2022 (3) TMI 3 - SC - Indian Laws

Interpretation of statute - possession of secured assets - expression used in the provision of section 14 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), may authorise any officer subordinate to him - whether it is open to the District Magistrate (DM) or the Chief Metropolitan Magistrate (CMM) to appoint an advocate and authorise him/her to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor within the meaning of Section 14(1A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002? HELD THAT - While considering the purport of the expression in Section 14(1A) of the 2002 Act, it must be noticed that the said provision was inserted vide Act 1 of 2013 with effect from 15.1.2013. In absence of express provision, such as sub-Section (1A) under the unamended Act, the CMM/DM could take possession of secured assets on a written application made by the secured creditor under Section 14(1); and while doing so in terms of Section 14(2) of the 2002 Act, it was open to the CMM/DM to take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion be necessary. This would include taking assistance of the local Police to obviate any untoward situation or law and order problem at the site while taking over possession. It was an inherent or implicit power vested in the stated authority and more particularly because advocates were no less than officers of the court of the CMM/DM. This view has been consistently followed not only by the High Court of Kerala, but also by other High Courts such as High Courts of Madras and Delhi. Most of the CMMs/DMs across the country have been following that dispensation. The only discordant note can be discerned from the decision of the Bombay High Court which is impugned before us. The Bombay High Court has followed the strict and literal interpretation rule and, thus, preferred statutory subordination logic. The view so taken can be sustained only if we were to hold that legislative intent in using the expression any officer subordinate to him completely rules out the other option which is being followed since commencement of the Act in 2002. The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the 2002 Act from the secured creditor for that purpose. As soon as such application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the 2002 Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. The latter is a ministerial act. It cannot brook delay. Time is of the essence. This is the spirit of the special enactment. However, it is common knowledge that the CMM/DM are provided with limited resources. That inevitably makes it difficult, if not impossible, for the CMM/DM to fulfil his/her obligations with utmost dispatch to uphold the spirit of the special legislation - It is well established that an advocate is a guardian of constitutional morality and justice equally with the Judge. He has an important duty as that of a Judge. He bears responsibility towards the society and is expected to act with utmost sincerity and commitment to the cause of justice. He has a duty to the court first. As an officer of the court, he owes allegiance to a higher cause and cannot indulge in consciously misstating the facts or for that matter conceal any material fact within his knowledge. Application disposed off.

Issues Involved:
1. Whether the District Magistrate (DM) or Chief Metropolitan Magistrate (CMM) can appoint an advocate to take possession of secured assets and documents under Section 14(1A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (2002 Act).

Issue-Wise Detailed Analysis:

1. Interpretation of Section 14(1A) of the 2002 Act:
The core question addressed is whether the DM or CMM can appoint an advocate to take possession of secured assets and documents under Section 14(1A) of the 2002 Act. This provision states that the DM or CMM "may authorize any officer subordinate to him" to take possession of such assets and documents and forward them to the secured creditor.

2. Conflicting High Court Decisions:
The Bombay High Court ruled that an advocate, not being a subordinate officer, cannot be appointed under Section 14(1A). Conversely, the Madras High Court, along with the Kerala and Delhi High Courts, held that an advocate could be considered an officer of the court and thus subordinate to the DM or CMM.

3. Precedent and Legislative Intent:
The Kerala High Court in Muhammed Ashraf & Anr. vs. Union of India & Ors. and subsequent cases upheld the appointment of advocates, emphasizing the implicit powers of the DM/CMM to use necessary means, including advocates, to take possession of secured assets. This view was reinforced by the Madras High Court in S. Chandramohan & Anr. vs. The Chief Metropolitan Magistrate, Egmore, Chennai & Ors., and the Delhi High Court in Rahul Chaudhary vs. Andhra Bank & Ors.

4. Literal vs. Functional Interpretation:
The Bombay High Court's strict interpretation of "officer subordinate" was challenged. The Supreme Court noted that such a literal interpretation might defeat the legislative intent of the 2002 Act, which aims to empower financial institutions to recover secured assets efficiently. The Court emphasized the need for a functional interpretation, recognizing advocates as officers of the court who can assist in executing the DM/CMM's orders.

5. Role of Advocates as Officers of the Court:
The Supreme Court highlighted that advocates are officers of the court and have a duty to assist in the administration of justice. This status justifies their appointment as commissioners to take possession of secured assets under the 2002 Act.

6. Practical Considerations:
The Court acknowledged logistical challenges faced by DMs and CMMs, who may not have adequate subordinate staff to handle the volume of applications under Section 14. Appointing advocates can help address these practical issues without compromising the statutory requirements.

7. Legal Definitions and Precedents:
The Court examined various legal definitions and precedents to interpret the terms "any officer subordinate" and "officer." It concluded that the broad and functional interpretation aligns with the legislative intent and practical needs of the 2002 Act.

Conclusion:
The Supreme Court ruled that the DM/CMM could appoint an advocate as a commissioner to take possession of secured assets and documents under Section 14(1A) of the 2002 Act. This decision resolves the conflict between the High Courts and supports a functional interpretation that facilitates the efficient recovery of secured assets by financial institutions.

Separate Judgments:
The judgment delivered by the Supreme Court was unanimous, and no separate judgments by individual judges were mentioned.

Final Orders:
1. The appeals filed by the secured creditors against the Bombay High Court's judgment were allowed, setting aside the impugned judgment.
2. The special leave petition filed by the borrowers against the Madras High Court's judgment was delinked for further hearing on a limited issue.
3. No order as to costs, and pending applications were disposed of.

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