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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 ..... cate, 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 leave petition SLP (Civil) No.12011 of 2020 has been filed by the borrowers. 3. The High Courts of Kerala (in Muhammed Ashraf & Anr. vs. Union of India & Ors. AIR 2009 Kerala 14; The Federal Bank Ltd., Ernakulam vs. A.V. Punnus AIR 2014 Kera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby, 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. Such delegation could be done only to an officer subordinate and none else. The High Court rejected the argument that the overburdened CMM/DM had inadequate subordinate staff and it would be difficult, if not virtually impossible for the secured creditor to take possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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) that it was open to the CMM/DM to appoint an Advocate Commissioner for taking possession of the secured assets and documents relating thereto for being forwarded to the secured creditor in terms of Section 14(1A) of the 2002 Act. This decision has been challenged by the borrowers b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted 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 court and not the officer in person. An Advocate Commissioner is certainly an officer subordinate to the court and the words employed in Section 14 (1A) of the SARFAESI Act are not to be understood as meaning an officer subordinate in service. Section 284 of the Code of Criminal Procedure, 1973 in fact empo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 with those provisions will not render the proceedings invalid. Sometimes, the word 'shall' may also be directory and not mandatory. ...." It then adverted to the decisions of this Court in Dattatraya Moreshwar vs. The State of Bombay & Ors. AIR 1952 SC 181, Mahadev Govind Gharge & Ors. vs. Special Land Acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision 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 Magistrate/CMM has now the discretion to appoint even their subordinate officers as receivers. 8.5 Pertinently, sub-section (1A) of Section 14 does not bar the appointment of advocates as receivers. The same position obtains vis-à-vis Rule 8(3) of The Security Interest (Enforcement) Rules, 2002, which has been cited in the aforementioned judgment of the Bombay H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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 only Courts of Justice but Courts of Equity, the orders passed under Section 14 are stayed, but ultimately the petitions fail. 15 Howsoever inconvenient it may be to a Court, rights of parties cannot be curtailed in the manner done in the impugned order. If law permits, the borrower can always tender the outstanding amounts to the Bank or the Financial Institution before a sale of the secured assets take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subordinate to the Collector") of the Indian Succession Act, 1925; Section 34H ("any subordinate officer of his"), and Sections 110A and 110B ("any person subordinate to him") of the Insurance Act, 1938; Section 2(a) ("any officer subordinate to that officer") of the Indian Coconut Committee Act, 1944; Section 14A ("such officer or authority subordinate to the Central Government" and "such officer or authority subordinate to the State Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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"), Section 58 ("officers subordinate to him"), Section 70 ("any officer subordinate to the Commissioner of Police"), Section 122 ("police officer of subordinate rank") and Section 147 ("any police officer of subordinate rank") of the Delhi Police Act, 1978; Section 14 ("to which that officer is subordinate") of the National Security Act, 1980; Section 23 ("an Income-tax Officer subordinate to him") of the Hotel-Receipts Tax Act, 1980; Section 17A ("the officer, subordinate to him") of the Child and Adolescent La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 whether Regional Transport Officer was subordinate to the State Transport Commissioner. While examining that question, the Full Bench of the Madras High Court dealt with three views pressed into service before it. The first view was founded on "administrative subordination", the second on "functional subordination" and the third on "statutory subordination". The Full Bench accepted the third view, namely, "statutory subordination", being a safer and logical approach. In the context of the provisions of that Act, it was held that the Regional Transport Officer was not subordinate to the State Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 20. Indeed, in the case of advocate, the logic of "administrative subordination" or "statutory subordination" cannot be extended. Inasmuch as, for being a case of "statutory subordination", the provisions of the 2002 Act and the Security Interest (Enforcement) Rules, 2002 for short, "2002 Rules" made thereunder, must expressly provide for such mechanism. This cannot be said about the provisions of the 2002 Act and the Rules made thereunder. Even the logic of "administrative subordination" as considered by this Court in A. St. Arunachalam Pillai supra at Footnote No.41 cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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 institutions to take possession of securities and sell them. The same has been translated into provisions falling under Chapter III of the 2002 Act. Section 13 deals with enforcement of security interest. Sub-Section (4) thereof envisages that in the event a default is committed by the borrower in discharging his liability in full within the period specified in sub-Section (2), the secured creditor may take recourse to one or more of the measures provided in sub-Section (4). One of the measures is to take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to 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 rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od 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 authorise any officer