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TMI Blog2022 (3) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 optio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets and Enforcement of Security Interest Act, 2002 for short, 2002 Act ? 2. The High Court of Judicature at Bombay for short, Bombay High Court vide judgment and order dated 6.11.2019 in Writ Petition (L) No.28480 of 2019 opined that the advocate, not being a subordinate officer to the CMM or DM, such appointment would be illegal. Against this decision, four separate appeals Civil Appeal No .. of 2022 @ SLP (Civil) No.30240 of 2019; Civil Appeal No .. of 2022 @ SLP (Civil) No.2055 of 2020; Civil Appeal No ..of 2022 @ SLP (Civil) No of 2022 @ Diary No.17059 of 2020; and Civil Appeal No ..of 2022 @ SLP (Civil) No of 2022 @ Diary No.23733 of 2020 have been filed by the concerned parties. On the other hand, the High Court of Judicature at Madras for short, Madras High Court vide judgment and order dated 18.3.2020 in C.R.P. No.790 of 2020 has taken a contrary view while following earlier decision of the same High Court on the reasoning that the advocate is regarded as an officer of the court and, thus, subordinate to the CMM or the DM. Having so held, it allowed the civil revision petition filed by the secured creditor (Canara Bank). Against this decision, a special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 30.10.2017. Their account was declared Non-Performing Asset for short, NPA . As a sequel, on 13.11.2017, a notice under Section 13(2) of the 2002 Act was issued to them and posted by Registered Post A.D. The docket was returned with intimation posted meaning thereby, the noticees were not available at the given address. The order further records that the Bank served the notice upon the borrowers by publication on 31.12.2017 calling upon them to pay the outstanding dues within sixty days. However, loan amount remained unpaid. As a result, the secured creditor approached the ACMM to pass appropriate directions, on which application the stated order dated 26.7.2019 came to be passed appointing an advocate. The same was communicated to the borrowers by the advocate on 11.10.2019. That order was challenged before the Bombay High Court by the borrowers by way of writ petition Writ Petition (L) No.28480 of 2019 under Article 226 of the Constitution of India, which has been decided by the High Court vide impugned judgment and order holding that Section 14(1A) of the 2002 Act does not permit the CMM/DM to authorise an advocate. The language used in the provision is amply clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n complied with by the secured creditor (Bank) and in any case, the appointment of the Advocate Commissioner was illegal. The Tribunal allowed the challenge vide order dated 4.2.2020. That decision came to be assailed by the Bank before the Madras High Court by way of civil revision petition C.R.P. No.790 of 2020 under Article 227 of the Constitution of India. The High Court noted two issues arising for its consideration, in paragraph 9 of the impugned judgment. The first issue was regarding the correctness of the conclusion recorded by the Tribunal on the plea of non-compliance of clauses (i) to (ix) of Section 14 of the 2002 Act. That came to be set aside being manifestly erroneous (see paragraphs 10 and 11 of the impugned judgment). However, on the second issue about power of the CMM/DM to appoint an Advocate Commissioner, the High Court, amongst other, relied upon its earlier decision as well as of the High Courts of Delhi and Kerala, to conclude that the Tribunal committed manifest error, including not to take notice of the decision of the same High Court referred to in the impugned judgment. In short, the Madras High Court accepted the argument of the secured creditor (Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the secured assets and taking possession thereof. This decision has attained finality owing to the dismissal of S.L.P. (Civil) No.1671 of 2009 on 2.2.2009 by this Court. Notably, this decision was rendered before the amendment of Section 14 and in particular insertion of sub-Section (1A) Inserted by Act 1 of 2013, sec.6(b) (w.e.f. 15.1.2013, vide S.O.171(E), dated 15.1.2013) . 10. The aforementioned decision, however, had been followed by the learned Single Judge of the High Court of Kerala in the case of The Federal Bank Ltd., Ernakulam supra at Footnote No.9 which had arisen after the amendment of Section 14 of the 2002 Act and insertion of sub-Section (1A) therein. Despite insertion of sub-Section (1A), learned Single Judge following the judgment in Muhammed Ashraf supra at Footnote No.8 , answered the issue in the following words: 5. It may however appear at first blush that such an Advocate Commissioner is not an officer subordinate to the District Magistrate or the Chief Judicial Magistrate. But a reference to Sections 12 and 17 of the Code of Criminal Procedure, 1973 indicates that the term District Magistrate or Chief Metropolitan Magistrate denotes the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Chief Metropolitan Magistrate, instead of personally visiting the spot to take possession of assets and documents, can very well appoint the Advocate Commissioner to visit on his behalf, as in the case of issuing of commissions under the Civil Procedure Code, as it is not possible for the Chief Metropolitan Magistrate/District Magistrate to visit personally to take possession. 