Gujarat High Court
Canara Bank Limited (Erstwhile ... vs State Of Gujarat on 13 January, 2022
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
C/SCA/8587/2021 ORDER DATED: 13/01/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8587 of 2021
==========================================================
CANARA BANK LIMITED (ERSTWHILE SYNDICATE BANK)
Versus
STATE OF GUJARAT
==========================================================
Appearance:
MR MASOOM K SHAH FOR MR VISHWAS K SHAH(5364) for the
Petitioner(s) No. 1
MR DHAWAN JAYSWAL, AGP for the Respondent(s) No. 1,2,3,4
==========================================================
CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 13/01/2022
ORAL ORDER
1. Heard learned advocate Mr. Masoom K. Shah for learned advocate Mr. Vishwas K. Shah for the petitioner and learned Assistant Government Pleader Mr. Dhawan Jayswal for the respondent-State through video conference.
2. By this petition under Article 227 of the Constitution of India, the petitioner has prayed for the following reliefs :
"A. Be pleased to quash and set aside impugned order passed by Ld. Collector and District Magistrate, Sabarkantha in case no. POL/Securitisation/Case no. 32 of 2018 (2) dated 08.08.2019;
B. Be pleased to quash and set aside impugned communication by Ld. Mamlatdar and Executive Magistrate, Himmatnagar bearing no. POL/Securitisation/Vashi/11- Page 1 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 1/2020 dated 10.11.2020;
C. Be pleased to direct Ld. Collector and District Magistrate, Sabarkantha to restore its order dated 08.07.2019 passed in POL/Securitisation/Case no. 32 of 2018 (1) wherein application under Section 14 of Securitisation Act, 2002 made by Petitioner bank was allowed and thereafter be pleased to direct Respondent No. 3 - Ld. Mamlatdar and Executive Magistrate, Himmatnagar to proceed with said order and facilitate taking over of physical possession of secured assets by the Petitioner Bank in coordination with Respondent No. 4;
D. Pending hearing, admission, and final disposal of this Petition, be pleased to stay the implementation of impugned order passed by Ld. Collector and District Magistrate, Sabarkantha in case no. POL/Securitisation/Case no. 32 of 2018 (2) dated 08.08.2019;
E. Pending hearing, admission, and final disposal of this Petition, be pleased to stay the implementation of impugned communication by Ld. Mamlatdar and Executive Magistrate, Himmatnagar bearing no. POL/Securitisation/Vashi/11- 1/2020 dated 10.11.2020.
F. Pending hearing, admission, and final disposal of this petition be pleased to stay further proceedings in context of order dated 08.01.18 passed by Respondent no.1 under Gujarat Protection of Interest of Depositors (in financial establishment) Act, 2003 qua secured assets of Petitioner Bank.
G. Cost of this petition.Page 2 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022
C/SCA/8587/2021 ORDER DATED: 13/01/2022 H. Any other relief, order or direction which Hon'ble Court may deem just, fit, proper and equitable in the facts of the case."
3. Brief facts of the case are as under :
3.1) The petitioner, erstwhile Syndicate bank was merged into Canara bank as part of the plan of the Union of India to consolidate 10 State-owned banks to four mega banks to make them more competitive, which came into effect from 1st April, 2020.
3.2) Erstwhile Syndicate bank advanced financial assistance to the tune of Rs.
1,92,00,000/- to one M/s. Reset Agritech Limited (borrower) for which a mortgage deed was executed on 1st June, 2017 between the erstwhile petitioner bank and the borrower whereby several properties came to be mortgaged with the petitioner-bank.
3.3) The borrower defaulted in repayment of loan. For such default, an FIR came to be registered at CID (Crime), Gandhinagar Zone police station bearing I.C.R. No. 000/2017 against the accused persons under the various provisions of the Indian Penal Code, the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (For short "the Act of 1978") and the Gujarat Protection of Interest of Depositors Act, 2003.
Page 3 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022C/SCA/8587/2021 ORDER DATED: 13/01/2022 3.4) After filing of FIR, respondent no.1 passed order dated 8th January, 2018 to attach the properties of the borrower mentioned in the Annexure thereto.
3.5) On 15th January, 2018, CID Crime Branch started the procedure for attachment of the properties mentioned in the order dated 8th January, 2018.
