful possession over the property in dispute, provided the petitioner deposits Rs. 50 lakhs within one week from today with respondent-3.
It is made clear that the proceeding before the District Magistrate has not been stayed by this Court.
With the aforesaid observations, the writ petition is disposed of."
There is nothing on record to indicate that in compliance of the order dated 26.06.2015, petitioner deposited any amount with the Bank nor there is any disclosure about the outcome of the proceedings of Case No. 221 of 2015, which was pending before the Debt Recovery Tribunal. It appears that on an application made by the respondent-Bank under Section 14 of the Act, the Additional District Magistrate (Finance & Revenue) passed order dated 22.07.2015 directing City Magistrate/Special Divisional Officer, Koil to take over possession of the secured asset through police force.
Aggrieved, the petitioner has approached this Court.
Learned counsel for the petitioner submits that under Section 14 of the Act, it is the Chief Metropolitan Magistrate or the District Magistrate, who are the specified authorities to entertain and pass orders on the application made under the said Section, as such, the order passed by Additional District Magistrate (Finance & Revenue) is patently without jurisdiction and is not liable to be sustained. It is further submitted that powers conferred by Section 14 of the Act upon the authorities specified therein, are judicial and adjudicatory in nature, hence, the same cannot be delegated.
Learned counsel for the respondent-Bank, however, contends that the term 'District Magistrate' will include the Additional District Magistrate or Additional Collector, and powers being administrative in nature, authorising any authority to exercise the said powers, will not amount to any delegation of powers.
The core issue, which arises for consideration is whether Additional District Magistrate can exercise powers conferred by Section 14 of the Act and assist a secured creditor in taking possession of the secured asset and pass an order in favour of the secured creditor for taking possession or control of any secured asset.
For answering the question posed before us for adjudication, it may be relevant to quote Section 14 of the Act.
"14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.-
(1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset 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 asset, 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 assets 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 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;
(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 not 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 satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets;
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 of 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."
A perusal of the aforesaid Section goes to show that it only refers to Chief Metropolitan Magistrate or the District Magistrate, who have been empowered to assist secured creditor in taking possession over the secured asset.
Placing reliance upon the use of word 'order' in the proviso to Section 14 of the Act, it has been submitted that authorities specified in Section 14 exercise judicial function while providing assistance to the secured creditor and, thus, the same cannot be entrusted to Additional District Magistrate. In our considered opinion, Section 14 of the Act is procedural in nature and only empowers the authorities to assist the secured creditor in taking over possession of the secured assets as per the procedure contemplated therein. The Section does not empower the authorities specified therein with any power to adjudicate in respect of any dispute pertaining to the secured assets. Power exercised by the authorities specified in Section 14, since is only an administrative power, authorising any authority to exercise the same, will not amount to delegation of power.
Our view finds support from the following observations made by the Hon'ble Apex Court in the case of Standard Chartered Bank Vs. Noble Kumar & Ors., 2013 (10) SCALE 540, "These provisions stipulate that a secured creditor who is seeking the intervention of the Magistrate under Section 14 is required to file an affidavit furnishing the information contemplated under various Sub-clauses (i) to (ix) of the proviso and obligates the Magistrate to pass suitable orders regarding taking of the possession of the secured assets only after being satisfied with the contents of the affidavits. The satisfaction of the Magistrate contemplated under the second proviso to Section 14 (1) necessarily requires the Magistrate to examine the factual correctness of the assertions made in such an affidavit but not the legal niceties of the transaction. It is only after recording of his satisfaction the Magistrate can pass appropriate orders regarding taking of possession of the secured asset."
In Union Bank of India Vs. State of Maharashtra, AIR 2010 BOM 150, Bombay High Court has taken the view that Section 14 is only procedural in nature and does not clothe the authorities with the power to adjudicate. It may be relevant to quote the following from the said judgment.
"Section 14 of the SARFAESI Act is procedural in nature and that the procedure stipulated therein enables the secured creditor to take the assistance of Chief Metropolitan Magistrate or District Magistrate in taking possession of the secured assets. It was also held that Section 14 only empowers the authorities to assist the secured creditor in taking possession of the secured assets as per the procedure contemplated under Section 14, but does not clothe the District Magistrate with the power to adjudicate in respect of any dispute pertaining to any secured asset."
Gujrat High Court in the case of Mansa Synthetic Pvt. Ltd. & Ors. Vs. Union of India, AIR 2012 GUJ 90 has held that authorities specified in Section 14 is bound to assist the secured creditor in taking possession of secured asset and is not empowered to decide question of legality or propriety of any action taken by the secured creditor under Section 14 of the Act.
A Full Bench of Andhra Pradesh High Court in the case of T.R. Jewellery & Ors. Vs. State Bank of India & Ors., AIR 2016 Hyderadabad 125 has also held that authorities empowered under Section 14 of the Act to assist the secured creditor are not vested with any power to adjudicate or decide any dispute in respect of secured assets and Section 14 is only procedural. It may be relevant to extract the following from the said pronouncement.
