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TMI Blog2010 (7) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of this legal position the contention canvassed by the learned counsels for respondent Nos.3 to 6 in this regard is devoid of substance. The respondent Nos.3 to 6 approached the District Magistrate who had no jurisdiction had passed the impugned order dated 19th April, 2010 and directed the petitioner to hand over the possession of the land, viz., Survey Nos.158 and 159 and, therefore, the auction of the secured assets which was scheduled on 20th April, 2010 could not take place. The conduct of the respondent Nos.3 to 6 on the back-drop of the above referred facts clearly demonstrates that though they have admitted the liability, dues of the bank, however, were successful in preventing the auction of the secured assets on one reason or the other, which has virtually resulted in frustrating the objectives of the SARFEASI Act. - WP No. 4033 of 2010 - - - Dated:- 5-7-2010 - D.D. SINHA AND MRIDULA BHATKAR, JJ Pravin Samdani and Harinder Toor Nainesh N Amin for the Petitioner. V S Gokhale, Lilian Lobo, G S Godbole and Ms. Khushbu Prabhu for the Respondent. JUDGMENT SINHA, J Rule, returnable forthwith. Heard the petition finally on merits at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his wife Respondent No.5 have guaranteed the payment of the dues of the respondent No.3 in consideration of sanction of restructured credit facilities to the respondent No.3 by executing the letter of guarantee dated 3rd April, 2007 for an amount of Rs. 30.82 crore. 5. The learned counsel for the petitioner has submitted that respondent No.3 has defaulted in repayment of dues of the petitioner-bank and the petitioner- bank having classified the account of such debt as non-performing asset ('NPA') on 31st May, 2007, has issued notice dated 26th June, 2007 under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act') calling upon the respondent No.3 and respondent No.6 mortgagors/guarantors to pay to the petitioner within 60 days from the date of notice a sum of Rs. 28,05,26,044.66 paise together with interest. Respondent No.3 and the mortgagors/guarantors have been served by personal service and they have acknowledged the service of the notice. 6. It is the case of the petitioner that on failure on the part of the respondent Nos.3 and 6 to comply with the requisitions as contained in the notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured assets on 4th March, 2010. The respondent Nos. 3 to 6 filed Writ Petition (Lodging) No.485 of 2010 in this court seeking necessary direction to the Debt Recovery Appellate Tribunal ('DRAT') to urgently hear the appeal on merits and for stay of the proposed auction which was fixed by the petitioner on 4th March, 2010. The said writ petition was dismissed as the respondent Nos.3 to 6 had already preferred an appeal before the DRATs, vide order dated 5th March, 2010. 11. It is the case of the petitioner that having failed to obtain any order either from DRAT Mumbai in appeal filed under section 18 of the SARFAESI Act or in Writ Petition (L) No.485 of 2010, respondent Nos.3 to 6 surreptitiously and without any notice to the petitioner, filed appeal bearing No.Desk/LNA/105/2010 on 3rd March, 2010, inter alia , challenging the order dated 17th July, 2008 passed by the District Collector/Magistrate under section 14 of the SARFAESI Act. Respondent Nos.3 to 6 prayed for interim relief to stay the scheduled sale of the mortgaged properties/secured assets, which was on 4th March, 2010. It is contended that the Additional Commissioner, Konkan Division, Mumbai, vide order dated 3r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 2008 passed in case No.39 of 2008 under section 14 of the SARFAESI Act. Similarly the impugned order is contrary to principles of natural justice as no notice or opportunity was given to the petitioner to put their case or reply to the contentions of respondent Nos.3 to 6. It is contended that it was obligatory on the part of the respondent No.2 to hear the petitioner before passing the impugned order. 15. It is contended that the petitioner in his notice issued under section 13(2) of the SARFAESI Act has given the description of all the immovable properties which were mortgaged to secure the dues of the petitioner-bank. It is contended that the District Magistrate under section 14 of the SARFAESI Act needs only to verify from the bank or financial institution whether notice under section 13(2) of SARFAESI Act is given or not and whether the secured assets fall within his jurisdiction. There is no adjudication of any kind permissible in law by the District Magistrate. It is contended that while passing the impugned order, District Magistrate travelled beyond the jurisdiction vested in him under section 14 of the SARFAESI Act and, therefore, the impugned order is without juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the District Magistrate was ministerial in nature and was without jurisdiction, the District Magistrate was entitled to revoke/ modify the said order considering the scheme of section 31( i ) of the SARFAESI Act by passing the impugned order, which is just and proper and is sustainable in law. 19. We have considered the contentions canvassed by the respective counsels for the parties and perused the impugned order passed by the respondent No.2. At the outset, we must express that the scope, ambit and purport of section 14( i ) of the SARFAESI Act has already been decided by this court and other High Courts, and, therefore, it will be appropriate to consider those decisions on the subject. 