3.6) On 28th February, 2018, the petitioner-bank declared the accounts of the borrower as Non-Performing Asset in consonance with the guidelines laid down by the Reserve Bank of India.
3.7) On 5th March, 2018, the petitioner bank issued demand notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(For short "the SARFAESI Act"). Due to persistent default in repayment of financial assistance availed by the borrower, notice was also published in Economic Times (English) and Sandesh (Local) newspapers on 17th March, 2018.
3.8) On 27th August, 2018, the petitioner bank issued possession notice under section 13(4) of the SARFAESI Act read with Rule 8 Page 4 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 of the Security Interest (Enforcement) Rules, 2002 and took symbolic possession of the secured assets of the borrower, which was also published in Business Standard (English) newspaper on 31st August, 2018.
3.9) The petitioner-bank thereafter filed application under section 14 of the SARFAESI Act for taking physical possession of the secured assets before the Collector, which came to be allowed by the District Magistrate vide order dated 8th July, 2019.
3.10) On 26th July, 2019, a rectification order came to be passed by the District Collector and Magistrate, Sabarkantha as the order dated 8th July, 2019 allowing section 14 application had wrongly mentioned the survey number of one of the properties, by virtue of which original order stood modified to that extent.
3.11) On 7th August, 2019, police protection came to be granted to the petitioner-bank to secure the peaceful physical possession of the secured assets of the borrower.
3.12) On 8th August, 2019, the Collector and District Magistrate, Sabarkantha recalled its order dated 8th July, 2019 and quashed the Page 5 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 same for the reason that the secured assets were already attached by the Government of Gujarat, Home Department vide its order dated 8th January,2018.
3.13) On 14th August, 2019 Mamlatdar and Executive Magistrate passed order recalling the schedule date of 20th August, 2019 for securing the physical possession of assets of borrower in pursuance of order dated 8th August, 2019 passed by the Collector and District Magistrate, Sabarkantha.
3.14) On 9th November, 2020 Mamlatdar and Executive Magistrate, Himmatnagar passed order fixing date of 26th November, 2020 for securing the physical possession of secured assets of the borrower in view of original order dated 8th July, 2018 passed by the Collector and District Magistrate, Sabarkantha. However, on 10th November, 2020 the said communication came to be recalled on account of order dated 8th August, 2019 passed by the Collector and District Magistrate, Sabarkantha, whereby section 14 order was recalled.
3.15) It is the case of the petitioner that the petitioner-bank came to know about recall of section 14 order only by impugned communication dated 10th November, 2020 and Page 6 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 that the petitioner-bank was not heard at the time of recalling of the said order.
3.16) The petitioner-bank issued auction sale notice on 15th May, 2021 scheduling auction of secured assets on 22nd June, 2021.
3.17) The petitioner therefore, being aggrieved by the action of the respondent authorities of recalling the order passed under section 14 of the SARFAESI Act, has preferred the present petition.
4. Learned advocate Mr. Shah for the petitioner submitted that respondent-District Magistrate could not have passed the impugned order dated 8th August, 2019 by cancelling the order dated 8th July, 2019 passed under Section 14 of the SARFAESI Act because once an order is passed under section 14 of the SARFAESI Act, the District Magistrate becomes a functus officio and he cannot review or recall the order passed by him.
4.1) Learned advocate Mr. Shah further submitted that the ground on which the order is cancelled by the District Magistrate is also not available under section 26E of the SARFAESI Act because as per the provision of section 26E, priority is assigned to secured creditor - the petitioner bank vis-a-vis the Page 7 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 State Government and merely because the secured asset is under the attachment of the State Government, such asset do not cease to be a secured asset and hence order under section 14 of the SARFAESI Act cannot be cancelled by the District Magistrate.
4.2) It was submitted that the respondent-State has not objected to the recovery proceedings initiated by the petitioner-bank at any point of time and petitioner-bank is entitled to recover its outstanding dues on sale of secured assets which are mortgaged as security for advancing loan to the borrower.
4.3) It was submitted that when there is a conflict between the Local Act and the Special Act, the priority is to be given to the Special Act and in the facts of the case, SARFAESI Act is a Special Act whereby the secured creditor can enforce security against the borrowers and therefore, the respondent - District Magistrate could not have recalled or cancelled the order which was already passed under section 14 of the SARFAESI Act.