"27. Relying upon the word order used in the proviso to Section 14, it has been urged, that the Chief Metropolitan Magistrate is exercising judicial function while assisting the secured creditor and the same cannot be entrusted to Chief Judicial Magistrate in non-metropolitan area when the Legislature never contemplated the same. It has been further urged that if really the intention of the Legislature was to give such power to Chief Judicial Magistrate, it would have referred to it atleast in the amendment brought to Section 14 in the year 2013. It is true that Section 14 of the Act refers only to Chief Metropolitan Magistrate and District Magistrate. But, if really the proceedings before the Chief Metropolitan Magistrate are judicial in nature, the Legislature would not have allowed the District Magistrate or the Chief Metropolitan Magistrate to authorize any Officer subordinate to them to take possession of such assets and documents relating there to and forward such assets and documents to the secured creditor. At this stage, an argument was sought to be advanced, stating that delegation as referred to in Section 14(1A) is only with regard to execution of the order by an Officer subordinate to Chief Metropolitan Magistrate or District Magistrate and not passing of the order. The same cannot be accepted. It is to be noted that Section 14(1)(a)(b) which deal with assistance by Chief Metropolitan Magistrate and District Magistrate also refers to taking possession of such assets and documents and forwarding them to the secured creditor."
The issue as to whether Additional District Magistrate can exercise power under Section 14 of the Act was subject matter of consideration by a Division Bench of this Court in the case of Irshad Husain Vs. District Magistrate Moradabad & Ors., 2009 (3) ADJ 81 (D.B.). The argument that Additional District Magistrate/Additional Collector has no power or authority to pass order under Section 14 of the Act was repelled by the Division Bench and it was held that District Magistrate/Collector shall include Additional District Magistrate/ Additional Collector.
The same issue was considered by another Division Bench of this Court in the case of Rich Field Industries Pvt. Ltd. Vs. State Bank of India & Ors., 2016 (10) ADJ 192 and after considering the judgment in the case of Irshad Husain (supra), the Division Bench answered the issue as under.
"It has been a considered legal position that the power exercised under Section 14 of the SARFAESI Act by the Collector/District Magistrate is only an administrative power and thus authorizing any authority to exercise these powers does not amount to the delegation of the power and, in view of the Full Bench judgment of the Supreme Court and the Division Bench judgment of Allahabad High Court, referred to above, this Court finds no illegality in the order that has been passed under Section 14 of the SARFAESI Act by the Additional District Magistrate."
Apart from above, under Section 20 of the Criminal Procedure Code, the District Magistrate and Additional District Magistrate in a district are appointed from amongst the executive Magistrates, so appointed by the State Government. The said section reads as under.
"20. Executive Magistrates.- (1) In every district and in every metropolitan area. The State Government may appoint as many persons as it thinks fit to be Executive Magistrates and shall appoint one of them to be the District Magistrate.
(2) The State Government may appoint any Executive Magistrate to be an Additional District Magistrate, and such Magistrate shall have such of the powers of a District Magistrate under this Code or under any other law for the time being in force as may be directed by the State Government.
(3) Whenever, in consequence of the office of a District Magistrate becoming vacant, any officer succeeds temporarily to the executive administration of the district, such officer shall, pending the orders of the State Government, exercise all the powers and perform all the duties respectively conferred and imposed by this Code on the District Magistrate.
(4) The State Government may place an Executive Magistrate in charge of a sub-division and may relieve him of the charge as occasion requires; and the Magistrate so placed in charge of a sub-division shall be called the Sub-divisional Magistrate.
(5) Nothing in this section shall preclude the State Government from conferring. Under any law for the time being in force, on a Commissioner of Police, all or any of the powers of an Executive Magistrate in relation to a metropolitan area."
Thus, both the District Magistrate and Additional District Magistrate are executive Magistrates and an Additional District Magistrate is empowered to exercise all such powers of District Magistrate under the Criminal Procedure Code or any other law in force, if authorised for the same.
Similarly Section 3 of the Cr.P.C. provides for construction of references to a Magistrate in the Code. Sub-section 4 (b) of Section 3 of the Code prescribes that where, under any law, other than this Code, functions exercisable by a Magistrate, which are administrative or executive in nature, shall be exercisable by an Executive Magistrate. Additional District Magistrate is also an executive Magistrate.
Once it is a settled legal proposition that power exercised under Section 14 of the Act by the District Magistrate is only an administrative power and not adjudicatory in nature and, thus, authorising Additional District Magistrate, who is also an Executive Magistrate will not amount to any delegation of power and there exists no illegality in exercise of powers of the said Section by an Additional District Magistrate.
In view of above facts and discussions, there is no error of jurisdiction in entertaining the application under Section 14 of the Act by an Additional District Magistrate and the order passed by him cannot be said to be illegal or without jurisdiction.
The writ petition, accordingly, fails and stands dismissed.
February 8th, 2017 VKS Judgement delivered by me under Sub-Rule (2) of Rule 1 of Chapter VII of the Rules of the Court.
8.2.2017