10. The amendment inserted by Act 1 of 2013 viz., Section 14(1-A) is permitting the Subordinate Officers to do the above said acts and nowhere prohibits the Chief Metropolitan Magistrate from authorising an Advocate Commissioner to go on his behalf for taking possession of assets and documents and forwarding the same to the secured creditor. The amendment gives discretion to the Chief Metropolitan Magistrate/District Magistrate either to authorise or take possession of such assets and document and the word used being 'may', it is not always necessary on the part of the Chief Metropolitan Magistrate to authorise any officer subordinate to him. It is a well settled proposition of law that the observance of the word 'may' used in the statute is only directory, in the sense, non-compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cured creditor, that is, the Andhra Bank. 8. Nevertheless, according to me, the language of Section 14(1A) of the SARFAESI Act uses the expression may and not shall . 8.1 There are two ways of appreciating the provision. First, that the expression may relates to the choice of the subordinate officer. The other meaning that can be placed on the provision is that District Magistrate/CMM is vested with discretion to appoint officers subordinate to him to take possession of the secured asset. 8.2 The District Magistrate/CMM is obliged to take possession once an application in that behalf is preferred under sub-section (1) of Section 14 of the SARFAESI Act by the secured creditor. 8.3 It is in the exercise of such power that recourse can be taken by the District Magistrate/CMM to the provisions of sub-section (1A) of Section 14. This provision was introduced via Act 1 of 2013. Before that the District Magistrate/CMM were perhaps taking recourse to sub-section (2) of Section 14 and, thus, appointing advocates as receiver. 8.4 To my mind, after the insertion of sub-section (1A) in Section 14, the only change that has been brought about is that the District Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment) Rules, 2002 shows that after possession of immovable property is physically taken over by the Officer authorized custody thereof can be handed over for care and protection of the property to any person authorized or appointed by him. Thus, after possession of a secured asset is taken over, its custody can be entrusted to any person who need not be an Officer of the Court or authorized subordinate staff of the Court. This could perhaps solve half the problem faced by District Magistrates and Chief Metropolitan Magistrates. 13 The cry of anguish in paragraph No.7 of the impugned order is also justified. Each day, atleast two, if not three petitions, are filed by way of mercy pleading to this Court that some time be given to the defaulting borrower to clear the defaulting loan so that the property mortgaged can be saved. Wide and varied facts such as exams of the children are ensuing, old and aged parents, paternal or maternal aunt are suffering from an ailment and are under going treatment at a nearby hospital are pleaded. The borrower is making attempts to sell another property to clear the outstanding amounts etc. Equities are pleaded. 14 Courts in India being not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Goods and Services Tax Act, 2017; Section 8 of the Fugitive Economic Offenders Act, 2018; and Section 31 of the Banning of Unregulated Deposit Schemes Act, 2019. enacted by Parliament/State Legislature. Somewhat similar expression has been used in Articles 53, 154 and 311 of the Constitution of India and in other legislations Article 53 ( officers subordinate to him ), Article 154 ( officers subordinate to him and any authority subordinate to the Governor ) and Article 311 ( an authority subordinate to that ) of the Constitution of India; Section 376 ( police officer subordinate to such police officer ) of the Indian Penal Code, 1860; Section 2 ( members of the subordinate ranks of any police-force ) and Section 7 ( any police-officer of the subordinate ranks ) of the Police Act, 1861; Section 4A ( any such officer subordinate to him ) of the Guardians and Wards Act, 1890; Section 3(5) ( Officer subordinate to the Governor General of India ) of the General Clauses Act, 1897; Sections 8 and 22 ( officers subordinate to the Jailer ) and Section 48 ( officer subordinate to the Superintendent ) of the Prisons Act, 1894; Section 195 ( any officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating authority subordinate to him ) of the Customs Act, 1962; Section 10M ( any officer subordinate to the Director of Inspection and Quality Control ) and Section 13 ( authority subordinate to the Central Government ) of the Export (Quality Control and Inspection) Act, 1963; Section 79 ( any officer subordinate to the Board ) of the Punjab Reorganisation Act, 1966; Section 42 ( any person subordinate to the State Government ) of the Unlawful Activities (Prevention) Act, 1967; Section 21 ( authority subordinate to the Central Government and authority subordinate to such Government ) of the Passports Act, 1967; Section 34 ( any officer subordinate to it ) and Section 154 ( any police officer subordinate to him ) of the Code of Criminal Procedure, 1973; Section 12 ( an officer subordinate to that Government and an officer subordinate to a State Government ) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; Section 3 ( subordinate ranks of the police force ), Section 12 ( other officers of subordinate rank ), Section 20 ( his subordinates ), Sections 21 and 25 ( any police officer of subordinate rank ), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency Virus and Acquired Immune Deficiency Syndrome (Prevention and Control) Act, 2017; Section 100 ( authority subordinate to the Central Government and authority subordinate to the State Government ) of the Industrial Relations Code, 2020. enacted by Parliament/State Legislature with little variation to further the intent of the concerned enactment. 