4.4) It was submitted that the petitioner-bank has rightful claim over the secured assets which are attached by the State Government under the provisions of Page 8 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 sections 3 to 6 of the Act of 1978 pursuant to the FIR registered with C.I.D. (Crime) Gandhinagar Zone police station being C.R. No. I-000/2017 for the offences under sections 409, 406, 420, 467, 498, 471, 474, 120-B of the Indian Penal Code. It was therefore, submitted that the petitioner has first charge over the property in question under the provisions of the SARFAESI Act though the same are attached pursuant to the registration of the aforesaid offences and the order passed under section 14 of the SARFAESI Act could not have been recalled and the petitioner bank ought to have been allowed to take over the physical possession of the property in question.
5. On the other hand, learned Assistant Government Pleader Mr. Jayswal submitted that the State Government has already attached the property in the year 2018 and therefore, District Magistrate committed an error while passing the order dated 8th July, 2019 under section 14 of the SARFAESI Act which was rectified by the impugned order dated 8th August, 2019 by recalling the same and therefore, the petition is required to be dismissed.
5.1) Learned AGP Mr. Jayswal relied upon the following averments in the affidavit in Page 9 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 reply filed on behalf of respondent nos. 2 and 3 Collector and District Magistrate as well as Mamlatdar and Executive Magistrate :
"6. It is respectfully submitted that it is the case of the petitioner - bank that in the year 2019 the Syndicate Bank was merged into the Canara Bank i.e. the petitioner - bank as a part of Central Government Plan to consolidate 10 State owned bank to four mega banks. The merger came into effect from 1st April, 2020.
7. It is further the case of the petitioner -- bank that the erstwhile Syndicate Bank had advanced financial assistance to the tune of Rs.
1,92,00,000/- to one M/s Reset Agritech Limited -- borrower, whose one of the directors is Geetaben Manishkummar Shah and it is the case of default in repayment by the borrower.
8. The borrower had mortgaged the following properties:
i. All those pieces and parcel of the immovable property in question i.e. NA industrial Land of Block/Survey no. 657, Khata No. 541
-- total land admeasuring about 13759.00 sq. mtrs. with construction thereon godown (Vegetable Processing Unit) situated at Village Hathrol, Ta.: Himmatnagar, Dist.: Sabarkantha within limit of Hathrol Gram Panchayat, Ta.: Himmatnagar, Dist.:
Sabarkantha, Gujarat owned by Mrs. Gitaben M. Shah D/o Mr. Devjibhai Arjanbhai Patel, Mr. Manishkumar Satyanarayan Shah Page 10 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 And ii. All those pieces and parcel of the immovable property in question i.e. Building constructed on NA plot no. 56 of Survey no. 397 paiki total land admeasuring about 181.47 sq. mtrs (i.e. 60.00 sq. mtrs. GF + 28.00 sq. mtrs. F.F. built - up area) bearing Nava Group Gram Panchayat property no. 56, situated at Village Balvantpura, Ta.:
Himmatnagar, Dist.: Sabarkantha owned by Mrs. Gitaben M. Shah.
9. I say and submit that on 22.10.2018 the petitioner - bank has submitted the application before the District Magistrate, Himmatnagar, Sabarkantha under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement and Security Interest Act, 2002 (Securitisation Act) for taking Physical possession of the above stated properties. The application was filed along with affidavit and Checklist. The copy of the application submitted on 22.10.2018 along with the relevant documents is annexed herewith and marked as Annexure-R1 to this affidavit in reply.
10. I say and submit that in the clause H of the checklist submitted by the petitioner - bank provides for "the details of the litigation if any, for "recovery of the amount may be before the Civil Court, or may be before DRT or before the Board of Nominees or before any forum known to the law as the case may be:" and to answer the said column, the petitioner - bank answered as 'No". And also Provided certificate on Page 11 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 17.11.2018 that no matter before D.R.T and any Court matter is pending against the borrower. The copy of the Certificate given by the bank dated 17.11.2018 is annexed herewith and marked as Annexure-R2 to this affidavit in reply.
