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TMI Blog2010 (7) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter, the impugned proceedings are unsustainable in the eye of law, as it would amount to arbitrary exercise of the powers conferred under section 14. Accordingly, the impugned order of the learned Chief Judicial Magistrate, Chengalpattu, dated December 14, 2009, is set aside. The writ petition is allowed. - WP NO. 4600 OF 2010 AND MP NOS. 2 AND 3 OF 2010 - - - Dated:- 27-7-2010 - D. MURUGESAN AND T. MATHIVANAN, JJ. A. Swaminathan for the Petitioner. N.V. Srinivasan for the Respondent . JUDGMENT D. Murugesan J. The petitioner is the absolute owner of the property situate at No. 114-117, Old Mahabalipuram Road, Sholinganallur Village, Chennai, admeasuring to an extent of 26,154 sq. ft. and a building with ground and first floor each measuring an extent of 1,274 sq.ft. and 783 sq.ft. comprised in re-survey No. 493/2, lying within the Sub Registration District of Saidapet. He was formally one of the Directors of Vemasi Chemicals Private Limited at Ambattur. The said company availed a loan from the Standard Chartered Bank, Chennai, for a sum of Rs. 40 lakhs on December 30, 2003. The said loan amount carried interest at the rate of 11.5 per cent. pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel appearing for the respondent-bank would, on the other hand, submit that the bank/financial institution is entitled to take symbolic possession under section 13(4) of the Act and before such symbolic possession is taken, no notice is contemplated. In the event, the bank/financial institution experienced any difficulty in taking possession, it may approach the Chief Judicial Magistrate concerned under section 14. Learned counsel would submit that the rights of the bank/financial institution to invoke section 14 of the Act is independent of the provisions of section 13(4) in the event the bank decides to take physical possession of secured immovable property. The powers of the Chief Metropolitan Magistrate/District Magistrate under section 14 is only ministerial and no adjudication is required. In view of the same, the order of the Chief Metropolitan Magistrate/District Magistrate is final and the same cannot be called in question in any court or before any authority. 5. To decide the controversy, the following provisions require consideration. The provisions of sections 13(2), 13(3A), 13(4), 14 and 17 of the Act read as under : "13. Enforcement of security interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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. (2) For the purpose of securing compliance with the provisions of the sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or caused to be used, such force, as may, in his opinion, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority . . . 17. Right to appeal.-(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 alongwith 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 measures had been taken : . . . (2) The Debts Recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secured creditor. 7. At the time when section 13(2) of the Act was considered by the Supreme Court in Mardia Chemicals Ltd. v. Union of India [2004] 120 Comp Cas 373; [2004] 4 SCC 311, there was no specific provision contemplating any opportunity for the borrower to make any objection or representation to the notice issued under section 13(2) of the Act. When the provision of section 13(2) was considered by the apex court, it was observed that it was necessary that the borrowers should have remedy to ventilate their grievance by submitting a reply explaining the reasons as to why measures may or may not be taken under sub-section (4) of section 13, in case of non-compliance of notice within sixty days. That explanation must be considered by the secured creditor by applying its mind and an internal mechanism must be evolved to consider such objections raised in the reply notice. 8. Based on the above observation of the apex court, sub-section (3A) of section 13 was inserted by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004, with effect from November 11, 2004. By that newly inserted provision, a borrower is made entitled to make a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets the possession of which has been taken over by the secured creditor ; and ( 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." 10. The secured creditor may also approach the Chief Metropolitan Magistrate/District Magistrate for assistance in taking possession of the secured assets as provided under section 14 of the Act. The powers of the Chief Metropolitan Magistrate or District Magistrate are only ministerial and the orders of such judicial officers passed in exercise of the provision of section 14 shall not be called in question in any court or before any authority meaning thereby that the said order is not amenable to appeal under section 17 of the Act. The scope of powers by the Chief Metropolitan Magistrate/Judicial Magistrate under section 14 is very limited in the sense that the officers should satisfy as to whether the secured asset falls within his territorial jurisdiction and whether notice under section 13(2) is given or not. 11. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 13(4) of the said Ordinance read with rule 9 of the said Rules on this . . . . . . . . day of . . . . . . of the year . . . . . . The borrower in particular and the public in general is hereby cautioned not to deal with the property and any dealings with the property will be subject to the charge of the . . . . . . (name of the Institution) for an amount of Rs. . . . . . and interest thereon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Description of the immovable property All that part and parcel of the property consisting of Flat No. . . . ./Plot No. . . . . . in Survey No. . . . . . . /City or Town Survey No. . . . . . ./Khasara No. . . . . . . within the registration Sub-District . . . . . . and District . . . . . . . . . . . . Bounded ; On the North by On the South by On the East by On the West by Date :Sd/- Place :Authorised Officer (Name of the Institution)" 13. The provisions of sub-section (4) of section 13 entitle the secured creditor to take possession of the secured assets of the borrower in the event of non-compliance with notice under section 13(2). A set of procedures is prescribed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he property, he could approach the Chief Metropolitan Magistrate/District Magistrate under section 14. It cannot be the intention of the Legislature to allow a secured creditor to invoke the provisions of section 14 in all cases irrespective of the provisions of section 13(4), as such power may result in drastic consequences on the borrower over his property. 16. In that event, a duty is cast upon the secured creditor to satisfy the Chief Metropolitan Magistrate/District Magistrate, as the case may be, as to the strict compliance with the provisions of sections 13(2) onwards till steps taken under section 13(4) and rule 8. Though the Chief Metropolitan Magistrate/District Magistrate discharges only a ministerial function when an order is passed under section 14, nevertheless he must be satisfied as to, among other things, the compliance of the other provisions and in the event the learned Magistrate is not satisfied as to the compliance with the provisions, he may refuse to exercise the power under section 14. In this context, we may point out that though the borrower or the guarantor would be entitled to approach the Tribunal after the proceedings of section 13(4), such a righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of an advocate commissioner to take possession of the property will lead to deprivation of a property of an individual bypassing the safeguards made under rule 8. In this context, we may also refer that the Appendix IV to rule 8 obligates the authorised officer to give a notice to the borrower as to possession having been taken and the public in general are also made to know of such action taken by the authorised officer. We may also point out that though rules have been framed to give effect to the provisions of section 13(2) and 13(4) of the Act, no rule has been framed as to how the advocate commissioner appointed by the Chief Metropolitan Magistrate/District Magistrate should take possession of the property, whether by again following the procedure contemplated under Rule 8 or not. In the absence of the rule, the strict compliance of the provisions of section 13(4) and rule 8, even in case of possession taken by virtue of an order under section 14, assumes importance. 18. Learned counsel appearing for the respondent had relied upon a judgment of a Division Bench of this court in Sundaram Home Finance Ltd. v. Thasildar [2007] 2 CTC 1. That was a case where the issue wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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