16. The construct of the provision, however, must depend on the context of the legislative intent and the purpose for which such dispensation has been envisaged. The setting in which the expression has been used in the concerned section of the Act would assume significance. 17. This Court has had occasion to deal with identical provision in the Motor Vehicles Act, 1939 for short, 1939 Act , in the case of A. St. Arunachalam Pillai vs. M/s. Southern Roadways Ltd. Anr. AIR 1960 SC 1191 (5-Judge Bench) . Even in that case, the Court had to resolve the conflicting views of the Full Bench of the Madras High Court and of the High Court of Andhra Pradesh. The Full Bench of the Madras High Court in S. Krishnaswamy Mudaliar Anr. vs. P.S. Palani Pillai Anr. AIR 1957 Mad 599 had occasion to consider the question as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Kerala in the case of Muhammed Ashraf supra at Footnote No.8 gave expansive meaning to the rule that it was open to the CMM/DM to take assistance of an advocate to be appointed as a commissioner for taking possession of the secured assets and documents relating thereto for being handed over or forwarded to the secured creditor. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches 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. (emphasis supplied) 22. The underlying purpose of the 2002 Act is to empower the financial institutions in India to have similar powers as enjoyed by their counterparts, namely, international banks in other countries. One such feature is to empower the financial institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Institution) is now required to comply certain conditions and to disclose that by way of an application accompanied by affidavit duly affirmed by its authorised officer in that regard. Sub-Section (1A) is in the nature of an explanatory provision and it merely restates the implicit power of the CMM/DM in taking services of any officer subordinate to him. The insertion of sub-Section (1A) is not to invest a new power for the first time in the CMM/DM as such. 25. Thus understood, the question is: whether the past practice followed by most of the courts across the country in recognising the power of the CMM/DM to appoint an advocate as a commissioner to assist him in merely taking possession of the secured assets and documents relating thereto and to forward the same to the secured creditor, needs to be discontinued as being prohibited owing to insertion of sub-Section (1A)? Section 14 of the 2002 Act, as amended and applicable to the cases on hand, reads thus: 14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.-(1) Where the possession of any secured assets is required to be taken by the secured credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the provisions of sub-section (4) of section 13 read with section 14 of the principal Act; (ix) that the provisions of this Act and the rules made thereunder had been complied with: Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets within a period of thirty days from the date of application: Provided also that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days. Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act. (1A) The District Magistrate or the Chief Metropolitan Magistrate may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such property. (4) The authorised officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed of. (5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:- (a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or (b) by inviting tenders from the public; (c) by holding public auction including through e-auction mode; or (d) by private treaty. Provided that in case of sale of immovable property in the State of Jammu and Kashmir, the provisions of Jammu and Kashmir Transfer of Property Act, 1977 shall apply to the person who acquires such property in the State. (6) the authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 29. It is common knowledge that in the respective jurisdictions, there is only one CMM/DM. If he is expected to reach at every location himself for taking possession, in some jurisdictions it would be impracticable, if not impossible, for him to do so owing to large number of applications in the given jurisdiction being a commercial city. Accordingly, strict construct would defeat the legislative intent and purpose for enacting the 2002 Act. Indeed, logistical problems of the Office of the CMM/DM cannot be the basis to overlook the statutory provision. However, we are persuaded to take the view that an advocate is and must be regarded as an officer of the court and subordinate to the CMM/DM for the purposes of Section 14(1A) of the 2002 Act. 30. Furthermore, as was the situation obtaining before insertion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office of trust, authority, or command. In public affairs, the term refers esp. to a person holding public office under a national, state, or local government, and authorized by that government to exercise