11. And therefore by considering the application along with the affidavit and checklist provided by the petitioner - bank, the District Magistrate, Sabarkantha had passed order on 08.07.2019 u/s. 14 of the Securitisation Act by allowing the application for physical possession of the above mentioned secured assets.
12. I say and submit that there is no mentioned about any court's order or order passed under provisions of law and therefore the order was passed u/s. 14 of the Securitisation Act for physical possession of the both the mentioned properties. But after the order dated 08.07.2019, the DYSP (CID Crime) had informed the office of the Collector and District Magistrate, Himmatnagar about the order dated 08.01.2018 passed by the State Government through Home Department for attachment of properties of M/s. Shagun Build Square Ltd., M/s Shagun Agrispace Ltd. and its Chairman, Managing Director, Director and their relatives C.I.D. (Crime), Gandhinagar Zone Police Station vide I.C.R. no. 03/2017 and the copy of the said order was provided to the office of the Collector and Dist. Magistrate, Himmatnagar, Sabarkantha.
The copy of the order dated 08.01.2018 Page 12 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 is annexed herewith and marked as Annexure-R3 to this affidavit in reply.
13. I say and submit that the above order was passed in view of the complaint lodged under the provisions of the Prize Cheats and Money Circulation (Banning) Act, 1978. The said complain was lodged against the borrower Mrs. Geetaben Manishkumar Shah and therefore the attachment order was passed for the properties owned by the said Geetaben Manishkumar Shah which includes both the properties mentioned as secured assets by the petitioner - bank and therefore after knowing the factual aspect of the secured assets being attached by way of attachment order dated 08.01.2018 passed by the State Government through Home Department, the Collector and District Magistrate had passed an order on 08.08.2019 by cancelling the earlier order passed u/s. 14 of the Securitisation Act dated 08.07.2019.
14. I say and submit that at the time of earlier order dated 08.07.2019 passed u/ s. 14, the factual position regarding the attachment order passed by the State Government qua of the secured assets mentioned by the petitioner - bank was not under knowledge of the Collector and District Magistrate, Himmatnagar and therefore once the said aspect was came into knowledge of the fact, the said order was immediately recall and cancelled by the District Magistrate, Himmatnagar, Dist. Sabarkantha and in the premises therefore, the answering respondent prayed before this Hon'ble Court to dismiss the present petition in the interest of justice."
Page 13 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022C/SCA/8587/2021 ORDER DATED: 13/01/2022 5.2) It was therefore, submitted that the impugned order passed by the District Magistrate is in consonance with the order dated 8th January, 2018 passed by the State Government through Home Department for the attachment of the property in question and therefore, no order could have been passed by the District Magistrate under section 14 of the SARFAESI Act.
6. Having heard the learned advocates for the respective parties and having considered the documents on record, it is necessary to refer to the provisions of sections 14 and 26E of the SARFAESI Act which reads as under :
"Section 14"
"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 Page 14 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 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.............."
"Section 26E"
"26E. Priority to secured creditors.-- Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority.
Explanation.-- For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code.]"
7. On perusal of the above provisions, it is clear that the District Magistrate has to discharge the ministerial act of providing assistance to the secured creditor to take physical possession of the secured assets Page 15 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 when the secured creditor has initiated the proceedings under section 13 of the SARFAESI Act.
8. As per the provisions of section 26E of the SARFAESI Act, the secured creditor has first claim/charge over the sale proceeds of the secured assets towards the recovery of the outstanding dues. Therefore, it is the mandatory for the District Magistrate to pass an order to provide police assistance to the secured creditors to take the possession of the secured assets as per provision of section 14 of the SARFAESI Act. Merely because there was an attachment of the property by the State Government under the provisions of Act of 1978, the possession of the property cannot be continued with the borrower and as such physical possession of the property ought to have been taken over by the petitioner - secured creditor as per the provisions of the SARFAESI Act.