subordinate to him,- (i) to take possession of such assets and documents relating thereto; and (ii) to forward such assets and documents to the secured creditor. (2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate any officer authorised by the Chief Metropolitan Magistrate or District Magistrate done in pursuance of this section shall be called in question in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders 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 (5): Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in the Form given in Appendix IV-A to be published in two leading newspapers including one in vernacular language having wide circulation in the locality. (7) every notice of sale shall be affixed on the conspicuous part of the immovable property and the authorised officer shall upload the detailed terms and conditions of the sale, on the web-site of the secured creditor, which shall include; (a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of sub-Section (1A) wherein the CMM/DM could avail the services of an advocate or any officer subordinate to him for discharging the ministerial work of taking possession of the secured assets and documents relating thereto, nothing prevents him/her from continuing to follow the same regime even after the insertion of sub-Section (1A). At the same time, while entrusting the act of taking possession of the secured assets consequent to the order passed under Section 14(1) of the 2002 Act to any officer subordinate to him, the CMM/DM ought to exercise prudence in appointing such person who will be capable of executing the orders passed by him. Merely because he has power to appoint "any" officer subordinate to him, it would not permit h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Joint Chief Controller of Imports and Exports is a subordinate of the joint Chief Controller through the acceptance of the bribe has nothing to do with the appeal pending before the Joint Chief Controller. R.G. Jacob v Republic of India, AIR 1963 SC 550, 553. [Indian Penal Code (45 of 1860), section 165 (omitted by Prevention of Corruption Act, 1988)] The construction placed on the expression 'subordinate' occurring in Rule 14(2) of the Rules is in consonance with the meaning and import of the word 'subordinate' occurring in Article 311(1) of the Constitution. There is nothing in the Constitution which debars the Government from exercising the power of appointing authority to dismiss a Government servant from service. These Rules cannot be read as implying that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 India, means subordination in rank and not subordination of function. Mahadev Prasad Roy v. S.N. Chatterjee, AIR 1954 Pat 285. The word 'subordinate' in Article 311(1) of the Constitution of India means subordinate in rank and not with reference to the functions exercised. Consequently when no officer of equal rank to the appointing officer is available then the order of dismissal or removal will have to be passed by an officer of superior rank. In no circumstances can such an order be passed by an officer of lesser rank. Any rule or statute which permits such an action must be held to be ultra vires as infringing the provisions of Article 311(1) of the Constitution. Gurmukh Singh v UOI, New Delhi, MLJ : QD (1961-1965) Vol.II C1050 : 65 Punj LR 964 : AIR 1963 P&H 370 For the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 diverse administrative and ministerial work as per the provisions of Code of Civil Procedure and Code of Criminal Procedure. An advocate is an officer of the court. This has been expounded in Virginia Law Review Vol. 11, No.4 (Feb 1925) pp. 263-77, in the following words: "The duties of the lawyer to the Court spring directly from the relation that he sustains to the Court as an officer in the administration of justice. The law is not a mere private calling but is a profession which has the distinction of being an integral part of the State's judicial system. As an officer of the Court the lawyer is, therefore, bound to uphold the dignity and integrity of the Court; to exercise at all times respect for the Court in both words and actions; to present all matters relating to his client's case openly, being careful to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge. 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. In the case of O.P. Sharma & Ors. vs. High Court of Punjab & Haryana (2011) 6 SCC 86 (para 38), the Court noted that in all professional functions, an advocate should be diligent and his conduct should conform to the requirements of the law by which he plays a vital role in the preservation of society and justice system. As an officer of the court, he is under a higher obligation to uphold the rule of law and justice system. 40. Be it noted that Section 38 of the 2002 Act empowers the Central Government to make rules for carrying out the provisions of the 2002 Act. Sub-Section (2) thereof does not specifically/expressly refer to power to make rule in respect of matter provided for in Section 14 unlike other provisions noted therein. However, it is open to the Central Government to frame r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 1 SCC 216, and Dipak Babaria & Anr. vs. State of Gujarat & Ors. (2014) 3 SCC 502, will be of no avail to the borrowers. In that, we have not invoked the principle of casus omissus. In our view, in law, an advocate is an officer of the court and, thus, subordinate to the CMM/DM. Further, there is no indication in the 2002 Act or the Rules made thereunder to exclude such interpretation. For the same reason, the plea regarding applying principle of ejusdem generis or noscitur a sociis and for that matter, expressio unius est exclusio alterius, also need not detain us. 44. The secured creditors would rely on the dictum of this Court in Authorised Officer, Indian Bank vs. D. Visalakshi & Anr. (2019) 20 SCC 47 wherein this Court upon considering the nature of activities of the Chief Judicial Magistrate for short, "CJM" on the one hand and that of the CMM/DM on the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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