some specific function. In corporate law, the term refers esp. to a person elected or appointed by the board of directors to manage the daily operations of a corporation, such as a CEO, president, secretary, or treasurer. Cf. DIRECTOR (2). (emphasis supplied) 33. The expression subordinate as given in P. Ramanatha Aiyar s Advanced Law Lexicon Volume 4 (6th Edition) reads thus: Subordinate defined. Act 24, 1859, section 1; Mad Act 3, 1909, section 2. Belonging to an inferior rank, grade, class or order; dependent upon the authority or power of another [Section 121, Indian Evidence Act (1 of 1872)]; a person or thing that is ranked lower. By the use of the word subordinate without any qualifying words, the legislature has expressed its legislative intention of making punishable such subordinates also who have no connection with the functions with which the business or transaction is concerned. An Assistant Controller of Imports in the office of the J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate . Naturally, no definition was necessary in view of the provision already made in Section 133-A. It must be assumed that the Madras Legislature was aware of the existence of Section 133-A when it introduced Section 44-A, and, when it used the word subordinate in that section, it must have intended that the word subordinate should be understood only in the manner to determine which provision had already been made in Section 133-A of the Act. Krishna Swamy Mudaliar v Palani Pillai, MLJ : QD (1956-1960) Vol.IV C151 : (S) AIR 1957 Mad 599 (FB). [Motor Vehicles Act (4 of 1939), section 133-A] The word subordinate occurring in Article 311(1), has reference to subordination in rank and not subordination in respect of powers and duties. Article 311(1) cannot be read as implying that the removal must be by the very same authority who made the appointment or by his direct superior. It is enough that the removing authority is of the same rank of grade. Laxminarayana Sarangi v State of Orissa, MLJ : QD (1961-1965) Vol. II C1050 : AIR 1963 Orissa 8 : ILR (1962) Cut 492. [Constitution of India, Article 311(1)] The word subordinate in Article 311(1) Constitution of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or order. Officers subordinate to him. A Minister is an officer subordinate to the Governor. Shiv Bahadur Singh v State of Uttar Pradesh, AIR 1953 SC 394. 36. As regards the procedure for taking possession of the secured assets, it can be discerned from Section 13 read with Section 14 of the 2002 Act. Section 13(4) permits the secured creditor to take recourse to one or more of the specified measures; and to enable the secured creditor to do so even at the stage of pre-confirmation of sale; in terms of Section 14, the CMM/DM has power in that regard albeit after passing order on a written application given by the secured creditor for that purpose. Once the order is passed, the statutory obligation cast upon the CMM/DM stands discharged to that extent. The next follow-up step is of taking possession of the secured assets and documents relating thereto. The same is ministerial step. It could be taken by the CMM/DM himself/herself or through any officer subordinate to him/her, including the Advocate Commissioner who is considered as an officer of his/her court. The Advocate Commissioner is not a new concept. The advocates are appointed as Court Commissioner to perform div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpound about the role of the advocate as being an officer of the court in Lalit Mohan Das vs. The Advocate-General, Orissa Anr. AIR 1957 SC 250. The Constitution Bench observed thus: (11) .. A member of the Bar undoubtedly owes a duty to his client and must place before the Court all that can fairly and reasonably be submitted on behalf of his client. He may even submit that a particular order is not correct and may ask for a review of that order. At the same time, a member of the Bar is an officer of the Court and owes a duty to the Court in which he is appearing. He must uphold the dignity and decorum of the Court and must not do anything to bring the Court itself into disrepute. . (emphasis supplied) 39. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M and the advocate being an officer of the court. The apprehension of the borrowers about improper execution of orders of the CMM/DM passed under Section 14(1) of the 2002 Act by the Advocate Commissioner, is plainly misplaced. Further, being an officer of the court and appointed by the CMM/DM, the acts done by the Advocate Commissioner would receive immunity under Section 14(3) of the 2002 Act - as an officer authorised by the CMM/DM. There is no reason to assume that the advocate so appointed by the CMM/DM would misuse the task entrusted to him/her and that will not be carried out strictly as per law or it would be a case of abuse of power. Rather, going by the institutional faith or trust reposed on advocates being officers of the court, there must be a presumption that if an advocate is appointed as commissioner for execution of the orders passed by the CMM/DM under Section 14(1) of the 2002 Act, that responsibility and duty will be discharged honestly and in accordance with rules of law. 43. For the view taken by us hitherto, the exposition in Satheedevi vs. Prasanna Anr. (2010) 5 SCC 622 , M/s. Hiralal Rattanlal etc. etc. vs. State of U.P. Anr. etc. etc. (1973) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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