9. This Court in case of Gruh Finance Limited v. The District Magistrate and others rendered on 9th February, 2017 in Special Civil Application No.436/2017 in similar facts has held as under :
"4. Looking at the contents of the impugned order whereby the District Magistrate has rejected the application under Section 14, it is viewed and stated by the Magistrate Page 16 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 that the Bank had not approached with clean hands as certain criminal proceedings were pending before the court of Chief Judicial Magistrate, Mehsana and the details about the said proceedings were not disclosed. It was next recorded that in Criminal Inquiry No.3 of 2015 pending before the court of Judicial Magistrate, First Class, Kadi, a report under Section 202 of the Code of Criminal Procedure was submitted and in that report, it was stated that the complainant had paid the amount and that no amount was due. The learned District Magistrate reasoned that the dispute was sub-judice in that way. On the ground that the dispute between the parties being sub-judice, the Magistrate refused to exercise the power and rejected the application of the petitioner. It is evident that the District Magistrate in his reasoning and approach while passing the impugned order, drifted into the adjudicatory arena of the dispute. This was not the function to be discharged by the District Magistrate under Section 14 of the Act, nor such adjudicatory exercise was within his ambit of jurisdiction. The order was based upon such exercise.
5. The question about the kind and nature of powers exercised by the District Magistrate under Section 14 and the order which may be passed upon such application, is no longer res integra.
5.1 Following observations are noticed from the decision of the Apex Court in United Bank of India vs. Satyawati Tondon [(2010) 8 SCC 110], "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 Page 17 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 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."
(Para 21) 5.2 The observation applied by the Supreme Court is that the District Magistrate is oblige to take possession. This Court in Bank of India vs. Pankaj Dilipbhai Hemani [2007 (2) GLH 326] considered the scope of powers exercisable under Section 14 and it was stated that the role assigned to the District Magistrate is of a ministerial kind in rendering assistance. It was observed and held as under inter alia that adjudicatory powers are conferred on the Tribunal functioning under Section 17 and the District Magistrate cannot enter into that arena, "On a plain reading it is apparent that the said provision is a procedural provision whereunder the Chief Metropolitan Magistrate or the District Magistrate, (the Authority) as the case may be, shall, on a request being made to him (a) take possession of such asset and documents relating to the assets; AND (b) forward such assets and documents to the secured creditor. Under sub-section (2) of Section 14 of the Securitisation Act the authority is empowered to take such steps and use such force as may be necessary for taking possession of the secured assets and the documents relatable thereto. Under sub-section (3) of Section 14 of the Securitisation Act, such act of the authority is protected and the action shall not be questioned in any Court or before any authority. Thus, it is apparent that the role envisaged by the legislature in so far as the Authority is concerned, is a ministerial role in the form of rendering assistance and Page 18 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 exercising powers by virtue of the authority vested in the District Magistrate or the Chief Metropolitan Magistrate including use of force as may be necessary. The said Authority, namely, the Chief Metropolitan Magistrate or the District Magistrate is not vested with any adjudicatory powers. There is no other provision under the Securitisation Act in exercise of which the said Authority, who is approached by a secured creditor, can undertake adjudication of any dispute between the secured creditor and the debtor or the person whose property is the secured asset of which possession is to be taken. If such adjudicatory powers were to be vested in the Authority, the Securitisation Act would have made a specific provision in this regard." (Para 6) 5.2.1 It was thereafter stated, "Section 13(4) of the Securitisation Act provides for various measures a secured creditor may take to recover the secured debt; one of such measures is to take possession of the secured asset. A person aggrieved by any of the measures referred to in sub-section (4) of Section 13 of the Securitisation Act is granted a right to make an application to the Debts Recovery Tribunal (the Tribunal) within the prescribed period under Section 17(1) of the Securitisation Act. Under subsections (2), (3) and (4) of Section 17 of the Securitisation Act the statute has provided a complete code, including the powers to the Tribunal to declare any of the measures taken by the secured creditor under Section 13(4) of the Securitisation Act invalid and consequential restoration of possession to the person from whom the Page 19 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 possession was taken. A person aggrieved by any order made by the Tribunal under Section 17 of the Securitisation Act has a statutory right of appeal under Section 18 of the Securitisation Act. Therefore, under the guise of acting under Section 14 of the Securitisation Act the Authority cannot be permitted to usurp statutory powers vested in the Tribunal." (Para
