Supreme Court

The Authorised Officer, Indian Bank V. D. Visalakshi and Anr.

MANU/SC/1303/2019

23.09.2019

Banking

A Chief Judicial Magistrate is equally competent to deal with application moved by the secured creditor under Section 14 of SARFAESI

The seminal question involved in present appeals is whether the Chief Judicial Magistrate (“CJM”) is competent to process the request of the secured creditor to take possession of the secured asset under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“2002 Act”). There are conflicting views of different High Courts on this question. The High Courts of Bombay, Calcutta, Madras, Madhya Pradesh and Uttarakhand have interpreted the said provision to mean that, only the Chief Metropolitan Magistrate (“CMM”) in metropolitan areas and the District Magistrate (“DM”) in non¬-metropolitan areas are competent to deal with such request. On the other hand, the High Courts of Kerala, Karnataka, Allahabad and Andhra Pradesh have taken a contrary view of the same provision, to mean that it does not debar or preclude the CJM in the non¬metropolitan areas to exercise power under Section 14 of the 2002 Act.

The earliest decision is of the Division Bench of the High Court of Kerala in Muhammed Ashraf and Anr. Vs. Union of India (UOI) and Others. The Court noted that, Section 14 of the 2002 Act expressly refers to CMM in relation to metropolitan areas and DM for non¬metropolitan areas. It then went on to observe that as the powers and functions of CJM in non¬metropolitan areas and CMM in metropolitan areas are one and the same (with only difference that CMM exercises powers in metropolitan areas and CJM in non¬metropolitan areas); and the expression CJM and CMM are interchangeably used namely, one is synonymous for the other depending on the area under its jurisdiction, by interpretative process, it concluded that in non¬ metropolitan areas, apart from DM, the CJM is also competent to exercise powers under Section 14 of the 2002 Act.

An inquiry conducted by the stated authority under Section 14 of the 2002 Act, is a sui generis inquiry. It is an administrative or executive function regarding verification of the affidavit and the relied upon documents filed by the parties. The inquiry is required to be concluded within the stipulated time frame. While undertaking such an inquiry, as is observed by this Court, the authority must display judicious approach, in considering the relevant factual position asserted by the parties. The inquiry does not result in adjudication of inter se rights of the parties in respect of the subject property or of the fact that the transaction is a fraudulent one or otherwise.

The powers and functions of the CMM and the CJM are equivalent and similar, in relation to matters specified in the Code of Criminal Procedure, 1973 (CrPC). These expressions (CMM and CJM) are interchangeable and synonymous to each other. Moreover, Section 14 of the 2002, Act does not explicitly exclude the CJM from dealing with the request of the secured creditor made thereunder. The power to be exercised under Section 14 of the 2002 Act by the concerned authority is, by its very nature, non-judicial or State's coercive power. Furthermore, the borrower or the persons claiming through borrower or for that matter likely to be affected by the proposed action being in possession of the subject property, have statutory remedy under Section 17 of the 2002 Act and/or judicial review Under Article 226 of the Constitution of India. No prejudice is likely to be caused to the borrower/lessee; nor is it possible to suggest that they are rendered remediless in law.

There is nothing wrong in giving expansive meaning to the expression "CMM", as inclusive of CJM concerning non-metropolitan area, who is otherwise competent to discharge administrative as well as judicial functions as delineated in the CrPC on the same terms as CMM. The CJM is equally competent to deal with the application moved by the secured creditor under Section 14 of the 2002 Act. Accordingly, view taken by the High Courts of Kerala, Karnataka, Allahabad and Andhra Pradesh is upheld and decisions of the High Courts of Bombay, Calcutta, Madras, Madhya Pradesh and Uttarakhand in that regard is reversed.

Relevant

Muhammed Ashraf and Anr. Vs. Union of India (UOI) and Others, MANU/KE/0456/2008

Tags : Inquiry CJM Competency

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