SC: A CJM can also deal with application under S.14 of the SARFAESI Act

The Hon’ble Supreme Court, on 23rd September 2019, in the matter of The Authorised Officer, Indian Bank, v. D. Visalakshi and Anr. pronounced that a Chief Judicial Magistrate (CJM) is equally competent to deal with the application moved by the secured creditor under Section 14 of the SARFAESI Act.

Question before the Hon’ble Supreme Court:

Whether the Chief Judicial Magistrate (“CJM”) is competent to process the request of the secured creditor to take possession of the secured asset under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ?

The Hon’ble Supreme Court observed that:

Going by the literal interpretation of Section 14 of the SARFAESI Act , it does appear that CMM (Chief Metropolitan Magistrate) or the DM (District Magistrate) within whose jurisdiction the secured asset is situated in, is bestowed with the authority to entertain the request of the secured creditor for possession of such secured asset. It also appears that remedy is provided before the designated authority, persona designata. (Para 31)

Notably, the powers and functions of the CMM and the CJM are equivalent and similar, in relation to matters specified in the Cr.P.C.. These expressions (CMM and CJM) are interchangeable and synonymous to each other. Moreover, Section 14 of the SARFAESI Act does not explicitly exclude the CJM from dealing with the request of the secured creditor made thereunder. (Para 34)

The power to be exercised under Section 14 of the SARFAESI Act by the concerned authority is, by its very nature, non­judicial or State’s coercive power. Furthermore, the borrower or the persons claiming through borrower or for that matter likely to be affected by the proposed action being in possession of the subject property, have statutory remedy under Section 17 of the SARFAESI Act  and/or judicial review under Article 226 of the Constitution of India. In that sense, no prejudice is likely to be caused to the borrower/lessee; nor is it possible to suggest that they are rendered remediless in law. At the same time, the secured creditor who invokes the process under Section 14 of the SARFAESI Act  does not get any advantage muchless added advantage. Taking totality of all these aspects, there is nothing wrong in giving expansive meaning to the expression “CMM”, as inclusive of CJM concerning non­metropolitan area, who is otherwise competent to discharge administrative as well as judicial functions as delineated in the Cr.P.C. on the same terms as CMM. That interpretation would make the provision more meaningful. Such interpretation does not militate against the legislative intent nor it would be a case of allowing an unworthy person or authority to undertake inquiry which is limited to matters specified in Section 14 of the SARFAESI Act . (Para 34)

Section 14 of the SARFAESI Act is not a provision dealing with the jurisdiction of the Court as such. It is a remedial measure available to the secured creditor, who intends to take assistance of the authorised officer for taking possession of the secured asset in furtherance of enforcement of security furnished by the borrower. The authorised officer essentially exercises administrative or executive functions, to provide assistance to the secured creditor in terms of State’s coercive power to effectuate the underlying legislative intent of speeding the recovery of the outstanding dues receivable by the secured creditor. At best, the exercise of power by the authorised officer may partake the colour of quasi­judicial function, which can be discharged even by the Executive Magistrate. The authorised officer is not expected to adjudicate the contentious issues raised by the concerned parties but only verify the compliances referred to in the first proviso of Section 14; and being satisfied in that behalf, proceed to pass an order to facilitate taking over possession of the secured assets. (Para 40)

Section 14, even if read literally, in no manner denotes that allocation of jurisdictions and powers to CMM and CJM under the Code of Criminal Procedure are modified by the SARFAESI Act. Thus understood, Section 14 of the SARFAESI Act, stricto sensu, cannot be construed as being inconsistent with the provisions of the Code of Criminal Procedure or vice­versa in that regard. If so, the stipulation in Section 35 of the SARFAESI Act will have no impact on the expansive construction of Section 14 of the SARFAESI Act. (Para 43)

The provisions of the Section 14 of the SARFAESI Act are in no way inconsistent with the provisions of Code of Criminal Procedure, it must then follow that the provisions of the SARFAESI Act are in addition to, and not in derogation of the Code. (Para 43)

Substitution of functionaries (CMM as CJM) qua the administrative and executive or so to say non­judicial functions discharged by them in light of the provisions of Cr.P.C., would not be inconsistent with Section 14 of the SARFAESI Act; nay, it would be a permissible approach in the matter of interpretation thereof and would further the legislative intent having regard to the subject and object of the enactment. That would be a meaningful, purposive and contextual construction of Section 14 of the SARFAESI Act, to include CJM as being competent to assist the secured creditor to take possession of the secured asset. (Para 46)

Copy of judgement: Judgement_23-Sep-2019

-Adv. Tushar Kaushik

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