7) 5.2.2 It was finally observed, "Hence, the Authority who is called upon to act under Section 14 of the Securitisation Act can only assist, nay, is bound to assist the secured creditor in taking possession of the secured asset. Any dispute between the parties regarding the secured asset raised before the Authority cannot be gone into by the Authority; the Authority has to relegate the aggrieved person to seek statutory remedy under the Securitisation Act after taking possession and handing over to the secured creditor. The Authority cannot be permitted to read anything beyond this is Section 14 of the Securitisation Act. (Para 9) 5.3 In Bharatbhai Ramniklal Sata vs. Collector and District Magistrate [2010 (2) GLR 985], after relying on the decision of the Supreme Court in Transcore vs. Union of India [(2008) 1 SCC 125] observed as under, "From the aforesaid provisions of law and the decision of the Supreme Court, it will be clear that for taking possession, one of the measures for recovery of secured debts under subsection (4) to Section 13 of the Act includes the measures taken by secured creditor under Section 14 and therefore, if any order is passed under Page 20 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 Section 14, though it cannot be challenged before any Court of law in view of sub-section (3) to Section 14, but one can raise the legality and propriety of such measures of taking possession under Section 17, if such measure is against the Securitisation Act or Rules framed thereunder." (Para
11) 5.4 Similar view was reiterated in Canara Bank vs. Sulay Traders through Bipin Kantilal Vakta [2010 (1) GLR 770], "After the aforesaid details are submitted, the learned Magistrate would be required to examine the same and verify the aspects being condition precedent for exercise of the power under Section 13(4) of the Act. If the learned Magistrate has any doubt about the genuineness of the statement or the reliability of the statement made, or about the compliance of any condition precedent for exercise of the power under Section 13(4) of the Securitisation Act, he has two options; one is that, he may call upon the Bank itself to supply the necessary details on any aspects, if he is not satisfied about the condition precedent for exercise of the power under Section 13(4) of the Securitisation Act; the second is that he may issue the notice to the borrower for verification of the existence of any fact which is required to be verified by him. Thereafter, he may proceed for exercise of the power under Section 14 of the Securitisation Act.
Be it noted that the Magistrate while exercising power under Section 14 of the Securitisation Act is required to verify the existence of the facts attracting power under Section 13(4) of the Securitisation Act, and he is not Page 21 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 required to examine or adjudicate the rights of the parties, if it is demonstrated before him that certain facts do exist. It is the only factual verification to be made by the learned Magistrate. For example, the existence of equitable mortgage wherein he will be required to verify whether there is a document of equitable mortgage and whether the original Title Deeds are deposited with the Bank or not. Similarly, whether notice under Section 13(2) of the Securitisation Act has been served upon the person concerned or not, whether any reply or objection is raised or not and if yes, whether decision is taken or not and whether such decision is communicated or not and whether any payment is made or not after the notice under Section 13(2) of the Securitisation Act and if yes, any amount outstanding, etc. There cannot be any exhaustive list of the verification of facts, but suffice it to state that he would only be required to verify the existence of the fact which are relevant to have condition precedent for exercise of the power under Section 13(4) of the Securitisation Act. But he will not be required to adjudicate on the aspects of illegality and validity of such facts or the rights flowing therefrom." (Para 7 & 8) 5.5 In I.D.B.I. Bank Ltd. vs. Hytaisun Magnetics Ltd. [2011 (2) GLH 1438], the same issue was addressed by the Division Bench and in the context various decisions on the point were surveyed. In that case, the borrowers had not disputed the fact of having taken financial assistance, however a plea was taken that the Bank was not holding any original title deeds of the property and therefore had no security interest which was essential for enforcement of the mortgage under the Securitisation Act. The District Page 22 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 Magistrate dismissed the application of the Bank under Section 14 of the Act. The Division Bench while setting aside the order proceeded to lay down the following principles, reproducing those relevant to the subject matter issue here, "(a) Only when the secured creditor finds difficulty to take possession of the secured asset, it may take assistance of the Chief Metropolitan Magistrate or the District Magistrate under Section 14 of the Act.
(b) The measures taken under Section 14 amounts to measures taken under Section 13(4) of the Act.
(c) As the measures taken under Section 14 amount to measures taken under Section 13(4) of the Act, under Section 14(3) such measures cannot be called in question before any Court or Tribunal.