20. The Division Bench of this court in the case of Trade Well (supra) in paragraph 90 has observed, thus : "90. Following conclusions emerge from the above discussion : 1.The bank or financial institution shall, before making an application under section 14 of the NPA Act, verify and confirm that notice under section 13(2) of the NPA Act is given and that the secured asset falls within the jurisdiction of CMM/DM before whom application under section 14 is made. The bank and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 22. Similarly, in case of Bank of India (supra), the learned Judge in paragraph 8 has observed, thus : "8. 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 authority, the authority has to relegate 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." 22.1 It is evident that section 14 of the SARFAESI Act is an enabling section which empowers Magistrate only to assist secured creditor in taking possession of the secured assets and, therefore, the power vested in the District Magistrate is limited and specific. Plain reading of section 14 of the SARFAESI Act demonstrates that it does not clothe the District Magistrate with power to undertake any adjudication in respect of any dispute between the parties regarding the secured assets. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset liability mis-match and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. Under section 13(4) if the borrower fails to discharge his liability in full within the period specified in sub-section (2) of section 13 of the SARFEASI Act, the secured creditor is entitled to take recourse to one or more of the measures stipulated in sub section (4) of section 13 to recover his secured debt. 26. Section 14 enables the secured creditor to take the assistance of the Chief Metropolitan Magistrate or District Magistrate in taking possession of the secured assets. The power of the CMM or DM under section 14 as per the scheme of the said section can only be invoked by the secured creditor in taking possession of the secured assets. The intention of the Legislature is to enable the banks and the financial institutions to realise their long-term assets, improve recovery process of taking possession of the securities. As per scheme of section 14 of the SARFEASI Act, only secured creditor can invoke the power of the CMM or DM vested under this section. Sub-section (3) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these vital undisputed facts as well as in view of the legal position emerges from the above referred decisions on the subjects and in view of the scheme of the provisions of section 14 of the SARFAES1 Act, the District Magistrate, in our considered view, had no jurisdiction, power or authority to reconsider the issue which was finally concluded by the order dated 17th July, 2008, at the behest of the concerned respondents and adjudicate as to whether the land, viz., Survey No.158 and Survey No.159 was the agricultural land or otherwise and whether in view of the provisions of section 31(z) of the SARFAESI Act, the provisions of the said Act shall not apply to these survey numbers. The jurisdiction exercised by the Magistrate under section 14 of the SARFAESI Act being limited only to assist the secured creditor in taking possession of the secured assets, had no jurisdiction or authority to adjudicate and decide the issue about the status of the lands and exclude them from the purview of the SARFAESI Act as provided under section 31( i ) of the SARFEASI Act since DM has no jurisdiction to entertain any dispute relating to secured assets. The impugned order, therefore, is wholly w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power to adjudicate in respect of any dispute pertaining to secured assets. Section 14(1) of the SARFEASI Act provides the contingency in which the secured creditor can request in writing the CMM or DM within whose jurisdiction the secured assets falls to grant assistance, for taking over possession of the secured assets. Sub-section (2) of section 14 provides the procedure which CMM or DM may undertake for the purpose of securing compliance with the provisions of sub-section (1). Sub-section (3) of section 14 provides finality to the act of the CMM or DM done under section 14 with the rider that the said act shall not be called in question in any court or before any authority. It is, therefore, evident that the intention of the Legislature is to give finality to the act done by CMM or DM by exercising power under section 14. The Magistrate having been exercised the said power under section 14 virtually becomes functus officio in relation to the concerned issue. The order passed or act done by the Magistrate under section 14 is given finality by the statute. The general power provided under section 21 of the Act of 1897 is to add to, amend, vary or rescind any order, etc., is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondent Nos.3 to 6 was disposed of by the Additional Commissioner, Konkan Division on 1st April, 2010, the petitioner once again scheduled the auction of the secured assets on 20th April, 2010. However, the respondent Nos.3 to 6 approached the District Magistrate who had no jurisdiction had passed the impugned order dated 19th April, 2010 and directed the petitioner to hand over the possession of the land, viz., Survey Nos.158 and 159 and, therefore, the auction of the secured assets which was scheduled on 20th April, 2010 could not take place. The conduct of the respondent Nos.3 to 6 on the back-drop of the above referred facts clearly demonstrates that though they have admitted the liability, dues of the bank, however, were successful in preventing the auction of the secured assets on one reason or the other, which has virtually resulted in frustrating the objectives of the SARFEASI Act. 33. For the reasons stated hereinabove, impugned order dated 19th April, 2010 passed by the District Magistrate, Raigad, Alibaug in Case No.39 of 2008 is being without jurisdiction and illegal, hence, is unsustainable in law. Same is quashed and set aside. 34. Rule made absol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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