(d) If such measures taken under Section 14 which amount to measures taken under Section 13(4) is not in accordance with the Securitization Act or the Rules framed thereunder, including the objection, if any, raised that the asset is not a secured asset to be taken under Section 13(4), the aggrieved person has a remedy under Section 17 before the Debts Recovery Tribunal to show that the measures taken are against the Act [Section 13(4)] or the Rules framed thereunder.
(e) All such determination is to be made by the Debts Recovery Tribunal including the question whether the asset is a secured asset or not and the Chief Metropolitan Magistrate or the District Magistrate has not been empowered to adjudicate such dispute, but is directed only to assist the secured creditor in taking possession Page 23 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 of the secured asset. If they are not empowered to adjudicate the dispute, they cannot also call for the secured creditor to produce any document to decide whether the asset is secured asset or not, which will be futile exercise in absence of power to adjudicate such issue." (Para 20) 5.6 In yet another decision of the Division Bench in Mansa Synthetic Private Limited vs. Union of India being Special Civil Application No.1829 of 2012, the principle was reiterated that the Magistrate is bound upon an application made, to assist the secured creditor in taking possession of the secured assets and is not empowered to decide the question of legality and propriety of any of the actions taken by the secured creditor under Section 13(4) of the Act. The proposition of law was followed and reiterated in Consumer Protection and Analytic Committee vs. State of Gujarat [2013 (4) GLR 3642]. The other decision on the same line is in Gruh Finance Limited vs. District Magistrate & Collector [2012 (2) GCD 1288]. The reiterative pronouncements in Kotak Mahindra Bank vs. District Magistrate decided by the Division Bench on 25.08.2011 being Special Civil Application No.8326 of 2011, in Kotak Mahindra Bank vs. District Magistrate decided on 18.06.2015 being Special Civil Application No.7512 of 2014 and in Gruh Finance Limited Vs District Magistrate decided on 03.07.2015 being Special Civil Application No.4838 of 2015, the later two decisions being by learned Single Judge.
5.7 In Gruh Finance Limited Vs District Magistrate, Surat being Special Civil Application No.18551 of 2015 decided on 25.11.2016, this Court held and observed in respect of scope of powers under Section 14 of the SARFAESI Act as under, "The powers and the jurisdiction under Page 24 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 Section 14 of the Act exercisable by the District Magistrate is not adjudicatory in nature. What are the rights of the parties in the civil realm, are not required to be gone into by the District Magistrate, nor the District Magistrate has powers to pronounce upon the rights of the parties in the context of any other law while entertaining the application under Section 14 of the Act. The function is anything but adjudicatory. The claims in respect of rights over the property cannot be considered at all. The powers are executory nature. What the Magistrate is supposed to see is whether ingredients of Section 14 of the Act are satisfied or not. The power is described as ministerial where the District Magistrate would turn line his adjudicatory eye. No rights are determined for the parties in Section 14 proceedings, as for that the Legislature has provided a special remedy before the Debt Recovery Tribunal who exercises the adjudicatory powers in respect of the disputes which may arise between the Bank and borrower and other aggrieved persons in course of the steps under the SARFAESI Act, 2002." (Para 6.1)
6. The case of the respondents about payment of amount was disputed by the petitioner. In any view, said aspect may be a defence for the respondents in the proceedings which may be initiated by the petitioner, but it does not constitute a ground for the District Magistrate to exercise powers under Section 14 of the Act."
10. In view of above conspectus of law, when the District Magistrate has already passed an order under section 14 of the SARFAESI Act on Page 25 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022 C/SCA/8587/2021 ORDER DATED: 13/01/2022 8th July, 2019, he could not have sit in appeal or review his own order passed under section 14 of the SARFAESI Act by recalling or cancelling the same as is being done by the impugned order dated 8th August, 2019.
11. For the foregoing reasons, impugned order dated 8th August, 2019 is hereby quashed and set aside and order dated 8th July, 2019 passed by the District Magistrate under section 14 of the SARFAESI Act is restored and the petitioner-bank is entitled to take the physical possession of the secured assets from the borrower as per the order dated 8th July, 2019.
12. It is made clear that the attachment placed by the State Government under the Act of 1978 shall continue to operate without being affected by taking over the possession by the petitioner- secured creditor under section 14 of the SARFAESI Act.
13. The petition is accordingly disposed of.
(BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 26 of 26 Downloaded on : Sat Dec 24 08:51:31 IST 2022